GRANTER WOODWORK & DECORATION CO LTD v. HAI DA CONSTRUCTION LTD AND OTHERS

HCCT 81/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION LIST NO. 81 OF 2002

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J U D G M E N T

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INTRODUCTION

1.  This is an action by a sub-contractor against its superior sub-contractors and the main contractor for cost of work done.  Judgment in default was entered against the 1^st Defendant on 29 November 2002 who had not file any intention to defend.  The present proceedings are concerned with the 2^nd and 3^rd Defendants.

2.  In April 2000, the Plaintiff entered into a sub-contract with the 1^st Defendant (the “1^st Contract”) for carrying out woodwork for two government school projects in a construction site in Kowloon Tong.  The 2^nd Defendant was the 1^st Defendant’s superior sub-contractor.  The 3^rd Defendant was the main contractor.  At the material times, the three Defendants were inter-related.  The 1^st Defendant was, until 3 August 2002, a joint venture company formed by the 2^nd Defendant and Handy Contractor Company Limited (“Handy”).  Though the 2^nd Defendant held 51% of the shares in the 1^st Defendant, the 1^st Defendant was managed and controlled by Mr David Chow, the person in charge of Handy.  The 1^st and 2^nd Defendants shared the same office.  The 2^nd Defendant was a subsidiary of Shanghai Construction (Group) General Corp (“Shanghai Construction”), a Mainland company.  The 3^rd Defendant was an associated company of Shanghai Construction.  Following a dispute arising out of the joint venture, the 2^nd Defendant transferred all its shares in the 1^st Defendant to Handy on 3 August 2002 and paid Handy a sum of $7.5 million.

3.  The Plaintiff commenced work under the 1^st Contract in November 2000.  Originally, the scheduled completion date for the decoration works in the two school projects was in June 2001.  However, progress was behind schedule as the 1^st Defendant was in arrears in paying its sub-contractors, including the Plaintiff.  The Plaintiff’s case against the 2^nd Defendant is based on an oral promise made by Mr Gu of the 2^nd Defendant at its office on or about 27 June 2001 that the 2^nd Defendant would pay the Plaintiff all money due under the 1^st Contract upon completion of the remaining work thereunder (the “2^nd Contract”).  The Plaintiff’s case against the 3^rd Defendant is that at a site meeting held by the 3^rd Defendant with all the sub-contractors in July 2001, the 3^rd Defendant, through the head of its buildings department, Mr Sin, promised all the sub-contractors, including the Plaintiff, that they would be paid all the money due under their sub-contracts upon completion of their works thereunder (the “3^rd Contract”).  The Plaintiff claimed that it had completed the remaining works under the 1^st Contract in November 2001 pursuant to the 2^nd and 3^rd Defendants’ promises in the 2^nd Contract and the 3^rd Contract, when it otherwise would not have.  The 1^st Defendant defaulted in paying the outstanding balance due under the 1^st Contract in the amount of $1,776,986.49.  Hence, the Plaintiff claims the above amount against the 2^nd and 3^rd Defendants under the 2^nd and 3^rd Contracts respectively.  The Plaintiff also claims, in the alternative, damages for misrepresentation and on a quantum meruit. 

4.  The disputes in this case are purely factual.  The principle issue in dispute between the Plaintiff and the 2^nd Defendant is whether Mr Gu gave the promise contained in the 2^nd Contract on or about 27 June 2001.  The principle issue in dispute between the Plaintiff and the 3^rd Defendant is whether Mr Sin made the promise contained in the 3^rd Contract at the site meeting in June or July 2001 which was accepted by all the sub-contractors including the Plaintiff. 

5.  The Plaintiff called three witnesses, namely, Mr Chu, Mr Chan and Ms Lo.  Mr Chu is a director of the Plaintiff.  Mr Chan is a director of Universal Aluminium Company Limited (“Universal Aluminium”), another sub-contractor engaged in the two school projects.  Ms Lo is an accounts clerk of the Plaintiff.

6.  The 2^nd Defendant called three witnesses, namely, Mr Gu, Mr He and Mr Cheng.  They are staff of Shanghai Construction who were deployed to work in the 1^st and/or 2^nd Defendants.  Mr Gu was deployed to work in the 2^nd Defendant as the deputy general manager but was also a director of the 1^st Defendant between 28 March 2000 and 31 August 2002.  He was responsible for the two projects.  Mr He was deployed to work in the 2^nd Defendant as an assistant general manager with responsibility for a different construction project sub-contracted to Handy.  He occasionally assisted in the two school projects.  Mr Cheng was deployed to work in the 1^st Defendant as the senior project manager responsible for the two school projects.  But he also had name cards which bore the title as a senior project manager of the 2^nd Defendant.  Because of the common involvement in the two school projects, the precise scope of their authorities as agents of the 1^st and/or 2^nd Defendants was difficult to discern.  This is particularly so as the 1^st and 2^nd Defendants shared the same office at the material time.

7.  The 3^rd Defendant called two witnesses, namely, Mr Sin and Mr Wong who were, respectively, the head of the buildings department and the project manager of the 3^rd Defendant in charge of the two school projects.

8.  The key witnesses are Mr Chu, Mr Gu, Mr Sin and Mr Wong.

the 2^nd Contract

The Plaintiff’s case

9.  According to Mr Chu, the Plaintiff had completed the work under the 1^st Contract to the value of over $6 million as at 27 June 2001.  After deducting deposit and retention money and after taking into account the various interim payments received, the Plaintiff was owed over $3 million at that time.  Mr Chu knew that the 1^st Defendant was a shelf company and a joint venture between the 2^nd Defendant and Handy.  He heard that the 1^st Defendant was in serious financial difficulty.  Hence he was concerned if the Plaintiff would be paid for its work done.  He chased Mr Cheng for payment, whom he thought was the 2^nd Defendant’s representative.  On 27 or 28 June 2001, Mr Cheng phoned him and asked him to collect payment at the office of the 2^nd Defendant on 19^th floor in Kwan Chart Tower in Wanchai.  Mr Chu went to Kwan Chart Tower on the same day.  He saw only the 2^nd Defendant’s name on the floor directory at the ground floor entrance.  He went up to the 19^th floor and there he only saw the name of the 2^nd Defendant at the entrance.  He was led into a conference room.  Then Mr Cheng came into the conference room to meet him and offered to pay him $600,000.  Mr Chu asked for more payment.  After some negotiation, Mr Cheng agreed to pay $800,000 and left the conference room for the cheque.

10.  At this juncture, Mr Gu, whom Mr Chu thought was the deputy general manager of the 2^nd Defendant, entered the conference room for a smoke.  Mr Chu told Mr Gu his concern that the Plaintiff was owed too much money by the 1^st Defendant and was worried if it could recover fully for the work done under the 1^st Contract.  Then Mr Gu told him that the 2^nd Defendant was a big and reputable company and would guarantee the Plaintiff would receive all money due if the Plaintiff could complete all its work without any quality problem.  After making the promise, Mr Gu left.

11.  Then, Mr Cheng returned with the cheque for $800,000 drawn on the 1^st Defendant’s bank account.  Mr Chu signed for receipt of the cheque and left.  The Plaintiff’s case is that but for the promise made by Mr Gu on behalf of the 2^nd Defendant, the Plaintiff would have stopped executing the remaining works under the 1^st Contract and would not have incurred further labour and material cost.

The 2^nd Defendant’s case

12.  The 2^nd Defendant’s primary defence is that Mr Gu had not given the promise under the 2^nd Contract.  Its alternative defence is that the parties had no intention to create a legally binding agreement under the 2^nd Contract, that Mr Gu did not have the 2^nd Defendant’s authority to give the promise under the 2^nd Contract and that the 2^nd Contract was not supported by any consideration.

13.  According to Mr Gu, he could not have met Mr Chu on 27 or 28 June 2001 and given him the promise under the 2^nd Contract.  He produced his diary which was a contemporaneous record of his daily activities.  The diary shows that on 27 June 2001, Mr Gu was at the office the whole day dealing with daily routines of the 2^nd Defendant.  It also shows that on the morning of 28 June 2001, Mr Gu was conducting an inspection in a construction site in Siu Sai Wan and had lunch with the site staff and in the afternoon he went to inspect the construction site of the two school projects in Kowloon Tong.  Mr Gu said that he had no recollection whether he had seen Mr Chu but denied having given the promise under the 2^nd Contract as alleged.

14.  Mr Gu said that he was a director of the 1^st Defendant between 28 March 2000 and 31 August 2002 responsible for co-ordinating work in relation to the two school projects.  He said that although he was the deputy general manager of the 2^nd Defendant, he had since 5 January 2001 been demoted to be the quality and safety manager because of his health reasons.  His responsibilities for the two school projects were handed over to Mr Luk Ngai.  Hence, he was not responsible for and not concerned with the two school projects and had no authority to give the promise under the 2^nd Contract in June 2001 as alleged.  He was later promoted to the position of human resources and administration manager of the 2^nd Defendant.

15.  Cheng was the senior project manager of the 1^st Defendant responsible for the two school projects.  He gave the cheque in the amount of $800,000 to Mr Chu on 28 June 2001.  According to him, it was the 1^st Defendant’s practice not to issue post-dated cheques.

Finding of fact

16.  The factual issues to be resolved are: (a) whether there was a meeting between Mr Chu and Mr Gu on 27 or 28 June 2001 and (b) if there was such a meeting, what was agreed at that meeting.

17.  The Plaintiff’s case has never been consistent as to when that meeting took place.  In its solicitors’ letter of demand dated 5 July 2002, its Statement of Claim issued on 6 September 2002, his witness statement filed on 29 April 2003 and its Answers to Interrogatories dated 2 July 2003, Mr Chu alleged in no equivocal terms that the meeting was held on 28 June 2001.  On 22 July 2004, Mr Chu retracted and filed a supplemental witness statement in which he said that the meeting might have taken place on 27 June 2001.  This was followed by an amendment to the Statement of Claim to that effect.  The supplemental witness statement and the Amended Statement of Claim must have been the result of conscious and careful thoughts.  Mr Lin, counsel for the 2^nd Defendant, suggests that the change was brought about by the disclosure of Mr Gu’s diary which shows that Mr Gu could not have met Mr Chu at the 2^nd Defendant’s office on 28 June 2001.  In his evidence in Court, Mr Chu reverted to his original version that the meeting took place on 28 June 2001.  While I would not speculate on the reason for the changes, Mr Chu did not impress me as a reliable witness.  The changes cast doubts on whether the meeting with Mr Gu, not the collection of the cheque which is not in dispute, had in fact taken place.

18.  In his evidence in Court, Mr Chu accepted that he went to the 2^nd Defendant’s office on 28 June 2001 after lunch and collected the cheque for $800,000, which could have been banked on the same afternoon or the following day.  He agreed that the cheque had not been post-dated.  However, on the deposit slip with which the cheque was banked is a time chop showing that the cheque was banked at 13:06 hours on 28 June 2001.  On his own evidence and the incontrovertible documentary evidence, Mr Chu’s visit to the 2^nd Defendant’s office could not have taken place on 27 June 2001 but must have taken place on 28 June 2001.  If Mr Gu’s diary is a true and accurate record of his daily activities, Mr Gu was in Siu Sai Wan at the material time on 28 June 2001 and could not have met with Mr Chu and given him the promise as alleged by Mr Chu.  I have examined the diary.  It appears to me to be an authentic record.  It contains records of many facts concerning Mr Chu, which were not disputed by Mr Chu.  I have no doubt that the contents of the diary are true.

19.  Mr Chu was also not consistent with what he alleged was promised by Mr Gu at the meeting.  In his solicitors’ demand letter to the 2^nd Defendant dated 5 July 2002 which contained his earliest version of the promise given under the 2^nd Contract, his solicitors wrote:

“On 28 June 2001, your Mr Koo Kang Hing confirmed and promised to pay the remaining Project sum at your office upon our client’s compliance of the Quotation.”

This version must have been the result of Mr Chu’s instructions to his solicitors.  This letter was issued a year after the alleged promise was made.  It must have been the most reliable recollection of Mr Chu because that occasion when he recounted the incident before his solicitors must have been the first occasion when he gave really serious thoughts to the incident.

20.  In the Statement of Claim dated 6 September 2002, the oral promise was pleaded as:

“The Plaintiff would receive from the 2^nd Defendant all the money due under the 1^st Contract once the Plaintiff completed all of the carpentry work of the Primary Schools.”

This departure may not be very significant but is some evidence of inconsistency as to what was promised.

21.  In Mr Chu’s witness statement dated 29 April 2003, Mr Chu described Mr Gu’s promise to pay as a guarantee and he introduced the qualification of “without any quality problems”.  He said:

“[Gu] said that the 2^nd Defendant could guarantee my company receiving all the money due if the Plaintiff could complete all the carpentry work of the 2 primary schools without any quality problems.”

22.  In his supplemental witness statement dated 22 July 2004, Mr Chu gave yet another version of the oral promise.  He reverted to a promise to pay instead of a guarantee and he added a representation as to the credit worthiness of the 2^nd Defendant.  He said:

“[Gu] told me that the 2^nd Defendant was a big company and could pay me if my company would continue to work under the 1^st Contract.”

23.  Under cross-examination, Mr Chu quoted what Mr Gu promised as:

“SCG was a very large company.  As long as the work was done properly, SCG would certainly pay us.”

24.  Thus, Mr Chu gave five different versions of the oral promise made by Mr Gu.  Mr Chu might have been very loose with his language.  The five versions are to the same effect.  Even though it may be argued that the differences are semantic and might be due to lapse of time, the inconsistencies reflect that he may not be recounting what he actually heard but may be making up his evidence.

25.  There is no dispute that the 1^st and 2^nd Defendants shared the same office in Kwan Chart Tower.  Mr Chu said that the visit on 28 June 2001 was his first visit to the office of the 2^nd Defendant.  That was why he paid attention to the directory on the ground floor and the name of the 1^st and 2^nd Defendants on the 19^th floor and that he did not see the name of the 1^st Defendant.  This evidence is to bolster his case that he saw Mr Gu at the office of the 2^nd Defendant and that Mr Gu made the promise as a senior employee and with the authority of the 2^nd Defendant.  However, that evidence is contradicted by the evidence of Mr Cheng and Mr Gu which is supported by incontrovertible documentary evidence.  Mr Cheng said that Mr Chu had been to the office of the 1^st Defendant in Kwan Chart Tower previously on 25 May and 13 June 2001 to collect cheques.  This is supported by copies of the cheques collected by the Plaintiff.  Those cheques were issued by the 1^st Defendant.  According to Mr Gu, on the morning of 25 May 2001, he assisted in receiving the woodwork and masonry sub-contractors of the two school projects in his office and had lunch with them.  The Plaintiff was the only woodwork sub-contractor in the two school projects.  Then he went to the construction site of the two school projects in Kowloon Tong to supervise payment to the sub-contractors.  Mr Gu also said that on 13 June 2001, he received the sub-contractors of the two school projects in his office and escorted them to a school site in Hunghom for a visit.  He had lunch with the sub-contractors and then went to the construction site of the two school projects in Kowloon Tong.  Though that visit was not exclusively for the woodwork sub-contractor, he said that Mr Chu attended.  Mr Chu said that he could not remember if he had attended that tour to the school site in Hunghom, but he was subsequently a sub-contractor in that project as well.  Mr Gu’s evidence is supported by his diary, which I consider was a genuine and contemporaneous record of his daily activities.  Though there was a possibility that Mr Chu might have collected its payment at the construction site together with the other sub-contractors on the two occasions, there could be no doubt that Mr Chu attended the office of the 1^st Defendant in Kwan Chart Tower on 25 May and 13 June 2001.  The two visits must have been arranged by the 1^st Defendant as the immediate superior sub-contractor rather than by the 2^nd Defendant.  Though the confusion as to the identities of the 1^st and 2^nd Defendants is understandable in the circumstances, Mr Chu’s evidence that it was his first visit to the 2^nd Defendant’s office in Kwan Chart Tower on 28 June 2001 was manifestly proven to be an exaggeration.  That badly damaged his credibility.

26.  Viewed objectively, Mr Chu’s account of the conversation is also inherently incredible.  It was so much of a coincidence that while Mr Cheng left the conference room for the cheque, Mr Gu went in to have a cigarette, made such a serious business commitment and then disappeared in a puff of smoke before Mr Cheng returned.  Even assuming in favour of the Plaintiff that Mr Gu was the deputy general manager of the 2^nd Defendant and not its quality and safety manager, that he was eager to have the two school projects completed on schedule, that he was thoroughly familiar with the affairs of the 1^st and 2^nd Defendants being respectively a director of the 1^st Defendant and the deputy general manager of the 2^nd Defendant, it is unlikely that he would have in such a casual conversation committed the 2^nd Defendant for a million dollars over less than the time taken to finish a cigarette and without ascertaining the extent of that commitment. 

27.  Viewed from the angle of the 2^nd Defendant, the promise made no business sense.  The due completion of the two school projects depends on the co-operation of all the sub-contractors.  There was overall delay and all works were behind schedule due to the 1^st Defendant’s failure to pay its sub-contractors.  The two school projects would not be completed even if the Plaintiff completed the 1^st Contract on schedule, if the other sub-contractors did not complete their respective sub-contracts.  It would serve no purpose to guarantee payment to one but not all the sub-contractors.  If the two school projects could not be completed on schedule because of the delays in the other sub-contracts, the promise would only create unnecessary liability for the 2^nd Defendant.  The prospect of recovery against the 1^st Defendant was slim as Mr Gu, being its director, must have known that the 1^st Defendant was impecunious.

28.  Viewed from the angle of the Plaintiff, as a result of the promise, it executed works to the value of over $4 million when it otherwise would not have done in view of his knowledge of the financial difficulties of the 1^st Defendant.  Mr Chu is a businessman.  As his argument with Mr Sin at the site meeting demonstrates, he realised that the Plaintiff had no contractual relationship with the 2^nd Defendant which was not under any legal obligation to pay for the Plaintiff’s work done for the 1^st Defendant.  Under such circumstances, it did not make any business sense for the Plaintiff incur $4 million without securing some written agreement to that effect.  On the other hand, according to the evidence of Mr Sin and Mr Wong of the 3^rd Defendant, at the site meeting in June or July 2001 and in the presence of all the other sub-contractors, Mr Chu openly vowed support for and trust in Mr Chow of Handy whom he regarded as the alter ego of the 1^st Defendant.  His support for Mr Chow of Handy must be the true reason why the Plaintiff incurred further expenses in the 1^st Contract.  Furthermore, even on Mr Chu’s own evidence, he showed distrust in the 2^nd Defendant’s certifying payment certificates at that meeting.  This casts serious doubts on the veracity of his evidence that it was on the strength of Mr Gu’s promise that the Plaintiff executed further works under the 1^st Contract.  The inference which may reasonably be drawn is that not only that the Plaintiff could not have incurred the further works on the strength of Mr Gu’s promise, such promise never existed at all.  The Plaintiff’s account of the meeting is inherently incredible.

29.  I also have some doubt on the credibility of Mr Gu’s evidence that he was demoted to quality and safety manager at the material time.  Though he presented some minutes of meeting in support of his demotion, his diary shows that he was still heavily involved in the two projects at the material time and there was nothing in his diary to suggest that his involvement was limited to quality and safety issues.  But his diary also shows that he had attended a meeting of safety officers and a training session in construction site safety on 23 July 2001.  In view of the confusing staff deployment by Shanghai Construction, I also have doubts that Mr Gu did not have authority to act for the 2^nd Defendant in relation to the two school projects.  But I do not consider those doubts affect Mr Gu’s credibility on the central issues whether there was a meeting between Mr Gu and Mr Chu and what was said during that meeting. 

Conclusion

30.  Having considered the totality of the evidence, I reject Mr Chu’s evidence.  His evidence is imprecise, exaggerated, inherently incredible and contradicted by other more credible evidence.  I am not satisfied that Mr Chu had a meeting with Mr Gu on 27 or 28 June 2001 or that Mr Gu made the promise as alleged under the 2^nd Contract.  In fact, I am satisfied to the contrary that such meeting never occurred.  In the circumstances, the Plaintiff has failed to prove the promise or the representation.  The Plaintiff’s claim based on misrepresentation and breach of the 2^nd Contract must fail.

31.  As for the claim based on quantum meruit, the Plaintiff claim was so inadequately pleaded that it fails to disclose a valid cause of action.  There are no particulars as to by whom and to whom the request for work or services was made, the work or services requested and the reasonable sum to which the Plaintiff is entitled.  Insofar as the Plaintiff’s claim is based on the conversation between Mr Chu and Mr Gu at the meeting of 28 June 2001, the claim must fail on my finding that such meeting never existed.  The Plaintiff called its accounting clerk, Ms Lo, to give evidence on the cost incurred by the Plaintiff during the period from around May 2001 to August 2002 as evidence of the reasonable sum to which the Plaintiff is entitled under the claim on quantum meruit.  Quite apart from the Plaintiff’s failure to identify the works and services requested by the 2^nd Defendant, the evidence of the cost incurred by the Plaintiff included cost incurred in another project undertaken by the Plaintiff in Hunghom and cost incurred prior to 28 June 2001 assuming that to be the cut off date.  The Plaintiff has utterly failed to prove its claim based on quantum meruit. 

32.  Having reached the above conclusion, it is unnecessary for me to consider the Plaintiff’s alternative case of Mr Gu’s lack authority to make the promise under the 2^nd Contract, the lack of consideration and lack of legal intention to make a binding contract.  It could probably be argued that Mr Gu had the authority to make the promise binding on the 2^nd Defendant and there was consideration moving from the Plaintiff by its continuing to perform the 1^st Contract under circumstances when it otherwise would have considered itself discharged by reason of the 1^st Defendant’s breach.  It could probably be argued that the 2^nd Defendant had no intention to make a legally binding promise.  But it is unnecessary for me to make those findings and I leave them open.

the 3^rd contract

The Plaintiff’s case

33.  The Plaintiff’s case in respect of the 3^rd Contract is that as the 1^st Defendant was in financial difficulties and unable to pay its sub-contractors, progress in the two school projects came to a halt.  The 3^rd Defendant became concerned.  On 23 July 2001, Mr Wong of the 3^rd Defendant called for a meeting with all the sub-contractors.  The meeting was chaired by Mr Sin, the head of the 3^rd Defendant’s buildings department.  Mr Sin told the sub-contractors not to worry about payment and offered to pay them when they completed all of their work with payment certificates certified by the 2^nd Defendant.  Mr Chu objected to the condition about certification of payment by the 2^nd Defendant, as he was worried that the 2^nd Defendant might refuse to certify.  After some negotiation, Mr Sin waived that condition and promised to pay the sub-contractors upon completion of work if they were not paid by the 1^st or 2^nd Defendants.  All the sub-contractors, including the Plaintiff, agreed.  Then Mr Sin discussed progress with the sub-contractors.  According to the Plaintiff, pursuant to that promise, it completed all the major works under the 1^st Contract on 27 August 2001 and completed all remedial works on 27 March 2002.  Pursuant to that promise, it received a cheque drawn by the 3^rd Defendant in the amount of $1,328,843.50 on 22 August 2001.  The Plaintiff did not receive any further payment by any of the Defendants and was owed $1,776,986.49 by the 1^st Defendant under the 1^st Contract, which it sought to recover from the 3^rd Defendant as damages for breach of the 3^rd Contract, misrepresentation and in quantum meruit.

The 3^rd Defendant’s case

34.  It is common ground that Mr Sin had a meeting with all the sub-contractors and made an offer to pay them directly.  But, the 3^rd Defendant disputes that the meeting was held in July 2001 and that there was any concluded agreement.  The 3^rd Defendant’s case is that the progress under the two projects was behind schedule and at a joint inspection in mid June 2001 with the Education Department and the Architectural Services Department, it was agreed that the completion date of the two school projects be postponed to 15 August 2001.  Mr Sin asked Mr Wong to convene a meeting with all the sub-contractors for the purpose of expediting the progress.  He knew that the problem stemmed from the 1^st Defendant’s lack of funds and delays in paying its sub-contractors.  He obtained prior approval from his superior to propose direct payment to the sub-contractors in respect of the remaining works to be executed, if necessary.  Hence, in addition to Mr Wong, he was accompanied by Ms Chung, the deputy contract manager and Mr Fung, the quantity surveyor of the 3^rd Defendant, in case it became necessary to make any quantitative assessments of the outstanding works at the meeting.

35.  At the meeting, Mr Sin offered to make direct payment to the sub-contractors in respect of all outstanding works to be executed.  The offer was subject to acceptance by all the sub-contractors and that all the sub-contractors were prepared to meet the completion date of the projects.  Mr Chu objected on the ground that he had no confidence in the 3^rd Defendant with whom the Plaintiff had no contractual relation and that the sub-contractors would only proceed pursuant to their sub-contracts entered into with Mr Chow, i.e. Handy.  Mr Sin was annoyed and sensed that the sub-contractors had teamed up with Mr Chow and it would be futile to discuss his direct payment proposal any further.  He then announced that his offer was withdrawn as it was not unanimously acceptable to all the sub-contractors.  The meeting concluded.

36.  Thereafter, Mr Sin exerted pressure on Mr Jin of the 2^nd Defendant to resolve the 1^st Defendant’s problem in paying its sub-contractors.  To his understanding, as a result of such pressure, the 1^st Defendant paid the Plaintiff $800,000 on 28 June 2001.  Hence, according to Mr Sin, the date of his meeting with the sub-contractors took place after the joint inspection in mid June 2001 but before the above payment on 28 June 2001.   

Finding of fact

37.  The factual disputes between the parties are: when was the meeting held and what, if any, was agreed at the meeting.  The first issue is not really material, except as to the background.

38.  The Plaintiff’s case as to the date of the meeting has never been consistent.  Back in July 2002 when the Plaintiff’s solicitors issued a letter before action, it was alleged that the meeting was held in mid-August 2001.  In its Statement of Claim filed in September 2002, two months later, it alleged that the meeting was held on or about 23 July 2001.  Mr Chu was unable to explain the change of the Plaintiff’s stance.  Mr Chow, counsel for the 3^rd Defendant, submits that the change was because initially Mr Chu concocted his case of the 3^rd Contract based on the direct payments made by the 3^rd Defendant on 22 August 2001, but later Mr Chu thought he would be able to built a much stronger case on the 3^rd Defendant’s letter to Universal Aluminium dated 23 July 2001, as such a case would be supported by documentary evidence.  I would not speculate the reason for the change of stance.  But in assessing Mr Chu’s credibility, I am bound to take into account the lack of a satisfactory explanation for the inconsistency.

39.  The Plaintiff relied on the evidence of Mr Chan of Universal Aluminium, one of the sub-contractors of the two school projects.  Mr Chan attended the meeting, which he said was held on 23 July 2001.  His evidence was somewhat equivocal as to what happened at the meeting.  He recalled Mr Sin made the offer of direct payment and that Mr Chu objected to the condition of certification by the 2^nd Defendant.  He became upset and was preoccupied with thoughts of how to get back his payment.  He paid no attention to what happened thereafter at the meeting and did not know if any agreement was reached.  I would view such evidence with suspect.  Apparently, there were only two speakers, Mr Sin who offered direct payment and Mr Chu who objected.  It is just incredible that after the meeting was concluded, Mr Chan just walked away not having any impression if the offer was accepted or withdrawn.  It is also incredible that he did not even ask any of the other sub-contractors what conclusion had been reached.  I think he was being evasive.

40.  Then according to Mr Chan, after the meeting, he went to see Mr Wong and asked Mr Wong to issue him a letter to the effect that the 3^rd Defendant would pay Universal Aluminium directly on completion of its works.  Later, he was given the letter by Mr Wong to that effect.  That letter was dated 23 July 2001.  He then rang up the other sub-contractors and suggested them to do the same. While Mr Chan’s evidence supports Mr Chu’s evidence that he disagreed with the condition that the direct payment be subject to certification by the 2^nd Defendant, it does not support Mr Chu’s evidence that a concluded agreement had been reached at the meeting.  The Plaintiff could only rely on Mr Wong’s letter obtained by Mr Chan as evidence of the date of that meeting.

41.  On the other hand, Mr Wong’s evidence is that the meeting was indeed held in July 2001.  Apart from that, his evidence tallied with that of Mr Sin.  Mr Wong said that he issued the letter dated 23 July 2001 to Universal Aluminium under circumstances which were wholly unrelated to that meeting.  He said that in preparation for inspection by the Fire Services Department, he discovered on or about 23 July 2001 that the works of Universal Aluminium were behind schedule.  He enquired with Mr Chan who said that the delivery of materials was held up because of the 1^st Defendant’s failure to pay but offered to complete the outstanding works on schedule if the 3^rd Defendant would give him direct payment.  As the fire services inspection was imminent, Mr Wong sought approval from Mr Sin who approved Mr Chan’s request.

42.  Mr Wong has left the employ of the 3^rd Defendant.  He is a dis-interested witness.  His evidence is supported by his letter dated 23 July 2001.  In the letter, he mentioned about the 1^st Defendant withholding payment to Universal Aluminium and about the fire services inspection.  He mentioned nothing about the meeting or Mr Sin’s offer at the meeting.  The payment arrangement mentioned in the letter is more consistent with it being a separate and isolated arrangement than an arrangement made pursuant to the agreement reached at the meeting.  His account of what led to the issue of the letter is cogent and makes more sense than that of Mr Chu’s.  Most importantly, Mr Wong confirmed that the interval between the issue of that letter and the meeting was about one month.  On that evidence, the meeting must have been held towards the end of June 2001 subsequent to the joint inspection in mid-June 2001.  Mr Wong impressed me as an honest and straightforward witness.  I accept his evidence that the letter was issued under circumstances which were wholly unrelated to the meeting and a month after that meeting.  It is obvious that Mr Wong was mistaken about the date of the meeting while the rest of his evidence is credible.  I reject Mr Chan’s evidence about the date of the meeting.  I accept Mr Sin’s evidence that the meeting was held in June 2001 and on a date prior to 28 June 2001 when the Plaintiff obtained the payment of $800,000 from the 1^st Defendant as referred to in paragraph 36 above.

43.  Mr Chu also relied on the direct payments made by the 3^rd Defendant to the sub-contractors, including the Plaintiff in the amount of $1,328,843.50, on 22 August 2001 as evidence of the 3^rd Contract.  Mr Sin explained the circumstances of those direct payments as follows.  On 10 August 2001, the Architectural Services Department released the 18^th payment of contract fees in the amount of $13,003,530 to the 3^rd Defendant.   After deducting payments to nominated sub-contractors and nominated suppliers, the 3^rd Defendant released the balance of $4,805,889.28 to the 2^nd Defendant on 21 August 2001.  On the same day, Mr Cheng, the project manager of the 2^nd Defendant, replied that the amount was not sufficient for it to pay its sub-contractors and requested a minimum payment of $7,857,762.91.  Mr He, of the 2^nd Defendant, also endorsed on the letter a request to Mr Sin to make direct payments to the sub-contractors on its behalf in that amount above in view of the urgency.  Then Mr Sin obtained approval for an advance payment of about $3 million to the 2^nd Defendant to meet its payment obligation.  The arrangement was supported by contemporaneous documents, the authenticity of which I have no doubt.  I am satisfied that those direct payments were made at the request of the 2^nd Defendant and not pursuant to any concluded agreement reached in that meeting.

44.  As to what happened at that meeting, I also prefer Mr Sin’s evidence.  Mr Chu’s evidence that Mr Sin waived the requirement of certification is inherently incredible.  The condition that the works executed must be certified before payment is a standard condition in almost any construction contracts.  It lacks business sense for Mr Sin to have agreed to pay without certification as Mr Chu alleged.  In fact, such a condition needs not be discussed, for it goes without saying.  Not only that, Mr Chu’s evidence is that the offer covered all works which remained unpaid, including works executed before the date of the meeting.  On this issue, Mr Chu’s evidence is contrary to the Plaintiff’s own pleading in which the Plaintiff pleaded that the offer only covered works executed after the date of the meeting.  I think Mr Sin’s evidence is more credible.  It is supported by the evidence of Mr Wong.  Both Mr Sin and Mr Wong impressed me as straightforward and honest witnesses.  Mr Sin’s offer to pay for works incurred since the date of the meeting was sensible.  The 3^rd Defendant as the main contractor might have already paid or be under an obligation to pay the 2^nd Defendant for works executed as at or shortly before the date of the meeting which had been certified.  There was no reason why the 3^rd Defendant should promise to pay for the same works again simply because the 1^st Defendant failed to pay its sub-contractors.  Mr Sin’s reason for terminating the meeting and withdrawing the offer was also reasonable.  It was obvious that Mr Chu and the other sub-contractors had teamed up against the main contractor.  In the circumstances, it was wise to discontinue the dialogue.  I accept Mr Sin’s evidence and also Mr Wong’s evidence, except as to the date of the meeting.  I reject Mr Chu’s and Mr Chan’s evidence.  I am not satisfied that there was any concluded agreement reached that the 3^rd Defendant would make direct payments to the sub-contractors for works executed under their sub-contracts with the 1^st Defendant.

Conclusion

45.  For the above reasons, I find that although the 3^rd Defendant had offered to pay the sub-contractors under certain conditions, the offer was rejected by the Plaintiff and then withdrawn by the 3^rd Defendant.  Accordingly, the Plaintiff has failed to prove that it had reached any concluded agreement with the 3^rd Defendant in the terms of the 3^rd Contract.  The Plaintiff’s claim for breach of the 3^rd Contract must fail.  On that finding, the Plaintiff’s claim based on misrepresentation must also fail.  The offer was rejected by the Plaintiff and withdrawn by the 3^rd Defendant before the Plaintiff can be said to have acted on the representation contained in the offer and suffered any detriment as a result. 

46.  The Plaintiff’s claim for quantum meruit, must also fail for similar reasons as those stated in paragraph 31 above.

Conclusion

47.  For the above reasons, the Plaintiff’s claims against the 2^nd and 3^rd Defendants are dismissed with an order nisi that the Plaintiff shall pay the costs of the 2^nd and 3^rd Defendants, such costs are to be taxed if not agreed.