CHAN KIN LAM v. SUNRAY CAVE LTD

HCA1997/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1997 OF 2006

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JUDGMENT

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1.  This is a contractual dispute. The core issue is whether the parties had entered into an agreement in 2005.

Background

2.  Although there are some minor differences, the material background facts up to late April 2005 are not really in dispute.

3.  The defendant is a private company incorporated in Hong Kong in March 1990.  It has a factory in Dongguan.  At all material times, its key business was the manufacturing and supply of distilled water under the brand name of “日之泉”.  Since around December 1992, the defendant expanded its business to Mainland China although it maintained its commercial presence in Hong Kong.  As a result, not only did the defendant supply distilled water to the Hong Kong market, its market in Mainland China was even bigger.

4.  In around 1993, the defendant started to employ drivers to transport the distilled water manufactured at its Dongguan factory to Hong Kong as well as cities in Mainland China.  The defendant also engaged contractors to carry out the necessary transportation work within Mainland China.

5.  Mr Lam Kim (“Mr Lam”) was at all material times the sole director of the defendant.  He was the one who owned and controlled the defendant.  In short, Mr Lam was and is the boss.  The plaintiff and Mr Lam are both natives of Dongguan.  They are also relatives, though not close relatives. 

6.  According to the plaintiff, he came from Mainland China to Hong Kong in around 1996 and was employed by the defendant from around 1998 to 2000 as a driver.  This was not really disputed by the defendant, although it suggested that the plaintiff was employed during the period from June 1999 (instead of 1998) to July 2000.  The exact period of employment aside, it is common ground that the plaintiff was until the 2000 Agreement (referred to below) employed by the defendant as a driver responsible for transporting distilled water from Mainland China to Hong Kong.

7.  The working relationship between the plaintiff and the defendant changed as a result of discussion that took place in the second half of 2000.  Instead of employing the plaintiff as a driver, the defendant engaged the plaintiff as a transportation contractor for transporting its distilled water from Mainland China to Hong Kong.  For this purpose, the plaintiff purchased a 16-ton (8,000 kg) goods vehicle and the defendant allowed him to use its Mainland-Hong Kong licence.  It is also common ground that the plaintiff and the defendant had, for this purpose, entered into a written agreement in Chinese dated 1 November 2000 (“2000 Agreement”).  The relevant parts of the 2000 Agreement read as follows:

“                                     協議書

日之泉有限公司 Sunray Cave Ltd (以下簡稱甲方)

陳建林　先生　 Chan Kin Lam (以下簡稱乙方)

甲方雙方經友好協商，同意達成以下協議：

(1) 甲方同意免費提供一個「行走中國大陸至香港」的直通汽車牌照予乙方，協助乙方專職全權負責和經營有關甲方的中港直通車運輸業務。但此中港直通汽車牌照擁有權和決定權，則永遠屬於甲方所有。

(2) 甲方同意將所有涉及中港貨運的業務，全部交予乙方經營，以保障乙方的利益。

(3) 乙方如無法完成甲方的需求或未能合符甲方的服務要求，甲方有權單方面聘用其他運輸公司及收回授權予乙方使用的中港直通汽車牌照。

(4) 乙方并非受聘予甲方。乙方收取甲方的中港運輸費用標準，必須低於市場價格。乙方如需其他收費或提高運輸價格，需獲甲方同意方可。

(5) 乙方單方面全部負責所有的有關中港運輸的責任和管理以及經營費用，包括聘請人員、經營成本、購買運輸汽車、工具、人員及汽車保險、汽車牌費、汽車維修等一切開支。

(6) 乙方及所有屬於乙方聘請的人員，必須嚴格遵守及嚴禁違反中國政府和香港特別行政區政府的法律。如有違法事件發生，其法律責任及經濟損失，全部由乙方負責和承擔，均與甲方無關。在辦理直通汽車牌照時，乙方繳交予國內有關部門的按金，則屬於乙方所有，甲方無權沒收，并且甲方也無需賠償等值的按金予乙方。

為了顧全雙方的利益，甲方雙方必須履行本協議書條款。本協議書一式二份，享有同等的法律效力。有效期由2000 年11 月01 日起至2005 年10 月31 日止。如任何一方要求修改有關條款或提前終止協議期以及提早簽署新的延續協議，可通過友好協商解決。” [Emphasis added]

8.  As can be seen from the above, the unit rate for each trip payable by the defendant to the plaintiff was not stated in the 2000 Agreement.  However, it was common ground that the unit rate adopted by the parties was (until the making of the 2004 Agreement referred to below) HK$2,500 per trip.  In addition, the plaintiff was paid extra sums if he assisted in the unloading of distilled water after they were transported to Hong Kong.  Those extra payments to the plaintiff is not part of the dispute between the parties in this action.

9.  The 2000 Agreement was for a period of 5 years, viz., from 1 November 2000 to 31 October 2005.  However, before the term of the 2000 Agreement expired, the parties had entered into another written agreement in Chinese dated 1 April 2004 (“2004 Agreement”).  The material parts of the 2004 Agreement read as follows:

“                                     中國運輸單價協議書

甲方：日之泉有限公司

乙方：陳建林　先生(承運商)

鑒於有效地協調中港運輸業務和有利於雙方的合作與整體發展，經友好協商，甲乙雙方同意並簽定以下協議：

(1) 甲方同意 ：中港運輸每車次單價(每車次載重量8,000 公斤為準)以HK$2,280.00 元為標準計付予乙方，並每年最少保證有288 車次的貨量供乙方付運，如甲方未能提供相關車次的貨量供乙方付運時，甲方必須以全年288 車次的數量以HK$2,280.00 元的單價標準，全數支付等額的運輸費用予乙方。

(2) 乙方同意：鑒於甲方每年均有慈善及擴展市場的需要，如甲方提供予乙方的運輸車次數量超越288 車次時，超越最前的車次數量內，其中6 次以內的數量，必須以HK$1,000.00 元的每車次單價標準計算予乙方之收益，超越6 車次數量後的運輸單價，將回復每車次以HK$2,280.00 元的單價標準計算予乙方。

          此協議由甲乙雙方各持一份，生效日期由2004年04月01日至2005年03月31日止，特此為憑。”

10.  There is a minor dispute between the parties over the effect of the 2004 Agreement.  According to the plaintiff, the 2004 Agreement replaced the 2000 Agreement.  The defendant, on the other hand, contended that the 2004 Agreement only supplemented the 2000 Agreement.  I do not think this particular issue affects the resolution of the dispute between the parties.  In my view, the 2004 Agreement had the effect of vary the 2000 Agreement.  As its title indicated, the focus of the 2004 Agreement was the unit rate, which was reduced from HK$2,500 (not stated in the 2000 Agreement but, as stated above, agreed by the parties) to HK$2,280 per trip.  Besides, it set out more details (such as the capacity of the goods vehicle to be used by the plaintiff for transporting distilled water and the number of trips guaranteed for a year) which were not expressed in the 2000 Agreement.  Another material change is the duration of the contract. The 2004 Agreement stated that the contractual arrangement between the parties was to expire on 31 March 2005, instead of 31 October 2005 as stipulated in the 2000 Agreement.

11.  In August 2004 (about 4 months after the signing of the 2004 Agreement), the plaintiff changed his 16-ton goods vehicle to a 24-ton goods vehicle.  As a result, the unit rate for trip was by mutual agreement revised from HK$2,280 to HK$3,420.  This represented a 150% increase, which was consistent with the 150% increase in the capacity of the plaintiff’s goods vehicle (from 16-ton to 24-ton).  Subsequently, this unit rate was further reduced by mutual agreement to HK$3,380 per trip.

12.  Since the 2004 Agreement would expire on 31 March 2005, the parties started to negotiate a renewal of their contractual arrangement in March 2005.  From the documentary evidence produced at trial, it is clear that the negotiation started in around late March 2005. By a letter dated 22 March 2005, the plaintiff proposed to reduce the unit rate from HK$3,380 to HK$3,350 per trip. By another letter dated 27 March 2005, the plaintiff offered to further reduce the unit rate to HK$3,333. Neither of these proposals were accepted by the defendant. Instead, Mr Lam on behalf of the defendant sent to the plaintiff a letter dated 26 April 2005.  This April letter is of some importance, as it shows the attitude of the defendant at the time.  The relevant parts of this April letter read as follows:

“有關今年度中港貨運單價，經本公司詳細地考慮了雙方的情況，希望定每車次為：HK$3,180.00 元，並請貴運輸公司回覆為要。

以目前香港的運輸和市場情況，本公司認為，應實際地評估雙方的利益：

(1) 貴公司承接本公司貨運已有3年多，並獲取了一定的利潤，現今並已選用了較大的運輸車輛，單人工方面，已節省了50%，年達數萬元，在正常的情況下，可不用再另聘街車而增加自己的運輸利潤。早前貴公司所要求的每車次：HK$3,333.00 元，即每車次只減了HK$153.00 元，預計全年減車費也不過是2 萬多元，加上貴公司每年有落貨收入，雖然落貨要付出辛勞，但其他行業並不一定有此收益，香港人的工作現象，正所謂想做而無機會做。

(2)     本公司最大的優勢是運輸訂單，而最不利的成本過高，以商言商方面，本公司定要降低成本，以目前而言，本公司並不一定堅持目前的營運模式，隨時會作出結業而外判的決定，也請貴公司明瞭一切，這是本公司今年度內不再與貴公司及溢陞運輸公司簽署任何合約的主要原因。” [Emphasis added]

13.  As can be seen from the above, the defendant counter-offered a lower unit rate of HK$3,180. Besides, the defendant stated that it wanted to reduce the costs of transportation and thus did not see fit to sign any contract with the plaintiff and another transportation company.

14.  There is not much dispute between the parties as to what happened between them up to the issue of this letter of 26 April 2005.  However, the parties part their way as to what happened thereafter.

The plaintiff’s case

15.  According to the plaintiff, he negotiated further with Mr Lam after he received Mr Lam’s letter of 26 April 2005 and that they reached an agreement on the unit rate of HK$3,300 as well as the other details such as the number of trips guaranteed by the defendant and the term of the agreement. At the suggestion of Mr Lam, the plaintiff proceeded to draft a new agreement in Chinese. This new agreement, contended the plaintiff, was eventually signed by the parties on 28 or 29 April 2005 (“Alleged 2005 Agreement”). The relevant parts of this Alleged 2005 Agreement read as follows:

“ 協議書

甲方：香港日之泉有限公司

乙方：陳建林　身份證為：......(承運商)

甲、乙雙方經友好協商、同意達成以下協定：

1、甲方同意將所有涉及中港貨運的業務全部交予乙方經營，以保障乙方的利益。

2、甲方同意中港運輸每車定價為港幣叁仟叁佰元正(HK$3300 元正)並每年最少保證有260 車次的貨量供乙方付運。如甲方未能提供相關車次的貨量供乙方付運時，甲方必須以全年260 車次的數量，以港幣捌拾伍萬捌仟元正(HK$858000 元正)全數支付等額的運輸費給乙方。

3、鑒於甲方每年均有慈善及擴展市場的需要，如乙方超越260 車次時，乙方以每車以港幣壹仟元正(HK$1000 元正)的單價標準計算。

本協定壹式貳份，甲乙雙方各執壹份為據，如未注明事項，甲方雙方可協商解決，生效日期由2005 年04 月01 日至2014 年03 月31 日”

16.  In the Alleged 2005 Agreement, the term was stated to be from 1 April 2005 to 31 March 2014, viz., a term of 9 years. According to the plaintiff, this was a mistake made by him when he drafted the 2005 Agreement and a mistake not spotted by the defendant. Instead of 9 years, it is the plaintiff’s case that his oral agreement with Mr Lam was that the new contract should be for a term of 10 years. 

17.  According to the plaintiff, the defendant only paid him at the unit rate of HK$3,300 per trip for the month of April 2005. As regards the transportation charges for the months after April 2005, it is the plaintiff’s case that Mr Lam told him that the defendant had financial or cash-flow difficulty and thus could only pay the plaintiff at the unit rate of HK$2,400 per trip plus HK$60 car parking charges (i.e. a total of HK$2,460 per trip).  Mr Lam, according to the plaintiff, promised to repay the difference between HK$3,300 and HK$2,460 per trip at the end of each financial year.

18.  By a notice in Chinese dated 30 May 2006, the defendant terminated the engagement of the plaintiff with effect from 1 June 2006.  This, according to the plaintiff, constituted a wrongful termination of the Alleged 2005 Agreement. Further, it is the plaintiff’s case that for the period from April 2005 to May 2006, the defendant only paid him a total of HK$479,080. Contrary to the agreement made with Mr Lam referred to in the last paragraph, the defendant failed to pay the balance between HK$3,300 and HK$2,460 per trip for this period. On this basis, the plaintiff commenced this action and claimed against the defendant the sum of HK$7,242,920 (i.e. HK$858,000 per annum x 9 years less the sum of HK$479,080 already paid by the defendant).

The defendant’s case

19.  The defendant disputes the making of the Alleged 2005 Agreement.  According to the defendant, the events happened as follows.

20.  When the parties were negotiating the new unit rate in March 2005, Mr Lam sought to ascertain the charging rates of other transportation companies. Through the introduction by a friend, Mr Lam received a fax dated 29 March 2005 from a Ever Gain International (HK) Ltd. (“Ever Gain”).  Ever Gain’s fax showed an attractive rate. However, the exact loading capacity of the goods vehicle to be used by Ever Gain was not clear from its fax and thus had to be followed up. For reasons explained by Mr Lam, the follow-up was not done immediately.  Eventually, the defendant found out that Ever Gain could provide transportation at a rate cheaper than that proposed by the plaintiff.  Besides, the plaintiff had not accepted the offer of HK$3,180 per trip. As a result, according to the defendant, the parties had not entered into any contract but had simply agreed that the unit rate of HK$2,460 should be adopted for transportation done by the plaintiff since May 2005. As for the month of April 2005, it was the defendant’s case that an ad hoc arrangement of HK$3,300 per trip was agreed between the parties.

21.  The defendant denied the making of the Alleged 2005 Agreement. Although Mr Lam accepted that the signature on the Alleged 2005 Agreement does look like his signature, he denied ever having agreed to sign the Alleged 2005 Agreement. In short, the defendant does not admit that the relevant signature on the Alleged 2005 Agreement was in fact signed by Mr. Lam; alternatively, if that signature is in fact Mr. Lam’s signature, the plaintiff must have procured it by some untoward means (see paragraphs 29 to 32 below). Further, according to Mr Lam, he would not ask the plaintiff to draft or prepare a contract even if an agreement had been reached. In addition, the defendant contended that the Alleged 2005 Agreement has the following suspicious features.

22.  First, unlike the 2000 Agreement and the 2004 Agreement (which are not in dispute), the Alleged 2005 Agreement was not printed on the defendant’s letterhead or company paper. 

23.  Second, the Alleged 2005 Agreement contained a simplified Chinese character “簽”, which is not used by the defendant in contracts to be signed in Hong Kong. 

24.  Third, the name of the defendant was stated as “香港日之泉有限公司” in the Alleged 2005 Agreement, whereas the correct name should be “日之泉有限公司”. The defendant contended that Mr Lam, as a director, would not have signed an agreement bearing an incorrect name of the defendant.

25.  Fourthly, unlike the 2000 Agreement and the 2004 Agreement, the Alleged 2005 Agreement did not bear the company chop of the defendant. According to the defendant, Mr Lam would affix the company chop every time he signed an agreement on behalf of the defendant. 

26.  Fifthly, the signature on the Alleged 2005 Agreement which purports to be the signature of Mr Lam is in Chinese. However, during the past 10 years or so when Mr Lam signed agreements or documents in Hong Kong, he only signed his name in English. Mr Lam, according to the defendant, only signed documents in Chinese if the documents were for use in Mainland China.

27.  Sixthly, unlike the 2004 Agreement, the Alleged 2005 Agreement does not specify the loading capacity of the goods vehicle to be used. According to the defendant, the loading capacity of the goods vehicle is of utmost importance as it would directly affect the costs per trip.

28.  The defendant reported the matter concerning the Alleged 2005 Agreement to the police in September 2006. The statement given by Mr. Lam to the police was adduced at this trial. In that statement, Mr. Lam denied the making of the Alleged 2005 Agreement. Up to the time of this trial, apparently no action has been taken by the police, although it is not clear whether the police withholds action so as to await the result of this civil dispute.

29.  The defendant has also offered an explanation as to how the plaintiff manage to obtain Mr Lam’s signature on the Alleged 2005 Agreement. Put briefly, the defendant’s explanation is as follows.

30.  Mr Lam set up a company called Dongguan Sunray Cave Distilled Water Limited (東莞日之泉蒸鎦水有限公司) (“PRC Company”) in Mainland China in around December 1993. At the material time, Mr Lam resided in Hong Kong whereas his father resided in Mainland China. Mr Lam’s father assisted in the management and operation of the PRC Company, although Mr Lam was until July 2006 the director and legal representative of the PRC Company.

31.  In around 2003, Mr Lam decided to change the mode of operation of the PRC Company. A number of application documents had to be prepared and filed with the relevant government departments in Mainland China. Initially, Mr Lam’s father brought the relevant documents to Hong Kong for Mr Lam to sign. When SARS broke out, the delivery of such documents between Mainland China and Hong Kong was handled by the plaintiff since he in any event had to drive between Mainland China and Hong Kong. 

32.  For the sake of convenience and with a view to avoiding delay, there were a few occasions on which Mr Lam’s father asked Mr Lam to sign on blank papers so that they could be used in case any urgent documents had to be submitted to the relevant government departments. According to Mr Lam, he had under such circumstances signed at the right bottom part of blank A4 size papers. After such blank papers were signed, they were put into an envelope and the plaintiff was instructed to deliver them to Mr Lam’s father. According to the defendant, there is a “possibility” that the plaintiff obtained one or some of the signed blank papers from the office of Mr Lam’s father at the PRC Company. 

Witnesses

33.  At this trial, the plaintiff is the only witness called to support the plaintiff’s claim. No other witness was called by the plaintiff.

34.  On the other hand, the defendant called three witnesses at this trial. The first witness is Mr Lam himself. The second one is Mr Tse Kwong Leung (“Mr Tse”), who was at all material times an employee of the defendant. By the time of this trial, Mr Tse had worked for the defendant for over 14 years. He was responsible for managing the warehouse of the defendant and had contacts with the plaintiff. The third witness is a Mr Fong Kwok Wa Alvin (“Mr Fong”), who is a friend of Mr Lam and who had on a few occasions come across the plaintiff. All three of them testified in support of the defendant’s case.

35.  It is perhaps worth noting that neither side has called any handwriting expert to deal with the signature on the Alleged 2005 Agreement which purports to be Mr Lam’s signature. In other words, there is no expert evidence before this court on the genuineness or otherwise of the signature in question. I mention this solely for the purpose of stating what evidence has been adduced at the trial, and not by way of criticism. Considering the way in which the parties conducted their cases (especially the defendant’s stance towards the signature on the Alleged 2005 Agreement), the absence of handwriting expert evidence is not too surprising.

Issue and approach

36.  It is evident from the above summary that the only real issue is whether the parties had entered into the Alleged 2005 Agreement. The dispute is one of fact and its resolution turns on the inherent probability of their respective contentions and the credibility of the witnesses called by the parties. 

37.  Counsel for the plaintiff submitted that the proper approach is the one explained in Yu Ming Investment Ltd v Peng Ru Chuan, Richard, unrep., HCA814/2002 (5 May 2005), where Chung J explained as follows (at para. 13):

“There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest.”

38.  I agree with the plaintiff’s counsel that the above-cited approach as explained by Chung J is applicable in the present case.  In addition, given the nature of the present dispute, the following often-quoted observation by Lord Nicholls of Birkenhead in Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563 (at p. 586) is also relevant:

“The balance of probability standard means that a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability ... ... Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.

Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established.  Ungoed-Thomas J expressed this neatly in Re Dellow’s Will Trusts [1964] 1 WLR 451 at p. 455: ‘The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it.’”

See also: Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387, per Lord Scott of Foscote NPJ at para. 625-626.

39.  In considering the inherent probability or improbability of the parties’ contentions and the credibility of witnesses, there are bound to be factors that go either way or that are neutral. Save in the plainest cases, it is not unusual that each side has the support of certain objective facts. The present case is no exception. At the end of the day, this court has to consider and weigh all the relevant considerations as well as to take an overall view of the matter. The following discussion deals with the main matters that the parties had raised at the trial or that this court considers material. Insofar as may be necessary, I would stress that although the following discussion does not deal with each and every point raised by the parties at the trial, I have considered all their submissions before reaching the conclusion set out at the end of this judgment.

Inherent probability

40.  Having considered all the relevant circumstances and applying the approach discussed in paragraphs 37 and 38 above, I find it inherently improbable that the defendant would have made the Alleged 2005 Agreement. My reasons are as follows.

41.  First, the objective circumstances and the parties’ respective bargaining position at the material time are important considerations. 

42.  As noted above, the parties’ negotiation started in March 2005.  The plaintiff sent two letters of 22 and 27 March 2005 to the defendant.  The first offered a unit rate of HK$3,350 per trip. This offer was already HK$50 cheaper than the rate of HK$3,380 he was paid at the time. Yet, this offer was not accepted by the defendant. The plaintiff then reduced his offer to HK$3,333 in his letter of 27 March 2005. This further reduced offer was also not accepted. Then came the defendant’s letter of 26 April 2005, whereby the defendant counter-offered the unit rate of HK$3,180 per trip. More importantly, as can be seen from paragraph 12 above, the defendant stated in no uncertain term in this letter of 26 April 2005 that it wanted to reduce its transportation costs and would not sign any contract with the plaintiff or the other transportation company named therein. 

43.  According to the plaintiff, he negotiated the matter with Mr Lam after he received this letter from the defendant. Putting aside the undesirable features of the plaintiff’s evidence in this aspect (which will be dealt with below), I find it inherent implausible that the defendant would fundamentally change its attitude within a few days’ time, viz., from 26 April 2005 (the date of the defendant’s letter) to 28 or 29 April 2005 (the date on which the Alleged 2005 Agreement was, according to the plaintiff, signed by the parties). Not only is there a complete absence of objective evidence to explain why the defendant would change its position within such a short period of time, the objective circumstances prevailing at the time do not sit well with the plaintiff’s case.

44.  It is clear from the objective evidence that the defendant was at all material times in a better bargaining position than the plaintiff. The defendant was the only customer of the plaintiff, whereas the defendant would be at liberty to continue to retain the plaintiff or choose to retain another contractor (such as Ever Gain). The difference in the parties’ bargaining position can also be seen from the reduction of unit rates paid by the defendant. Since the making of the 2000 Agreement, the defendant managed to get reduction of the unit rate, first from HK$2,500 per trip to HK$2,280 per trip and then (after the plaintiff changed to a 24-ton goods vehicle) from HK$3,420 to HK$3,380. Apart from the unit rate stated in the Alleged 2005 Agreement (an increase from the defendant’s offer of HK$3,180 to HK$3,330) which is in dispute, the plaintiff had never declined the defendant’s request to reduce the unit rate. Besides, on the evidence, the relevant transportation market at the time was competitive.  The quotation from Ever Gain obtained by Mr. Lam in late March 2005 also illustrated this point. Given these circumstances and looking at the matter from the commercial point of view, there was simply no objective basis to explain the defendant’s complete change of stance as alleged by the plaintiff.

45.  The only explanation put forward by the plaintiff is the fact that he changed to a larger (24-ton) goods vehicle in August 2004.  According to the plaintiff, Mr Lam agreed to enter into the Alleged 2005 Agreement with him after he explained to Mr Lam that he had to pay monthly instalments for this new goods vehicle. I find this explanation inherently implausible. Mr Lam was aware of the plaintiff’s change to a 24-ton goods vehicle even before the negotiation started in March 2005.  The defendant’s letter dated 26 April 2005 stated this fact as a reason to justify the defendant’s proposal for a lower unit rate (see paragraph 1 of the letter). Further, it is common ground that the parties by mutual agreement revised the unit rate from HK$2,280 to HK$3,420 after the plaintiff changed to a 24-ton goods vehicle. Notwithstanding this, the defendant’s letter of 26 April 2005 still counter-offered HK$3,180 per trip and still stated that it did not intend to sign a new contract with the plaintiff or the other transportation company. In addition, the defendant had the alternative of engaging Ever Gain which had also sent a quotation to the defendant. More importantly, on the evidence, it is plain that the defendant (through Mr. Lam) was handling this matter purely as a commercial deal. Even though they are both from Dongguan and were distant relatives (facts which the plaintiff’s counsel sought to stress), it is unlikely that Mr Lam would have agreed to enter into the Alleged 2005 Agreement so as to assist the plaintiff, which fixed a unit rate higher than HK$3,180 and for a period of 10 years (though, by mistake, the Alleged 2005 Agreement only provided for 9 years). 

46.  The unusually long-term of the Alleged 2005 Agreement will be discussed below. At this juncture, it would only be necessary to point out that on the plaintiff’s own case, he would have completely repaid the price for the new (24-ton) goods vehicle in 3 years’ time (3 year from August 2004). Such a period of 3 years is usual in the context of hire-purchase or lease of a vehicle. Hence, even if Mr Lam were to take into account the plaintiff’s position and were willing to assist him, it remains unlikely that he would have agreed to enter into an agreement for 10 years (especially with a fixed unit rate higher than the defendant’s counter offer of HK$3,180 together with a guaranteed number of trips per year).

47.  Second, the length of the term claimed to have been agreed by the parties (10 years) or as stated in the Alleged 2005 Agreement (9 years) is another important consideration in the context of the present case. From any angle, 9 or 10 years is a long period for a contract of this nature.

48.  One can understand that in some cases, a long-term contract may protect the position of both sides to the contract. However, as one would expect in a normal commercial context, a long-term contract would usually have provisions dealing with adjustment of the consideration and early termination. I fully appreciate I am not dealing with sophisticated contracts prepared by experienced commercial solicitors. However, these are just ordinary commercial considerations that people like Mr Lam and the plaintiff would take into account. Clauses (3) and (4) of the 2000 Agreement, which was not drafted by solicitors but by Mr Lam, demonstrates this point as well. In the Alleged 2005 Agreement, none of such provisions existed. On the contrary, it contained a fixed unit rate of HK$3,300 per trip together with a guarantee for 260 trips per annum for the entire term of the contract. 

49.  Considering the matter objectively, it is inherent implausible that the defendant would have agreed to such a long-term contract. First, the defendant’s letter of 26 April 2005 started off by stating that it was only dealing with the unit rate for the year of 2005/2006. This shows that the defendant did not intend to negotiate any arrangement for more than a year, let alone a contract for 10 or 9 years. Second, as Mr Lam explained in his testimony and which was not challenged by the plaintiff, the defendant’s main market at the time was Mainland China. The defendant only maintained a commercial presence in Hong Kong so that it could market its distilled water as a Hong Kong brand. From a business point of view, this is perfectly understandable. That being the case, there was simply no reason or motive for the defendant to guarantee a minimum of 260 trips per year for a total or 10 or 9 years. Given its marketing policy, the defendant’s market in Hong Kong might further reduce with the result that the need for transportation between Mainland China and Hong Kong would also reduce. 

50.  In this regard, the number of trips guaranteed for each year as stated in the Alleged 2005 Agreement is also relevant. Under the 2004 Agreement which was based on the previous 16-ton goods vehicle, a total of 288 trips per year was guaranteed. If one is to take into account the 150% increase in capacity resulted from the change of 16-ton goods vehicle to a 24-ton goods vehicle, the number of guaranteed trips for a 24-ton goods vehicle would be 192 trips per year (16 tons times 288 trips, and then divided by 24 tons = 192 trips). However, in the Alleged 2005 Agreement, it is stated that the number of trips guaranteed was 260. Bearing in mind the plaintiff had changed to a 24-ton goods vehicle by the time of the Alleged 2005 Agreement, this means that the defendant agreed to guarantee 68 trips (260 trips less 192 trips) more under the Alleged 2005 Agreement than under the 2004 Agreement. This, in my view, is again inherent improbable in the circumstances of this case. In particular, there is simply no objective evidence to explain why the defendant would have agreed to such a significant increase for a period or 10 or 9 years.

51.  The parties’ previous course of dealings also does not sit well with the plaintiff’s claim for a 10-year or 9-year contract.

52.  It is true that the 2000 Agreement was for a term of 5 years (which in any event is considerable shorter than 10 years or 9 years).  However, the 2000 Agreement did not contain any fixed unit rate or any guaranteed minimum number of trips per year. Instead, clause (4) of the 2000 Agreement expressly provided that: (1) the unit rate charged by the plaintiff had to be below the market rate; and (2) if the plaintiff wanted to adjust the price, it had to have the consent of the defendant. Further, clause (3) of the 2000 Agreement expressly provided that the defendant had a right to terminate the agreement in the event the plaintiff failed to perform to the satisfaction of the defendant. As discussed above, such provisions were noticeably absent in the Alleged 2005 Agreement. 

53.  In the 2004 Agreement, the unit rate and the minimum number of trips were fixed. However, it is important to note that the 2004 Agreement only has a term of one year. 

54.  Considering the 2000 Agreement and the 2004 Agreement in the context of this case, they show that the defendant was unlikely to agree to a long-term contract with fixed unit rate and a minimum number of trips per year. This is consistent with the analysis set out in paragraphs 48 to 50 above. 

55.  Although the plaintiff was asked during the trial, he was unable to offer any satisfactory explanation as to why the defendant would agree to such a long-term contract with such provisions as contained in the Alleged 2005 Agreement. In paragraph 61 of his closing submissions, counsel for the plaintiff sought to stress that Mr Lam is a generous person and that the two of them are both from Dongguan and are relatives. On that basis, the plaintiff’s counsel argued that one cannot exclude the possibility that Mr Lam was consciously giving a generous deal to the plaintiff.  I find this contention difficult to accept. From the evidence, Mr Lam was continuously seeking to reduce the unit rates payable to the plaintiff. This plainly shows that Mr. Lam was very costs-conscious in respect of matters concerning the defendant’s business, even though (as the evidence shows) he might be generous to his good friends. Looking at the letter dated 26 April 2005 mentioned above, the defendant was plainly treating this matter as a commercial deal. Bearing all these factors in mind, it is improbable that Mr Lam would have agreed to make the Alleged 2005 Agreement so as to be generous to the plaintiff.

56.  Third, the contemporaneous documents and conduct of the parties are also relevant. Amongst others, the payments made by the defendant to the plaintiff since May 2005 is of particular importance. The contemporaneous documents, in the form of monthly statements and bank payment slips, in respect of the transportation works done by the plaintiff since May 2005 all show that the defendant consistently paid the plaintiff at the unit rate of HK$2,460 instead of HK$3,300 as stated in the Alleged 2005 Agreement. 

57.  In this regard, the plaintiff’s explanation as to why he was only paid HK$2,460 instead of HK$3,300 per trip is of course relevant.  However, putting aside whether or not the plaintiff’s explanation in this regard is satisfactory (which will be discussed below), I find it difficult to see why the monthly statements did not state the agreed amount of HK$3,300, the payment received and the balance payable if the plaintiff’s version of events were true. Besides, considering the past history, if the defendant did in fact have financial or cash-flow difficulties, it is more likely than not that Mr. Lam would have asked for a reduction in the unit rate rather than putting forward the arrangement contended by the plaintiff. On the whole, I find that the contemporaneous documents are more consistent with the defendant’s case than the plaintiff’s case.

58.  As regards the month of April 2005, it is true that the defendant had paid the plaintiff at the unit rate of HK$3,300. However, in view of the objective circumstances of this case and also for the reasons explained below, I accept the testimonies of Mr Lam and Mr Tse that this was only an ad hoc arrangement put in place solely for the month of April 2005; the unit rate of HK$3,300 was not paid pursuant to the Alleged 2005 Agreement. In particular, one has to bear in mind that although the 2004 Agreement expired on 31 March 2005, the parties were still negotiating the new arrangement up till the end of April 2005. Hence, although I can understand the plaintiff’s criticism of the defendant’s evidence in this particular aspect (which will be discussed below), the defendant agreeing to an ad hoc arrangement for the month of April 2005 is understandable and not inherently implausible.

59.  Fourth, to a lesser extent, the termination notice of 30 May 2006 is also relevant (though not determinative). The termination notice made no reference at all to the Alleged 2005 Agreement. Had the Alleged 2005 Agreement been made as the plaintiff contended, it would be more likely that the defendant would have referred to it in the termination notice.  In particular, one would expect the defendant to say that it was giving notice to terminate the Alleged 2005 Agreement. The absence of any such reference shows that the defendant did not think there was the existence of the Alleged 2005 Agreement.

60.  In this regard, counsel for the plaintiff argued that there would not be a need to issue the termination notice if the parties had not made the Alleged 2005 Agreement (paragraphs 23 and 24 of the plaintiff’s closing submissions). I do not agree. The defendant had been engaging the plaintiff’s transportation service on a monthly basis for over a year since April 2005. At the very least, the defendant would have to inform the plaintiff that the latter’s service was no longer required. Viewed thus, a written notice such as the termination notice of 30 May 2006 does not support the plaintiff’s claim.

61.  Fifth, comparing the case advanced by the plaintiff with that advanced by the defendant, I am of the view that the defendant’s case is inherently more likely. As stated in the defendant’s letter dated 26 April 2005, the defendant did not intend to sign any further contract with the plaintiff and the other transportation company. Given the previous working relationship and the reduced unit rate of HK$2,460, it is understandable that the defendant continued to engage the plaintiff after the end of April 2005. Such a monthly arrangement was consistent with the intention stated in the defendant’s letter of 26 April 2005 and the business need of the defendant. On the other hand, as the plaintiff had been working for the defendant for so long and since his only customer was the defendant, it is equally understandable that the plaintiff acceded to this month-to-month arrangement. Besides, as pointed out above, the transportation industry at the time was competitive. From the defendant’s point of view, the opportunity to continue to take the plaintiff’s order (albeit on a month to month basis, as opposed to a fixed term contract) would remain attractive.

62.  The above analysis has not taken into account the various features of the Alleged 2005 Agreement that the defendant contended to be suspicious (see paragraphs 22 to 27 above). Of the six features relied on by the defendant, I find the first (not printed on the defendant’s company letterhead), fourth (absence of the defendant’s company chop) and fifth (Mr Lam’s signature in Chinese instead of English) relevant but not conclusive. These three features add to the doubt that one may have over the genuineness of the Alleged 2005 Agreement, especially when one compare the Alleged 2005 Agreement with the 2000 Agreement and the 2004 Agreement (which show the mode of how the parties dealt with their agreements). The other three suspicious features relied on by the defendant are, in my view, neither here nor there. 

63.  By disputing the making of the Alleged 2005 Agreement, the defendant was in effect suggesting that the plaintiff either forged Mr Lam’s signature or knowingly tendered a forged document. Plainly, this is a very serious allegation. Apart from the need to bear in mind the observation in Re H (Minors) (Sexual Abuse: Standard of Proof) (see paragraph 38 above), this Court should of course consider whether it is inherently probable that the plaintiff would go all the way to create the Alleged 2005 Agreement when he knows that it had not been reached with the defendant. Besides, this Court would have to consider whether it is inherently probable that the plaintiff could manage to create the Alleged 2005 Agreement if Mr Lam had not signed on the document with all the terms stated therein.

64.  These are admittedly difficult questions, and I have pondered over them for quite some time. However, having taken into account the matters discussed above, I come to the view that it is inherently improbable that the defendant had made the Alleged 2005 Agreement. 

Credibility of witness

65.  In considering the credibility of the parties’ witnesses, I have taken into account the fact that the events in dispute took place in April 2005 while the trial took place in the second half of 2009. Given this lapse of time, the witnesses’ inability to recall exactly what had happened at the material time is to a certain extent understandable. Besides, I have taken into account (but without any disrespect to the plaintiff) the fact that the plaintiff is a transportation contractor and apparently did not receive much education whereas Mr Lam is a seasoned business; thus it is understandable that their ability to articulate their points may be different and that an appropriate degree of latitude should be given to the plaintiff when considering his oral testimony.

66.  Having considered the testimony of the plaintiff and having observed his demeanour when he testified at the witness box as well as bearing in mind the factors discussed in the last paragraph, I come to the view that the plaintiff is not a credible or reliable witness. Instead, not only is the plaintiff’s testimony full of inconsistencies, he was from time to time evasive. A few examples will demonstrate the unsatisfactory nature of the defendant’s testimonies.

67.  The first aspect is the plaintiff’s testimony on the negotiation between him and Mr Lam that led to the making of the Alleged 2005 Agreement.

68.  As noted above, the defendant stated in its letter dated 26 April 2005 that it would not sign any contract with the plaintiff. Yet, according to the plaintiff, the defendant fundamentally changed its stance after a few days as a result of further negotiation. What happened during those few days and how the negotiation was conducted are thus of utmost importance in considering the plaintiff’s credibility. However, the plaintiff’s oral testimony in this aspect is far from satisfactory.

69.  In paragraph 9 of his Affirmation filed in support of the plaintiff’s application for summary judgment, the plaintiff asserted that he had a telephone conversation with Mr Lam after he received the letter of 26 April 2005 and an agreement was reached. There was no mention of any face-to-face negotiation in this Affirmation. Effectively the same picture was painted by the plaintiff when he gave his evidence-in-chief. However, a different picture emerged when one considers the plaintiff’s reply to the defendant’s second request for further and better particulars of the Amended Statement of Claim (dated 29 October 2007) and his testimony under cross-examination. In particular, the plaintiff suggested during cross-examination that he called Mr Lam on the same day after he received the letter of 26 April 2005. Although the plaintiff was adamant that he managed to agree on the unit rate during this telephone conversation, the plaintiff’s evidence as to the further negotiation was unsatisfactory and at times self-contradictory. Paragraph 8 of the defendant’s closing submissions dated 28 December 2009 set out the unsatisfactory features of the plaintiff’s testimony in this aspect and I agree with those submissions.

70.  In the course of the trial, there was a dispute as to whether the plaintiff could manage to call and speak to Mr Lam. Although I accept that the plaintiff did at the time have the various phone numbers of Mr Lam, the overall evidence does not really support the telephone conversations with Mr Lam which the plaintiff alleged during the period from 26 to 29 April 2005. During the trial, a Call Details Report (printed on 29 November 2009) was produced by the plaintiff. This Call Details Report, however, only shows two telephone calls to Mr Lam’s mobile phone (at the phone number specifically stated in Answer 1(d)(iv) of the plaintiff’s reply to the defendant’s 2^nd request for further and better particulars of the Amended Statement of Claim dated 29 October 2007) but the first one was made as late as 28 April 2005. Contrary to the allegations of the plaintiff, this Call Details Report does not show any calls being made to Mr Lam’s mobile phone on 26 or 27 April 2005.

71.  The second aspect is the plaintiff’s allegations concerning the drafting of the Alleged 2005 Agreement. 

72.  In his said Affirmation, the plaintiff suggested that Mr Lam “urged” him to draft the new agreement. While I would not place excessive weight on the word “urged” used in his said Affirmation, it is plain from the tenor of the said Affirmation that the plaintiff wanted to paint a picture that the agreement was reached very quickly and then Mr Lam invited him to draft the new agreement. In his Affirmation filed in answer to interrogatories served by the defendant, the plaintiff suggested that Mr Lam called him several times for the purpose of asking him to prepare the new agreement. When cross-examined, he initially said Mr Lam called him one to two times and then changed his evidence that he could not remember. Besides, he said that Mr Lam did not “urge” him to draft the new agreement.

73.  In addition and more importantly, the plaintiff was asked as to whether he had shown the draft new agreement to Mr Lam. His answers were also inconsistent. At one time, he said he had not shown the draft to Mr Lam. At another point of time during cross-examination, he said he could not recall. Interestingly, when asked why he did not show the draft to Mr Lam, the plaintiff said he did not find it necessary to do so and that Mr Lam did not ask for the draft. If these latter answers were true, the plaintiff should be quite clear that he had not shown the draft new agreement to Mr Lam (since he did not find it necessary to do so). It is difficult to see why he would have said he could not recall whether he had shown the draft to Mr Lam.

74.  In any event, I find it unlikely that Mr Lam would have asked the plaintiff to prepare the draft for the Alleged 2005 Agreement.  Without disrespect, the plaintiff was a transportation contractor with limited education. On the other hand, Mr Lam was a seasoned businessman with operation in both Hong Kong and Mainland China. Mr Lam also testified that normally he would do the drafting himself. It is not in dispute that the 2000 Agreement and the 2004 Agreement were prepared by the defendant. Even if Mr Lam did not want to draft the new agreement himself, he could certainly have instructed his staff to do the drafting. Objectively, there was at the time no reason why Mr Lam would have left the drafting to the plaintiff. In my view, the plaintiff put up the allegation that he was asked by Mr Lam to prepare the Alleged 2005 Agreement so as to explain why the Alleged 2005 Agreement (unlike the 2000 Agreement and the 2004 Agreement) was not printed on the defendant’s letterhead.

75.  The plaintiff’s explanation as to the difference between HK$3,300 and HK$2,460 is also telling. As noted above, it is the plaintiff’s case that soon after the making of the Alleged 2005 Agreement, Mr Lam said to him that he could only paid him HK$2,460 per trip due to the defendant’s financial or cash flow difficulty. According to the plaintiff, Mr Lam promised to repay the difference at the end of the financial year. When asked whether the plaintiff had demanded repayment of the difference before the commencement of this action, the plaintiff said that he had not actually made any such demand but had asked for a loan from Mr Lam. 

76.  I also find this part of the plaintiff’s testimony incredible. If his version were true, the plaintiff had a right to demand the difference.  I can understand that he might not want to push for repayment in too strong a way so as to avoid any unnecessary deterioration of relationship with Mr Lam. However, it is odd (to say the least) for the plaintiff to ask for a loan from Mr Lam. Mr Lam’s reason for non-payment, according to the plaintiff, was the defendant’s financial or cash flow difficulty. In such circumstances, the plaintiff either believed the reason allegedly put forward by Mr Lam or he did not accept the reason. If the plaintiff believed the reason allegedly put forward by Mr Lam, he would not have asked for a loan from Mr Lam since he would have known that Mr Lam did not have the financial means to make a loan to him. On the other hand, if the plaintiff did not believe the alleged reason put forward by Mr Lam, one would expect the plaintiff to ask for at least partial repayment from Mr Lam instead of asking for a loan. 

77.  As regards the evasive attitude of the plaintiff, one of the examples is when he was cross-examined as to whether the transportation industry was competitive and whether he knew the market rate charged by other transportation contractors. Under the 2000 Agreement, the plaintiff was obliged to charge the defendant at a rate below the prevailing marketing rate. Naturally, the plaintiff would have an interest to find out the prevailing market rates from time to time. Besides, since he was in the transportation industry, it would not be difficult for him to find out such information. Yet, when cross-examined, he tried hard to avoid giving a direct answer or simply suggested that he did not care about the rates charged by other transportation contractors.

78.  As regards the witnesses called by the defendant, I shall deal with Mr Fong first. Among the witnesses called by the parties, I regard Mr Fong as an independent witness. Although he is a friend of Mr Lam, he did not have any interest to serve. The outcome of this litigation does not in any way affect his interest. During the trial, I specifically asked the plaintiff whether he could offer any explanation as to why Mr. Fong would choose not to tell the truth. The plaintiff answered that he was not in a position to offer any explanation. If Mr Fong’s testimony is credible and supports the defendant’s case, it would have an impact on the determination of the parties’ dispute.

79.  According to Mr Fong, he went up to Mr Lam’s office on a date in late April 2005. Mr Fong explained that on that day, he took his car to a place near Mr Lam’s office for repair and thus went up to visit Mr Lam. While he was having a casual chat with Mr Lam, the plaintiff turned up at Mr. Lam’s office. Mr. Fong heard the plaintiff saying to Mr Lam that he agreed to continue to do the transportation for the defendant at a certain costs. He also heard that the plaintiff said words to the effect that he regretted that he did not accept the defendant’s earlier offer at a higher rate. 

80.  It is true that, as Mr Fong accepted, he only stayed at Mr Lam’s office for a short while after the plaintiff turned up. He explained that he found the situation embarrassing and thus left.  However, Mr Fong explained that the embarrassing situation is the reason why he could recall the meeting and what he saw and heard. I accept Mr. Fong’s explanation. Such kind of embarrassing situation did not happy often, and it is thus understandable that Mr. Fong could recall the meeting and what he saw and heard during the meeting.

81.  On the whole, I have no reason to reject Mr Fong’s evidence and I also find him an honest and reliable witness. Although his account of the meeting is a brief one, Mr Fong’s testimony is entirely consistent with the defendant’s case. Considering the contemporaneous documents, Mr Fong’s account of the meeting in late April 2005 supports the defendant’s case that after the letter of 26 April 2005 offering the unit rate of HK$3,180, there was further negotiation and the parties eventually agreed at the unit rate of HK$2,460. It follows that the parties had not entered into the Alleged 2005 Agreement. Had the parties made the Alleged 2005 Agreement, either the meeting testified by Mr Fong would not have taken place or the plaintiff would not have said at the meeting that he regretted he did not accept the earlier and higher offer (HK$3,180) from the defendant.

82.  The next witness is Mr Tse. Although he was at all material times an employee of the defendant and thus cannot be treated as an entirely independent witness, I find him a straight-forward and reliable witness. In particular, although I accept that the plaintiff did on occasions have chance to meet and speak to Mr Lam, I accept Mr Tse’s evidence that he was usually the person responsible for dealing with the transportation contractors including the plaintiff. This, in my view, is understandable since Mr Tse was at all material times responsible for managing the defendant’s warehouse. Given Mr Tse’s role and scope of responsibility, Mr Lam would certainly have informed Mr Tse if the Alleged 2005 Agreement had been signed. Yet, according to Mr Tse (and which I accept), he was not aware of the making of the Alleged 2005 Agreement.  Further, Mr Tse’s testimony concerning the payments at the unit rate of HK$2,460 per trip also supports the defendant’s case.

83.  Lastly, there is Mr Lam. In his closing submissions dated 28 December 2009, the plaintiff’s counsel sought to attack the credibility and reliability of Mr Lam as a witness (see paragraphs 32 to 45 thereof).  I accept that there are areas in Mr Lam’s testimony that are not as satisfactory as the other areas. In particular, the parts of Mr Lam’s testimony regarding the following up action on the fax from Ever Gain and also whether the plaintiff could have telephoned him are less than satisfactory.  Besides, Mr Lam’s oral testimony as to when he agreed to pay the plaintiff at the unit rate of HK$3,300 for the month of April 2005 may also be subject to certain criticisms. However, bearing in mind the above analysis of the inherent improbability of the Alleged 2005 Agreement as well as Mr. Fong’s testimony, I do accept Mr Lam’s testimony that the Alleged 2005 Agreement was never made. Besides, comparing the oral testimony of the plaintiff and that of Mr Lam as well as their demeanour when giving evidence, I also find Mr Lam more credible and reliable than the plaintiff.

84.  On the whole, I reject the evidence of the plaintiff insofar as it is in conflict with the evidence adduced by the defendant. In particular, I reject the plaintiff’s evidence regarding the making of the Alleged 2005 Agreement. I find the plaintiff’s testimony regarding the Alleged 2005 Agreement inherent improbable and inconsistent with the contemporaneous documents.

Conclusion on liability

85.  By reason of the above discussion, I find as a fact that the plaintiff and the defendant had not made the Alleged 2005 Agreement.  For this reason, I dismiss the plaintiff’s claim in its entirety. 

Quantum of damages

86.  In light of my conclusion on liability, it is strictly speaking not necessary to deal with the question of damages. Insofar as may be necessary, I would deal with one aspect of the disputes between the parties on quantum.

87.  As stated above, the plaintiff sued the defendant for the sum of HK$7,242,920 (i.e. HK$858,000 per annum x 9 years less the sum of HK$479,080 already paid by the defendant).  In the course of the trial, I raised with the plaintiff’s counsel the question of whether it would be necessary to deduct the expenses that the plaintiff would have incurred had there been no termination of the Alleged 2005 Agreement (if this court finds that such an agreement was made). Counsel for the plaintiff contended that the Alleged 2005 Agreement provided for the payment of a fixed sum and thus there was no need to deduct any expenses which would have been incurred. In paragraph 69 of the plaintiff’s closing submissions, it is contended that the plaintiff’s claim is for a debt rather than for damages.

88.  I have difficulty with the contention that the plaintiff’s claim is for a debt and not for damages. Considering the nature and provisions of the Alleged 2005 Agreement, I am of the view that the best case scenario for the plaintiff is only a claim for damages and not a debt.

89.  In this regard, counsel for the defendant sought to argue in his closing submissions that the clause in the Alleged 2005 Agreement providing for the payment of HK$858,000 is in effect a penalty clause. In this regard, I agree with the plaintiff’s counsel that the defendant is not at liberty to raise this defence since this has never been pleaded or raised before the defendant made its closing submissions.

90.  In short, had it been necessary to deal with quantum of damages, I would have ruled that the expenses that would have been incurred by the plaintiff had there been no termination of the Alleged 2005 Agreement would have to be deducted so as to arrive at a fair and just assessment of the amount of damages payable.

Defendant’s summons dated 23 December 2009

91.  After all the witnesses had been called but before the making of the closing submissions, the defendant issued a summons dated 23 December 2009 for leave to adduce certain documents issued by the Administrative Section of the Industrial and Commercial Bureau of the Dongguan City (東莞市工商局行政管理局). Having heard the parties’ submissions in respect of this Summons on the last day of this trial (30 December 2009), I dismissed the defendant’s summons and indicated that reasons would be given when this court delivered judgment on the plaintiff’s claim in this action. 

92.  According to the defendant, the purpose of adducing those documents was to rebut the case put forward by plaintiff when he adduced certain documents at the adjourned part of this trial in November 2009.  While I can understand the defendant’s desire to leave no stone unturned, I am of the view that production of those documents on the date scheduled for closing submissions was simply too late. More importantly, I do not think those documents really assist this court in resolving the dispute between the parties. For these reasons, I dismissed the defendant’s said Summons with costs to the plaintiff to be taxed if not agreed.

Order and costs

93.  I order that the plaintiff’s claim in this action be dismissed.  I also make an order nisi that the plaintiff do pay the costs of this action to the defendant to be taxed if not agreed.

94.  Lastly, I would like to express my gratitude to both parties’ counsel for their assistance.