LONG COURT LTD v. TAIT INTERNATIONAL LTD

DCCJ 4374/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4374 OF 2009

--------------------

JUDGMENT

Background

1.  The Plaintiff here claims the sum of $236,000, being the alleged unpaid balance for decoration works done at the request of the Defendant at the Defendant’s former office premises situate at Unit 03, 6/F, Eastern Centre, No. 1065 King’s Road, Hong Kong (“the Premises”).

2.  It is undisputed that the Defendant did engage the Plaintiff’s services in about April 2004 to carry out certain decoration works at the Premises.

3.  It is also agreed that:- a. Ms. Wong Sisiwinnie (“Wong”) of the Plaintiff and Mr. Chan Hark Ping Andy (“Chan”) of the Defendant were the only persons that negotiated and concluded this decoration works contract.

b. Chan and Wong used to be good friends back in year 2004.

c. In mid-August 2004, Chan did pay the Plaintiff the sum of $200,000 towards decoration fee, using his personal cheque.

4.  Concerning the subject decoration works, Wong said she had tendered quotation to Chan which he on behalf of the Defendant agreed before the decoration work commenced in April 2004. 

5.  Wong said when the decoration works was in progress, Chan requested additional decoration works and as a result, the decoration works (except the signboard) was completed in January 2005.   The fees for these additional items had not been agreed.

6.  Wong now says the whole decoration works cost $436,000 and therefore the sum of $236,000 is still due and owing from the Defendant.

7.  In support of this contention, Wong produced 2 invoices both dated 20 March 2005 which Wong says were sent to the Defendant at the request of Chan on or about 20 March 2005. 

8.  Wong further says that subsequent to despatch of the 2 invoices to the Defendant, Wong had booked the total invoiced amount to the accounts of the Defendant. She said further that on numerous occasions she asked Chan to conduct joint inspection of the Premises to check the decoration works done at the Premises and to confirm with her the fee for the decoration works but Defendant failed to respond.

9.  Wong said the Defendant did not complain about quality of the work done or the accuracy of the invoices until June 2009 when she demanded payment.

10.  Wong said Defendant had since moved from the Premises.  Wong says therefore that the Defendant is now estopped and precluded from denying the invoiced amount. 

11.  Defendant denied having received these invoices until June 2009.

12.  Chan on behalf of the Defendant, says that Wong had prior to commencement of decoration works agreed that all decoration works at the Premises would cost $200,000 and that Wong would not charge anything extra.  Chan further says as they had already paid $200,000, there is no unpaid balance.

13.  Wong said there was never an agreement that the Plaintiff would cap the decoration fee of the Premises at $200,000 nor did she agree not to charge extra for additional work.

14.  Chan now says the work done described in the invoices were inaccurate and that they were either not done or quantity of work done was wrong.

Issues in Dispute

15.  After hearing the evidence at trial, the main issues to be resolved are:-

(a)    Whether or not the Plaintiff had agreed to cap or limit its charge for decoration works at $200,000 as alleged?

(b)   If not, what should be the total decoration fee for the Premises?

16.  In order to resolve the above issues, it is helpful that I attend first to the following sub-issues:-

(i)  Whether the Defendant had received the invoices from the Plaintiff in March 2005?

(ii) Whether or not Chan had acknowledged on 5^th May 2009 or at anytime the existence of an outstanding balance of renovation fee due to the Plaintiff?

(i) Whether the Defendant had received the invoices from the Plaintiff in March 2005?

17.  Wong said in or about 20^th March 2005, she received an urgent request from Chan asking the Plaintiff to tender them the invoices for the whole decoration project within the day. Wong said Chan requested the Plaintiff to split, for tax purpose, their invoices for the whole decoration project into two, i.e. one for furniture and equipment and the other one for leasehold improvement.

18.  Wong said as she was outside the office at thetime, she phoned back the office and asked her staff to prepare the same, giving instructions to the staff over the phone as to how to prepare the invoices.

19.  Wong said Chan emphasized over the phone that so long as the amount of the invoices were correct, the description of the work done in these invoices was not as important.

20.  Wong said as a result, the Plaintiff prepared 2 invoices both dated 20 March 2005, the same were faxed to the Defendant on the same day. Wong said Chan confirmed receipt of the same over the phone.  The total of the invoiced amount was $436,000.

21.  Chan on behalf of the Defendant denied having received the invoices prior to June 2009.  He denied having requested the Plaintiff to split the invoices as alleged by Wong in March 2005 or at any time.  He also denied the Plaintiff having demanded from the Defendant outstanding sums due under the invoices before June 2009.

22.  Although Chan denied at any time having requested Wong to split the decoration fee invoice, this Court cannot think of any good reason why Plaintiff would have done so on their own.

23.  Further, it was pointed out by Ms. Tjia, counsel for the Plaintiff that the model number of the fridge bought by Wong for the Defendant should read ‘惠而浦 YOGA 231X’ but the Plaintiff made a mistake in their invoice and had described it as ‘惠而浦  YOGA 23’. Strangely, the Defendant in their financial statements and report of auditors for the period ended 31 December 2004 (Trial Bundle P. 259) had similarly made such mistake and described the model of the fridge as ‘Whirlpool Yoga23’.  Chan in Court, when cross-examined was unable to explain how this might have come about.

24.  Moreover, the sequence of the items listed on P.13 of the same document (Trial Bundle P.259) was very much in the same order as those listed in the said furniture and equipment invoice of the Plaintiff i.e. in the order air-conditioners, micro-wave oven, hotter, door bell, refrigerator, Whirlpool Yoga 23, Boiler, kitchen/pantry appliances, toilet appliances.  Chan of the Defendant when questioned explained that those are common items in every company.

25.  Whilst I agree there was nothing unusual about these items, putting those items in miraculously almost identical sequence is more than coincidence.  In fact, when questioned, Pang Wing Sze (“Pang”), the former chairman and shareholder of the Defendant agreed to this observation.

26.  Further, the figure of $258,000 under leasehold improvements of the accounts of the Defendant (Trial Bundle P.259) coincides with the leasehold improvement invoiced amount of the Plaintiff, i.e. leasehold improvement invoice No. 10091(A). (Trial Bundle P. 103 - P. 106), one of the 2 invoices dated 20 March 2005.

27.  Chan explained the figure of $258,000 actually represented $200,000 decoration fee charged by the Plaintiff for the subject decoration project and $58,000 decoration fee paid for the warehouse.  However, one can find in the same set of accounts under the heading “Sundry Expenses” another figure of $38,000 described as fee for decoration of warehouse. 

28.  The said set of accounts of the Defendant Company was in fact dated 16^th July 2005 i.e. about 4 months after the date of the 2 invoices.

29.  This Court notes also that the Plaintiff filed the Reply alleging that the Defendant had in fact submitted the said invoices to the auditors for preparation of their accounts and had booked the entire amount of these invoices in the Defendant’s set of accounts at a time prior to they having obtained the above accounting document from the Defendant.

30.  Chan was asked in Court that if he had not received any invoice from Wong before June 2009, why did he not chase Wong earlier for the same in order to prepare final accounts for Defendant. Obviously in order to prepare the accounts of the Defendant for the period 2004/2005, all expenses documents of the company need be tendered. 

31.  Chan said at one stage that he had in fact chased Wong for invoice or receipt in sum of $200,000 but despite repeated demands he was refused.  Wong was not cross-examined on this issue in Court by the Defendant.  It is also difficult to accept this piece of evidence because Wong and Chan were still good friends then.

32.  Later, Chan gave another explanation and said as he was already reimbursed by the Defendant the sum of $200,000 which he paid on behalf of the Defendant using his personal cheque, he felt therefore there was no need for him to obtain an invoice from the Plaintiff.  He admitted however that the accounts clerk had asked him for it.

33.  This Court finds the evidence of Chan unbelievable.

34.  This Court finds that Chan had on 20 March 2005 requested Wong to split the invoices for tax purpose as alleged by Wong and that these invoices were sent and received by the Plaintiff on the same day.  The total price of these invoices was $436,000 and they were booked into the accounts of the Defendant, as demonstrated.

(ii) Whether or not Chan had acknowledged on 5^th May 2009 or at anytime the existence of an outstanding balance of renovation fee due to the Plaintiff?

35.  Wong said since the issue of the 2 invoices, she had demanded Chan many times for payment of the outstanding decoration fee of $236,000.

36.  She said Chan always gave excuses that the Defendant was owed a lot of debts and they had cash problem.

37.  Wong said as they were good friends, she did not press him hard for payment.

38.  In fact, it is agreed that Chan at the time also owed Wong substantial amount of personal loans.

39.  Chan on the other hand said neither the Plaintiff nor Wong havedemanded for outstanding decoration fee from the Defendant until June 2009 when they first received the invoices. 

40.  It is not disputed that on 5^th May 2009, when Wong knew Chan was present in the home of their mutual friend, the Yu couple, she went over with the documents such as vouchers, invoices, receipts pertaining to the decoration project and asked Chan to check the documents in order to confirm the total decoration fee and pay the balance. 

41.  Wong said at first Chan denied there was any sum outstanding. Later, Chan presented Wong with the disbursements vouchers receipts and invoices in relation to the decoration projects and Chan checked these documents and questioned only 2 invoices, one concerning the carton boxes and the other concerning extension cords, total amount of these 2 invoices was only $600 odd.

42.  Wong said Chan then said he would go back to his office and discuss with the other partners of the Defendant company on the matter.

43.  When cross-examined, Chan said that he had not examined all the disbursements invoices and receipts concerning the decoration works produced by Wong at the meeting on 5 May 2009.  He admitted after he had checked some of these documents, he raised queries concerning the paper boxes and the extension cord expenses. 

44.  Later, when further cross-examined, Chan said he had just a very brief glance at these documents before he left. 

45.  At one stage, when questioned as to why he did not finish perusing these documents, Chan said because he had paid $200,000, the Defendant company did not owe the Plaintiff money for the decoration. 

46.  The question is, why would he check these documents had there been a fixed fee agreement between the Defendant and the Plaintiff as alleged? 

47.  Had there really been such an agreement, why would Chan even start perusing these documents and not insist on the agreement and just brush Wong aside and decline to check the disbursements documents? 

48.  It is agreed that at the 5 May 2009 meeting, Chan had also signed his name on a blank piece of paper, handed it to Wong before he left.

49.  Wong said Chan had done so as he asked Wong to prepare a Chinese document recording what had been agreed at the meeting.  This concerns the agreed amount of outstanding personal loan from Chan, manner of repayment of this personal loan and the mention of the subject outstanding decoration fee. Wong said Chan also volunteered his ID card for her to put his identity particulars in the document.  Wong said at the time just shortly after she finished writing the ID card no. of Chan or when she was writing the outstanding personal loan figure, Chan suddenly said he wanted to leave and left.  She said she continued recording the agreement that evening between them and asked the Yu couple to sign on the document as witnesses.  The document was produced by Wong. (Trial Bundle P. 109) The same stated explicitly that Chan confirmed he owed Wong and the Plaintiff total sum of $666,150, the same not having included the outstanding decoration fee for the Eastern Centre.  The Yu couple had signed as witnesses to the document.

50.  Wong said Chan did not follow up with her after the meeting regarding the decoration fee as promised and Wong had chased him.

51.  Chan when questioned why he signed his name on the piece of blank paper and handed it to Wong (who was chasing him money at the time) said he would like to see if Wong could get money from bank by presenting the piece of paper with a signature of himself on it. He said he just casually signed his name on a blank A4 paper, gave it to Wong and then left Yu’s home.

52.  In this document, the outstanding decoration fee for the Premises was mentioned.

53.  Court noted that Wong only obtained copy cheque from bank with ID number of Chan at the back after the said document was signed by Chan on 5 May 2009. 

54.  Did Chan just sign on the document casually as he suggested?  If so, why would he also give his own ID card to Wong? Surely, the document was meant for something more serious than Chan tried to suggest.

55.  When further cross-examined as to why he would sign on the piece of paper and handed it to Wong, Chan explained that he was then under the influence of alcohol. This Court noted however that during cross examination, Chan was able to remember details of what happened that evening, through his evidence was inconsistent and changed.

56.  The odd thing is, if he disputed owing money to the Plaintiff for the decoration project and he was chased by Wong for payment of the same at this meeting, why would he sign on a blank piece of paper and give the same to Wong, the one chasing him for the outstanding decoration money that same evening?

57.  It is also an undisputed fact that the Yu couple signed on the paper as witnesses.

58.  Wong said after the 5 May meeting, she did send many SMS to Chan chasing him to settle the decoration fee as she did not hear further form him.  She said she also chased the Defendant for inspection of the Premises to take account concerning the decoration works done.  She produced to Court the SMS dated 3 June 2009 (Trial Bundle P. 117) and 5 June 2009 (Trial Bundle P. 118).  She said Chan did not respond to these SMS.

59.  Chan was also cross-examined as to why he did not respond to the SMS sent to him by Wong including the ones dated 3 June 2009 and 5 June 2009. 

60.  The SMS on 3 June 2009 requested that Chan shall arrange an appointment with Wong to check the decoration work done at the Premises before the Defendant moved from the Premises.

61.  Wong said she also warned the Defendant in these SMS that should there be no inspection, the Plaintiff would rely on and charge the Defendant decoration fee as per the said invoices.  The said SMS also said that if need be, Wong could also arrange the attendance of the surveyor, electrician and the mason during the inspection of the Premises.

62.  The 5 June 2009 SMS again reminded Chan to fix the appointment as soon as possible to confirm the amount of decoration fee and to pay the outstanding decoration fee which had then been outstanding for over 4 years. 

63.  The 2 SMS also reminded Chan to repay the $450,000 personal loan. 

64.  Chan when cross-examined said he had, on receipt of the 3 June 2009 SMS, rang Wong and scolded her.  He also said as the Defendant did not owe anything towards decoration due to the existence of the $200,000 fixed fee agreement, he did not arrange inspection.  He just ignored the 2 SMS. 

65.  There was nothing on record from the Defendant disputing the contents of these SMS.

66.  In fact, Wong denied Chan had rung her and scolded her.  She said Chan had not responded at all.

67.  It is admitted by Chan that he did receive the 2 SMS but I do not accept his evidence that he had responded to the 2 SMS as alleged, i.e. that he had rang Wong and scolded her or at all.

68.  The Defendant had chosen to be silent and not responded in the face of receipt of such SMS is not consistent with there being a fixed fee arrangement.  His conduct at the 5 May 2009 meeting, i.e. by going through the disbursements documents, also supported the non-existence of the fixed fee agreement.

69.  Now I come back to issue (a).

(a) Whether or not the Plaintiff had agreed to cap or limit its charge for decoration works at the Premises at $200,000 as alleged?

70.  Chan said the decoration works at the Premises was completed in August 2004 when he paid the agreed fee in the sum of $200,000 and that there was no additional works.

71.  In support of this contention, Chan produced refund cheque of decoration deposit by the management office of Eastern Centre dated 19 October 2004 (Trial Bundle P. 244) which Chan says supports the fact that the decoration works were completed by August 2004.  He said it took the management office 2 months to process his application for the refund cheque.

72.  Wong disputed and said although there was an agreed sum for the original decoration work, Chan requested for additional works which she carried out and completed in January 2005. 

73.  Wong also said the $200,000 paid by Chan was only deposit for the decoration works.

74.  She said the contract price for these additional items were not agreed.  In fact, she said as Chan did not give detailed instructions to her regarding the signboard of the Defendant company, the same was only completed in July 2006. She exhibited invoice of the same from Hoi Yue Company. (Trial Bundle P. 130) 

75.  Wong alsoexhibited an invoice issued by New Zealand Fire Services Engineering Co Ltd. dated 14 September 2004 (Trial Bundle P. 146) which concerned supply and installation of shower and water sprinkling system for the Premises. The invoice stated that the work was to commence from 16 September 2004.

76.  Wong further produced receipts for delivery of materials to the Premises dated 22 September 2004.(Trial Bundle P. 226) 

77.  In addition, Wong had exhibited a copy application form addressed to management office of Eastern Centre in the building where the Premises situated (Trial Bundle P. 245).  The same stated that due to decoration works within the Premises and change of fresh water and water flushing system, they needed to suspend the water supply for both fresh water and flushing water on 30 October 2004.  The date of application was 27 October 2004. 

78.  This contradicted Chan’s evidence that there was no change of water pipes from the cooling tower on roof of Eastern Centre to the Premises. 

79.  Wong also produced an invoice dated 30 August 2004 from Shing Shun Air-condition Engineering which included additional scaffolding works and charges for air diffusers.

80.  She also produced another invoice from Shun Chong Decoration Engineering Co. dated 31 August 2004 which involved carpeting of the Premises.  (Trial Bundle P. 179) 

81.  Wong also tendered to Court an invoice dated 17 September 2004 from Chun Nam Decoration Working Company which concerned a hanging cabinet.  (Trial Bundle P. 181) 

82.  When cross-examined, Chan explained the installation of the hanging cabinet in the office was late because the Plaintiff was late in delivery.  He said these were not additional works.  He admitted these were done after August 2004, the alleged completion date.

83.  Pang when cross-examinedalso confirmed that there was still decoration works at the Premises until January 2005.  The evidence of Pang is consistent with that of Wong.

84.  In Court, Chan told the Court that they had complained the Plaintiff many times of water leakage due to their defective decoration workmanship and this explained why the Plaintiff needed to come back for repair after completion of the decoration works. 

85.  This Court noted however that it had never been mentioned in his witness statements nor by him in whatever manner, nor was it pleaded by the Defendant earlier about defective workmanship.  In fact, defective workmanship was only first mentioned at trial by Chan when cross examined.   

86.  When asked why there was nothing in writing concerning these alleged complaints, Chan said as both Chan and Wong were good friends and these were just minor matter, he did not put it in writing. 

87.  The said invoices which stated work commenced after August 2004 clearly supported the Plaintiff’s evidence that decoration works continued after August 2004 and that there were additional items to the original agreed decoration works. 

88.  In the light of the above, this Court finds as a fact that the decoration works were completed only in January 2005 and that there were ordering of additional works in addition to the original agreed decoration works to the Premises.

89.  Wong also said the direct cost of the decoration works already exceeded $200,000 and so it would be against common sense for her to cap or to have agreed the total decoration fee at $200,000.

90.  I find there was no agreement between the Plaintiff and the Defendant that the decoration fee for the Premises be capped at $200,000. 

91.  It is inherently unbelievable that a contractor can agree to a fixed decoration fee irrespective of and without regard to the amount of decoration works to be undertaken. 

(b) If not, what should be the total decoration fee for the Premises?

92.  Wong said neither Chan nor the Defendant made any complaint regarding the invoices until she demanded again the outstanding decoration sum at the 5 May 2009 meeting and after 9^th June 2009 when the Plaintiff sent the Defendant the original invoices.

93.  Wong says the Defendant did not pay anything towards the balance of decoration fee despite reminders from Wong to Chan as Chan always gave excuses that the Defendant had cash flow problem.

94.  Wong said later she queried the reason for Chan not repaying her (i.e. personal loan and balance decoration fee) when she knew that Chan had purchased a warehouse and a Maserati car.  She produced to Court a SMS from Chan to her dated 8^th November 2008 (Trial Bundle P.112) which evidenced Chan trying to explain his actions above to Wong.

95.  Wong said, at the meeting on 5 May 2009, after checking the disbursements vouchers, receipts and other documents pertaining to the decoration project, Chan did only query the delivery notes/receipts for carton boxes and extension cord totaling $600 odd. Wong said after the meeting, she returned to her office and found the delivery notes/receipts relating to the delivery of the carton boxes were chopped by the Defendant confirming their receipt.           

96.  Wong said Chan did not raise any other further queries other than the 2 invoices.  Wong said although Chan said on 5 May 2009 he would go back and discuss with the other partners of the Defendant regarding the decoration fee, she did not hear from the Defendant further.

97.  Wong said in the SMS to Chan on 3^rd June 2009 when she requested that the parties should conduct a joint inspection of the Premises and confirm the final figure for the decoration fee of the Premises, she also expressly warned Chan of the Defendant that if they moved from the Premises without the inspection, then the Plaintiff would rely on and charge the Defendant as per the 2 invoices as the final figure for the total decoration works (as the joint inspection could not be done after they moved out). 

98.  In the same SMS, Wong asked Chan, i.e. the Defendant not to further delay payment.

99.  Wong admitted that some of the items stated in the invoices dated 20 March 2005 were incorrect in that they were either items not done or items done but wrongly described, as explained by her in the Scott Schedule.  She said however that she had not charged the Defendant for these items in the 2 invoices.  She said as for the alleged wrong quantity of work done, the allegation was incorrect and she had explained the same in the Scott Schedule (Trial Bundle P. 102(8) & P. 102(9)) prepared. 

100.  In Court, Wong had again confirmed the contents of the Scott Schedule.

101.  During trial, Wong had impressed this Court as a truthful and reliable witness.  Her evidence is not shaken despite detailed cross-examination.  She answered questions direct and spontaneous.  Her evidence is consistent.

102.  On the other hand, Chan’s evidence shifted and is inconsistent.  He frequently changed his evidence as he was being cross-examined e.g. as to whether and to what extent he did in the evening of 5 May 2009 check the vouchers/receipts presented to him, he gave different versions.  Further, some of his explanation is inherently unbelievable.

103.  He is also evasive when giving answers to questions asked and frequently questions have to be repeated before one could get an answer from him.  I do not find him a reliable witness.

104.  The Defendant in this case had ample opportunity to conduct joint inspection with the Plaintiff concerning the decoration works done and to raise objection thereto.  They have however chosen not to do so despite repeated requests from the Plaintiff prior to June 2009, i.e. more than 4 years after completion of the decoration project.  Since then the Defendant have moved from the Premises and further inspection was impossible. 

105.  Further, despite the receipt of the 2 invoices on 20 March 2005, the Defendant had not objected to any items therein until 5 May 2009 i.e. more than 4 years later when confronted by Wong and queries were raised only in relation to $600 odd, which had been answered by Wong.

106.  I accept the evidence of Wong that previously all along, Chan had been saying that the Defendant was unable to pay the outstanding decoration fee because there was cash problem.

107.  The present only objections to the 2 invoices by the Defendant as pleaded concern the quantity of work done and the non-existence of the work done as described in the invoices.  This has all been replied to by Wong on behalf of the Plaintiff in the Scott Schedule.

108.  Apart from the oral evidence of Chan which I do not find reliable and the photos of the Premises which I also do not find particularly useful in substantiating the objections to the invoices, there was no further evidence supporting what the Defendant now says.

109.  I have no hesitation to accept the explanation offered by Wong in relation to these objections.

110.  The total decoration fee for the Premises is therefore $436,000.

Conclusion

111.  As the total decoration fee of the Premises was $436,000, the outstanding sum due from the Defendant is therefore $236,000.

112.  The Defendant is therefore ordered to pay the Plaintiff:-

(a)  the sum of $236,000;

(b) interest thereon from date of writ to date of judgment at 8% per annum and thereafter at judgment rate till date of payment;

(c)  order nisi that the Defendant shall pay the Plaintiff costs of this action with certificate for counsel and including all costs reserved, the same to be taxed if not agreed.