GITANES ENGINEERING CO LTD v. COWINDA LTD

Action No. 11472/82

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff's claim against the defendant arises out of an oral agreement which it claims was reached between the parties on or about the 15th January, 1982 whereby the plaintiff was to transport mud for disposal at a dumping area in Nine Pins on behalf of the defendant at rates which it claims were agreed at $10.00 per 12 ton truckload and $14.00 per 16 ton truckload; and the plaintiff was to buy from the defendant pell mell rubble at rates which the plaintiff claims were agreed at $70.00 per 12 ton truckload and $46.65 per 8 ton truckload. It was the plaintiff's case that no term for which the agreement was to last was fixed and that each delivery was to amount to a dealing.

2. The plaintiff avers that on or about the 12th February, 1982 the rates were varied: the rate of $10.00 per 12 ton truckload of mud was maintained but only if the quantity of mud was the same as the quantity of rubble delivered by the defendant during any half-monthly period, and where the quantity of mud exceeded that of the pebbles then the plaintiff would charge at the rate of $25.00 for each 12 ton truckload that was in excess in the same half-monthly period. The price of rubble was varied to $30,00 per 12 ton truckload and $20.00 per 8 ton trucdload.

3. The plaintiff ' s claim is that for the period 16th January- 17th October, 1982 an amount of $951,084 .20 was due and payable by the defendant for services rendered by the plaintiff in the transportation and disposal of mud; and for the period 16th January-30th June, 1982 an amount of $305,328.75 was due and payable by the plaintiff to the defendant for the rubble it bought from the defendant. Giving the defendant credit for $100,000.00 paid on the 5th May, 1982 and allowing a set-off in the amount it owed to the defendant, the plaintiff now claims the balance of $545.755.45.

4. The defendant admits the meeting of the 15th January, 1982. It admits ts that the rates in respect of mud were as stated by the plaintiff but avers that the other terms agreed were:

5. The meeting of the 12th February, 1982 is admitted, but the defendant avers that at this meeting the defendant was requested "to withhold further deliveries of rubble to Hoi Sum Temple Pier for collection in compliance with a written warning from the Government whereby the plaintiff was ordered to reduce the quantity of rubble accumulated thereat", and accordingly delivery of rubble ceased for the period 13th February - 12th March, 1982.

6. In its amended defence and counterclaim, the defendant claims that for the period 20th January - 30th June, 1982 the amount payable by the plaintiff for rubble sold and delivered by the defendant was $858.305.00; and for the period 16th January-15th October, 1982 the amount owed to the plaintiff by the defendant for transportation of mud was $510,710.00 On this basis, the defendant claims that a sum of $347,595.00 is due and owing to it by the plaintiff, which it claims in its counterclaim. It also counterclaims the refund of $100,000.00 which it says was paid as "deposit on account to secure additional services to be rendered by the plaintiff to Virbo (HK) Ltd. "(it should read Vibro which was the name mentioned in evidence )"at the defendant's request, namely, sea transport of mud from Hoi Sum Temple Pier to the reclamation area at Hong Kong and Macau Ferry Pier".

7. In its reply, the plaintiff joins issue with the defendant on its defence in so far it relates to what is alleged by the defendant to have been agreed between the parties, and while admitting that an agreement with Vibro (HK) Ltd. for the dumping of mud was entered into, it denied that the payment of $100,000.00 by the defendant had any connexion with that agreement with Vibro.

8. At the beginning of the trial, the parties agreed to each other's bundle of documents, both as to their authenticity and admissibility. The plaintiff's bundle was marked Ex. P1 and that of the defendant, Ex. D1. As various documents from these bundles were referred to during the trial, I have used the particular exhibit number to which the document belongs, followed by the document's number in the bundle.

9. Also agreed between the parties is the quantity of mud and pebbles that was delivered, the various quantities being those set out in Ex. P1/157-158, upon which the calculation of the amounts stated in the pleadings has been based.

10. It was also agreed that various statements of account, Ex. P1/ 19-50, had been posted to the defendant at the address stated on the face of the various statements, the date of each posting being on or about the same date as that of the statement; and it was agreed that those various statements of account which were posted had not been returned.

11. Evidence indicates that in 1982, Hip Hing Construction Co Ltd. were the main contractors for the site formation of Phase 1, Chuk Yuen Housing Estate, which involved excavation work and disposal of the excavated matter which was mud and rubble. They employed another company called Sonchy as sub-contractor which, in its turn, employed Cowinda Ltd. (the defendant) as its sub-contractor.

12. At about the same time, the plaintiff company had a project in Quarry Bay in the Taikooshing area in connection with the Eastern Corridor. In early January, 1982 FOK For-kan (P.W.5), who described himself as the plaintiff' s consultant, met a broker by the name MAK Yiu at the Lung Fung Restaurant in Mongkok and a discussion between them concerning mud and pebbles from Ma Chai Hang led to the first meeting between P.W.5 and CHOW Kwok-lun(D.W.1), a director of the defendant, who was accompanied by the broker.

13. The version of each side as to what was agreed at that meeting broadly is what I have indicated above. P.W.5 said that D.W.1 did not commit himself on the quantity of the pebbles, or "SHUI SHEK" as they were described in evidence, that was to be delivered. D.W.1 however said that he mentioned the total quantity of one million cubic metres of mud and pebbles which, according to Government expectations, comprised 5% to 7% stones; his own estimate being 10%. He said that P.W.5 was prepared to take the whole lot, which P.W.5 described as "small". D.W.1 said that at the material time not many 12 ton trucks were in use to convey stones; though 12 ton and 16 ton trucks were used in the transportation of mud, Regarding payment, D.W.1 said that it was agreed at first that payment would be after the completion of the whole construction site.

14. P.W.5 said that in early February he learnt from FOK Chee- shing, the plaintiff' s general manager, that certain quantities of shui shek were expected from Wai Kee Company free, Evidence of this was forthcoming from William Zen (P.W.3), a director of Wai Kee Construction & Transportation Co, Ltd., who said that in February, 1982 his company was excavating a site in Tsing Yi Island for Caltex Terminal, as sub-contractor of Gammon H.K. Ltd. and the excavation was expected to yield 400,000 cubic metres of soft soil and hard rock. It was agreed with FOK Chee-shing that in return for the plaintiff building a ...(illegible) for Wai Kee at the site, the latter would give the plaintiff all the rock excavation free. P.W.5 said that because of this he told MAK Yiu to stop delivery of shui shek and mud with effect from 11th February, and this led to the second meeting between the same three the following day.

15. At this second meeting, the version of the variation in the rates which P.W. 5 maintained were agreed to by D.W.1 is broadly what has been stated above. D.W. 1 said that P.W.5 asked him to stop further deliveries of stones because there was so much stock at the Hoi Sum Temple Pier that it was feared that the seawall might burst; and P.W.5 wanted deliveries to be suspended for a month in order to clear up the stock, According to D.W.1 the delivery of mud was not effected but P.W.5 told him that he was going to increase the price alleging that the defendant had made a profit. D.W.1 said that he did not accept this proposal.

16. D.W.1 continued to refer to a third meeting which he had with P.W.5 on 6th March, in company with TAM Ying-cheung (D.W.2) a director of Sonchy; the subject then discussed was the transportation of mud from Chuk Yuen to the reclamation site project of Vibro (HK) Ltd. at the Macau Ferry Pier, I shall come to that in a moment. For the present, suffice it to say that P.W.5 denied having met D.W.1 at such a meeting.

17. It was submitted by Mr. Lee for the defendant that P.W.5 put himself in a convenient position as consultant of the plaintiff in name and having attended the crucial negotiations at the first and the second meetings, conveniently evaded himself of any liability or involvement in the latter meeting. He said that P.W.5 was totally unreliable.

18. For the plaintiff, Mr. CHAN took the opposite view He submitted that the negotiations on the 15th January concerned business as one deal in which P.W.5 talked all along in terms of 12 ton trucks in relation to mud and pebbles. He said this was confirmed by Ex. P1/158 which sets out the agreed quantity, according to which more 12 ton truckloads of pebbles were delivered than were of 8 ton truckloads.

19. It is not disputed that deliveries started the very next day, that is, 16th January. And by the time of the second meeting on 12th February, some deliveries of rubble had been made, viz. for the period 20th to 31st January 152,12 ton truckloads and 56 of 8 ton truckloads were delivered; for the period 1st February to 13th February 12 ton truck- loads amounted to 1,034 and those of 8 ton truckloads to 419. This gives some indication, as Mr. Chan submitted, that more truckloads of 12 tons were being delivered than the smaller unit, At least on this aspect, D.W.1 was not very convincing when he said that the era of the 12 tonners has just begun then. However, Mr. chan seems to me to be on much firmer ground when he argued that the statements of account which the plaintiff consistently sent out to the defendant confirm the version of P.W.5 As stated earlier, the fact that the plaintiff posted various statements to the defendant on or about the dates indicated on them was agreed, as was the fact that those statements had not been returned. The irresistible inference is that those various statements were in fact received by the defendant as no point on to the address was taken. One of such statements is Ex. P1/27, which is dated 9th April, 1982 and and reflects the new rates for the transportation of mud which were varied at the second meeting. The significance of this lies in, as I see it, the fact that this was the first statement sent to the defendant on the basis of the revised rates for the transportation of mud which, as will be recalled, D.W.1 denied having agreed to. Had there been no revision, I should have expected the defendant to have reacted to that statement immediately; nor is there any evidence that he objected to the next six similar statements, the last being Ex. P1/39 for the period 16th June to 30th June, 1982, These were merchant's accounts and it is trite to say that in such cases an inference of correct- ness will generally arise unless objection be made within a reasonable time. In this case, no such objection was made, and I am of the opinion that in these circumstances it is proper to draw the inference that those seven statements starting with Ex. P1/27 reflected the correct account, which relates back to the revised rates. I find this a compelling factor lending support to the version of P.W.5

20. Mr. Chan submitted that there was good reason for P.W.5 to revise the rate for the pebbles also at the February meeting, Besides the evidence of P.W.3 concerning "supplies of stones, which quite apparently was on barter basis, at the material time, there was evidence from LOK Tei-he (P.W.4), the sole proprietor of Luk Kee Engineering Co., concerning an agreement with the plaintiff dated lst March, 1982 - Ex. P1/51 regarding supply of pell mell rubble, the rates of which are differently stated according to the place of delivery and means of transportation, but being cheaper than those which P.W.5 had agreed with D.W.1 in January. P.W.5 however had acted upon the information about the barter supply from from P.W.3 in asking MAK Yiu for the cessation of the deliveries, both of mud and stones. The reason for the quick response this brought from D.W.1 is to be seen in his evidence under cross-examination when he said that they had to work the construction site according to a schedule and sometimes it became difficult for them to keep the mud and stones on the site and had to be disposed of Mr. Chan argued that this was one of the reasons why D.W.1 agreed to the revised rates so that the defendant would have continuous disposal in order to keep progress in his work, Yet D.W.1 maintained that he did not agree to the formula of the revised rates. It seems to me fairly obvious that there was such a discussion at the February meeting, I have drawn the inference that the seven statements concerning mud set out the correct rates, i.e. revised rates to which no objection was taken. Also to be considered is the assertion of D.W.1 regarding the accounts. Mr. Chan submitted that this could not be because of the uncertainty as to when the defendant might complete the project at Chuk Yuen. It certainly sounds reasonable that the parties would discuss settlement of accounts and quite unreasonable that these would be left in abeyance for an unspecified period of time. The plaintiff's conduct in submitting statements fortnightly certainly lends support to P.W.5, and further support comes from the evidence of LOK Tei-he (P.W.4) who had business dealings with the plaintiff at around the same time of the practice of submitting statements every fifteen days. Considering all this I am driven to the conclusion that the weight of the evidence points to the probability that the version of P.W.5 about the rates which were agreed for the sale of rubble to the plaintiff at the first meeting and about the settlement of accounts is correct, as it is about the revised rates for both the rubble and the transportation of mud which were discussed at the second meeting in February, I find that D.W.1 agreed to such revised rates.

21. This leads me to the issue of the payment of $100,000.00 which was made by the defendant on the 5th May, 1982. Here too there is conflict in evidence. Kenny LAI Kan-chung (P.W.1) is the administrative manager of the plaintiff, and in charge of its accounts. He said that on lst May, he saw an account concerning the defendant, according to which the defendant owed the company $160,000.00. He telephoned CHAN Man-jim (D.W.4 ) director of the defendant, and asked for settlement and was told that D.W.4 had to consult other directors. He kept on telephoning D.W.4 and on 4th May threatened to stop the collection of mud from the defendant if payment was not made the following day. And on 5th May, a cheque for $100,000.00 was delivered to him, for which he issued a receipt, Ex. D1/3. He said that he described the payment as temporary payment for the cost of the work. According to this receipt, the payment was "temporary payment for working expenses". He said that he telephoned D.W.4 again and asked for the balance. He was told that he would think it over to see when he could pay it. P.W.1 said that at this time Vibro had no dealings with them and he did not know this company.

22. The version of the defendant of how this payment of $100,000.00 came to be made comes from D.W.1 and TAM Ying-cheung (D.W.2), a director of Sonchy. Before going any further, it may be pertinent to say that the main contractor of the Chuk Yuen site was Hip Hing Construction Co. Ltd. Sonchy was purposely set up for that project, and Hip Hing owns 60% of it. Another company called the Faith Nominee Ltd, was also mentioned. D.W.2 agreed that of the 500,000 shares issued by Cowinda, Faith Nominee and D.W.2 each hold 114, 999, which makes D.W.2's share in Cowinda one short of D.W.1 LUI Hung-lai (P.W.6) who is the chief accountant of Vibro (HK) Ltd. and accountant of Hip Hing said that these two companies and Sonchy belong to the same group, an opinion with which D.W.2 was unable to agree though he said that they were related, However, the interest of D.W.2 in the defendant company was established.

23. D.W.1 and D.W.2 maintained that they saw P.W.5 in March, 1982 concerning the transport of mud to the Vibro project. Their case is that P.W.5 asked for some security because he did not know Vibro or Hip Hing.D.W.1 said that P.W.5 asked for a deposit of $250,000.00 but later agreed to $100,000.00 which was to be paid before work started. All this was denied by P.W.5.

24. It was agreed that the plaintiff had an agreement with Vibro for the transportation of mud. P.W.5 did not know about it, and P.W.1 said Vibro had no dealings with them at the time the payment was made WAN Hon-chuen(P.W.2)was the site agent for Vibro and he agreed that the transportation was done by the plaintiff who sent the four statements - Ex. P1/66 - 69 - which he forwarded to the company's headoffice for payment. P.W.1 agreed that business with Vibro started five days after the payment of $100,000.00 on the 5th May. Even if I were to accept that there was a meeting with P.W.5 in early March concerning the transportation of mud to Vibro, which in fact was subsequently delivered by the plaintiff, the issue is as to whether the payment of $100,000.00 was by way of a deposit in that regard.

25. It is a prominent feature of D.W.2's evidence that he did not inform anyone in Vibro or Hip Hing about the payment allegedly made on behalf of Vibro. Both P.W.2 and P.W.6 knew nothing about it, and P.W.6 said that it was not possible for somebody else to have paid such an amount on behalf of Vibro. I find the evidence of D.W.2 quite incredible, coupled with the fact that the receipt issued by P.W.1 does not reflect what D.W.1 and D.W.2 said about this payment. There is again no evidence of any protest having been made about that receipt. Two other matters may be mentioned regarding D.W.2. He said that he came to know D.W.1 after the word at the site started. Considering D.W.2's interest in Cowinda it seems probable that he would have known the other shareholder quite well before this project. The other matter is that according to D.W.2 he was instrumental in persuading P.W.5 to accede to his request to undertake deliveries of mud to Vibro. Mr, Chan points out that this is contrary to the defendant's pleading. I think that he is right in this regard.

26. The man who handled the cheque was CHAN Man-jim (D.W.4), a director of the defendant. He was responsible for its finance. He said that as the matter had been discussed by D.W.1, there was no need for him to discuss it again with anyone in the plaintiff company. He was cross-examined on his two affirmations which he had made in the proceedings concerning the application by the plaintiff for security of costs. Despite an objection from Mr. Lee, I allowed the cross- examination to continue with a view to testing the credit of D.W.4. I think that the correct principle is that affidavits which a party has knowingly used as true in a judicial proceeding for the purpose of proving a particular fact are evidence against him in subsequent proceedings to prove the same fact. He agreed that that in his first affirmation he had said that the fact that the defendant owed people rent was used as an excuse to urge the plaintiff to repay them $100,000.00. He was cross-examined about other matters also, but I am of the opinion that his admission of using his company's indebtedness for rent as an excuse to get that amount back from the plaintiff is indeed significant. If that payment had been paid as deposit for something quite unrelated to their business dealings with the plaintiff, they needed no excuses to ask for its refund. Taking this together with the other matters concerning this payment, I find that the explanation offered by the defence is palpably unconvincing and manifestly false. I find in the totality of evidence that the payment of $100,000.00 was in fact in part payment of the defendant's account and for no other reason.

27. For these reasons I accept the plaintiff's version, and enter judgment for the plaintiff in the sum of $545,755.45 with costs. The defendant's counterclaim is dismissed with costs to the plaintiff. The plaintiff will have interest on the sum awarded at the rate of 8% from the filing of the writ until today, and at the rate of 13% thereafter until payment.