Civil Action2002

W K CHANG v. WAI MAN ENGINEERING LTD

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CACV385/2004W K CHANG v. WAI MAN ENGINEERING LTD

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52031-EN-2006-03-27

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DCCJ 7882/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 7882 OF 2002

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

BETWEEN

	W K CHANG	Plaintiff
	and
	WAI MAN ENGINEERING LIMITED	Defendant

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

Coram: Deputy District Judge S. T. Poon in Court

Date of Hearing: 27^th – 28^th February 2006 & 1^st March 2006

Date of Handing Down Judgment: 27 March 2006

______________________

J U D G M E N T

______________________

Introduction

This is a retrial.

The Plaintiff (“P”) is a quantity surveyor and the Defendant (“D”) a construction contractor. P sued under a written agreement (“the Agreement”) for an amount of $243,095. The Agreement reads:

“UNDERGROUND DRAINAGE WORKS AT VISTA PANORAMA

If the provisional sum of $486,190.00 is paid to us in full or in part by the Employer, a success fee of 50% on the amount paid will be paid to you.”

At the first trial HH Judge Wong dismissed P’s claim on the ground that the Agreement is unenforceable in that the parties were at cross-purposes as to the subject matter of the Agreement.

P appealed. The Court of Appeal (Hon Rogers VP, Le Pichon JA and Cheung JA) had the view that the learned trial Judge failed to consider a material fact when arriving at her decision and ordered that the case be remitted back for retrial.

The material fact in question is whether there has been a duplication of work stated in the tender of D for the underground drainage maintenance work of Vista Panorama (“the Project”).

Issues

The main issues in the present trial are:-

(a) Whether the term “provisional sum” under the Agreement refers to an amount, as understood by the parties, being part of or in addition to the contract price of the Project;

(b) Whether the parties were at cross-purposes at the time of signing the Agreement; and

(c) Whether P had provided consideration to the Agreement.

Factual Background

1. Vista Panorama (“the Property”) is a multi-storey residential building. In 2001, the Building Department ordered the Incorporated Owners of the Property (“the Owners”) to carry out underground drainage maintenance work on the Property.

2. The Owners instructed its agent Multiple Surveyor Ltd. (“MSL”) to invite tenders from contractors for the Project. A printed set of “Tender Documents” was prepared by MSL for contractors to submit tenders.

3. The mode of tender was in the nature of a “lump sum tender”, which means that the tenderer is required to put down an overall amount of charge for the whole project rather than giving quotations on individual items of work.

4. The Tender Documents composed of different parts. The tenderer was required to fill in a “Lump Sum Fixed Price” on the “Form of Tender” for the Project.

5. Under the “Conditions of Tender” of the Tender Documents, the Lump Sum Fixed Price given in the Form of Tender shall be the tenderer’s all-inclusive price.

6. D was interested in the Project. According to Mr. Chan Kam Tin (“Chan”), a director of D, he instructed a part-time employee who was still studying at the Polytechnics to fill in the Tender Documents. The form was then submitted to MSL with Chan’s approval.

7. There was no Lump Sum Fixed Price filled in on D’s Form of Tender but a total price of HK$1,089,680 was put down on the “Summary of Tender” part. It was however stated on the Summary of Tender that the amount must be the same as the tender sum in the Form of Tender.

8. Although the tender was intended to be a Lump Sum Tender, a “Schedule of Works” comprising 3 different tables was provided for tenderers to fill in. Two of the said tables filled in by D are as follows:-

Item	Descriptions	Qty	Unit	Rate	Amount
2 Underground Drainage System
2.01	Underground Drainage System (地下水渠系統)
	a) Conducting CCTV survey including clean up of drainage to EACH AND EVERY sections of existing underground drainage and manholes stipulated in Drawing No:DP-02. (進行		Sum		25000.00
	地下水渠勘察及疏通淤塞水渠) b) Submit and/or resubmit remedial proposals and drawings to BD until acceptance and approval by BD so as to settle the Investigation Order BSI 2/K/98 (提交勘察報告)		Sum		20000.00
	c) Rain water Drainage (雨水渠) 225mm C.I. Pipe 150mm C.I. Pipe 100mm C.I. Pipe Manhole G.T. Connection work with manhole to Government (include CCTV survey to last manhole)	12 51 98 21 21	Lm Lm Lm Nos Nos Sum	600 500 460 3200 400	7200 25500.00 45080.00 67200.00 8400.00 15000.00
Sub-total for Rain water Drainage					213380.00
	d) Soil and Waste Water Drainage (污水渠) 150mm C.I. Pipe 100mm C.I. Pipe Manhole G.T. Connection work with manhole to Government (include CCTV survey to last manhole)	80 121 40 40	Lm Lm Nos Nos Sum	500 460 3200 400	40000.00 55660.00 128800.00 16000.00 16000.00
Sub-total for Soil and Waste Water Drainage System					256460.00
Sub-total for Underground Drainage System
Total for this page					469840.00

Item	Descriptions	Qty	Unit	Rate	Amount
2.02	c) Replacement of Rain water Drainage (PROVISIONAL) (雨水渠) (備用金)
	225mm C.I. Pipe 150mm C.I. Pipe 100mm C.I. Pipe Manhole G.T. Connection work with manhole to Government (include CCTV survey to last manhole)	12 51 98 21 21	Lm Lm Lm Nos Nos Sum	600 500 460 3200 400	7200 25500.00 45080.00 672000.00 8400.00 15000.00
	d) Demolish existing Drainage pipe and reinstate concrete works (拆除現有水渠)		Sum		36000.00
Sub-total for Replacement of Rain water Drainage (Provisional)					204380.00
	e) Replacement of Soil and Waste Water Drainage (PROVISIONAL) (污水渠) (備用金)
	150mm C.I. Pipe 100mm C.I. Pipe Manhole G.T. Connection work with manhole to Government (include CCTV survey to last manhole)	80 121 40 40	Lm Lm Nos Nos Sum	500 460 3200 400	40000.00 55660.00 128000.00 16000.00 16000.00
	f) Demolish existing Drainage pipe and reinstate concrete works (拆除現有水渠)		Sum		36000.00
Sub-total for replacement of Soil and Waste Water Drainage System (Provisional)					291660.00
Sub-total for Underground Drainage System
Total for this page (Provisional)					496040.00

9. It is necessary to set out the above tables in full because they represent the central issue in relation to the suspected duplication of work that the Court of Appeal showed much concern.

10. As was observed by the Court of Appeal, it is apparent that paragraphs c) and e) of item 2.02 are substantially replicated in paragraphs c) and d) of item 2.01.

11. The Lump Sum Fixed Price was later reduced to an amount of HK$990,000. By a letter dated 22^nd August 2001 (“the Building Contract”) signed by MSL and D, D’s tender was accepted with a tender sum of HK$990,000 including a provisional sum of HK$486,190.

12. In contemplation of a successful tender, D retained P for general assistance in an amount of HK$3,500 per month. Under the retainer P would assist D on matters including drafting of letters and communications with MSL.

P's case

13. It was P’s case that Chan went to his office on 20^th February 2002 to seek his advice specifically on the problem of the provisional items of work consisted in the latter table above.

14. According to P, Chan was very much troubled by the fact that duplication of works was put down on the Tender Documents as provisional items and he might therefore be unable to charge for the provisional sum of HK$486,190. Chan told P that he would not even have sufficient money to finish the Project if the provisional sum was to be deducted.

15. P indicated to Chan that he might be able to help and suggested that a success fee of 50% of the provisional sum be paid to him for reward should D receive the provisional sum in the end.

16. Chan agreed and P prepared a written contract for signing.

17. It was under these circumstances that the Agreement was executed.

18. According to P, the entire site needed only 60 manholes whereas the price of 122 manholes was quoted under items 2.01 and 2.02 altogether. Chan realized this problem.

19. P said his strategy was that D should wait to see if MSL would take issue to the duplication of items. If MSL takes issue, P would then see if he could do anything within the terms of the Building Contract to prevent the provisional sum from being deducted.

20. When asked by his counsel if he had done anything in performance of the Agreement, P said he had done something but without going into details. However, this part of P’s evidence had not been challenged by D in cross-examination.

D's case

21. Chan denied having sought P’s advice in relation to the duplicated items. He said he visited P at his office on 20^th February 2002 to greet him for the Lunar New Year.

22. Out of curiosity, Chan asked P why the term provisional sum was written on the Building Contract. P then suggested to him that P can do something to enable D to get HK$486,190 more in addition to the contract price. He understood it as an amount extra to the contract price, not within it.

23. P then prepared a document within a few minutes. Chan had no idea how P can get the extra amount, he just signed document without much consideration. Chan said P cheated him.

24. Chan said paragraphs c) and d) of item 2.01 and paragraphs c) and e) of item 2.02 are not duplicated. Paragraphs c) and d) of item 2.01 refer to cleaning of water pipes whereas paragraphs c) and e) of item 2.02 refer to replacement of water pipes.

25. When Mr. Harris, counsel for P, queried why the quotations for the two different nature of works being the same, Chan explained that they charged more in item 2.01 to cover the deficit in item 2.02.

Finding of facts

26. I have no difficulty in preferring P’s version of facts against Chan’s.

27. It is obvious when we compare the two tables that the rates and amounts quoted under paragraphs c) and d) of item 2.01 and paragraphs c) and e) of item 2.02 are identical.

28. “Clean up of drainage” was expressly included under item 2.01(a) and a lump sum was quoted for HK$25,000. Chan could not provide any reason as to why the cleaning of water pipes is mentioned again in the same table.

29. Chan’s explanation for the apparently high charge for cleaning work is unsustainable. It is D’s case that replacement of water pipes was contemplated at the outset and the tender was a lump sum tender. It follows that a quotation of a higher charge for the replacement work would not prejudice D’s chance of winning the tender, as only the overall price that matters.

30. There is simply no reason to do the exercise of quoting a higher charge for cleaning work and on the other hand lower the quotation for replacement work.

31. In relation to what had happened in the meeting on 20^th February 2002, the account of Chan is unbelievable.

32. “Provisional Sum” and “Provisional Work” are terms not uncommon in the construction field. Chan had been operating his own business in the field for many years. He should not have any curiosity about such terms being used in the Building Contract. Chan must have known the meaning of the term “Provisional Sum”.

33. The Agreement refers expressly to “a provisional sum of HK$496,190.00”. If the discussion between P and Chan referred to an amount extra to the contract sum, this term would not have been used.

34. Furthermore, there was no basis whatsoever given by P at the meeting on 20^th February 2002 for charging an extra amount or even securing extra works in respect of the Project. It is contrary to common sense that P and Chan would proceed to execute a written contract without even exploring how P would be able to achieve it.

35. P’s version is on the other hand a reasonable one.

36. Although the tender was a lump sum tender, provisional works are still subject to re-measurement. Under Clause G of the Schedule of Works of the Tender Documents, the value of work for a provisional item will be ascertained by measurement.

37. Be it a result of inadvertence or otherwise, the quotations in D’s tender are clearly in duplication. There exists a risk that MSL or the Owners might take issue of this and ask to deduct fees.

38. Given the long-standing relationship between P and Chan and P’s expertise in construction contracts, one would not be surprised that Chan then went to seek advice from P.

39. I find P a credible witness and accept his evidence in full.

40. I find as a fact that Chan visited P to seek his advice on the possible deduction of the provisional sum in view of the duplication of items in D’s tender.

41. I find that P and Chan on behalf of D agreed as what was written on the Agreement. The term “provisional sum” was understood by both P and Chan as referring to an amount forming part of the contract price of HK$990,000.00 for the Project. D had in the end received the said contract price including the said provisional sum.

42. The parties were not at cross-purposes at the time of signing the said written contract.

Discussion

Mistake

43. It is submitted by Mr. Li, solicitors representing D, that there was in fact no provisional sum in existence at the time of formation of the Agreement.

44. Mr. Li submitted that provisional work means work subject to the approval of the Building Department (“BD”). As such approval had already been given by the time of the Agreement was made, the items ceased to be provisional.

45. Mr. Li also submitted that at the time of the formation of the Agreement, Chan had in his mind no doubt that he would be fully paid.

46. I disagree with Mr. Li. A provisional item of work does not mean only that it is pending approval by the BD. Here I accept P’s evidence that theoretically all construction works are subject to BD’s approval.

47. There is an element of re-measurement within the construction agreement between D and MSL. The risk of deduction on the provisional sum relates to re-measurement rather than BD’s approval.

48. I accept that it was within the contemplation of MSL and D that the replacement work was to be done in any event. However, it does not necessarily mean that D could then receive the provisional sum in full. There was always a risk that MSL might take issue on the duplications on the tender.

49. As I have found as a fact hereinbefore, Chan was worrying about the possible deduction when he signed the Agreement.

Consideration

50. Mr. Li also submitted that P had provided no consideration for the Agreement as P had contributed nothing to the payment of the provisional sum.

51. It is not very clear in the evidence as to the exact scope of the retainer of P. What I can understand from the evidence is that P would provide general assistance for clerical and liaison works as regard the Project.

52. However, the fact that P and Chan entered into a separate agreement as regard the provisional sum indicates that this aspect is outside the scope of the retainer.

53. It is also not clear in the evidence what P had actually done in pursuant to the Agreement. Nevertheless, P gave evidence that he had put in some kind of effort after the Agreement including the study of the Building Contract. As I have mentioned before, D did not challenge P’s evidence on this.

54. Furthermore, even if P did not in fact put in any effort pursuant to the Agreement, a promise to perform is still good consideration. I do not think D can succeed in this point in whatever way.

Illegality

55. At the end of the trial I raised the point of illegality which is not a point taken up by either party.

56. D did not plead illegality in the Defence. I note that this alone does not bar the Court from refusing to enforce a contract that is plainly illegal. However, before the Court can take this course it must be satisfied that all material facts have been placed before it for consideration and there is only one conclusion to be drawn. Chitty on Contracts, 28^th Edition, para.17-196.

57. The Court of Appeal concerned about the possible perpetration of fraud against the Owners in charging them double the fees.

58. Although I find as a fact that the items under 2.01 and 2.02 of the tender are duplicated, it does not necessarily follow that there exists an element of fraud.

59. It must be noted that the tender was a lump sum tender, the quotations as regard individual items of work was immaterial, it was the overall amount that was relevant for the Owners’ considerations.

60. There could be many reasons that the rates and amounts were put down in duplication on the tender apart from a fraudulent one. Inadvertence or unprofessionalism could be one, or as mentioned by P in his evidence, the tender was simply badly drafted.

61. The fact that duplicated figures were filled in on the tender and charging a single work done double are two different things.

62. P did not say in concrete terms how he could avoid the provisional sum being deducted. He mentioned something about looking into the terms of the Building Contract.

63. One may not rule out the possibility that D can still be entitled to the whole contract sum under the Building Contract even a mistaken quotation has been put down on the tender.

64. I do not think there are sufficient materials before me that I can conclude that the Agreement was part of a scheme to deceive the Owners or any others.

65. In the circumstances, I find that P is entitled to the amount claimed.

66. Judgment be entered in favour of P against D for the sum of HK$243,095 with interests thereon at 8% per annum from the date of writ until Judgment and thereafter at Judgment Rate until payment.

67. I can see no reason that costs should not follow the event. I make an order nisi that costs of this action be to P to be taxed if not agreed, with certificate of counsel.

(S. T. Poon)
Deputy District Judge

Mr. Jonathan Harris instructed by Messrs Deacons for the Plaintiff.

Mr. Kent K. Li of Messrs. Chan & Cheng for Defendant.

42995-EN-2004-09-03

W K CHANG v. WAI MAN ENGINEERING LTD

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DCCJ 7882/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 7882 OF 2002

__________

BETWEEN:
	W K CHANG	Plaintiff

	AND

	WAI MAN ENGINEERING LIMITED	Defendant

__________

Coram: Her Honour Judge H.C. Wong in Court

Dates of Hearing: 10 - 13 May 2004

Date of Handing Down Judgment: 3 September 2004

_________________________

JUDGMENT

_________________________

1. In the present action, the Plaintiff claims against the Defendant for consultancy fees outstanding for services rendered in the sum of $243,095.

2. The Plaintiff is and was a chartered quantity surveyor with 40 years of construction industry experience. The Defendant is and was a construction contractor in underground drainage works.

Background

3. On or about 7th July 2001 the Incorporated Owners of Vista Panorama ("the Employer") through its agent Multiple Surveyors Ltd. ("MSL") awarded to the Defendant a contract for underground drainage works at Vista Panorama ("the contract"). Such work was to be carried out in compliance with the Building Department's order. The Defendant was handed over the site at 29th August 2001 at a contract price of $990,000 including a provisional sum of $486,190.

4. Due to the uncertainty of the condition of the underground drainage of the Vista Panorama at the time, the parties further agreed that the Defendant would perform a CCTV survey report and replace all underground drainage pipes at the $990,000 lump sum. On 22nd August 2001, the Employer through MSL amended by letter the date of commencement of work to 23rd August 2001.

5. The Defendant conducted detailed CCTV survey on 28th August 2001, this was completed on 4th September 2001. Based on the detail CCTV report, the Architect submitted its recommendation to the Building Department on 29th October 2001 for approval. Preliminary approval was obtained on or about 5th November 2001. Written instructions for such works were issued on 11th January 2002. It confirmed that all the existing underground rain-water drainage and soil and waste drainage were to be replaced by the Defendant.

6. According to Mr. Chan Kam Tin of the Defendant, the Defendant retained the Plaintiff as a consultant for the said contract in or about August 2001 at a flat fee of $3,500 per month. The Defendant duly engaged and paid for the Plaintiff's services for a period of 9 months paying him a total sum of $31,500.

7. On the other hand, according to the evidence of Mr. Chang Woon Kay, the Plaintiff, he supplied services to the Defendant between 19th December 2001 and 18th June 2002 during which time he was paid $3,500 per month.

8. It is not disputed that Mr. Chang and Mr. K.T. Chan, director of the Defendant, at their meeting on 7th February 2002 went through the said contract and subsequent contract documents and discovered that the MSL letter of 22nd August 2001 referred to the tender sum accepted to be "HK$990,000 including a provisional sum of HK$486,190". Mr. Chan became concerned and when Mr. Chang offered to pursue the matter on his behalf, Mr. Chan agreed.

9. The issue in dispute is what was the agreement reached on 7th and 20th February. Was it for Mr. Chang to help the Defendant to obtain a further payment of $486,190 or was it to avoid a deduction of the $486,190 from the tender sum of $990,000 for the work done?

10. It is the Plaintiff Mr. Chang's claim that Mr. Chan agreed to split the $486,190 with him should he 'make sure' that MSL would not deduct the provisional sum of $486,190 from the contract sum, and if it should be deducted from the contract sum he would help him to get the money back.

11. On the other hand, it was Mr. Chan's understanding that Mr. Chang would pursue against the Employer and the Architect through MSL for payment of the 'provisional sum' of HK$486,190 to the Defendant in addition to the tender sum of $990,000. Should Mr. Chang succeed in doing so, the Defendant would split the $486,190 so obtained with Mr. Chang equally.

12. The Plaintiff claims that as the provisional sum of $486,190 was not deducted from the tender sum of $990,000, he is entitled be paid half of the $486,190.

The Issues

13. The issues are:

A. What was the contract between the Employer and the Defendant?
B. What was the agreement between the Employer and the Defendant regarding the provisional sum of $486,190?
C. What were in the minds of the Plaintiff and Mr. Chan when they reached the 7th and 20th February agreement (the 2nd agreement)?
D. Is the 2nd agreement between the Plaintiff and the Defendant enforceable?

A. What was the contract between the Employer and the Defendant?

14. The Defendant delivered a tender for the underground drainage work on 1st March 2001 enclosing a breakdown of the tender price. According to Mr. Wong Wai Kit, a director of Multiple Surveyors Ltd. ("MSL"), giving evidence for the Defence, the final contract sum agreed on the said contract was $990,000 with no further measurements. This was reached upon discussions with the Incorporated Owners of Vista Panorama ("the Employer"). He agreed that at the initial stage, the 7th July 2001 letter of award (P.135 of the bundle) did specify the tender sum accepted was '$990,000 including a provisional sum of $486,190'. This letter of award was cancelled subsequently due to further instructions from the Employer and the Defendant was notified of the cancellation by the MSL letter of 11th July 2001 (P.139 of the bundle). Following oral negotiations with the Defendant and upon the Defendant's reply to MSL's queries on 13th July 2001 (P.140). Mr. Wong wrote to the Defendant setting out the items for clarification and confirmation on the Defendant's tender and requested the Defendant to reply on the same day (P.141). By a letter of the same date, the Defendant confirmed the items requested by MSL (P.142).

15. On 31st July 2001, MSL requested the Defendant to re-confirm its final tender sum under seal to the Incorporated Owners of Vista Panorama ("the Employer") on or before 12 noon of 1st August 2001. Mr. Wong claimed that this was at the request of the Employer (P.144). On 1st August 2001, the Defendant duly delivered a letter reconfirming the tender sum of $990,000.

16. Mr. Wong, under cross-examination, insisted that the parties had reached an agreement for the work on 17th July 2001. Further, the contract sum was for a price of $990,000 without measurements. The only reason a re-confirmation letter had to be delivered to the Employer under seal was because the Employer had requested it.

17. Mr. Wong further confirmed that, in fact, the agreement reached was oral at the time and the tentative commencement date of work was 16th July 2001 and the agreed lump sum contract price was $990,000. He claimed that the MSL letter date 22nd August 2001 was written to record the amended contract commencement date from 23rd August 2001 to 29th August 2001 (P.146-147). He admitted that the 22nd August 2001 letter (P. 146) was written by an assistant surveyor assisting him who had copied from the 7th July 2001 letter but had wrongly retained in the last sentence of the first paragraph of the earlier letter the words "including a provisional sum of HK$486,190." He alleged that this phrase should have been deleted; at the time, he thought it had been deleted when he signed it.

18. The evidence of Mr. K.T. Chan was that he had confirmed with Mr. Wong orally upon receipt of the 16th July 2001 letter from MSC if they had been given the contract, and he had an oral confirmation that the Defendant had a contract with the Employer.

19. Based on the evidence of Mr. Chan and MSL's Mr. Wong who is not an interested party in these proceedings, it is clear, as far as the Employer, MSL and the Defendant were concerned the contract was a lump sum contract including the replacement of all underground drains at a lump sum price of $990,000.

B. What was the agreement between the Employer and the Defendant regarding the provisional sum of $486,190?

20. According to the evidence of Mr. Wilfred Wong, in the initial agreement of 7th July 2001, the contract sum was to be $990,000 which included a provisional sum of HK$486,190. The provisional sum had represented the fee charged for items under No. 2.02 of the tender i.e. replacement of whatever drainage pipes the CCTV survey might be necessary. However, after studying the initial CCTV survey report and found over 70% of the underground pipes required replacement, he concluded that to avoid further replacements in the near future, all the underground pipes should be replaced. Consequently, he notified the Defendant of his conclusion and specifically informed the Defendant that a fixed sum of $990,000 would be paid including complete replacement of all underground drainage system. On 16th July 2001 the agreement was executed.

21. It is Mr. Wong's evidence that under the 16th July agreement, there would be no provisional items to be performed for all the work contained in the tender would be completed at the lump sum price of $990,000 under the contract. For the same reason, there was no deduction of the contract lump sum of $990,000. It follows that there would be no provisional sum payable.

22. Mr. Wong further said that the circumstances of this job had overridden the provisions in the contract. It is also common practice for the terms of payment to be amended in his experience. On the basis of Mr. Wong's evidence, I am satisfied that the contract awarded to the Defendant by MSL and the Employer was a lump sum contract with no provisional sum payable.

C. What were in the minds of the Plaintiff and Mr. Chan when they reached the 7th and the 20th February 2002 agreement ( the 2nd agreement)?

23. Mr. Chan admitted his English was not proficient. However, from his dealings with MSL, based on the oral confirmation from MSL, he understood the contract was a lump sum contract of $990,000. He was not concerned about the MSL letters until after he retained the Plaintiff's services. He admitted that he had shown the Plaintiff the 16th July 2001 and 31st July 2001 letters and it was the Plaintiff who drafted the 1st August 2001 letter for him to sign. He admitted that he met the Plaintiff over lunch on 1st August 2001 and he requested Mr. Chang to draft the 1st August 2001 letter on his behalf. He further admitted that at that stage he was consulting the Plaintiff whom he knew professionally for many years and had engaged his services paying him a fee of $1,000 per hour. Later, when told by the Plaintiff that the said contract was complicated requiring constant attention, he agreed to retain the Plaintiff at a flat fee of $3,500 per month.

24. Mr. Chan was extensively cross-examined on the type-face of the 1st August 2001 letter and other letters drafted by Mr. Chang. Mr. Chan insisted that the 1st August 2001 letter was typed by Mr. Chang's secretary and that the Defendant had no facilities for typing letters in English whatsoever. Furthermore, by then he thought he had to consult Mr. Chang over this contract because of Mr. Chang's expertise in the construction industry and knowledge of the English language.

25. At the early February 2002 Chinese New Year meeting, Mr. Chang had gone through the contract documents and correspondence with Mr. Chan and they came across the 22nd August 2001 letter. Mr. Chan claimed that he noticed for the first time the retention of the remark 'including a provision sum of $486,190' in the last sentence of the first paragraph after the words 'the tender sum accepted is $990,000'. He told Mr. Chang that since the work being carried out was to be in accordance with the 16th July 2001 agreement, there should be no provisional sum. Mr. Chang then proposed to him that he would pursue against the Employer and the Architect for payment of the provisional sum of $484,190 for the Defendant. In Mr. Chan's understanding of the contract, the contract was a lump sum contract and no further sum would be payable, but Mr. Chang had assured him that he would use his expertise to demand a further payment of $486,190 over and above the contract sum of $990,000. Under those circumstances, Mr. Chan agreed that should Mr. Chang succeed in obtaining a further sum of $484,190 from the Employer and the Architect, the Defendant would pay him half of the extra payment.

26. It was Mr. Chan's evidence that he agreed to Mr. Chang's proposal because he believed Mr. Chang would obtain the extra sum of $486,190 using his expertise, and that the Defendant would not be required to perform any further work on the contract. Since the profit margin of the Defendant on the contract was under 5%, the offer of Mr. Chang to obtain further payment was obviously attractive.

27. On the other hand, it was the evidence of Mr. Chang that the Defendant engaged his services at the end of 2001 to draft correspondence, translate English documents and prepare applications for payments. He claimed that this service was performed between 19th December 2001 and 18th June 2002, he was paid $3,500 per month for those 6 months ("the 1st agreement").

28. Mr. Chang claimed that Mr. Chan had expressed to him at the 7th and 20th February 2002 meetings his concern over an apparent duplication between the scope of work under the contract sum and the provisional sum of $486,190 under the contract. He said Mr. Chan was nervous about a real possibility of a deduction from the contract sum for the value of the duplicated work. In the contract documents, there was a reference to possible deduction of contract price after re-measurement. He then told Mr. Chan that he would make sure MSL did not deduct the $486,190 and would help him to get it back if MSL deducted it from the contract sum. It was Mr. Chang's claim that Mr. Chan agreed to split the $486,190 with him equally if there was no deduction in the end. Mr. Chang also claimed that by 20th February when the agreement was signed ("the 2nd agreement"), the 28th January 2002 deadline for completion had already expired and it was likely that the penalty of $10,000 liquidated damages may be imposed by MSL.

29. In pursuance to the 1st and 2nd agreements, Mr. Chang claimed he performed various services for the Defendant. These included attending conferences with Mr. Chan, drafting correspondence, translating English documents, preparing applications for payments and preparing applications for extension of time and site inspections.

30. He claimed that he attended a mediation meeting on or about 20th February 2002 in relation to the progress of work to be done by the Defendant under the contract and he assisted the Defendant to mediate with MSL in relation to the Defendant's application for payment and extension of time. He also drafted a number of letters on or about 21st February 2002 to answer the queries raised by MSL at the 20th February 2002 meeting.

31. It is not disputed that the Defendant was paid the $990,000 for the work done under the contract certified by a payment certificate dated 11th October 2002 and no further sums were paid under the contract.

32. From the evidence of Mr. Chang and Mr. Chan, they obviously had something completely different in mind when they reached the oral agreement on 7th February 2002 and when the 20th February 2002 agreement was signed. The document was drafted by Mr. Chang in English and given to Mr. Chan to sign.

33. According to the evidence, Mr. Chan thought Mr. Chang was going to obtain from the Employer an extra $486,190 while Mr. Chang thought he would stop the Employer from deducting $486,190 or any part of it from the lump sum price of $990,000.

34. The 20th February 2002 letter reads as follows:-

"Dear Mr. Chang,

Underground Drainage Works at Vista Panorama

If the provisional sum of $486,190.00 is paid to us in full or in part by the Employer, a success fee of 50% on the amount paid will be paid to you."

35. The document apparently supported Mr. Chan's evidence that the provisional sum of $486,190 mentioned in the letter seemed to suggest an extra payment would be claimed rather than it being a part of the contract sum of $990,000. Nothing about the deduction of this sum from the lump sum contract price of $990,000 was referred to in the document. This was the cause of the ambiguity of the 2nd agreement.

36. Furthermore, during the same period of time, there was already in existence the 1st agreement under which the Defendant agreed to pay Mr. Chang a monthly fee of $3,500 to draft letters, attend meetings with the MSL, prepare payment applications etc. it is unlikely the Defendant would agree to pay Mr. Chang half of the $486,190 provisional sum for supplying the same services.

37. According to the evidence of Mr. Wong, he met Mr. Chang on one occasion only and it was in late January 2002. The issue discussed was extension of completion date due to delay caused by rain and interim payment of fees. Mr. Wong claimed that they did not discuss any provisional sum or work at that meeting or at any time. He noticed and was given the impression at that meeting that Mr. Chang was not familiar with the scope of work under the contract at all. Mr. Wong further claimed that he had not engaged in any oral or written exchanges with Mr. Chang at any time other than that meeting.

38. The evidence adduced by the Defence clearly supported Mr. Chan's understanding of the 2nd agreement which was that Mr. Chang would pursue payment of an extra $486,190 over and above the lump sum contract price of $990,000 rather than the recovery or avoidance of deduction of the said contract sum.

39. On a balance of probability, the meeting Mr. Chang attended with Mr. Chan would most likely be in late January 2002, because the completion date under the contract was to be 28th January 2002. It is likely that Mr. Chang had accompanied Mr. Chan to meet with Mr. Wong to discuss the extension of time due to delay in completion before the completion deadline on 28th January 2002 or soon after the deadline rather than in late February. It is evident that the matters discussed were part of Mr. Chang's services under the 1st agreement. If Mr. Chang had agreed to supply the same services under the 2nd agreement as the 1st agreement, the 2nd agreement would have superseded the 1st agreement. However, that is not Mr. Chang's case, he claimed that he was supplying services under both the 1st and 2nd agreements after 20th February 2002, and he was paid $3,500 per month up to 18th June 2002 under the 1st agreement.

40. If Mr. Chang was performing the same services applying for payments and attending meetings with Mr. Chan under both agreements, even if the 2nd agreement did not supersede the 1st agreement and both agreements were being performed at the same time, the 2nd agreement would not be supported by any consideration from Mr. Chang at all. For, according to Mr. Chan and Mr. Wong, Mr. Chang did nothing positive in ensuring that the Defendant would be paid the provisional sum of $486,190 or any part of it. Neither were there any evidence showing Mr. Cheung had done anything over and above what he was required to do under the 1st agreement to apply for payments under the contract on the Defendant's behalf. According to Mr. Wong, he met Mr. Chang on one occasion only over this job and it took place in January 2002 well before the date of the 2nd agreement.

41. Even if the evidence of Mr. Chang is true and his recollection of the agreement is correct, his understanding of the basis of the 2nd agreement was obviously completely different from Mr. Chan's understanding of it. The parties were at cross-purposes and not ad idem.

D. Is the 2nd agreement between the Plaintiff and the Plaintiff enforceable?

42. Chitty on Contract, 29th ed. vol. 1, paragraph 5-060 states:-

"Parties at cross-purposes. In most cases the application of the objective test will preclude a party who has entered into a contract under a mistake from setting up his mistake as a defence to an action against him for breach of contract. If a reasonable man would have understood the contract in a certain sense, then, despite his mistake, the court will hold that the mistaken party is bound. But where parties are genuinely at cross-purposes as to the subject-matter of the contract and the terms of the offer and acceptance are so ambiguous that it is not possible to point to one or other of the interpretations as the more probable, the court must necessarily hold that no contract exists."

43. Based on the evidence of Mr. Chang and Mr. Chan, it is clear the parties were at cross purposes as to the subject matter of the agreement, it follows that the 2nd agreement is void ab initio. It is of no effect and unenforceable because the parties had something completely different in mind when they entered into the agreement. Since their understanding of the 2nd agreement was completely at cross purposes, the agreement is not capable of being enforced.

44. The Plaintiff's claim is therefore dismissed. Costs to the Defendant to be taxed if not agree with certificate to Counsel.

	( H.C. Wong )
	District Judge

Representation:

Parties: Mr. G. Shaw of Messrs. Deacons for the Plaintiff.

Miss Pauline Leung instructed by Messrs. Chan & Cheng for the Defendant.

Appeal by the Plaintiff to Court of Appeal. Order for retrial before a different judgment. please refer to the appeal judgment of CACV385/2004.

A.	What was the contract between the Employer and the Defendant?

B.	What was the agreement between the Employer and the Defendant regarding the provisional sum of $486,190?

C.	What were in the minds of the Plaintiff and Mr. Chan when they reached the 7th and 20th February agreement (the 2nd agreement)?

D.	Is the 2nd agreement between the Plaintiff and the Defendant enforceable?