MING KEE CONSTRUCTION CO LTD v. 范奕生

DCCJ 444/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 444 OF 2011

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BETWEEN

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JUDGMENT

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Introduction

1.  This is a contract dispute.

Background

2.  The Plaintiff (“Ming Kee”) is a contractor of the Hong Kong Government under contract no. DMW/ND/02/2009 (“the Main Contract”). The construction site involved is situated at a remote hill side near Wu Tip Shan, Sheung Shui, New Territories (“the Site”).

3.  Ming Kee sub-contracted part of its works to the Defendant (“Mr. Fan”).

4.  Ming Kee alleged that Mr. Fan has failed to complete the sub-contract.

5.  Mr. Fan denied the claim and counterclaimed for balance of payment under the sub-contract.

The Plaintiff’s Case

6.  There are 2 witnesses. They are Mr. Sit Kim Ming (“Mr. Sit”), the director of Ming Kee, and Mr. Lee Fai (“Mr. Lee”) who is the responsible person of Fai Kee Engineering Company (“Fai Kee”) (輝記工程公司).

Mr. Sit

7.  Under the Main Contract, Ming Kee is responsible to erect a metal pavilion at the Site. 

8.  On around 24 February 2010, Mr. Sit, on behalf of Ming Kee, orally sub-contracted certain works under the Main Contract to Mr. Fan at a contract price of $300,000 (“the Oral Agreement”)

9.  The works under the Oral Agreement are:-

i.  transportation of construction materials to the Site;

ii.  transportation of construction tools/machineries to the Site; and

iii.  arrange water supply to the Site

(collectively referred to as “the Works)

10.  Apart from the Works, Mr. Fan is also required to assist in the transportation of the metal structural members of the pavilion by providing man power.

11.  Upon entering the Oral Agreement, Ming Kee paid Mr. Fan a total sum of $100,000 (by 2 cheques) (“the First Payment”).

12.  On 18 March 2010, upon the request of Mr. Fan, Ming Kee made a further payment of $100,000 (also by 2 cheques) (“the Second Payment”). Mr. Fan also signed a Chinese note entitled “承判書” (which means “Sub-contract”) (“the Note”) acknowledging that he had received a total of $200,000 and the scope of work under the Oral Agreement (see Bundle B, p1). By that time, around 1/3 of the Works were completed.

13.  However, Mr. Fan failed to perform the Oral Agreement further or to complete the Works.

14.  Mr. Sit was unable to contact Mr. Fan. He made a number of phone calls but there was no reply.

15.  Ming Kee therefore engaged Mr. Lee to complete the remaining part of the Works at an agreed sum of $250,000 (“the Sit/Lee Agreement”).

16.  Ming Kee claims for (i) $150,000 being extra cost incurred; and (ii) $150,000 being additional management fees and labour cost.

17.  There is another sub-contract between Ming Kee and Mr. Lee dated 26 March 2010 in relation to the building work at the Site (“the Building Agreement”). It has nothing to do with the Works under the Oral Agreement.

Mr. Lee

18.  Mr. Lee told the Court that in around February 2010, Mr. Fan represented to him that he had sub-contracted with Ming Kee for transportation of 100 tons of construction materials to the Site at a contract price of $230,000. Mr. Fan asked if Mr. Lee was interested to co-operate with him to complete the sub-contract. Mr. Lee agreed and they would share the expenses/profits in equal shares (“the Partnership Agreement”).

19.  In relation to the transportation work, construction materials were delivered by suppliers to an open area near Wu Tip Shan (“the Open Area”) where 4 workers were engaged to pack the materials into small bags for onward transportation, by a 5.5 ton goods vehicle, to a helipad (“the Helipad”) further up the hill.

20.  Mr. Yip Pak Keung (“Mr. Yip”) and his workers were engaged to transport the bags of construction materials from the Helipad to the Site via a hill top known as 大石古 (“the Peak”) by using mechanical farmer trailers provided by Mr. Fan. Each of these trailers has a maximum load capacity of 400 kg.

21.  The farmer trailers were not in good conditions and broke down from time to time. On average, there were only 2 trailers in operation. By mid March 2010, all trailers were broken down. Mr. Fan did not arrange for replacement. Mr. Yip and his workers threatened not to carry on with their work any further because it was impracticable to transport further construction materials to the Site without conveyance.

22.  Around end of March 2010, Mr. Fan told Mr. Lee that he would not complete the transportation work for Ming Kee and terminate the Partnership Agreement.

23.  Mr. Lee informed Mr. Sit of the position. After some discussions, Mr. Lee and Ming Kee entered into the Sit/Lee Agreement to finish the remaining part of the Works for Mr. Sit for a sum of $250,000.

The Defendant’s Case

24.  There are 3 witnesses. Apart from Mr. Fan, the other 2 are Mr. Yip and Mr. Shahid Mahmood (“Mr. Mahmood”).

Mr. Fan

25.  Mr. Fan said that, under the Oral Agreement, he was only responsible to transport 100 tons of building materials to the Site. Ming Kee has to pay $3,000 for each extra ton.

26.  There was no agreement for the transportation of construction tools/machineries or supply of water. There was also no agreement for provision of man power to transport the structural members of the pavilion.

27.  Mr. Lee was his partner in this matter. However, he did not tell Mr. Sit anything about the partnership.

28.  Mr. Fan and Mr. Lee started their work on 24 February 2010. On around 18 March 2010, Mr. Fan informed Mr. Sit that there was no space at the Site/the Peak to place/store further building materials. He urged Mr. Sit to engage contractors and to commence the construction work of the base or platform for the pavilion. He further advised Mr. Sit that he would suspend the transportation work until there was space for storage.

29.  Mr. Fan did suspend the transportation work for 10 days.

30.  Mr. Fan further told the Court that he, together with Mr. Lee, had completed all the tasks under the Oral Agreement on around 12 May 2010. Therefore, he is entitled to the balance of the contract price in the sum of $100,000 under the Oral Agreement.

Mr. Mahmood

31.  Mr. Mahmood is a part-time causal labour employed by Mr. Fan. He and 3 other Pakistani co-workers (all arranged by Mr. Mahmood) were responsible to pack construction materials into small bags at the Open Area. Thereafter. The materials were loaded onto a 5.5 ton goods vehicle for transportation to the Helipad.

32.  He worked from 24 February 2010 to 12 May 2010.

Mr. Yip

33.  Mr. Yip is a sub-contractor engaged by Mr. Fan and is responsible for the transportation between the Helipad and the Site.

34.  The agreed quantity for transportation is 100 tons. Under the contract with Mr. Fan, he is also responsible to transport construction tools/machineries.

35.  Mr. Fan did provide 4 farmer trailers to Mr. Yip and his workers to carry out the transportation work. While the trailers broke down from time to time, Mr. Fan had repaired them and returned them for use on the same day or the next morning.

36.  Mr. Yip had complained to Mr. Fan that there was no space at the Site/ the Peak to store the construction materials. In reply, Mr. Fan told Mr. Yip to decide what to do himself.

37.  Thereafter, he suspended transportation work when there was no space to store the construction materials. He resumed the work when he was told that there was storage space.

Discussion and Analysis

38.  The issues here are (i) who is in breach of the Oral Agreement; and (ii) the remedies.

Who is in breach of the Oral Agreement?

(I) Terms of the Oral Agreement

39.  Witnesses gave different versions of the terms of the Oral Agreement. However, I am of the view that there is no need for me to resolve all the differences for the purpose of ascertaining the terms of the Oral Agreement. The reasons are as follows. Ming Kee is saying that Mr. Fan has only partly performed the Oral Agreement. The remaining parts of the Works are done by Mr. Lee.  On the other hand, Mr. Fan is saying that he together with Mr. Lee have fully performed the Oral Agreement. In other words, there is no dispute as to whether the Works under the Oral Agreement have been completed. The dispute is who did the Works. Therefore, in one sense, the differences are not material.

40.  It is another question when the credibility of a witness is concerned. I will therefore deal with the differences as to the terms of the Oral Agreement for the purpose of assessing the credibility of the witnesses.

(a) Quantity of construction materials to be transported

41.  Mr. Fan said that the agreed quantity is 100 tons.

42.  This piece of evidence only emerges when he gives oral testimony in the witness box. It is not pleaded and it does not appear in his witness statement.

43.  Most important of all, it is not mentioned in the Note which records the scope of the work to be done under the Oral Agreement. The words actually used in the Note are “所有建築材料” (which means all construction materials). If there is a limit in relation to quantity, there is no reason why Mr. Fan did not raise any objection.

44.  Under cross-examination, Mr. Fan explained that he did not read the Note clearly because (i) he did not put on his glasses; and (ii) Mr. Sit and Mdm. Lau, the girl friend of Mr. Sit, told him to hurry up and to sign the Note.   

45.  The Note is a one-page document with 8 lines in total and 2 lines dealing with the scope of work under the Oral Agreement (Bundle B, p1). It will not take more than a few minutes to go through it.

46.  I have carefully considered all the evidence, it is my finding that Mr. Fan is responsible to transport all construction materials under the Oral Agreement.

(b) Construction tools/machineries included?

47.  In the witness box, Mr. Fan said that he was not responsible to transport construction tools/ machineries under the Oral Agreement.

48.  However, in his AmendedDefence and Counterclaim (paragraph 5) and his witness statement (paragraph 3), he clearly accepts that he is responsible for the transportation of construction tools/machineries.

49.  Mr. Fan explained that he mixed up the date in paragraph 3 of his witness statement. The reference of “February 2010” should be “March 2010”. He is saying that it was in March 2010 that Mr. Sit, through the Note, added in the transportation of construction tools/machineries.

50.  This explanation cannot sit well with paragraph 8 of his witness statement where he said “…本人見承判書内容覆述了本人負責承包工作, 即 …地盆所有建築材料及工具 …之搬運工作 …及合約金額, 本人不覺得有問題, 於是便在上面簽署 …” (in essence, it means that the Note recites the work under the sub-contract which includes the transportation of construction tools/machineries and the contract price; Mr. Fan found no problem with that and he signed the Note).

51.  What Mr. Fan said in paragraph 8 clearly means the Note accurately re-capped the terms of the Oral Agreement which includes the transportation of the construction tools/machineries.  

52.  I reject Mr. Fan’s evidence and his explanation aforesaid. I find that Mr. Fan is responsible to transport construction tools/ machineries under the Oral Agreement.

(c) Supply of Water

53.  Mr. Fan said that he was not responsible for arranging water supply to the Site.

54.  However, the Note stated that “…承接 … 地盆所有建築材料及工具及泵水到地盆之搬運工作 …” (which means transporting all construction materials and tools and pump water to the Site).

55.  Mr. Lo, Counsel for the Defendant, suggested that “泵水” (which means pumping water) should read as “水泵” (which means water pump) as otherwise the sentence will not make sense because “pumping water” is a piece of work and cannot be transported. Only water pump which is a piece of tool/machinery can be transported. 

56.  I do not accept Counsel’s submission. “water pump” must be a kind of tool or machinery. That is already provided in the Note under the phrase “工具” (which means “tools/machinery”). There is no need to spell out “water pump” separately.

57.  It is my finding that Mr. Fan is responsible to arrange water supply to the Site.

(d) Transportation of the structural parts of the pavilion

58.  Mr. Fan said that he is only required to assist in transportation but not obliged to do so. In other words, there is no contractual duty to do so. However, he will offer man power to help when that is available.

59.  Mr. Sit told the Court that the pavilion comprises of metal parts would be dissembled for the purpose of transportation. Mr. Fan is duty bound to provide man power and assist the workers of Ming Kee to transport the parts to the Site.

60.  In this regard, the Note provides “… 鋼鐵只作協助 …” (literally means only assists/helps in ironwork). Mr. Lo submitted that Mr. Fan’s version is supported by the Note.

61.  I do not accept his submission. If there is no contractual duty on the part of Mr. Fan to provide man power, there is simply no reason to mention this in the Note.  

62.  I accept the submission of Ms. Leung, Counsel for the Plaintiff, that the words “協助” (which mean help or assist) are used to show that it is not the sole responsibility of Mr. Fan to transport the structural parts. Mr. Sit is also responsible to send in his men to do the transportation work. 

63.  It is my finding that Mr. Fan is responsible to provide man power to transport the structural parts of the pavilion.

(e) Payment schedules

64.  On this, Mr. Fan said that the contract sum is payable by 3 instalments. The first payment of $100,000 upon commencement of work. The second payment of $200,000 is due when 60 tons of construction materials are transported. The last payment is due when the remaining 40 tons are transported.

65.  This was not mentioned in the pleading or in Mr. Fan’s witness statement. It is also not provided in the Note.

66.  Having rejected Mr. Fan’s evidence as to quantity limitation, I have no hesitation in rejecting his version here.

(II) Who is at fault?

67.  The complaint is that Mr. Fan ceased to carry out the Works shortly after the Second Payment. Mr. Sit believed that Mr. Fan was not going to perform the Oral Agreement any further.

68.  Mr. Sit said that all the 4 farmer trailers provided by Mr. Fan were broken down. There is thus no conveyance for Mr. Yip and his workers to transport the construction materials. Mr. Lee told him that Mr. Fan would not continue with the Oral Agreement. Mr. Sit then tried to contact Mr. Fan by telephone but in vain. He called Mr. Fan everyday for a week. There was no answer and the calls were diverted to voice-mail box. Mr. Sit did leave messages asking Mr. Fan to return call. There was no reply. Mr. Sit then left message at the voice-mail box that if Mr. Fan did not reply within 7 days, he would terminate the Oral Agreement. There was no response.

69.  Thereafter, Mr. Sit purchased 2 new farmer trailers and provided them to Mr. Lee who agreed to complete the remaining parts of the Oral Agreement. The 2 new farmer trailers were in turn provided to Mr. Yip and his workers to carry out their works.

70.  Mr. Fan said that there was a temporary suspension of the transportation work for around 10 days in March 2010 because there is no space at the Site or at the Peak to store the construction materials.

71.  At one stage, Mr. Fan said that the suspension was between 24 or 25 March 2010 and 3 April 2010. When he recalled that he met Mr. Sit on 18 March 2010 for the signing of the Note, he clarified that the suspension should have commenced before 18 March 2010. He resumed transportation work when there was space to store the materials. All these, however, are not pleaded and do not appear in his witness statement.

72.  Indeed, Mr. Yip also mentioned something about suspension of transportation work. When he informed Mr. Fan that there was no space to store the construction materials, Mr. Fan told him to decide what to do himself. As a result, Mr. Yip suspended transportation work for 3 or 4 days. Mr. Yip accepted that Mr. Fan had not instructed him to suspend the work. All these are not mentioned in his witness statement.

73.  Mr. Lo submitted that Mr. Lee made a false report to Mr. Sit that Mr. Fan intended not to carry on with the Oral Agreement because all the trailers were broken down.  He submitted that Mr. Lee did that in order to secure a fresh contract for his own benefit after he found out that the contract price of the Oral Agreement was $300,000 instead of $230,000.

74.  I do not accept Mr. Lo’s submission. At that time, Mr. Sit knew nothing about the Partnership Agreement. He would not simply rely on the words of Mr. Lee who in his eyes was only someone working for Mr. Fan. When Mr. Sit verifies the position with Mr. Fan, the truth will surface. 

75.  Mr. Lo also submitted that the receipts produced by Mr. Fan can show that he was all along performing the Oral Agreement. He further reminded the Court that Mr. Lee regarded the Partnership Agreement a subsisting one even after 1 April 2010. Further, Mr. Mahmood and Mr. Yip said that they worked until 12 May 2010.   

76.  While these matters are something that I have to consider when I evaluate the evidence as a whole, it must be noted that the conduct on the part of Mr. Lee would have no impact upon Mr. Sit. What I have to consider here is whether there is any repudiation on the part of Mr. Fan and, if so, whether the repudiation is accepted by Mr. Sit. If there is repudiation by Mr. Fan and that is accepted by Mr. Sit, the Oral Agreement had come to an end. Any further performance by Mr. Fan or workers formerly engaged by him will not revive the Oral Agreement.  I will say no more than is necessary as to the dealings between Mr. Fan and Mr. Lee because Mr. Fan may have a claim against Mr. Lee under the Partnership Agreement.

77.  I am of the view that Mr. Fan and Mr. Yip are not telling the truth. If otherwise, there is no reason why they did not mention the suspension in their respective witness statements. Further, the duration of the suspension is different. Mr. Fan said it was 10 days but Mr. Yip said it was 3 to 4 days.

78.  Under cross-examination, it took Mr. Yip almost one minute for deliberation before he gave a positive answer to the suggestion that 2 new farmer trailers were provided to him and his workers to carry out their work in early April 2010.

79.  Mr. Lo had tried all his best to clarify the position under re-examination. He asked a series of questions, framed in different ways, in order to find out what Mr. Yip meant by “new” farmer trailers:  “brand new” or “replacement” of the current trailers. However, there was no reply from Mr. Yip to these questions, except the last one, notwithstanding much time was given to him to consider his answer after each and every question. His last answer is far from unambiguous. He said that he knew the trailers were “new” but did not know whether they were “second-hand” or “third-hand” trailers.

80.  Ming Kee had already paid Mr. Fan $200,000 before he engaged Mr. Lee to perform the remaining parts of the Works for an extra sum of $250,000. It means Ming Kee has to, and indeed paid, a total of $450,000 for the Works. Mr. Sit must have a reason for so doing. What is the reason?

81.  The only logical explanation is that Mr. Sit is telling the truth. There was no conveyance for transportation and thus there was no one working. Further, he could not locate Mr. Fan. Mr. Sit worried much about the completion of the Main Contract.

82.  On the other hand, the evidence of Mr. Fan in relation to the terms of the Oral Agreement was not satisfactory. I doubt his credibility.

83.  For the reasons aforesaid, I reject the evidence of Mr. Fan and Mr. Lee. I accept the evidence of Mr. Sit and Mr. Lee in this regard.

84.  In the light of the factual background as I found, it is reasonable for Mr. Sit to conclude that Mr. Fan was not going to perform the Oral Agreement any further. If otherwise, there is no reason why Mr. Fan did not reply to the phone calls and messages.

85.  It is my ruling that Mr. Fan had repudiated the Oral Agreement. Such repudiation was accepted by Mr. Sit and the Oral Agreement came to an end.

The Remedies

86.  Mr. Sit remedied the situation by entering into the Sit/Lee Agreement. It is my finding that the works done under the Sit/Lee Agreement are the remaining parts of the Works under the Oral Agreement.

87.  There is only one matter that I should mention further. That is the supply of water to the Site. Both the Building Agreement and the Sit/Lee Agreement provided that Mr. Lee should arrange water supply.

88.  I do not think it is possible for anyone to say that Mr. Lee arranged water supply under the Building Agreement but not under the Sit/Lee Agreement or vice versa in this case. I also do not think that I need to make any finding on this too. While the cost for water supply is not separately provided for because both agreements are lump-sum agreement, they must be the same.  

89.  There is nothing to suggest that the contract price under the Sit/Lee Agreement is unreasonable.

90.  Mr. Sit is entitled to $150,000 being the extra cost he had paid.

91.  There is no evidence to support the claim for management fee and labour costs. Nothing can be recovered under this item.

92.  Ms. Leung submitted that Mr. Sit had incurred $72,000 for purchasing 2 farmer trailers. However, this cannot be regarded as management fees or labour costs as claimed.

Conclusion

93.  For the reasons aforesaid, I enter judgment in favour of the Plaintiff in the sum of $150,000 together with interest at 8% from date of writ to date of judgment and thereafter at judgment rate until full payment.

94.  The Counterclaim is dismissed.

95.  I also make an order nisi that the Defendant to pay the Plaintiff’s costs of this action together with all costs reserved to be taxed if not agreed with certificate for Counsel. This order nisi shall become absolute unless there is application to the otherwise within 14 days after handing down of this Judgment.