UNION BEST ENGINEERING LTD v. CHING NGAR ENGINEERING LTD AND ANOTHER

CACV 88/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 88 OF 2005

(ON APPEAL FROM DCCJ NO. 6376 OF 2003)

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BETWEEN

  UNION BEST ENGINEERING LIMITED Plaintiff
  and  
  CHING NGAR ENGINEERING LIMITED 1st Defendant
  CHU WAI WING 2nd Defendant

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Before: Hon Cheung, Yeung and Tang JJA in Court

Date of Hearing: 3 March 2006

Date of Judgment: 15 March 2006

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J U D G M E N T

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Hon Tang JA (giving the judgment of the Court):

1. This is an appeal against a finding of fact. Mr Robert Pang, counsel for the appellant, in an able submission, acknowledged thedifficulties on an appeal against the finding of fact, namely, that we cannot interfere unless we are satisfied that the judge wasplainly wrong.

2. The claim which succeeded before District Judge C B Chan was based on an oral guarantee.

3. The respondent (the plaintiff) was a contractor and the 1st defendant was a sub-sub-contractor, in relation to a project called K2 Project.

4. The appellant (2nd defendant) was a director and shareholder of the 1st defendant.

5. On 9 September 2003, the plaintiff and the 1st defendant agreed to terminate the sub-sub-contract and for the 1st defendant to leave the site forthwith.

6. It was also agreed that the plaintiff would pay the 1st defendant $500,000 and that the 1st defendant should “bear all labour responsibilities, including wages, wages in arrears etc.” up to the termination.

7. Eventually, the 1st defendant failed to pay its workers and as the contractor, the plaintiff was held liable to pay the sum of $556,770 in LBTC 100133of 2003.

8. The plaintiff’s claim is that the 2nd defendant had orally guaranteed that the 1st defendant would perform its duties under the termination agreement.

9. Whether there was such an oral guarantee was one of the fact and depended on the evidence of Mr Lor Wai Leung, a director of theplaintiff, and the 2nd defendant.

10. It was Mr Lor’s evidence that initially he intended to pay $500,000 by a cheque post-dated to 25 September 2003, but later agreedto give the 2nd defendant a cash cheque in return for the 2nd defendant guaranteeing the performance of the 1st defendant of the terms of the termination agreement.

11. We note in passing that on 9 September 2003, 2 cheques were issued by the plaintiff in favour of the 1st defendant, one for $500,000 in relation to the termination of the K2 Project, and the other for $200,000 in respect of the Tai PoProject. The cheque for $200,000 in respect of the Tai Po Project was post-dated to 25 September 2003.

12. This is what the judge said in paras. 27-29 of her judgment:

“27. It seemed to me that the 2nd Defendant would not have easily agreed to guarantee the payment of the salary of the workers personally since he was not the bossof the workers. On the other hand, it is not credible that there was no discussion about the requirement on Ching Ngar’s partfor a cash cheque before the Plaintiff issued the cash cheque. In my view it is unlikely that the Plaintiff would have offereda cash cheque to the 2nd Defendant without a request for it. Nor is it likely that the Plaintiff would have given a cash cheque without some form of guaranteethat the 2nd Defendant would not use it for his own purposes since the cheque could be converted into cash by the 2nd Defendant and taken by the 2nd Defendant for his own use as the money did not have to pass through Ching Ngar bank account. Further the Plaintiff as an experiencedcontractor would have been mindful of his liability as a principal contractor to Ching Ngar workers for unpaid wages and thereforewould have tried to safeguard his falling into this scenario when the Plaintiff is adjudged to pay the unpaid wages of Ching Ngar.

28. On the above facts and taking into account the above factors, I find that the Plaintiff on the 9th September 2003 offered the 2nd Defendant a post-dated cheque in the sum of $500,000.00. The 2nd Defendant asked for a cash cheque. The Plaintiff then requested the 2nd Defendant to guarantee that the money received would be used to pay the workers. The Plaintiff by then had prepared the Agreement. When the Plaintiff agreed to issue a cash cheque to the 2nd Defendant upon the oral agreement that the 2nd Defendant would guarantee that Ching Ngar would comply with the terms of the Agreement, the Plaintiff altered the last page of theAgreement by writing the name of the 2nd Defendant as Party B. He also put the name of Lor Wai Leung as Party A on the last page of the Agreement. I find that Lor WaiPor had put pressure on the 2nd Defendant to use part of the $500,000 to pay the wages of Yeung Ming Hang and Law Kwok Ming who were the workers of Luen Kwong. Were the 2nd Defendant to disagree, Lor Wai Por stated that payment would not be made to Ching Ngai later, even were Ching Ngar to sue him orget someone to assault him. The 2nd Defendant was under pressure as Luen Kwong had failed to pay the interim payments to Ching Ngar. The 1st and 2nd Defendants were of the view that Luen Kwong may default in making payment to them. That was why the 1st and 2nd Defendants requested to receive payment from the Plaintiff rather than from Luen Kwong. The Plaintiff stepped in because the Plaintiffwanted the workers of Ching Ngar to leave the site as required by its principal contractors. The Agreement was not amended to reflectthe guarantee perhaps because there was pressure to conclude this transaction in the course of the meeting and there was insufficienttime to do so.

29. Despite careful consideration and consciousness of the adverse consequences for the 2nd Defendant upon this finding, I have no alternative but to find that there was an oral guarantee agreement between the 2nd Defendant and the Plaintiff wherein the 2nd Defendant guaranteed that the 1st Defendant would perform its duties under the Agreement. It is a sad case for the 2nd Defendant that because of the pressures he was under he had agreed to be a personal guarantor that the 1st Defendant would comply with the terms of the Agreement. However I find that the evidence points to an oral guarantee having beengiven by the 2nd Defendant that the 1st Defendant would honour the terms of the Agreement.”

13. Mr Pang submitted that the judge had not expressly rejected the appellant’s evidence, or expressed a general preference for theevidence of Mr Lor.

14. We believe that although the judge had not expressly rejected the appellant’s evidence, it is clear that she preferred Mr Lor’sevidence.

15. Mr Lor’s evidence, of course, hinged on his allegation that he had intended to give the 1st defendant a post-dated cheque. That was accepted by the judge. This was critical to the plaintiff’s case, and highly damagingto the 2nd defendant’s defence.

16. Mr Pang submitted that Mr Lor’s evidence should not have been accepted because post-dating the cheque would not have preventedthe 1st defendant’s workers from suing the plaintiff, and that under section 43D of the Employment Ordinance, Cap. 57, these workers had at least 60 days to give notice to the plaintiff that their wages had not been paid. Thus, the plaintiffmight not know by 25 September 2003 that these workers had not been paid, and giving a cheque post-dated to 25 September 2003 wouldnot have served his purpose.

17. According to Mr Lor, 25 September 2003 was the next payday. And looking at the matter with common sense, unless the workers werepaid within a relatively short time of 9 September 2003, it was unlikely that they would wait 60 days before notifying the plaintiffthat they had not been paid, so postponing the post-dating cheque until 25 September 2003 was a reasonable measure. Indeed, it seemsthat the cheque for $200,000 post-dated to 25 September 2003 was in fact dishonoured.

18. Nor was this point explored below.

19. In all the circumstances, we are unable to say that the judge was wrong, much less plainly wrong.

20. For the above reasons, we would dismiss the appeal. We also make an order nisi that the respondent is to have the costs of the appeal to be taxed if not agreed.

(Peter Cheung)
Justice of Appeal
(Wally Yeung)
Justice of Appeal
(Robert Tang)
Justice of Appeal

Mr Raymond Lau, instructed by Messrs Ng & Co., for the Plaintiff (Respondent).

Mr Robert Y H Pang, instructed by Messrs Joseph Leung & Associates, for the 2nd Defendant (Appellant).