CHAN SUN KEE ENGINEERING CO. (a firm) v. HWA KEE PILING & CONSTRUCTION CO. LTD.

HCCT11/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

ACTION NO.11 OF 1997

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J U D G M E N T

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1. In this action the plaintiff is seeking recovery of the sum of $2,075,054.50. Of this sum $287,023.35 was paid after the issue of the writ, being an amount admitted due by the defendant and later the defendant admitted that a further sum of $13,470.60 was due and the plaintiff obtained summary judgment for that latter sum in June, 1996. Consequently, the amount now sought by the plaintiff is $1,774,560.65.

2. The money is said by the plaintiff to be due by the defendant in respect of work done and materials supplied in a construction contract. The plaintiff claim is founded on analysis on two bases, that the sum is actually due by reason of the contract between the parties, but also on the basis that on 3 January 1995, the defendant agreed that the sum was due and acknowledged this by signing and chopping a statement prepared by the plaintiff.

3. At the commencement of the trial it became clear that the defendant was not legally represented but represented by one of its directors, Miss CHU Man-wai. Before we had progressed very far Mr LAM pointed out to me that Miss CHU had come to court without the bundles of documents that had been served on her last week. I did not understand her explanation for failing to do the obvious and that is to bring with her, for the purposes of a trial, documents served on her for the purposes of the trial. It was clear that if the trial were to proceed this morning on the basis of the plaintiff's claim under the contract, that Miss CHU would be handicapped by not having the documents in front of her.

4. Rather than adjourn the matter until tomorrow so that Miss CHU could come to court with the documents, I made a direction that there to be a trial on the preliminary issue of the second bases for the plaintiffs' claim. This was a simple issue necessitating reference only to the single document which was the statement in question. If the plaintiff was successful on this basis then that would be the end of the matter. Accordingly the trial proceeded on that basis.

5. The defendants' defence to the allegation that it had agreed that statement, was a denial and certain particulars were given. These particulars were that, firstly, the plaintiff asked the defendant to sign on the statement in order to assist the plaintiff to show his creditors that the plaintiff was in credit and able to discharge its debts. The second particular is that as a long-term business acquaintance, the defendant agreed and signed on the statement. The third particular is that the defendant did not sign to acknowledge or confirm the accuracy or truth of the contents of the statement. And finally, the defendant says in the premisses, the defendant has never agreed, confirmed or admitted the sum concerned.

6. The sole proprietor of the plaintiff firm, Mr CHAN Hung-san, gave evidence on this issue. He says that he prepared and signed the statement in question. He took it to the defendant's office in order to recover payment. There he saw Mr CHU, Mr CHU SHEK Ng-gai, one of the directors of the defendant company. Mr CHU, I understand, has since died. He was the uncle of Miss CHU who represents the defendant and is another director.

7. Mr CHAN says that he asked Mr CHU for the money owing to the plaintiff, saying that it had been owed this sum for quite a long time, but Mr CHU said that the defendant did not have the money. So Mr CHAN asked Mr CHU to sign on the statement to acknowledge the defendant's indebtedness. Mr CHU then asked Miss CHU to come and he asked her to look at the statement. She took the statement away and came back with a file. Mr CHAN saw her comparing the statement with documents in that file, although he could not see those documents himself.

8. After this checking process, Miss CHU told Mr CHAN that some of the figures were incorrect. He asked her to point out the errors and make the necessary corrections, and she did so and after making those corrections she signed the statement. Mr CHAN asked her to put the defendants' chop on the statement as well and she did so and that was the end of that meeting and conversation. Shortly afterwards the defendant paid the plaintiff $100,000; that was on 25 January. Mr CHAN says that no-one said to him that the statement was not final and subject to change. Mr CHAN says that although he didn't really agree with the amendments by Miss CHU, he was prepared to acquiesce in them. He says he did not tell anyone that the purpose of the statement was to show to his creditors.

9. Under cross-examination by Miss CHU he maintained his position and said that he owed no money at that time, so he had no need for a statement for the purpose of showing to his creditors. That was the plaintiff's evidence on this issue.

10. Miss CHU then gave evidence of behalf of the defendant. To a large extent what she says coincides with what Mr CHAN says about the meeting on 3 January 1995, the significant differences being that Miss CHU says but Mr CHAN denies that the purpose for which he required the statement and asked for it to be verified by the defendant, was to show to his creditors, and Miss CHU says and Mr CHAN denies that he was told that this statement was not a final account.

11. But as to Miss CHU taking this statement and checking it against her own papers and making corrections, the parties' two witnesses agree. And they also agree as to the fact that Miss CHU firstly only signed the statement, and only afterwards applied the chop at Mr CHAN's specific request.

12. Miss CHU seemed to agree that as a result of her signing and chopping the statement on behalf of the defendant, the statement had all the appearances of a document containing figures that had been agreed by the defendant. So she knew that on her version, Mr CHAN was going to show to his creditors a document that said something that was not true. Miss CHU must have known this on her own version, but her evidence was most unsatisfactory as to whether she thought it was wrong that she should have assisted Mr CHAN to mislead his creditors.

13. And although it must be said that her evidence is, that when Mr CHAN asked her to chop the document, she hesitated, but it was never made clear to me why she hesitated in that respect. Miss CHU's evidence regarding the amendments made to the statement is also highly unsatisfactory.

14. If, as she suggests, the sole purpose of this statement was to show creditors and that it was not meant to represent an agreement by the defendant as to the amount due, it's very hard to understand why she should have made amendments to that statement. It is not as if these amendments were rough and ready. They were meticulous, right down to making a correction of a difference of 50 cents. It seems to me, in the highest degree probable, that the amendments were made because it was clear to Miss CHU that what she was doing was seeking to reach a figure which the defendant did agree was due to the plaintiff. Otherwise, there is no satisfactory explanation for the exercise of Miss CHU checking this statement against her own documents and making careful amendments to it.

15. In the result, on the evidence, I find that the defendant, through Miss CHU, and indeed, Mr CHU, who knew precisely what was going on here, in fact, agreed this statement. It follows that on that basis alone, the plaintiff is entitled to succeed and it is unnecessary to investigate whether the plaintiff would also be successful on the basis of its claim under the contract.

16. Accordingly, there will be judgment for the plaintiff against the defendant in the sum of $1,774,560.65.

(Discussion re interest and costs)

17. In addition to the judgment capital, the defendant will also pay interest from 29 March 95 at the rate of one per cent over bank prime rate until today, and thereafter at the judgment rate. And the defendant has to pay the plaintiffs' costs of action as taxed, if not agreed.

(J.K. Findlay)

18. Judge of the Court of First Instance of the High Court

I/we certify that to the best of our ability and skill, the foregoing is a true transcript of the audio recording of the above proceedings

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B. Pirie Date: 29 July, 1998