CHAN CHUN WAH t/a YUEN SANG TRANSPORTATION CO v. HOUTAI CONSTRUCTION ENGINEERING (HONG KONG) LTD

DCCJ 1263/2021

[2024] HKDC 1612

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1263 OF 2021

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BETWEEN

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JUDGMENT

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1.  This is a contractual dispute case.

2.  The plaintiff (“Chan”) ran a business of providing lorries for transportation of construction site materials. The defendant (浩泰建築工程(香港)有限公司, “Houtai HK”) is a construction company registered in Hong Kong and one of its directors is 鄧水仙 (“Tang”) whom Chan has been acquainted for many years. Tang is also a director of another company with a similar name, Hou Tai Construction Limited (浩泰建築有限公司) (“Houtai”).

3.  Houtai and Houtai HK share the same office address and both names appear on the name board outside the office (see photograph Trial Bundle B, page 166).

Background

4.  Dragages Hong Kong Limited and Bouygues Travaux Publics S.A., collectively known as the contractor (“the Contractor”) had an agreement with the Government of the Hong Kong SAR for the construction of the Tuen Mun-Chek Lap Kok Link Northern Connection Sub-sea Tunnel Section (“the Link”).

5.  By way of an agreement dated 16 August 2013 (Trial Bundle C1, page 1-2), part of the Project was subcontracted to Houtai by the Contractor.

6.  Houtai further subcontracted with Chan for lorry rentals (for transportation of e.g. building materials and machineries) by way of second subcontractor agreements dated 18 February 2014 (Trial Bundle C1, page 3) and dated 31 August 2017 (Trial Bundle C1, page 120).

7.  Crown Asia Engineering Limited (冠亞工程有限公司) (“Crown”) was also involved in the construction project. It provided barges for transportation of soil excavated in the construction of the Link to China.

8.  Besides renting lorries to Houtai, Chan also rent lorries to Crown for transportation of the soil from the construction site to the loading area of Crown’s barges.

9.  As such, Chan provided separate invoices and received separate payments for these two rental arrangements for the two different companies (see for example Trial Bundle C1, page 13 and 14).

10.  This is the background and relationships of the various parties involved, but the agreement in dispute has nothing with such contracts, subcontracts or arrangements.

11.  At around late 2016 or beginning of 2017, something unexpected happened and Crown could not operate barges for soil transportation to China. However, the tunnel boring operation could not stop so there was an urgency to seek a supply of barges and unloading sites in China.

The plaintiff’s case

12.  According to the plaintiff’s case, Chan was approached by Tang Kai Ming, Samuel (“Samuel”) the deputy general manager of both the defendant (i.e. Houtai HK) and Houtai (see name card of Samuel on Trial Bundle B, page 171) to help locate barges and sites.

13.  There was an oral agreement around January 2017 between Chan and Samuel that the defendant would pay Chan to arrange for transportation of soil from the construction site at Tuen Mun to Nam Sha in China at the price of HK$32 per tonne (“the Oral Agreement”).

14.  Chan claimed that he has arranged, via friends he knew in China and their companies in PRC (深圳市煜太貿易有限公司 and 廣州市列剛運輸有限公司, “the Two PRC Companies”) for 2 trial runs of barges to transfer soil to Nam Sha (“the Two Trial Runs”, see custom documents Trial Bundle C1, page 42-43 for the trial run on 6 January 2017 and page 45-46 for the trial run on 17 January 2017). Further transportation stopped after the Two Trial Runs because of transportation problems and that the receiver found the soil quality unsuitable.

15.  Nevertheless, Chan sent the invoice dated 7 January 2018 for the sum of HK$251,282.56 to Houtai HK (“the Invoice”, Trial Bundle C1, page 166) but this remained unpaid, and as such, Chan commenced this action to claim this sum (plus interest) from Houtai HK.

The defendant’s case

16.  The defendant, Houtai HK, denies the following:

a. it has authorised Samuel to enter into the Oral Agreement.

b. Samuel was the defendant’s director or employee;

c. it has anything to do with the Two Trial Runs and that these were undertaken by the Two PRC Companies in an attempt to “poach” the soil transportation contract the Contractor and Houtai (and not Houtai HK)

d. Chan (and the plaintiff) was involved in the Two Trial Runs;

e. it has received the Invoice: the Invoice concerned another company called “浩泰建築(香港)有限公司” which is not the defendant (because the words “工程” was missing on the invoice) (paragraphs 3, 4 and 5 of the Defence, Trial Bundle A, page 36 - 37).

Consideration

Irrelevant matters

17.  First of all, much has been argued that the contract for the Link was between the Contractor and Houtai and not the defendant, Houtai HK.

18.  I think this is entirely irrelevant.

19.  The fact that Houtai was involved in the main contract in the construction of the Link does not stop the defendant, and its representative, entering into the Oral Contract to seek Chan to assist in this unexpected event. There was no reason why the Oral Agreement could not be entered into by the defendant entirely independent of the main contract between the Contractor and Houtai.

20.  Similarly, the fact that it was Houtai, and not Houtai HK, that has subcontracted with Chan for lorry rental is not relevant as the Oral Contract was independent of this subcontract and, indeed, did not concern with lorry rental.

21.  It is not in dispute that it was Houtai, and not Houtai HK, which had been issuing the cheques for lorry rental payments to Chan. I am of the view that this is also irrelevant to the Oral Agreement. In any case, since Tang appeared to be in charge of both companies, I cannot see why he could not instruct any one of the companies to make the payment.

22.  Further, it is also not relevant that Samuel signed his employment contract with Houtai and not Houtai HK. I cannot see why he could not be authorised to represent Houtai HK if this was the instruction from a person in charge of Houtai.

Houtai or Houtai HK?

23.  It could not be in dispute that, despite Chan having subcontracted with Houtai for lorry rental in the Link project, he has all along issued his invoices incorrectly addressed to “浩泰建築(香港)有限公司” which was neither Houtai nor Houtai HK. Nevertheless, he would get paid with cheques issued by Houtai.

24.  According to Chan’s evidence (paragraph 2 of the Witness Statement of Chan Chun Wah, Trial Bundle A page 103-104), he has been working with Tang since 2013/2014. When he first got work from Tang, Chan has attended Tang’s office in Shatin and noticed that the name board outside the lift on the 23^rd Floor only contained the name of Houtai HK (photograph at Trial Bundle B, page 163). However, the name board outside the office (which was the registered address) display the names of both Houtai and Houtai HK (photograph at Trial Bundle B, page 166). As such, Chan had asked Tang to which company that he should issue the invoice. Tang replied that Chan should issue his invoices to the company containing the words “Hong Kong”, i.e. Houtai HK.

25.  Chan also claimed that there was at least another occasion at the site office (when Samuel was present) when Tang again confirmed to Chan that he should issue the invoice to Houtai HK.

26.  Indeed, it is also the evidence of Samuel (which I would substantiate further below) that Chan invoice was addressed to Houtai HK and all the senior management of the company knew that Tang had requested Chan to do so.

27.  Under cross-examination, Tang agreed that the name board outside his office displayed both the names of Houtai and Houtai HK.

28.  When it was put to him that Chan had asked him which company he should issue the invoice to, Tang initially disagreed. He then admitted that he could not remember whether he told Chan to issue invoice to the one that contained the words “Hong Kong”.

29.   When it was further put to Tang that he repeated this instruction on another occasion in the site office, Tang confirmed that:

“I could not remember. It was so long ago.”

30.  On balance, I find that Tang must have instructed Chan to issue the invoice to Houtai HK. Chan already has a lorry rental contract with Houtai so unless he was specifically asked to issue his invoice to Houtai HK instead of Houtai, I cannot why Chan would go out of his way to do so.

31.  Of course, I need not speculate the reasons why Tang instructed Chan to do so. On balance, it must be that, despite the written contract between Houtai and Chan, in practice, there was a “parallel agreement” that Chan should issue his invoice to Houtai HK.

32.  Chan further claimed that, in all these years, he has always issued his invoices to Houtai HK but he has mistakenly made a typo with the name of Houtai HK (missing out the words “工程”) on his invoices. The incorrect name was in his computer which he never sought to correct. Despite this typo, Chan was aware that this was addressed to Houtai HK and his invoices still got approved and paid all along (paragraphs 3 and 4 of the Witness Statement of Chan Chun Wah, Trial Bundle A, page 105).

33.  Chan said in court that he was aware all along that although Tang asked him to issue invoice to Houtai HK, he received payment with cheques issued by Houtai. He did not care as long as he got paid.

34.  Indeed, this is somewhat reflected what Tang said in court during cross-examination (and repeated during re-examination): he admitted that he did not bother about the name of the company written on Chan’s invoice, he was only concerned with the sum: if this was OK, he would sign for payment.

35.  Therefore, I find that despite Chan persistently miswrote the name of Houtai HK in his invoices (including the Invoice), Samuel and other staff working for Tang / Houtai / Houtai HK were aware of this and understood that the invoices were issued for Houtai HK as instructed by Tang. On the other hand, Tang did not bother with how the company name was written on the invoices but only with the sums.

The authority of Samuel

36.  Samuel was also called to give evidence for the plaintiff.

37.  Samuel gave evidence that he was first employed by the defendant as a site director (地盤總監) in February 2014 and was promoted to become a deputy general manager (副總經理) in May 2016 (paragraph 1 of the Witness Statement of Tang Kai Ming, Trial Bundle A, page 112).

38.  Importantly, Samuel has exhibited his name card (given to him by Tang for distribution) with his title “deputy general manager”. The names of Houtai and Houtai HK both appeared on this name card (Trial Bundle B, page 171). Tang later confirmed that this was printed upon his instruction and approval.

39.  In addition, Samuel gave evidence that since his promotion to be deputy manager, he was Tang’s “right-hand man” and that Tang was the decision maker for both Houtai and Houtai HK. Samuel claimed that Tang authorised him to represent the defendant to deal with soil transportation as well as signing contracts on behalf of the defendant (paragraph 2 of the Witness Statement of Tang Kai Ming, Trial Bundle A, p. 113).

40.  As such, I find that Samuel had authority to represent Houtai HK to enter into the Oral Agreement.

41.  Further, given that Samuel has actually worked under Tang and not Chan, he should be considered an independent witness so appropriate weight should be given to his evidence.

The Two Trial Runs

42.  As far as the current case is concerned, Samuel confirmed that (paragraph 2 of the Witness Statement of Tang Kai Ming, Trial Bundle A, page 113):

a. Tang requested him to order Chan to transport the soil to Nam Sha;

b. the Oral Agreement was made between him representing Houtai HK and Chan in early 2017 with the agreed price of HK$32 per tonne;

c. Chan completed the Oral Agreement and submitted various documents to support this;

d. Chan invoice was addressed to Houtai HK and all the senior management of the company knew that Tang requested Chan to do so;

e. Chan has always miswrote Houtai HK (missing out the words “工程”) and that all along Tang was aware and accepted this;

f. The Invoice had already been approved both by him and another staff (a foreman), Choi Kin Wai, and was awaiting for Tang to issue the cheque for payment (which he has not done).

43.  Samuel also explained how Tang divided work between Houtai and Houtai HK (paragraph 5 of the Witness Statement of Tang Kai Ming, Trial Bundle A, page 113):

a. Houtai has a working relationship with the Contractor in the construction of the Link;

b. The construction site involved removing a lot of soil and it was Houtai HK which instructed Crown to perform such work.

44.  I note that the defendant’s case does not dispute the Two Trial Runs has actually happened. The dispute was who or which companies were involved in arranging for it.

45.  In its Defence, the defendant pleaded that Chan was not involved in the Two Trial Runs (see paragraph 16(d) above).

46.  I note that Chan did not produce the bill of payment for the trial runs to his friends or the Two PRC Companies. However, Chan explained that he has produced the Invoice to Hotei HK along with all the shipping documents for the two trial runs (Trial Bundle C1, page 40-48).

47.  I accept the argument that if Chan had not arranged for the Two Trial Runs, there was no explanation how he would obtain these shipping documents in the first place.

48.  Indeed, the defendant did not challenge this. Indeed, it was not the defendant’s case that Chan has forged any documents in order to obtain payment fraudulently.

49.  More importantly, Samuel explained in court that in order to arrange for the Two Trial Runs, a lot of work was involved. They would need a certificate of disposal from Nam Sha. There were also site inspections by various parties: himself, Chan, Hotei, the Contractor and the government representative (“AECOM”) in order to verify the depth of water at the pier, proper roads for transportation and to verify the GPS location etc. Chan needed approval from the government and the Contractor before the start of the trial run.

50.  As such, Samuel said that Tang must all along be fully aware of Chan arranging the Two Trial Runs.

51.  Samuel also explained that after further soil transportation to Nam Sha was stopped after the Two Trial Runs, Hotei was busy trying to locate new soil transportation sites so he did not ask Chan to present his invoice until around January 2018.

52.  However, since both Samuel himself and Choi Kin Wai were fully aware that Chan has arranged and paid for the Two Trial Runs under the Oral Contract, they have both signed and approved the Invoice. Their signatures are clearly seen on the Invoice (Trial Bundle C1, page 166). The defendant and Tang does not dispute this.

53.  I am of the view that this must be correct: the contract between Houtai HK and Crown, and how Houtai HK paid Crown has nothing to do with the current case, which concerned the (alleged) Oral Agreement between Hotei HK and Chan.

54.  There was also no serious challenge during cross-examination of Chan and Samuel on their very detailed evidence on the circumstances of how Crown’s barges were detained, how Chan was asked to help out with soil transportation and how he arranged for the Two Trial Runs via his friends in China.

55.  In the Defence, the defendant alleged that it was the Two PRC Companies which arranged the Two Trial Run in order to try to “poach business” away from Crown. Of course, this would suggest that the Two PRC Companies would have approached Houtai and the Contractors to offer their services.

56.  However, despite Tang being the director and shareholder of both Houtai and Houtai HK, he never gave any evidence of any alternative scenario of how the Two PRC Companies approached Houtai and the Contractor (perhaps out of the blue?) to do the Two Trial Runs in order to “poach the business” from Crown as claimed. This is clearly not believable.

57.  The defendant’s counsel also advanced another line of defence during the cross-examination of Chan: that Houtai has already paid Crown for the Two Trial Runs. The defendant referred to an invoice from Crown to Houtai (not Houtai HK) that appeared to cover the Two Trial Runs (Trial Bundle C1, page 59 and p. 64) and showed that Houtai has already paid Crown for the Two Trial Runs.

58.  However, Samuel explained in court that :

a. all “cross-border” soil transportation work in the Link project was contracted by Houtai to Crown so Crown would still invoice all such work to Houtai.

b. However, it is the practice that if Houtai needed to rent barges on its own via a third party (e.g. in this emergency situation when Crown could not operate), it would pay the parties arranging for the barges directly and then deduct such payments from the Crown invoice.

c. The contract between Houtai and Crown specified that the soil transportation be paid at the rate of HK$41.50 per tonne so if Hotei managed to arrange its own transportation at a cheaper rate, Crown would earn the difference. Conversely, if this could only be done at a higher rate, than Crown would lose out.

59.  Samuel did not dispute that Houtai has paid Crown for the Two Trail Runs, but he was of the view that this was between Houtai and Crown and under the practice as stated above, Chan should be paid and Houtai should deduct that payment from the payment to Crown. If Houtai has failed to deduct accordingly, it is a matter between Houtai and Crown.

60.  It is not entirely clear how the arrangements (agreements and payment procedures) were between Houtai, Houtai HK and Crown. Suffice to say that any agreement between Houtai (and / or Houtai HK) and Crown, and how Houtai (and / or Houtai HK) paid Crown has nothing to do with the current case, which concerned the (alleged) Oral Agreement between Houtai HK and Chan.

61.  Further, it is of note that when Tang gave evidence in court, he has deviated from the pleaded case in the Defence (see paragraph 45 above): he did not deny that Chan has arranged for the Two Trial Runs nor that he has paid for it.

62.  During cross-examination, when the plaintiff’s counsel showed Tang the barge measurement records of each of the trial runs (Trial Bundle C1, Page 41 and 48), Tang agreed that Crown was aware of the Two Trial Runs because these documents were signed by representative of Crown. As such, Tang also agreed that Crown agreed for Chan to arrange for the Two Trial Runs.

63.  When it was put to Tang that Samuel had asked him for approval for Chan to do the Two Trial Runs, Tang only claimed that:

“I could not remember.”

64.  But Tang then admitted that he was aware of the Two Trial Runs and was aware of the site inspection at Nam Sha by the Contractor, Chan, Samuel and AECOM.

65.  I find it inconceivable that Tang was aware of the site visit and the Two Trial Runs but could not remember instructing Chan (via Samuel) to proceed. On balance, Tang must have done so.

66.  Indeed, under further questioning, Tang finally admitted that it was true that Chan had arranged for the Two Trial Runs.

67.  In fact, it would appear that Tang’s case was again the “new defence” (previously raised by defendant’s counsel during cross-examination of Chan). Tang said in court (as I translate),

“Why do I have to pay Yuen Sang (i.e. Chan)? I have already paid Crown.”

68.  Tang initially agreed that the practice was for the payment to Crown to be deducted accordingly when a third party was instructed to arrange for the barges (according to the evidence given by Samuel). At this point, when it was put to him that Chan’s payment should have been deducted, Tang then changed his evidence and disagree with this practice.

69.  In conclusion, on balance of probability, I find that Tang was all along aware of Chan arranging and paying for the Two Trial Runs under the Oral Agreement with Houtai HK. I could only speculate that Tang was reluctant to pay Chan because he has failed to deduct the payment from the invoice of Crown so, in his eyes, he was being asked to pay twice.

70.  However, the fact that Tang might have overpaid Crown would be entirely his own fault and for him (or Houtai / Houtai HK) to seek repayment from Crown. This cannot be a defence against the current claim: it has nothing to do with the Oral Agreement between Chan and Houtai HK.

Conclusion

71.  I would therefore find for the plaintiff and order that the defendant shall pay the plaintiff a sum of HK$251,282.56 plus interest to paid at half judgment rate from the date of the Invoice (i.e. 7 January 2018) to the date of this judgment, and thereafter at judgment rate until the date of payment.

72.  I would also order that the costs of the action be awarded to the plaintiff to be taxed if not agreed, with certificate for counsel be granted.