HO YUK CHU v. NG CHUN HUNG

HCA10036/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.10036 OF 2000

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J U D G M E N T

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The plaintiff's claim

1. The plaintiff's claim is for the sum of $360,000 which represented commission fee at $15,000 per month for the period 1 April 1992 to March 1995 totaling $540,000 less partial payments totaling $180,000 made by the defendant between 4 November 1992 and 6 April 1993. The agreement to pay the commission was made orally by Mr Cheang acting on behalf of the plaintiff and the defendant on or about 18 March 1992. The commission was said to be payable for Mr Cheang, acting on behalf of the plaintiff, agreeing to introduce and recommend the defendant to one Senco Engineering Company ("Senco") to assist the defendant in procuring the contract to perform electrical works for Senco. Senco was the subcontractor of one Yiu Wing Construction Company Limited ("Yiu Wing") which obtained a contract from the Architectural Services Department of the Government in late March 1992. The contract with the Government was for a term of 36 months commencing on 1 April 1992. Senco awarded the sub-contract to the defendant in late March 1992 for the full term of the contract that Yiu Wing had with the Government.

The defence

2. The defence was that Mr Cheang would be engaged as a consultant of the defendant and the consultancy was terminable at will by either party, either orally or in writing. At the time of the last payment of the consultancy fee of $l5,000 per month by the defendant on 2 April 1993, he gave notice to Mr Cheang that his service was no longer required and Mr Cheang, acting for and on behalf of the plaintiff, orally accepted the termination of the consultancy agreement. This was pleaded in the re-amended defence.

3. In the original defence, it was pleaded that the defendant requested Mr Cheang to assist him to obtain the contract for electrical works under the main contract between the Government and Yiu Wing. The defendant and Mr Cheang orally agreed that in the event the defendant was awarded the electrical works of the main contract, the defendant would employ Mr Cheang as a general consultant and negotiator of the new project. Mr Cheang's services would be paid by the defendant for each new project introduced to the defendant by Mr Cheang, irrespective of whether the defendant subsequently accepted the new project. Both parties agreed that this arrangement/employment could be terminated at will by either party by notice, either orally or in writing, to the other. Mr Cheang introduced several new projects to the defendant. The terms of these new projects were not acceptable to the defendant; nevertheless, the defendant paid Mr Cheang for his services in the total sum of $180,000. After the last payment on 2 April 1993, the defendant formally gave oral notice to Mr Cheang that his services were no longer required and Mr Cheang orally accepted the termination of the employment.

Mr Cheang's evidence

4. Mr Cheang gave evidence that he introduced the defendant to do the sub-contract work for the electrical works under the main contract which was awarded to Yiu Wing. His agreement with the defendant was that he would be paid $15,000 per month as a commission fee for the whole term of the contract namely 36 months. The payment to him would be to reward him as an introducer and he had to provide no services to the defendant. This was accepted by the defendant. He gave evidence that if he had not introduced the defendant to the relevant person of Yiu Wing, the defendant would not have been able to obtain the sub-contract. He gave evidence that the defendant did the sub-contract works for three years, from 1 April 1992 to 31 March 1995. He said that his agreement with the defendant was entered into just prior to 18 March 1992 and by that time the plaintiff was already married to him. The plaintiff later set up Skyforce Engineering Company ("Skyforce") and the defendant agreed he would pay the commission fee to Skyforce. Skyforce was set up in July 1992.

5. Mr Cheang gave evidence that the defendant paid the $180,000 on three occasions, in October 1992 and in January and April 1993 instead of the payments being monthly payments because he said that the defendant told him that he had cash flow problems and he asked Cheang to accommodate him. Cheang said that the defendant mentioned his desire to terminate the commission agreement because of his problem with cash flow but Cheang encouraged him to carry on. The defendant said he wanted to stop the payment of the commission fee to Cheang and might not continue with the work but Cheang did not accept. Cheang encouraged him to carry on with the work and Cheang would accommodate him by giving him more time to pay Cheang.

6. After April 1993 Cheang and the plaintiff received no further payments from the defendant as commission. On two occasions after that Cheang met the defendant and reminded him of the outstanding payments; the first occasion was at the end of July 1996 and the second occasion was a phone call to the defendant at the end of August 1996. In addition to those two occasions Cheang also wrote reminders to the defendant and the first was a letter in Chinese dated 31 March 1999 (Exhibit P2). The second letter was another Chinese letter from Cheang to the defendant dated 16 April 1999 (Exhibit P3). The third letter was another Chinese letter from Skyforce to the defendant dated 31 May 1999 (Exhibit P4). In June 1999 Cheang instructed his solicitor to handle the matter and his solicitor, on 4 June 1999, wrote to the defendant about the outstanding sum of $360,000 (Exhibit P5).

7. The defendant instructed solicitors who wrote to the plaintiff's solicitors in an undated letter where the alleged oral agreement to employ Cheang as a general consultant was mentioned (Exhibit P6). It was mentioned that Cheang failed to fulfil his consultancy during the period from 1 April 1992 to 6 April 1993 and because of that the defendant had no alternative but to terminate the employment and this was duly accepted by the plaintiff. This undated letter from the defendant's solicitors was faxed to the plaintiff's solicitors on 14 June 1999.

8. In cross-examination Cheang said that the figure of $15,000 per month was reached after negotiation between him and the defendant. He confirmed that the fee was not for consultancy work. He was asked why in Exhibit P2 the term introduction/consultancy fee was mentioned and he said that the letter was prepared by his secretary and he just signed the letter. He was asked why in Exhibit P4 the term consultancy fee was again mentioned and he said that the letter was issued by the book-keeper of Skyforce and Cheang did not sign it.

9. He was asked why in the plaintiff's solicitors' letter the outstanding fee was mentioned as the "consultancy fee" and why in Skyforce's letter of 31 May 1999 Exhibit P4 again the term consultancy fee was mentioned. Cheang's reply was that this letter had also been issued by the book-keeper. Cheang again reiterated that the defendant got the sub-contract from Yiu Wing through his introduction.

10. He was asked why he was not calling the responsible person from Yiu Wing and his answer was that person had emigrated. Cheang denied that the $15,000 per month was a consultancy fee and he denied that throughout the consultancy his performance was unsatisfactory which was why the defendant terminated the agreement. Cheang agreed that when the defendant paid $45,000 in April 1993, he mentioned the termination of the agreement but Cheang said he disagreed. Cheang said that the defendant had mentioned stopping payment of the commission. Cheang denied that the defendant said that if Cheang accepted the cheque that would be the end of the agreement. Cheang again reiterated that he was merely the introducer and that since the work started on 1 April 1992 he was never involved in any paper work connected with the contract.

The plaintiff's witness

11. The plaintiff also sought to rely on a witness statement made by Mr Ng Lap who was the contract manager of Yiu Wing. This was objected to by the defence and no explanation was given as regards why the witness could not have been called to give evidence and be cross-examined. I attach no weight to that statement for the reason mentioned.

The defendant's evidence

12. The defendant gave evidence that he knew Cheang and in 1991, they discussed forms of cooperating together to put in tenders to main contractors either as joint ventures or as Cheang working for the defendant as a consultant. In 1992 they came to a consultancy agreement, the remuneration of which would be $15,000 per month. Under the agreement Cheang had to handle correspondence with the Government and sub-contractors for the defendant because the defendant's English was limited.

13. The defendant said that insofar as engineering work was concerned he did not need the assistance of Cheang. However, he used Cheang because he had to have someone and he thought that Cheang would be able to do the job. The agreement was reached in around the middle of March 1992. Under the agreement, after Cheang had handled all the work in the defendant's company he could do anything. He was not required to attend the defendant's office every day. As it happened, Cheang did not perform his duties according to the agreement at all because he never came to the defendant's office and all he did was to explain some things to the defendant over the telephone. The defendant said he still paid Cheang because Cheang had done some things for him over the telephone.

14. The first payment to Cheang was delayed because Cheang said he would set up a company and so the defendant had to wait for the company to be set up. When the defendant made the second and the third payments he was not satisfied with Cheang's performance but Cheang said he would improve. By the time the defendant paid Cheang the last time, he made it clear that that was the last payment. The defendant disagreed that Cheang had helped him obtain any sub-contracts. The defendant said that Cheang had no involvement in the negotiations for the sub-contract awarded to the defendant.

15. The consultancy agreement with Cheang was terminated in April 1993 when the defendant told him that because he could not fulfil the requirements of the defendant's company, the defendant had to terminate his service. The defendant told Cheang that if he accepted the cheque for the last payment of $45,000, he was agreeing to the termination. Cheang was reluctant but he accepted the payment. After the agreement was terminated, Cheang never made any demands from the defendant for payment apart from the letters which Cheang wrote to the defendant after six years.

16. In cross-examination the defendant said that the correspondence between the contractor and the sub-contractor related to terms which involved more than just simple English and because Cheang had been a contracts manager before, he was in a position to understand it. Whenever technical matters were mentioned in correspondence, Cheang had a duty to give his opinion on how to manage it. Cheang was not required to work in the defendant's office but he had to answer some of the questions the defendant asked about things mentioned in the correspondence. Cheang did this on several tens of occasions. The defendant then said that he did not employ Cheang purely to deal with the company's correspondence because when they had a development, they needed a consultant to give them some opinion.

17. On the occasions when Cheang advised the defendant over the telephone, if it was possible to talk about a document over the phone they would, if not, the defendant would send a copy to Cheang. Cheang would then more or less dictate in Chinese to the defendant how to reply to a particular letter. The reply by the defendant would be in Chinese if it was to the main contractor but if it was a reply to the Government, then the reply was in English in which case some other colleague in the company would have to translate. The defendant then admitted that it was not a case that he needed Cheang's knowledge of English because he said if the correspondence required technical knowledge of engineering, ordinary people would not be able to handle it. The defendant said that Cheang failed to fulfil his duty because time was of the essence in dealing with correspondence and Cheang's assistance over the telephone was not that good because he never handled it right away. It was not on every occasion that Cheang was able to provide the defendant with an answer immediately and he would often say that he would follow it up. Sometimes Cheang would have a draft reply and fax it to the defendant.

18. The defendant said that once he employed Cheang as his adviser on correspondence, Cheang ceased to assist the defendant with trying to obtain contracts. About May or June 1992 the defendant began to feel dissatisfied with Cheang's work and from then until April 1993 he did complain to Cheang about his dissatisfaction but Cheang did not improve. He admitted that despite his dissatisfaction he still paid Cheang and, three months later, paid him again and after another three months, again paid him.

19. After he terminated Cheang, he did not appoint another person to replace him. The matter was resolved by the defendant doing it himself or someone else doing it. He said that after years' training he thought he was competent to do it and by that time some new staff were employed who were proficient enough to do the work. He said that he gained experience in dealing with the correspondence because Cheang could not deal with the matter right away and so he had to do it himself.

20. He admitted that the re-amended defence was explained to him and he agreed with it. He said that the reason why he did not allege in the re-amended defence that Cheang failed to fulfil his duty under the agreement was because his solicitor said that that was only an adjective and could not be substantiated so it was not necessary to put it down. He said the solicitor was of the opinion that this was simply a matter of employment and if the defendant wanted he could dismiss Cheang anytime. However he admitted that between July 1999 and February 2000 he gave different instructions to his solicitor. He said that after he received the three letters from Cheang, he rang Cheang and talked to him. This was after he got the second letter. He said to Cheang :

"Why did you send such a letter to me, the contract was terminated a long time ago."

In reply Cheang said :

"Your business is very good so you have to pay me back this money."

21. The defendant admitted that in April 1993, Cheang had said to him that if he had problems with finances he could pay him later. The defendant said that he disagreed with that.

Assessment of the evidence

22. On a balance of probabilities, I prefer the evidence of Mr Cheang to that of the defendant. The defendant obviously changed his instructions to his solicitor which resulted in his original defence being amended and then re-amended. The stark differences between his original defence and his final defence as pleaded in the re-amended defence have been mentioned above. The defendant's evidence on why he employed Cheang as a consultant and what Cheang had to do in return for which he was paid $180,000 by the defendant was nothing short of incredible. The defendant's evidence that Cheang failed to perform his duty under the alleged consultancy agreement by his delays in providing advices over the telephone when asked by the defendant was never put to Cheang by the defendant's counsel, nor was the nature of Cheang's work for the defendant ever put to Cheang. Clearly this part of the defendant's evidence must have been recently made up by him and he never instructed his lawyers on this part of his case. I therefore find that there was an agreement between Cheang, acting on behalf of the plaintiff and the defendant for the defendant to pay a commission fee of $15,000 per month to the plaintiff for the duration of the sub-contract which was awarded to the defendant through the introduction of Cheang. I find also that this sub-contract lasted for the full duration of the main contract namely 36 months from 1 April 1992 to the end of March 1995. Under the agreement the defendant was liable to pay to the plaintiff the sum claimed of $540,000.

23. Counsel for the defendant had submitted that $30,000 representing the payments for the months of April and May 1993 are statute barred because the obligation to pay these payments was longer than six years prior to the issuance of the writ on 19 June 1999.

24. I find on a balance of probabilities that Cheang did allow the defendant more time to pay the outstanding commission fee and the defendant in reliance thereof did not continue to pay the balance. I find therefore that the original commission agreement was varied and the defendant's liability to pay the fee for the months from April 1993 to March 1995 was deferred until Cheang sent the first written request to the defendant to pay the balance. This was on 31 March 1999 in Exhibit P2. I therefore find that the claim for $30,000 is not statute barred and I give judgment to the plaintiff in the sum of $360,000 plus interest and costs to be taxed on the High Court scale.