HUI CHU WING t/a YAU LUEN AIR-CONDITIONING ENGINEERING CO v. WORLD TREND ENGINEERING LTD

DCCJ1442/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1442 OF 2004

J U D G M E N T

1.  In this action the plaintiff claims the sum of $106,250, being the balance of charges, for work done and materials supplied to the defendant, at the defendant’s request, in the years 2001 to 2003.  Particulars of the amounts due were set out in five invoices.  Once of the invoices relates to work done at Kwai Chung Plaza, and the remaining invoices cover work done at the Jockey Club stables at Shatin.  Both parties are air-conditioning contractors installing, modifying and maintaining air-conditioning systems.

2.  I can deal shortly with the issue of the invoice relating to Kwai Chung Plaza.  It was not the defendant’s case that the work had not been done, or it had been done badly, or that he had, in fact, paid the plaintiff.  Mr Cheung, a director of the defendant company, and who conducted the case on its behalf, as well as giving evidence, said that his company had never received the invoice in question.  That, of course, is beside the point.  I accept the plaintiff’s evidence that the work described in the invoice, dated 22 February 2001, had been done and that he had not been paid for it.  The defendant is, in consequence, obliged to pay.

3.  In any event, the defendant, I find, must have been aware that the amount in question was outstanding as a statement of outstanding invoices was sent by the plaintiff to the defendant.  This statement, dated 17 September 2001, refers to the invoice in question and bears a handwritten note by Mr Cheung.  Mr Cheung, therefore, must have been aware of the invoice at that date at the very latest.  And if he did dispute it, I am in no doubt that he would have done so at the time.  I am satisfied that the work was done and the defendant must pay the amount of this invoice.

4.  I now turn to the work done at the Jockey Club stables.  This project had been contracted to the defendant by a firm called Keio.  The defendant subcontracted it to the plaintiff.  There seems to be no written agreement between the plaintiff and the defendant.  According to the plaintiff, what happened was that the defendant’s engineer, a Mr Choi, contacted the plaintiff about the project.  They discussed what work had to be done and the price.  Mr Choi then spoke to Mr Cheung and subsequently confirmed the agreement with the plaintiff.  No doubt these discussions took place over a period of time, and eventually, a total figure of $850,000 was agreed.

5.  The plaintiff also explained that in certain circumstances additional work had to be done, or the original planned work had to be modified, and in that case the parties would discuss any necessary variation in the cost.  Mr Cheung’s account was somewhat different.  He said that there was no fixed price agreed for the Jockey Club project.  As with previous work that he had arranged with the plaintiff, the plaintiff would submit invoices from time to time, but the price quoted in the invoice was to be subject to negotiation.

6.  He maintained that the plaintiff would be entitled to a reasonable sum for the work done but negotiations as to the amount would only take place after completion of the work.  He also said that he might pay money on account to the plaintiff as the work progressed.

7.  As for the four invoices in question, Mr Cheung said that on receipt of the first two he telephoned the plaintiff, whom he says agreed to reduce the first from $80,000 to $60,000 and the second from $50,000 to $30,000.  It is not in dispute that these reduced sums were paid.  The remaining two invoices covered variations or modifications of the original work.  Mr Cheung said that it was the usual practice for the price of the extra work to be negotiated after all the work was done.  He was asked, in cross-examination, why this had not been done, bearing in mind that the invoices were issued in January and July 2003.  He said that he had to obtain confirmation from Keio, the main contractor, that the work had been carried out satisfactorily.  When asked if he had confirmed with Keio, he said “No”, because they had to have the work confirmed by the Jockey Club.

8.  I have to say that I find Mr Cheung’s evidence most unlikely and I have no hesitation in preferring the evidence of the plaintiff.  I do so for these reasons.  Firstly, it is to be noted that the receipt sent to Mr Cheung, acknowledging payment of $60,000 in payment of Invoice 05003 for $80,000, stated that the sum of $60,000 was received in part payment of the invoiced sum of $80,000.  That it was in part payment is also confirmed by the handwritten note on the plaintiff’s copy of the invoice.  It is true that the receipt for payment of the reduced sum of $30,000 for Invoice 07001 in the sum of $50,000, does not indicate that the lesser sum was in part payment.  But the plaintiff says, and I accept it, that this was simply an omission by his accounts clerk.  In any case, that it was a part payment rather than full settlement was indicated on the plaintiff’s copy of the invoice.

9.  Mr Cheung’s contention that the price to be paid for the extra work, or variations in work, was to be decided after it was done is disputed by the plaintiff.  But even if, which I do not believe this was the case, it seems extraordinary that no negotiations have taken place between the parties to agree the correct figure.  Mr Cheung’s answer that he was waiting to hear from Keio, who were themselves waiting to hear from the Jockey Club, simply does not make commercial sense.  If the position was as Mr Cheung suggested, no contractor would ever get paid, or at least there would be considerable delay.

10.  It is this point which undermines Mr Cheung’s underlying argument, that no fixed price was ever agreed between the parties for the work to be done; an agreement would only take place, after negotiation, when the work was over.  The plaintiff said, and I accept, that this was not the arrangement.  He did say that if the amount involved was small, then the price payable for a variation in the work could be subject to negotiation at a later stage.  But he pointed out that the Shatin project was to last two years and he would expect to be paid as the work progressed and not to have to wait until the end for everything to be negotiated.

11.  In my view, it simply does not make commercial sense for a contractor to undertake a major project, such as the work to be done at the Jockey Club stables, without knowing in advance how much he is to be paid. 

12.  This was a substantial undertaking.  Even on Mr Cheung’s evidence, he has paid over $1 million to the plaintiff.  The plaintiff’s evidence was that the price agreed with Mr Choi, the defendant’s engineer, was $850,000, but that was the initial price.  Inevitably, as the work progressed, changes had to be made.  This was understood by both parties.  It was also understood that the plaintiff would send an invoice to cover the extra work. 

13.  It was never agreed, I find, that negotiation for the extra work would be left until the end of the whole work.  It may be that this happened during previous work done by the plaintiff at the defendant’s request, but the evidence from the plaintiff, which I accept, was that this had worked to his disadvantage and he had suffered a loss.  He had therefore made it plain to the defendant, before the Shatin project was under way, that he would not work on that basis again and that payment for extra work had to be made according to the invoices, which he would deliver from time to time.

14.  I am satisfied that Mr Cheung did not believe, and had no grounds to believe, that he  could wait until the end of the work and then start negotiating the prices on the invoices.  If he had a query over any of the work appearing in any of the invoices, I believe he would have raised it at the time the invoice was delivered. 

15.  I find that the plaintiff has done the work detailed in the five invoices in question and he is entitled to be paid by the defendant in full.  There will therefore be judgment for the plaintiff against the defendant in the sum claimed, namely $106,250.

(Submissions on costs)

16.  Cost in favour of the plaintiff, to be taxed if not agreed. 

17.  I order interest from the date of the writ until today at the rate of 6 per cent, and from today, at the usual judgment rate, until paid.

Ms J. Auyang, instructed by Messrs Ho & Ip, for the Plaintiff

Defendant, In Person, present