Leung Wan Kee Shipyard Ltd v. Dragon Pearl Night Club Restaurant Ltd and Another
Read the full judgment text of HCA 1288/2010 on BabelCite. This High Court CFI judgment was delivered on 31 August 2015.
2. By an agreement in Chinese (titled “建造合同”) dated 2 July 2008 (“the Agreement”), the 1 st defendant engaged the plaintiff to design and build a vessel (“the Vessel”, to be named “Dragon Pearl” and “海龍明珠”) at its shipyard in the city of Wuzhou (梧州) (“the Xijiang Shipyard”) in the Guangxi Zhuang Autonomous Region in the Mainland for a CIF price of $19,200,000.
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HCA 1288/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE HIGH COURT ACTION NO 1288 OF 2010 ________________
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________________ JUDGMENT A. THE PARTIES 1.At all material times:
By their own admission, the defendants were new to shipbuilding and had no experience in relation thereto, the 1st defendant having been renting cruisers (with catering facilities and restaurant seating) before the transaction the subject of this action and counterclaim. B. THE AGREEMENT 2.By an agreement in Chinese (titled “建造合同”) dated 2 July 2008 (“the Agreement”), the 1st defendant engaged the plaintiff to design and build a vessel (“the Vessel”, to be named “Dragon Pearl” and “海龍明珠”) at its shipyard in the city of Wuzhou (梧州) (“the Xijiang Shipyard”) in the Guangxi Zhuang Autonomous Region in the Mainland for a CIF price of $19,200,000. 3.The following are the relevant terms of the Agreement:
4.The Standard Terms and Conditions (“the STC”) of the plaintiff, referred to at clause 14.3 of the Agreement, contain the following:
5.There is annexed to the Agreement another document titled “50M STEEL TWIN SCREW PASSENGER CRUISER: TECHNICAL SPECIFICATION”, or “50米鋼質雙槳觀光艇：技術規格書”, issue 2, of June 2008 (“the Technical Specification”), containing detailed specification for the Vessel (in both Chinese and English) to be designed and built. This is the document referred to in clauses 3.1 and 14.2 of the Agreement. In particular:
C． THE PLAINTIFF’S CLAIMS AGAINST THE 1ST DEFENDANT 6.In this action, the plaintiff complains of the following alleged defaults by the 1st defendant in relation to the late or non‑payment of the various instalments under the Agreement:
7.The plaintiff also claims two sums, at $122,605 and $267,730, being HKMD survey fees of the Vessel during December 2008 to January 2009 and during February 2009 to March 2010 respectively. The first sum is alleged to be due on 27 March 2009, being seven days after the issue of invoice no 8026/08 on 20 March 2009. The second sum is alleged to be due on 8 May 2010, being the date of the issue of invoice no 8070/10 on that date (the plaintiff alleging that the Agreement having been terminated already on about 14 April 2010 by reason of the 1st defendant’s alleged repudiatory breach of the Agreement: see the following paragraph), or alternatively on 15 May 2010 (being seven days after the issue of the invoice if the Agreement had not been terminated by then). 8.The plaintiff alleges that it had sent numerous demands to the 1st defendant asking for immediate payment of the 5th instalment under the Agreement between 26 September 2009 and 12 April 2010, when it gave an “ultimatum” to the 1st defendant to pay the sum on or before 14 April 2010. The 1st defendant having failed to do so, the plaintiff alleges that this was a repudiatory breach of the Agreement by the 1st defendant which was accepted by it, and the Agreement was terminated, on 14 April 2010. It would appear that the plaintiff’s case that the Agreement was terminated on 14 April 2010 was not based on any alleged act by it on that date supposedly evincing an intention by it to accept the alleged repudiatory breach by the 1st defendant. Rather, its case is that the termination occurred because by giving an “ultimatum” to the 1st defendant to pay by 14 April 2010 in its letter of 12 April 2010, it notified the 1st defendant that the latter’s repudiation of the Agreement would be accepted by the plaintiff unless the 5th instalment was paid on or before 14 April 2010, and the 1st defendant did not so pay. However, the plaintiff also refers, in its Statement of Claim, to a letter dated 27 May 2010 from its solicitors to the 1st defendant purporting to accept the repudiation of the Agreement by the 1st defendant and to terminate the same. The repudiatory breaches relied upon in that letter are: (i) the non‑payment of the 5th instalment, and (ii) the alleged misappropriation of the Vessel by the 1st defendant on about 9 May 2010. 9.The alleged misappropriation that took place on about 9 May 2010 occurred as follows. According to the plaintiff, in the afternoon of 9 May 2010, it was discovered that the Vessel, which had arrived in Hong Kong on 6 February 2010 and had been moored or berthed by the plaintiff at its shipyard at Tsing Yi (with chains and ropes), was stolen. A report was made to the police which found the Vessel near Tsuen Wan and took it into custody. It is alleged that representatives of the 1st defendant were found on board the Vessel at the time and they were taken by the police back to the police station for investigation. The Vessel was returned to the plaintiff on 13 May 2010. 10.It is the plaintiff’s case that the 2nd defendant and representatives of the 1st defendant, acting under his direction and leadership, unlawfully entered its shipyard, cut off the chains and ropes welded and/or tied on or to the Vessel and towed away the Vessel without its consent, authority or knowledge. 11.The plaintiff alleges that this taking of the Vessel involved the committing of various tortuous acts (being trespass to land (ie its shipyard at Tsing Yi) and to property, and conversion), since as at that date the Vessel was the property of the plaintiff, because:
12.The plaintiff also alleges that the taking of the Vessel by the 1st defendant was in breach of the Agreement, including in particular the terms and conditions on the delivery of the Vessel. But, of course, on its own (primary) case, the Agreement had been terminated by then. 13.The plaintiff alleges that had the 1st defendant acted in compliance with the Agreement and paid the 5th instalment, it would have been in a position to deliver the Vessel (and the relevant delivery documents) to the 1st defendant by about 14 February 2010, and as a result it had been deprived of the 6th and 7th instalments, and the fees for additions and/or variations of works. It also alleges that it had incurred additional costs and/or charges in respect of the Vessel since 14 February 2010. 14.It is the plaintiff’s case that the following additions and/or variations of works had been carried out pursuant to the request of the 1st defendant and/or the consensus of the parties, with the result that it is entitled to an additional sum in aggregate of $2,719,420 from the 1st defendant under clause 14.1 of the Agreement:
Apart from Variation Order No 6, the plaintiff is unable to produce any copies of the variation orders bearing any signature by someone on behalf of the 1st defendant. It is the plaintiff’s case that the relevant additions and/or variations had all been orally confirmed by the 1st defendant. 15.Thus, the plaintiff claims the following against the 1st defendant:
16.The plaintiff also asks for a declaration that the Vessel is its property and it is entitled to dispose of the same in mitigation of its loss. Alternatively, it asks for a declaration that it is entitled to a lien over the Vessel in respect of the outstanding balances under, and/or damages payable for breach of, contract and/or interest, and that it has a right to resell the same to pay for the said balances, damages and/or interest. D. THE DEFENCE AND COUNTERCLAIM 17.By the Defence and Counterclaim, the defendants:
18.The 1st defendant counterclaims the following:
E. THE PLAINTIFF'S ANSWER 19.In its Amended Reply and Defence to Counterclaim, the plaintiff:
F. THE DEFENDANTS’ REJOINDER 20.In the Rejoinder, the defendants:
G. DISCUSSION: THE PLAINTIFF’S CLAIMS 21.Each side called only one witness at the trial. The plaintiff’s only witness is Lam Chun Hung (“Lam”), its shipyard manager. The 2nd defendant is the only witness for himself and the 1st defendant. 22.In this part of the Judgment, I shall consider each head of claims by the plaintiff in its Statement of Claim, and make any necessary findings of fact and rulings on law. I shall deal with the 1st defendant’s counterclaim in the next section, and make any necessary findings of fact and rulings on law. In doing so, in so far as there are disputes of fact between the parties, I shall attempt to deal with such disputes in so far as it is necessary (and possible for me) to resolve such disputes in the disposal of this action and/or the counterclaim, having regard to the evidence given by the witnesses and the documentary evidence. I am conscious of the fact that the demeanour of a witness is very often not a reliable guide to the question of whether he or she is telling the truth. I shall therefore seek to resolve the disputes and make my findings, if I possibly can, by reference to the inherent probabilities and credibility of the evidence given, in particular against the contemporaneous documents and undisputed facts, rather than by having any reliance on or reference to my observation and impression of the witnesses’ demeanour. I take note of the guidance given in the authorities including Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36‑42 per Bokhary PJ and Tradepower (Holdings) Ltd v Tradepower (Hong Kong) Ltd (2009) 12 HKCFAR 417 at §24 per Ribeiro PJ and §140 per Litton NPJ. I further bear in mind the guidance given by Mortimer J in All Best Wishes Ltd v Commissioner of Inland Revenue (1992) 3 HKTC 750 at 773:
23.Before going to each head of claim, I shall make some general observations. 24.On either side’s case, the Contract subsisted until at least 14 April 2010 (§§8 and 17(13) above). Thus, notwithstanding the fact that each of the plaintiff and the 1st defendant has accused the other of breach of contract even before 14 April 2010, and even if such accusations (or some of them) are true and valid, the “innocent” party remained bound to perform its own obligations which had arisen before 14 April 2010 under the terms of the Contract thereunder. 25.However, in my view, the Contract was not terminated on 14 April 2010, as the plaintiff alleges in its Statement of Claim (although Mr Suen, counsel for the plaintiff, appears to resile from that in closing and relies on the letter of 27 May 2010 (which is its alternative pleaded case) as the acceptance of repudiation instead), irrespective of whether the 1st defendant had committed any repudiatory breach by then entitling the plaintiff to terminate. This is because the letter of 12 April 2010 from the plaintiff, which is relied upon, only purported to set out an agreement allegedly made at a meeting on 9 April 2010 that the 1st defendant would pay the 5th instalment by 14 April 2010, whereupon the plaintiff would arrange for final survey by the HKMD. There was no statement as to any consequence if the 1st defendant failed to pay by 14 April 2010, and thus the description of the letter by the plaintiff in its pleadings as an “ultimatum” (resulting in an automatic termination) is I am afraid wrong. As I observed at §8 above, the plaintiff is not saying that it did anything further on 14 April 2010 to terminate. It is, of course, trite that acceptance of a repudiation must be clear and unequivocal (Chitty on Contracts (31st edn, 2012) at §24‑013; Chao Keh Lung v Don Xia [2004] 2 HKLRD 11 at §43 per Cheung JA and at §§73‑74 per Ma JA (as he then was)). That letter was not. 26.For the same reason, the Contract was not terminated on 28 April 2010 by the letter from the solicitors for the 1st defendant, as the 1st defendant alleges, irrespective of whether the plaintiff had committed any repudiatory breach by then entitling the 1st defendant to terminate. That letter set out a list of alleged breaches of contact and duties by the plaintiff, concluding in a demand by the 1st defendant to take possession of the Vessel, ie a demand by the 1st defendant that the plaintiff perform the Contract and thereby affirming it. Again, I do not see how this letter amounted to a clear and unequivocal acceptance of any purported repudiatory breach of contract by the plaintiff and to terminate the same. Since the 1st defendant did not purport to terminate the Contract on 28 April 2010, it is not necessary for me to consider whether if the plaintiff had committed any breach of contract, the breach is repudiatory or not. 27.In their closing the defendants appear to suggest that the 1st defendant had accepted the repudiatory breach of the plaintiff by conduct, referring to acts after 28 April 2010 (including the taking of the Vessel on 9 May 2010). However, the only pleaded acceptance is the letter of 28 April 2010, which as I have found was actually an affirmation of the Contract. Further, as one shall see, in any event I do not find the plaintiff to be in breach of the Contract on any of the pleaded grounds thus entitling the 1st defendant to terminate the Contract at any time. 28.Rather, in my judgment, the letter dated 27 May 2010 from the solicitors for the plaintiff (which was clearly written on the basis that the Contract was still subsisting by then, and had not been terminated on 14 April 2010) was a purported acceptance of alleged repudiatory breaches (persistent non‑payment of the 5th instalment and wrongful appropriation of the Vessel) (§8 above) and by suggesting that the plaintiff would sell the Vessel was a clear and unequivocal statement that it treated the Contract as terminated. I shall deal with the question of whether the 1st defendant did commit repudiatory breaches of the Contract entitling the plaintiff to terminate on 27 May 2010 below. G1. The 2nd instalment 29.The question of whether the 1st defendant committed any breach of contract in relation to the 2nd instalment (by the delay in payment) requires a construction of clause 4.1 of the Agreement as to when the payment became due. 30.Under clause 4.1, the 2nd instalment would be payable seven days after the laying of the keel. The 1st defendant’s case is that clause 4.1 requires inspection by the 1st defendant or[8] the HKMD confirming this fact before the seven days began to run, and there was no such inspection or confirmation. 31.In my judgment, there is nothing special about the requirement of inspection and confirmation by the 1st defendant or the HKMD of the fact of laying of the keel under clause 4.1. Where payment of an instalment by a contracting party depends on the happening of an event, it is only fair and right that the paying party be afforded a chance to confirm, either by inspection by itself or by a third party which it feels that it can rely on, that the event has happened. And this was the intention behind the inspection and confirmation requirement under clause 4.1, objectively construed. Thus, once the 1st defendant itself had had a chance to confirm, by inspection, that the event did happen, then the payment obligation was triggered. And, in my judgment, inspection means no more than having the chance to see and ascertain for oneself as to the state of the relevant matter regarding the Vessel. 32.The evidence of Lam is that the keel of the Vessel was laid in a ceremony held on 15 October 2008 at the Xijiang Shipyard, attended by the following persons from the 1st defendant: a Ms Deng Lixia (鄧麗霞) (“Ms Deng”) (the chairman (董事長) of the 1st defendant), a Mr Deng Wuihua (鄧偉華) (“Mr Deng”) (the vice‑chairman (副董事長) of the 1st defendant, and the younger brother of Ms Deng), and a Mr Chan Siu Ming (陳少明) (the elder brother of the 2nd defendant and a shareholder of the 1st defendant). The 2nd defendant was not present. The aforesaid matters are accepted by the 2nd defendant and I find them as facts. 33.Lam also says that a Mr Fok Chi Lam (霍志林) (“Fok”), who was the supervisor at the Xijiang Shipyard appointed by the 1st defendant, was also present. The 2nd defendant is unable to say whether Fok was present as he himself was not present at the ceremony, and he cannot be sure as to when Fok was appointed as supervisor although it was around that time. I accept Lam’s evidence and find as a fact that Fok, the supervisor, was also present at the laying of the keel. 34.As the 1st defendant’s representatives, including its supervisor, were present at the laying of the keel, in my judgment there had been proper inspection and confirmation of this fact by the 1st defendant for the purpose of clause 4.1. It cannot be the intention of clause 4.1 that this payment obligation would have been triggered if the 1st defendant sent someone to inspect the Vessel sometime after the ceremony and confirm that indeed the keel had been laid, but not when its own representatives (including the supervisor) were there to witness the laying of the keel itself. In the premises, the 2nd instalment became payable seven days thereafter, namely on 22 October 2008. 35.I also reject the 1st defendant’s case that there is an implied term that the plaintiff had to furnish sufficient evidence in respect of the progress of the construction of the Vessel prior to the issue of each invoice for an instalment. I do not see why the implication of such a clause is necessary, or as a matter of presumed intention of the parties or business efficacy, since under clauses 7.1 and 7.2 of the Agreement the 1st defendant was required and entitled to inspect the Vessel and the progress of construction at any time, and under clause 4.1, as I said above, the purpose of the inspection and confirmation provision was to allow the 1st defendant to be satisfied for itself (by its own inspection or by the HKMD) that the relevant stage had been reached. Nor can I find the implied term by reason of any trade practice as alleged by the 1st defendant, as there is no evidence of any such practice. 36.As for the discrepancy between the interest rate in clause 11.4 and as stated on the invoice (§17(5) above), in my judgment, as submitted by the plaintiff, what was stated on the invoice cannot override the binding contractual term. The 1.5% per month interest appears to come from clause 3(b) of the STC (although clause 3(b) provides for compound interest but the invoice does not). But in so far as there is any conflict between the terms of the Agreement, being the main contract, and the STC, which were incorporated by reference, the terms of the Agreement prevail: Lewison, The Interpretation of Contracts (5th edn, 2011) at §9.12. 37.In my judgment, therefore, the plaintiff is entitled to interest on the late payment of the 2nd instalment at 0.1% per day as follows:
G2. The 4th instalment 38.The 4th instalment was payable seven days after the completion of the construction of the superstructure of the Vessel, subject to the inspection and confirmation requirement. 39.According to a survey report prepared by the HKMD dated 4 June 2009, which contents I accept as accurate, on 3 June 2009, the HKMD carried out an inspection (being part of the 7th inspection carried out on 1 to 4 June 2009) of inter alia the structural framework of the superstructure of the Vessel. The inspection was carried out pursuant to revised drawings submitted to the HKMD (which were subsequently approved on 23 July 2009). There was no indication in the report that the superstructure was incomplete or otherwise defective as at 3 June 2009, as can be seen from the “outstanding items to be followed” listed. 40.Thus, the HKMD had inspected and confirmed the completion of the superstructure of the Vessel. 41.According to a fax dated 5 August 2009 from the plaintiff to the 1st defendant, the survey report of 3 June 2009 was sent to the 1st defendant. While the 2nd defendant accepts that he had received the fax, he denies the receipt of the report as an attachment. I find that incredible because although the fax cover sheet stated that the total number of pages sent was one, it did refer to various attachments. Later, in another fax dated 13 August 2009 from the plaintiff, which the 2nd defendant also accepts as having been received, the fax of 5 August 2009 and the attached reports of the HKMD were referred to. Given the fact that the attachments were mentioned in both faxes, if somehow they were not transmitted or received, the 1st defendant must have enquired the plaintiff about it. There is no suggestion by the 2nd defendant that the 1st defendant did so. I find as a fact that the report of 3 June 2009 had been sent to the 1st defendant on 5 August 2009, if not earlier. 42.Indeed, it is the evidence of Lam that for each survey by the HKMD, the plaintiff would provide a copy of the report to Fok. Further, the supervisor of the 1st defendant was present at each HKMD survey (except the first three). I accept the evidence and find the aforesaid as facts, as they are inherently probable (with no evidence in contradiction). The 2nd defendant in his testimony said that Fok ought to have arrived at Xijiang Shipyard by June 2009. Thus, I find as a fact that Fok was present at the survey on 3 June 2009 when the superstructure was inspected by the HKMD. In my judgment the provision of survey reports to the supervisor of the 1st defendant at the Xijiang Shipyard would be a proper provision of the reports to the 1st defendant, and the presence of the supervisor of the 1st defendant at each inspection means that the inspection was properly carried out in its presence and to its knowledge. The 1st defendant must therefore be taken to know of the completion of the superstructure and the inspection thereof by the HKMD as from about 3 June 2009. 43.The fact that the 1st defendant did in fact pay the 4th instalment (save for $4,000) in two tranches in October 2009 also suggests to me that it was satisfied that the superstructure had been completed, and there is no suggestion that it was so satisfied because of something done nearer the time of eventual payments. 44.As for the 2nd instalment, the 1st defendant argues that there should be an implied term for evidence, and also refers to the different interest rate stated on the invoice. For the same reasons, I reject those arguments. 45.The 1st defendant also relies on a letter dated 10 August 2009, by which the 1st defendant said to the plaintiff that before any instalment or fee would be payable, a signed confirmation by Fok would be required. Even though the plaintiff had indicated its willingness, in its reply of 13 August 2009, to provide documents relating to the shipbuilding fees to Fok for him to verify and sign off, I do not read the letter as any acceptance by the plaintiff that it would be bound by such a condition before it would be entitled to payment of an instalment. Rather, in particular in relation to the 1st to the 4th instalments it relied on clause 4.1 itself. I therefore fail to see how the 1st defendant could have validly imposed, as a matter of legal obligation, such an additional condition, so as to affect the clear contractual right of the plaintiff to be paid in accordance with the terms of the Contract. This letter is not pleaded by the defendants and it has not been suggested in the pleadings that the contractual terms regarding payment had been validly varied as a result, or somehow the plaintiff could no longer insist on its contractual rights. 46.In the premises, I find that the plaintiff is entitled to payment of the 4th instalment seven days after the completion of the superstructure, which was not later than 3 June 2009 (in fact Lam in his testimony said the superstructure was completed in April 2009). Note that clause 4.1 states that payment would be due seven days after completion of the superstructure, and not seven days after invoice or inspection or confirmation or proof thereof. Thus, the 4th instalment was due as from 10 June 2009 the latest. However, since the plaintiff only claims interest on the basis of the 4th instalment being due as from seven days after the issue of the invoice, ie as from 15 June 2009, I shall award interest on that basis. 47.In my judgment, therefore, the plaintiff is entitled to the outstanding $4,000 and interest at 0.1% per day on the late payment as follows:
G3. The 5th instalment 48.According to clause 4.1 of the Agreement, the 5th instalment was payable seven days after the launching of the Vessel. 49.It is the plaintiff’s case that the Vessel was launched on 19 September 2009, after a ceremony attended by Ms Deng, Mr Deng and Mr Jiang Rihui (江日輝) (“Jiang”) of Grandview (which had taken over as the 1st defendant’s on‑site supervisor from Fok). The 2nd defendant accepts in his testimony that the Vessel had indeed been physically put into water on 19 September 2009, but disputes that to be a proper “launching” for the purpose of the Contract. 50.It is important, for this head of claim, to consider in some detail what happened in the days just before and after the putting of the Vessel in the water at the Xijiang Shipyard on 19 September 2009. 51.The following contemporaneous documents have been adduced before me:
52.It is clear from the above that Grandview, the 1st defendant’s own supervisor at the Xijiang Shipyard, which must presumably know something about shipbuilding and the launching of vessels, had taken the view, by 9:37 pm on 16 September 2009 the latest, that the Vessel was ready to be launched. As the 1st defendant says in closing, being new to shipbuilding, it would have to rely on the expertise of its supervisor. The supervisor said that the Vessel was ready to be launched. Grandview was clearly of the view that there was nothing outstanding that was needed to be done before the Vessel could be launched. It was therefore simply a matter of putting the Vessel into water. I therefore reject the 1st defendant’s pleaded case that at that time the Vessel was not ready to be launched as the wheelhouse was not ready and the engines had not been installed, or the evidence of the 2nd defendant, raised for the first time in his supplemental statement, that launching included the completion of the berthing trials and sea trials of the Vessel:
53.As stated above, it is not in dispute, and I find as a fact, that the Vessel was physically put into water at the Xijiang Shipyard on 19 September 2009, at a ceremony attended by Ms Deng, Mr Deng and Jiang. It is the case of the plaintiff, which of course was a company in the shipbuilding business, having been founded in the 1970’s, and the evidence of Lam, who has been in the shipbuilding industry since 1977, that by that the Vessel had been properly launched. I see no reason not to accept the said case and evidence, and I find as a fact that the Vessel was launched on 19 September 2009 for the purpose of the Contract. 54.I place no reliance on a report[12] from Grandview dated 14 October 2010 which appears to suggest that there were incomplete items for the purpose of launching, as it was a report prepared after the relationship between the parties had broken down completely, and was contradictory to the contemporaneous email from Jiang on 16 September 2009 that the Vessel was ready to be launched. Further, the plaintiff does not have an opportunity to cross‑examine the maker of the report. 55.By a fax dated 26 September 2009 to the 2nd defendant, the plaintiff referred to the fact that the Vessel had been launched, and asked for payment of instalments. There is no evidence that the defendants challenged or disputed that around the time. Indeed, as detailed at §22 of the Statement of Claim, the plaintiff had sent numerous reminders and chasers to the 1st defendant asking for the payment of the 5th instalment on the basis that the Vessel had been launched, and it had not been suggested by the 1st defendant that the Vessel had not been properly launched, or otherwise not ready for launching, on 19 September 2009, for the purpose of the Contract, and it did not ask for further documents as proof or verification. As a matter of fact which I find to be the case, on at least three occasions, the 1st defendant promised the plaintiff that it would pay the 5th instalment without any suggestion that the liability to do so had not arisen (ie the 1st defendant promised the plaintiff that it would pay the 5th instalment once the Vessel left the Xijiang Shipyard (which it did on 13 January 2010); the 1st defendant promised the plaintiff that it would pay the 5th instalment upon the arrival of the Vessel in Hong Kong (which it did on 6 February 2010); and in an email dated 6 February 2010 from the 2nd defendant to the plaintiff, after the Vessel had arrived in Hong Kong). I do not accept any suggestion on behalf of the defendants, made in closing submissions, that they bona fide believed that the Vessel had not been launched and so the 5th instalment was not payable: the email from Jiang would have told them otherwise and if they did so believe they surely would have said so when being chased by the plaintiff for the payment. 56.Rather, it was not until the letter dated 28 April 2010 from its solicitors, citing the non-installation of the wheelhouse and the engine as the reason, that the 1st defendant made any complaint about the launching of the Vessel. As discussed above, I do not accept that reason as to why the Vessel was not ready to be, and had not been, launched on 19 September 2009. 57.The 1st defendant argues that while the plaintiff had asserted in the fax of 26 September 2009 that the Vessel had been launched, it had failed to provide any particulars as to date and time of the launching, or any evidential proof. I do not see why those were requirements under clause 4.1, properly construed, before the plaintiff would become entitled to be paid the 5th instalment. During his testimony, the 2nd defendant asserts that the plaintiff had to provide documentary proof of the launching, being proof from the HKMD and signed confirmation from the supervisor. However, I cannot see how those were required under clause 4.1. Further, for reasons stated above, I also reject the 1st defendant’s case of an implied term that the plaintiff had to adduce evidence of the launching to the 1st defendant prior to the issue of the invoice. 58.The Vessel having been properly launched on 19 September 2009 in the presence of representatives of the 1st defendant, including its supervisor (Jiang representing Grandview) (the analysis regarding the 2nd instalment at §§31 and 34 above is applicable mutatis mutandis), I find that the plaintiff became entitled to be paid the 5th instalment as from 26 September 2009. The only condition for the payment of the 5th instalment was the launching of the Vessel, and not matters (sought to be relied on by the 1st defendant) such as the provision of any definite delivery date by the plaintiff, or whether licences had been issued or the Vessel passed various surveys by the HKMD, as those are matters relevant only to the 6th instalment. 59.The fact that the Contract was eventually validly terminated by the plaintiff on 27 May 2010 (as I shall find below) does not affect its entitlement to the 5th instalment already accrued due (Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129; Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574). 60.In my judgment, therefore, the plaintiff is entitled to the sum of $2,880,000 and interest at 0.1% per day thereon for the period from 26 September 2009 to the date of actual payment. G4. Survey fees 61.The plaintiff claims survey fees totalling $390,335: see §7 above. 62.The only ground pleaded in the Defence and Counterclaim in defence is that there are no terms or conditions under the Agreement for the survey fees to be chargeable to the 1st defendant. This is clearly incorrect, as clause 6 of the Agreement provided for the payment of fees for the surveys by the 1st defendant. 63.In his statement, the 2nd defendant says that he had been “advised” that the usual trade practice was that there are usually around 10 surveys, but because of the negligence and/or failure to exercise reasonable skill and care by the plaintiff, there were double that number of surveys required. He further alleges that some HKMD officers told him that the reason why the Vessel repeatedly failed the surveys was because the plaintiff did not even obtain the updated version of the booklet containing the requirements from the HKMD. However, these matters are not pleaded and in my judgment it is therefore not open to the 1st defendant to rely on such alleged representations to avoid the liability to pay the survey fees under clause 6 of the Agreement. 64.Further, and in any event, I accept the plaintiff’s case that the 2nd defendant’s evidence in this regard is inconsistent and self‑contradictory, and I reject the same:
65.Further, there is simply no evidence adduced by the 1st defendant showing that the number of surveys required had been increased because of any negligence or failure to exercise due care and skill by the plaintiff. I place no weight on the vague and unparticularised statement as to what the HKMD officers were supposed to have told the 2nd defendant because there was no evidence as to how, if at all, the number of surveys had been increased because of any use by the plaintiff of some obsolete requirements (even if true), by linking any use of any obsolete requirement with an actual increase in the number of surveys required, in the sense that one or more surveys needed not be conducted at all, or that the fees for any had been increased, but for such use. 66.I therefore find that the plaintiff is entitled to the claimed survey fees of $390,335. However, the provision for interest at 0.1% per day in clause 4.1 is not applicable as that only covers late payment of instalments under clause 4. The plaintiff accordingly seeks to rely on clause 3(b) of the STC, which provides for compound interest of 1.5% per month. 67.In my judgment, the STC form part of the Contract between the parties, having been specifically incorporated by clause 14.3 of the Agreement. While clause 14.3 was inserted only in the final draft of the Agreement, there is no plea in the Defence and Counterclaim that the STC had not been properly incorporated into the Contract, or that clause 3(b) was somehow not enforceable, in reply to the plaintiff’s pleaded cases in reliance on clause 3(b).[16] Rather, the pleaded case of the 1st defendant, as confirmed by the supplemental statement of the 2nd defendant, is that “during the execution process” the plaintiff showed a copy of the STC to the 1st defendant saying that they were “ordinary rules” (thus implying that they were of contractual force) and it was based partly in reliance on that representation that the 1st defendant signed the Agreement (thus implying the Agreement was only signed after the plaintiff told the 1st defendant about the STC). In his testimony the 2nd defendant gives a different version: he suggests that it was after the Agreement had been signed that the STC were produced by the plaintiff. There is no explanation for this change and I decline to accept the 2nd defendant’s testimony in this regard. Rather, the 1st defendant is bound by its own pleaded case (as affirmed by the 2nd defendant in his supplemental statement), which suggests (and I find) what the plaintiff had done was reasonably sufficient to bring to the attention of the 1st defendant the STC so as to make it part of the Contract. I therefore hold that the STC (including clause 3(b)) had been properly incorporated into the Contract between the parties. 68.There are pleaded issues on the enforceability of clause 12(c) of the STC, being an exemption clause, in the circumstances of the incorporation of the STC, which ultimately I need not adjudicate on, but that does not apply to clause 3(b). 69.The plaintiff is therefore entitled to compound interest on $122,605 at 1.5% per month for 27 March 2009 until actual payment, and on $267,730 at 1.5% per month for 15 May 2010 until actual payment. G5. Termination of the Contract 70.I have dealt with the plaintiff’s claims in relation to various sums that fell due under the Contract before the purported termination on 27 May 2010 by the plaintiff. I have already ruled above that the Contract was not terminated on 14 April 2010 or 28 April 2010. Thus, the respective parties were still bound to perform the Contract up to at least 27 May 2010. That means all sums falling due under the Contract before 27 May 2010 had to be paid by the 1st defendant according to the terms thereof, and the obligations of the plaintiff in constructing, testing, delivering and completing the legal formalities in relation to the Vessel under the Contract also remained up to 27 May 2010. And the obligations of each party under the Contract had to be performed in accordance with the Contract notwithstanding any breach of contract by the other party. 71.The question is whether, as at 27 May 2010, when the plaintiff purported to terminate the Contract by reason of the persistent failure of the 1st defendant to pay the 5th instalment, and/or the alleged misappropriation of the Vessel by the 1st defendant on 9 May 2010, the plaintiff had a right to do so, thus bringing to an end. G5A. Failure to pay the 5th instalment 72.As I have ruled above, the 5th instalment fell due on 26 September 2009. Apart from the fax of 26 September 2009 and the invoice dated 16 November 2009, at least nine chasers were sent by the plaintiff demanding the payment of the 5th instalment, with the last one being in the letter of 12 April 2010 from the plaintiff. The 1st defendant had at least promised on three further occasions that it would pay the 5th instalment but it did not. And, for the first time, in the letter dated 28 April 2010 from solicitors acting for the 1st defendant, the 1st defendant took issue on whether the Vessel was ready to be launched in September 2009. 73.As stated by Cheung JA (with whom Yeung JA (as he then was) and Burrell J agreed) in Creatiles Building Materials Co Ltd v To’s Universe Construction Co Ltd [2003] 2 HKLRD 309 at §23:
74.In Creatiles, the defendant failed to make interim payments under the contract while at the same time demanded to know if the plaintiff would still comply with the terms and conditions of the contract. Thus, while it refused to perform under the payment obligation contract, it demanded the plaintiff to do so. In the circumstances the Court of Appeal affirmed the ruling of the trial judge that there had been a repudiatory breach of the contract by the defendant as it was unilaterally changing the payment method under the contract, with the payment term changing from one of cash payment to one of credit payment. 75.In my judgment, the same applies here. By insisting, in the letter of 28 April 2010, on delivery of the Vessel while in effect rejecting the plaintiff’s entitlement to be paid the 5th instalment, without even making any proposal as to how and when the same would be paid, the 1st defendant was unilaterally changing the payment terms of the Contract, and had thereby evinced an intention not to be bound by the Contract. The plaintiff was in my judgment entitled to treat the letter dated 28 April 2010 from the solicitors for the 1st defendant as evincing an intention not to be bound by the Contract and to, and did, terminate the same on 27 May 2010. 76.The 1st defendant argues that the plaintiff was not entitled to terminate the Contract because section 12 of the Sale of Goods Ordinance (Cap 26) (“SOGO”[17]) provides that unless a different intention appears from the terms of the contract stipulations as to time of payment are not deemed to be of the essence of a contract of sale. However, no authority is cited to the effect that a failure to pay on time can never be repudiatory, and indeed Creatiles is an authority to the contrary. The legal test is whether the circumstances of non-payment show an intention not to be bound by the contract, which is a question of fact in each case (Hongkong Underground Engineering Ltd v Welcome Construction Co Ltd (formerly known as Shun Hing Construction Co Ltd), HCA 1834/2003, 15 August 2005, at §89 per Sakhrani J).[18] 77.Nor has the fact that the Agreement provided for a payment of 0.1% per day for late payment taken away this legal right of the plaintiff to terminate the Contract for non‑payment which constituted a repudiatory breach. I do not see how the mere fact that the Agreement did not provide for an express right to terminate the Contract[19], but that interest at 0.1% per day was to be paid in the event of default, meant that it was the intention of the parties that the plaintiff could not terminate on default in payment even if the same evinced an intention not to be bound by the Contract. If anything, the conduct of the 1st defendant in repudiating its obligation to pay the 5th instalment under clause 4.1 of the Agreement must mean also that it was repudiating its obligations under clause 11.4 to pay interest therefor. 78.Having terminated the Contract properly, the plaintiff was and is entitled to resell the Vessel as its owner: see Benjamin on Sale of Goods (9th edn, 2014) at §§15‑105 and 15‑107. G5B. Misappropriation of the Vessel 79.As for the alleged misappropriation of the Vessel, it is not disputed that the 1st defendant towed away the Vessel on 9 May 2010 from the plaintiff’s shipyard at Tsing Yi, where the Vessel was moored. The 1st defendant argues that the towing was done with the knowledge and/or consent of the plaintiff, since the Vessel had in fact been delivered to the 1st defendant on 7 February 2010 by the plaintiff allowing its crew on board since and allowing the conduct of sea trials by the 1st defendant later. Further, it is said that the plaintiff had never informed the 1st defendant that the Vessel could not be taken away from its shipyard. 80.In my judgment, it is clear that the plaintiff did not consent to the 1st defendant taking away the Vessel at all, and as at 9 May 2010 that was to the knowledge of the defendants, for the following reasons (and in so far as I refer to any facts I make findings therefor accordingly):
81.In the premises, I find that the taking away of the Vessel on 9 May 2010 by the 1st defendant (through the crew on board supplied by Uniformity and directed by the 2nd defendant) was (to the knowledge of at least the 1st defendant) without the consent of its owner, the plaintiff, and amounted to trespass to and conversion[20] of the Vessel, and in so far as agents of the 1st defendant had to go on the plaintiff’s shipyard to effect the same, trespass to land had also been committed. While the 2nd defendant denies that he had knowledge of the plaintiff’s acts in taking away the starter of the engines and the securing of the Vessel with welded chains and ropes, and thus the lack of consent shown thereby, he must have known of the plaintiff’s stance as stated in the letter dated 6 May 2010, and in any event I accept the plaintiff’s submissions that it is not a defence for the 2nd defendant, who on his own admission instructed Uniformity to take the Vessel away, to say that he did not know what he was doing infringed the plaintiff’s rights (Clerk & Lindsell at §17‑73). 82.I agree with the plaintiff that the 1st defendant’s misappropriation of the Vessel on 9 May 2010 evinced an intention by the latter not to be bound by the Contract. The knowing act of taking delivery of the Vessel without the consent of the plaintiff, rather than seeking to obtain redress under the Contract, if necessary through the Court, was in my view a clear indication that the 1st defendant was disregarding the mutual rights and obligations of the parties under the Contract. Thus, the plaintiff was also entitled to, and did, terminate the Contract on 27 May 2010 because of the misappropriation of the Vessel by the 1st defendant. G5C. Effect of termination 83.As a result of the termination of the Contract by the plaintiff on 27 May 2010 by reason of the repudiatory breaches of the 1st defendant, it is entitled to an award of damages so as to place the it, so far as a monetary award can do so, in the same position as if the Contract had been performed in accordance with its terms, subject to any loss being within the reasonable contemplation of the parties: see De Monsa Investments Ltd v Richly Bright International Ltd [2015] 3 HKC 583 at §§15‑23 per Ribeiro and Fok PJJ. If the 1st defendant had paid the 5th instalment as required, and did not misappropriate the Vessel, and the Contract had been performed in accordance with its terms, the plaintiff would have been entitled to be paid the 6th and 7th instalments, as well as any sums it was entitled to be paid under the variation orders (which I shall deal with in the next section). On the other hand, the Vessel, which is still in the ownership and possession of the plaintiff, would have been delivered to the 1st defendant, thus in getting any monetary award, the plaintiff would have to give credit to the 1st defendant for the value of, or sale proceeds for, the Vessel, up to the total amount of sums, damages and interest payable by the 1st defendant. 84.Accrued rights (such as any payments already due under the Contracts before termination) are not affected by the subsequent termination, and thus sums accrued due are recoverable as such: see §59 above; Chitty at §§24‑050 and 24‑053; and Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] AC 1056 at 1098-1099 per Lord Brandon of Oakbrook and Hurst v Bryk [2002] 1 AC 185 at 193 per Lord Millett (both citing with approval what was said by Dixon J in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476‑477). Thus, the plaintiff’s accrued rights to the instalments, and survey fees, that had fallen due before 27 May 2010 (and/or interest therefor) remain enforceable as such. G6. Variation orders 85.I shall now deal with the question of the variation orders. Under clause 14.1, the plaintiff is entitled to be paid for additions and variations, when the 6th instalment is being paid, which have been agreed by the parties after negotiations. There is no requirement under clause 14.1 that the agreement for a particular addition or variation has to be in writing or countersigned by the 1st defendant. 86.As stated at §14 above, the plaintiff is suing on seven variation orders. It is its case that the items in each of them had been agreed to by the 1st defendant, and copies of the variation orders had been sent to the 1st defendant. The 1st defendant avers that the additions and/or variations were merely carried out as a result of the plaintiff’s defective design and/or rectification works as a result of such defective design and/or the plaintiff’s failure to comply duly with the relevant requirements laid down by the HKMD, and it is further not admitted that the works, if carried out (which is also not admitted), were carried out pursuant to the request of the 1st defendant or consensus of the parties. 87.Variation Order No 6 had been signed and returned (with amendment) by the 1st defendant and that is not in issue. The plaintiff is entitled to the amended sum of $9,000 stated therein as damages. 88.The 1st defendant’s case is that none of the variation orders (other than Variation Order No 6) had been given to it, as stated by the 2nd defendant in his supplemental statement. However, during his testimony the 2nd defendant accepts that a copy of Variation Order No 7 had also been provided, as it had just been found amongst the files of the 1st defendant. In the trial bundles there is also a copy of Variation Order No 5 with scribbled comments thereon. In his cross‑examination, the 2nd defendant accepts that the scribbles were made by Ms Deng, who then left a copy of this variation order with the scribbles with the Hong Kong office of the 1st defendant with a direction that it be sent back to the plaintiff. It is therefore clear, and I find, that the same had been provided to the 1st defendant via Ms Deng. In my judgment, at most what the 2nd defendant can in evidence say is whether he personally had seen or been sent, or could recall seeing, copies of the other variation orders. What he cannot say is whether, for example, Ms Deng or Mr Deng, whom he says had carried out most of the negotiations on behalf of the 1st defendant, had been given any such copies, or indeed whether they had agreed to any of the additions or variations. I shall therefore place no weight on the evidence of the 2nd defendant that the 1st defendant had not been provided with copies of the variation orders (save for Variation Order Nos 6 and 7). In any event I do not see why the provision of a copy of the variation order to the 1st defendant is necessary before the plaintiff is entitled to be paid for the relevant items under clause 14.1: the only issue is whether the items had been agreed between the parties. 89.I shall also mention that in the pleadings the 1st defendant alleges that by an agreement as evidenced by a letter dated 26 September 2009, the plaintiff agreed to waive its rights (if any) for making a claim on the additions or variations. I must say that that letter contains not even the tiniest hint of any such agreement on any reading and, as the plaintiff rightly points out, it is in fact the defendants’ own case (which I reject below anyway) that it had agreed to no additions or variations, and had not received any variation orders, by then, so there could not have been any agreement to settle or compromise the same, as eventually accepted by the 2nd defendant in cross-examination. 90.It is the evidence of Lam that the works stated in all seven variation orders had been carried out. The 1st defendant has not adduced any evidence to the contrary save for a few items and Lam is not cross‑examined on this point. 91.In his statement, the 2nd defendant says he has been “advised” by Grandview, based on a “rough examination” by it, that certain items in Variation Order No 5 had not been done. 92.I am afraid I can place no weight whatsoever on this hearsay evidence, based supposedly on a “rough examination” by Grandview, with no opportunity for the plaintiff to cross‑examine Grandview, as to what works had not been done. 93.In his supplemental statement, the 2nd defendant also asserts that some items had not been carried out, namely item 1 in the minutes of the meeting of 24 June 2008 (regarding a skylight screen (天幕)), and (according to his personal knowledge) certain other items of Variation Order No 5 (not those stated in his (first) statement). There is no evidence from the 2nd defendant that other items had not been done. 94.However, the skylight screen had not been included in any variation orders and so it is irrelevant. As for the stated items in Variation Order No 5, the plaintiff has not produced any documentary evidence to support item 3.3 but does have such evidence for the other items. Further, the 1st defendant had been pressing for delivery of the Vessel all along and had indeed gone to court to seek an order for delivery, and it would be most surprising if the additions and variations which, as will be seen below, I shall find to have been agreed to by the 1st defendant, had not been done. Accordingly I find that all items in the variation orders had been carried out save for item 3.3 of Variation Order No 5 (in the sum of $80,000). 95.The 1st defendant argues that under clause 14.1 not only the parties had to agree on the works to be carried out, but also the price therefor. This is not what clause 14.1 says and in my judgment the provision in clause 14.1 for all such additions and variations to be computed and settled at the time of the 6th instalment (when the Vessel was to be delivered) suggests to me that any negotiation, dispute and agreement as to the quantum of each matter is to be resolved at that time. If whether something is to be done, and at what price, has to be agreed each time, there does not appear to me to be any need for a clause like clause 14.1, as a complete agreement would have to be made ad hoc every time. Rather, clause 14.1 was intended, in my judgment, to provide for a mechanism for the agreement of additions or variations to be carried out if and when needed, and with a separate standing arrangement regarding pricing and payment. As Lam says in cross‑examination, which I accept, there might be variations or additions which were required to be done which could not wait (or otherwise the progress of the construction of the Vessel would be affected), and clause 14.1 allows such agreed variations or additions to be done first, with any negotiations on the price to be dealt with later as expressly provided for. 96.In relation to each variation order (save for Variation Order No 5), in the absence of any evidence to the contrary from the 1st defendant challenging the pricing of each item, for reasons stated below, I find that the plaintiff is entitled to be paid as damages the sum stated in each of the variation order, being the best, unchallenged, evidence of what is the proper price to be charged by the plaintiff for each item. In this regard, I note that, as I shall find below, while copies of each variation order had been given to the 1st defendant, there is no evidence that, save for Variation Order No 5, the 1st defendant had ever commented upon the quoted prices for the items, thus indicating its implied consent thereto. In relation to Variation Order No 5, while there is no evidence that the comments thereon by the 1st defendant had been accepted by the plaintiff, the amended prices represent what at least were accepted by the 1st defendant to be the proper prices for the relevant items, and I shall award damages for the same accordingly. 97.I shall now deal with each variation order (save for Variation Order No 6) in turn. G6A. Variation Order Nos 1 and 2 98.It is the plaintiff’s case, and the evidence of Lam, that the items in Variation Order Nos 1 and 2 were discussed and agreed upon by the plaintiff and the 1st defendant at a meeting held on 24 June 2008 (and followed up on 2 July 2008), by reason of changes to the kitchen and dining area requested by the 1st defendant, and two sets of copies of the two variation orders were given to Ms Deng, Mr Deng and the 2nd defendant at a meeting held on 24 July 2009. The plaintiff has also produced copies of the minutes of the meetings held on 24 June 2008 and 2 July 2008, which recorded what had been agreed as additions or variations and which accorded with Variation Order Nos 1 and 2.[21] In a letter dated 13 August 2009, the plaintiff enclosed copies of those minutes and said that changes were made by the plaintiff at the request of the 1st defendant[22], and there is no evidence that the 1st defendant had challenged that around the time. 99.During his cross‑examination, at first the 2nd defendant says he is not sure if he attended the meeting on 24 June 2008, but later he says he did not attend. If so, the 2nd defendant is not in a position to give any evidence as to what had or had not been agreed during that meeting, which was attended by, inter alia, Lam, and why. 100.Lam is not cross‑examined on the items in the two variation orders. 101.In the light of the contemporaneous documents and the evidence of Lam stated above, I find that the items in Variation Order Nos 1 and 2[23] had been agreed to by the 1st defendant at the meetings of 24 June 2008 and 2 July 2008, and that copies thereof had been provided to the 1st defendant on 24 July 2009. While the 2nd defendant denies receiving the same on 24 July 2009, he accepts that he saw Ms Deng being given some documents by the plaintiff. Thus, I find that at least Ms Deng had been given copies of the two variation orders. I also find that minutes of the meetings of 24 June 2008 and 2 July 2008 were provided to the 1st defendant by letter dated 13 August 2009. 102.In his closing submissions Mr Suen for the plaintiff has very helpfully set out how each item in Variation Order Nos 1 and 2 had been agreed to by the 1st defendant. I accept the submissions of Mr Suen in this regard, and I further find that they are matters not covered by the Technical Specification. I find that the plaintiff is entitled to the sums stated in these two variation orders as damages. 103.The 1st defendant argues that the plaintiff had orally promised that the contract price would include making the relevant applications to the Food and Environmental Health Department (“FEHD”), and the items in those variation orders were made in compliance with FEHD requirements. Apart from the fact that the admission of evidence of such an oral promise probably offend the parol evidence rule, even if the plaintiff did make such a promise that would appear to me, on the 1st defendant’s own case, to cover the costs of making applications to the FEHD only, but not any additional costs if additions or variations were required to be made as a result. Further, even though a finding by me one way or another as to whether the plaintiff did make the alleged oral promise is not necessary, I observe here that the 2nd defendant’s own evidence is that it was he who made the relevant applications to, and attended the meetings with, FEHD on behalf of the 1st defendant, although he did bring with him Chan of the plaintiff so that the latter could answer questions if necessary. 104.In my judgment it does not matter whether each such change was proposed by the plaintiff or the 1st defendant: the fact is that if the matter is not covered by the Technical Specification but is an addition thereto or variation therefrom, and had been agreed to by the parties, then it is an addition or variation for which the 1st defendant ought to pay. I find that the aforesaid applies to each item in Variation Order Nos 1 and 2. In this regard, there is simply no evidence from any suitably qualified person (and the 2nd defendant is not such a person, and I give no weight to any evidence from him in this regard) to support the 1st defendant’s case that the additions and/or variations were merely carried out as a result of the plaintiff’s defective design and/or rectification works as a result of such defective design and/or the plaintiff’s failure to comply duly with the relevant requirements laid down by the HKMD. 105.In his statement the 2nd defendant says he has been advised by Grandview that on a “rough examination” of the description of the works in the variation orders many of such works were carried out as a result of the plaintiff’s failure to comply with the standards of the HKMD or other relevant government departments and ought not be included in the variation orders. A list of such works or items are then included. I am afraid I can place no weight whatsoever on this vague and unparticularised hearsay evidence, which is self‑admittedly based on a “rough examination” by Grandview, with no opportunity for the plaintiff to cross‑examine Grandview, and with no details as to why any such works were due to the fault of the plaintiff. This applies to all variation orders. 106.In relation to item 1 of Variation Order No 2, that is, the provision of 135 kW generators instead of 100 kW ones as stated in the Technical Specification, I accept the evidence of Lam that the change was made because while on the electricity requirements then known provisionally, three 100 kW generators would have been sufficient but as over 80% of the capacity would have been used, it would be more prudent to have three 135 kW generators instead so as to reduce the percentage used at a given time, and this was agreed to by the parties at a meeting on about 21 August 2008. In his cross‑examination, the 2nd defendant accepts that he was not a party to any negotiations regarding this change. Thus, this was another variation from the Technical Specification agreed upon by the parties, for which the 1st defendant ought to pay. There is no evidence that the original specification of three 100 kW generators (instead of 135 kW ones) were design defects of the plaintiff. G6B. Variation Order No 3 107.It is the plaintiff’s case, and Lam’s evidence, that a copy of Variation Order No 3 was provided to the 1st defendant on 24 July 2009 (at the same time as Variation Order Nos 1 and 2). For the same reasons as above, I find that the 1st defendant (via Ms Deng) was given a copy of Variation Order No 3 on that date. 108.According to Lam, the items in Variation Order No 3 reflect changes made as a result of a meeting on 4 May 2009 and in an email dated 10 May 2009 from the 1st defendant. That the 1st defendant had proposed various changes on about 30 April 2009 was also supported by the letter dated 13 August 2009 from the plaintiff (and there is no evidence that the 1st defendant had challenged that around the time) and by the report dated 18 August 2009 from Fok. Lam is not cross-examined on the items in this variation order. I accept Lam’s evidence. 109.As in the case of Variation Order Nos 1 and 2, there is simply no evidence from any suitably qualified person (and the 2nd defendant is not such a person, and I give no weight to any evidence from him in this regard) to support the 1st defendant’s case that the additions and/or variations were merely carried out as a result of the plaintiff’s defective design and/or rectification works as a result of such defective design and/or the plaintiff’s failure to comply duly with the relevant requirements laid down by the HKMD. 110.I find the items contained in Variation Order No 3 were additions or variations to the Technical Specification and had been agreed upon by the 1st defendant, and in this regard I also accept Mr Suen’s closing submissions as to why and how each such item had been agreed, and I find that they are not covered by the Technical Specification. The plaintiff is entitled to the sums thereunder as damages. G6C. Variation Order No 4 111.This variation order concerns the addition of a fourth 136 kW[24] generator. 112.The parties have adduced a fair amount of evidence as to the question of calculation of the electricity requirements of the Vessel, in relation to which party was to be blamed for the fact that a fourth generator was found to be necessary. In summary, the 1st defendant says it was the miscalculation by the plaintiff which resulted in the provision of only three (at 100 kW each originally) generators in the Technical Specification, while the plaintiff says that the 1st defendant had only provided the electricity requirement specifications to it in November 2008 (after the Contract had been entered into), with only provisional specifications supplied in June 2008, and it was the revised electricity requirements supplied by the 1st defendant in June 2009 that prompted the discussion and agreement on the need for a fourth generator. 113.There is no dispute that it is the 1st defendant which was to supply the kitchen and pantry equipment (clause 10 of the Technical Specification) and it was only the 1st defendant which knew what sort of equipment would be there and the electricity requirements therefor. The plaintiff could only have suggested the number and capacity of the generators required based on the 1st defendant’s requirements. I therefore do not quite understand how, on the evidence of the 2nd defendant himself that the electricity specifications of all kitchen electrical installation/appliances were only supplied to the plaintiff in November 2008, four months after the Contract was made stating the use of three 100 kW generators, the 1st defendant could blame the plaintiff for any miscalculation in relation to the generator requirements in the Contract. Even though it is the plaintiff’s own case that some provisional specifications had been provided in June 2008 (resulting in the calculation that three 100 kW generators would have been sufficient based on those specifications but that would take up more than 80% of the capacity), the 1st defendant has not suggested, or adduced any evidence showing why, based on those specifications in June 2008, the plaintiff, or a competent and reasonably careful shipbuilder and designer, would have calculated that four 136 kW generators would have been required. Indeed, during cross‑examination, the 2nd defendant accepts that the specification provided in June 2008 was not supposed to be accurate.[25] 114.In my judgment, I find the position to be as follows:
115.In my judgment, the plaintiff is entitled to be paid the sum under Variation Order No 4 as damages. G6D. Variation Order No 5 116.A stated above, the plaintiff has produced a copy of Variation Order No 5 with scribbled comments on it by Ms Deng. I find that a copy of this variation order had been provided by the plaintiff to the 1st defendant.[27] 117.Some of the comments made by Ms Deng on the variations concerned the quoted price of the items (for some Ms Deng took the view that they were too expensive), or how many of a particular item was needed. There was no suggestion in the copy that the 1st defendant was not liable for the items – rather, the concern of Ms Deng about some of the prices or quantity suggests clearly that she accepted that the 1st defendant was to pay for the items, otherwise she would not have cared how much they cost, or how many were required. 118.On 5 July 2009, the plaintiff sent an email to the 1st defendant enclosing the minutes of a meeting held on 22 June 2009 whereby agreed changes had been recorded. There is no evidence that the 1st defendant had challenged that around the time. I find that the plaintiff and the 1st defendant did agree on the changes at the meeting on 22 June 2009. 119.Lam is not cross‑examined on the items in this variation order. 120.As in the case of Variation Order Nos 1 to 4, there is simply no evidence from any suitably qualified person (and the 2nd defendant is not such a person, and I give no weight to any evidence from him in this regard) to support the 1st defendant’s case that the additions and/or variations were merely carried out as a result of the plaintiff’s defective design and/or rectification works as a result of such defective design and/or the plaintiff’s failure to comply duly with the relevant requirements laid down by the HKMD. 121.In his closing submissions Mr Suen has again very helpfully set out how each item in Variation Order No 5 had been requested and/or agreed to by the 1st defendant, mainly at the meeting of 22 June 2009 but some items were requested/agreed on other occasions. I accept the submissions of Mr Suen in this regard, and find that they are matters not covered by the Technical Specification. In my judgment, the plaintiff is entitled to be paid for the items stated in Variation Order No 5 as damages. In my judgment the plaintiff is entitled to the sum of $121,750 (having regard to the comments of the 1st defendant[28], and deducting item 3.3: see §§94 and 96 above) as damages. G6E. Variation Order No 7 122.As stated, it is now accepted by the 2nd defendant that a copy of Variation Order No 7 had been provided to the 1st defendant. There is no evidence that around the time the 1st defendant disputed this variation order. 123.Lam is not cross‑examined on the items in this variation order. 124.Lam has produced the following documents:
125.As in the case of Variation Order Nos 1 to 5, there is simply no evidence from any suitably qualified person (and the 2nd defendant is not such a person, and I give no weight to any evidence from him in this regard) to support the 1st defendant’s case that the additions and/or variations were merely carried out as a result of the plaintiff’s defective design and/or rectification works as a result of such defective design and/or the plaintiff’s failure to comply duly with the relevant requirements laid down by the HKMD. 126.It is the plaintiff’s case that the additions and variations referred to in the aforesaid documents were reflected in Variation Order No 7. It is clear to me that whatever additions and variations that were referred to in those documents were agreed to by the parties. Again, Mr Suen has very helpfully set out in some detail in his closing submissions how each item in Variation Order No 7 had been agreed. I accept his submissions and find that the items are not covered by the Technical Specification. In my judgment, the plaintiff is entitled to be paid for Variation Order No 7 as damages. G6F. The STC and quantum meruit 127.The plaintiff also claims the sums under the variation orders under clauses 4 and 5 of the STC and on a quantum meruit basis. In the light of my findings above, it is not necessary for me to say anything about these bases of claim. G7. Interest on the 6th instalment and variation orders 128.The plaintiff would have been entitled to the payment of the 6th instalment, and the sums under the variation orders, seven days after delivery of the Vessel and the relevant documents to the 1st defendant, but for the termination of the Contract. But the 6th instalment, and the sums under the variation orders, did not accrue before the termination as, on the plaintiff’s own case, it did not deliver the Vessel. However, in my judgment, the plaintiff is entitled to damages being the 6th instalment and the sums under the variation orders. As for when interest (at the contractual rate of 0.1% per day, which also applies to the sums under variation orders as they were to be paid as part of the 6th instalment) should start to accrue, it would depend on when delivery of the Vessel and the relevant documentation would have been made but for the failure by the 1st defendant to pay the 5th instalment, as it is clear, as admitted by Lam, after the Vessel arrived in Hong Kong on 6 February 2010, the plaintiff did not take steps to effect the final survey of the Vessel by the HKMD and to complete the documentation solely because of the non-payment of the 5th instalment. 129.According to Lam, but for the non‑payment of the 5th instalment, after the Vessel arrived in Hong Kong, the plaintiff would have arranged for final survey of the Vessel by the HKMD on 12 February 2010. Once the survey was completed, the issue of all necessary documentation could be completed within a day or two. As the Vessel arrived in Hong Kong in the early morning of 6 February 2010, had the 1st defendant paid the 5th instalment that day, the plaintiff would have been able to deliver the Vessel and the relevant documentation to the 1st defendant on about 14 February 2010, and the 6th instalment and the sums under the variation orders would have been payable by 21 February 2010. 130.However, I note from a summary of surveys prepared by the HKMD (the accuracy of which I have no reason to doubt), in fact seven inspections were carried out between 8 February 2010 and 23 April 2010[29], with various defects identified. Lam has not explained whether such defects (which presumably would have been found if the final survey was done on 12 February 2010 as originally planned) would have affected the completion of the approval process and issue of documentation. What the document shows is that after the 18th survey was carried out on 23 April 2010, only the final survey (fire drill, safety equipment and “megger test” [sic]) was outstanding, as supported by a “Survey Item List”. In the premises, if the 1st defendant had paid the relevant sums on 23 April 2010, on the balance of probabilities I find that the Vessel would have been ready to be delivered (with all documentation) not long thereafter, and most likely before the date of termination, ie 27 May 2010.[30] In the premises, I award interest on the 6th instalment and the sums under the variation orders, payable by the 1st defendant now as damages, as from 3 June 2010 (seven days after 27 May 2010). 131.Thus, I award damages to the plaintiff as follows:
The total is $5,397,870. 132.Interest is also awarded at 0.1 per day on $5,397,870 as for 3 June 2010 to the day of actual payment. 133.As for the 7th instalment, no claim for pre-judgment interest has been made. I award the sum of $576,000 as damages, and interest thereon at 0.1% per day from the date of this Judgment to the date of actual payment. G8. Damages for misappropriation and other expenses 134.I have already held, in section G5B above, that the that the taking away of the Vessel on 9 May 2010 by the 1st defendant, and as directed by the 2nd defendant, amounted to trespass to and conversion of the Vessel, and in so far as agents of the 1st defendant had to go on the plaintiff’s shipyard to effect the same, trespass to land had also been committed. I accept the plaintiff’s case that it is entitled as damages being the expenses for towing the Vessel back to its shipyard on 13 May 2010, in the sum of $12,075. However, I disallow the following claims:
135.The plaintiff also claims various expenses being fees or charges to keep the Vessel in a state to be ready for delivery to the 1st defendant (upon payment of the 5th instalment) and thereafter with a view to exercise their right of resale. In principle these expenses would be recoverable as damages. The evidence of Lam as to the items of expenses incurred and the quantum had not been challenged in cross‑examination and I accept his evidence in relation thereto. The evidence of Lam, however, only gives details of the quantum up to August 2010 and there is no evidence regarding the position after that date. In the premises I shall only award damages to the plaintiff as claimed at §32(8) of the Statement of Claim, and attested to at §76(8) of the statement of Lam, in the total sum of $1,037,000.18. H. DISCUSSION: THE 1ST DEFENDANT’S COUNTERCLAIM H1. Delay delivery and non‑delivery 136.It is of course common ground that the Vessel had not been delivered to the 1st defendant by the plaintiff at all. I have already held that the plaintiff was entitled to, and did, terminate the Contract on 27 May 2010. If the plaintiff was already under an obligation to deliver the Vessel by that date, but did not, then it would have been in breach of the Contract. 137.In my judgment, the obligation to deliver the Vessel did not arise by the time the Contract was terminated by 27 May 2010, for the following reasons:
138.In the premises, I reject the 1st defendant’s counterclaim based on or related to any alleged delay in delivery or the non‑delivery of the Vessel by the plaintiff. In particular, regarding the claim for the return of the 1st to the 4th instalments, since this was a shipbuilding contract with no total failure of consideration, the 1st defendant is not entitled to have them repaid. In Hyundai Heavy Industries and Stocznia Gdanska (distinguishing Dies v British and International Mining and Finance Corporation Ltd [1939] 1 KB 724), it was held that a shipbuilder was entitled to sue for unpaid instalments that had fallen due before the contract was terminated. Thus, a fortiori, the shipbuilder must be entitled to retain paid instalments. This is a matter of general law and not dependant on the existence of express clauses (in Hyundai Heavy Industries and Stocznia Gdanska) that the shipbuilder was entitled to retain the paid instalments. Thus, as stated byRibeiro PJ in Polyset Ltd v Panhandat Ltd (2002) 5 HKCFAR 234 at §62:
139.Indeed, in his closing submissions Mr Wong for the defendants says that the claim for the first four instalments was as damages for non‑delivery and not because of a total failure of consideration, and I have held that there was no breach by the plaintiff in this regard. 140.I dismiss the counterclaim for items (1) to (6) and (8) as stated at §18 above. H2. Other alleged breaches by the plaintiff 141.As stated at §18(7) and (9) above, in its Defence and Counterclaim, the 1st defendant also seeks damages (said to be “to be assessed”):
142.The complaints of the 1st defendant under the first head concern the following:[34]
143.In the light of my ruling that the plaintiff was entitled to withhold delivery of the Vessel up to the time when it validly terminated the Contract on 27 May 2010, I do not see how the 1st defendant could have suffered any loss or damage by reason of any of those four matters, even if the plaintiff had somehow been at fault in relation to each complaint. If the 1st defendant had indeed been given a Vessel with a much reduced capacity, and with an inferior quality, and if the same were due to some default of the plaintiff, then I can see that the 1st defendant might have a claim for any loss and damage which it might have suffered as a result. But the fact is that it had not been, and was not entitled to be, provided with a Vessel built in accordance with the approved plans and drawings. Thus, whatever was and is the real and actual state of the Vessel as built did not cause, and could not have caused, any loss and damage to the 1st defendant. 144.Thus, even if there had been some breach of contract by the plaintiff as alleged, the 1st defendant would only be entitled to nominal damages. H2A. Capacity 145.In relation to the capacity, the original figure of 917 stated at clause 1.2 of the Technical Specification was expressly stated to be “subject to HKMD’s final approval” (「按香港海事處最終確認」). It was thus provisional. The final approved figure was in fact 853, and not 800 as pleaded. This is accepted by the 2nd defendant in cross-examination, but he says he estimates that the final capacity would be reduced to 800 as the plaintiff was installing some cupboards for storage of life jackets, which would further reduce the seating capacity. 146.The capacity had changed a few times during the approval process because of changes in the layout and design of the Vessel. Evidence has been adduced by both sides as to the reason for each change in capacity. The evidence of Lam is that each change was made as required by the HKMD and/or because of changes requested by the 1st defendant. The 1st defendant alleges that at least some of the changes were required by the HKMD because of design defects made by the plaintiff. In closing, the 1st defendant also argues that the plaintiff had a duty to advise it on the effect any change proposed by the 1st defendant on capacity, but no such duty is pleaded at all and so I shall not deal with it. 147.In my judgment, it is not necessary to lengthen this Judgment by going through each change and to make findings on the cause therefor. If a particular change was made because of a request by the 1st defendant, it cannot complain. If the change was made because of a requirement of the HKMD, then clearly that had to be complied with (as envisaged by clause 3.2 of the Agreement and clause 1.2 of the Technical Specification), and even if the change was required because of a design defect by the plaintiff and/or because the plaintiff had failed to comply with some HKMD regulations or requirements, the change was in effect to put that right, and in the absence of any evidence from any person qualified to give such evidence that the plaintiff could have designed and built a vessel with a bigger capacity than it did taking into account all the requirements of the HKMD and the 1st defendant, the 1st defendant has simply failed to establish a case that the Vessel having a capacity less than 917, or at 853, is in any way a breach of contract or of any legal duty by the plaintiff.[35] H2B. Mild steel 148.As for the mild steel used, the Technical Specification did not specify the thickness thereof. At clause 1.4 it is stated:
And clause 2.2 states:
There is no evidence from the defendants that the use of 0.8 cm mild steel does not satisfy the requirement under clause 2.2 or any of the cited rules or regulations. In his testimony, the 2nd defendant says that the use of 1 cm mild steel was orally promised by the plaintiff. However, quite apart from the fact that the admission of this evidence probably offends the parol evidence rule, this has not been pleaded nor referred to in the witness statements of the 2nd defendant. There is no proper explanation for this omission and I decline to accept the 2nd defendant’s evidence in this regard. There is no breach of contract or duty by the plaintiff regarding the thickness of the mild steel used. H2C. Pillars 149.According to Lam, the seven pillars[36] (which were not on any approved plans) were installed at the suggestion of the HKMD, but it was not a “requirement”, nor was it necessary for the plans to be revised to include the same. In fact, it is Lam’s evidence that the pillars on deck No 2 can be taken out anytime. 150.In my judgment, the addition of the pillars was contrary to the approved plans. As it must have been known to the plaintiff that the Vessel was to be used as a cruise ship with dining and entertainment facilities (including a dance floor) on No 2 deck, as these were clearly shown even on the general arrangement plans annexed to the Agreement, the provision of seven additional pillars would have affected the capacity, layout and utility of deck No 2 as a dining and entertainment area (without making it, however, not reasonably fit to be a cruise ship with dining facilities or not of satisfactory quality: certainly, after knowing the existence of the seven pillars by January 2010 the latest, thereafter the 1st defendant still wanted the Vessel to be delivered). The fact that, on the plaintiff’s own case, the inclusion of the pillars was not required by the HKMD suggests to me that the plaintiff ought not have done so contrary to the approved layout plans. 151.Lam suggests in his evidence that the plaintiff had discussed the addition of the pillars with the supervisor of the 1st defendant before proceeding. However, as the addition of the pillars was not supposed to be necessary, I find it unlikely that the supervisor or the 1st defendant would have agreed to it. 152.However, the Agreement has provided for the situation where the plaintiff had failed to build the Vessel in accordance with the plans and drawings under clause 3.2, namely for the 1st defendant to require the rectification thereof by the plaintiff while refusing to accept the Vessel in the meantime: see clauses 7.2, 7.3 and 7.4. What the 1st defendant should have done was to set out this defect in writing and demanded the plaintiff to rectify the same. As the 1st defendant itself accepts, it did the former but not the latter by an email dated 6 April 2010. If it had done both, the plaintiff would then be under an obligation to rectify, and any failure by it to do so would have been a breach of clause 7.4 of the Agreement (which is not pleaded), and not clause 3.2 (which is pleaded). 153.Further, on a proper construction of the Agreement, it appears to me clear that the time to consider whether the plaintiff had acted in breach of clause 7.4 would be the time of delivery, as unless and until the time for delivery comes the plaintiff would still have been in a position to rectify any defects. Because, as I have ruled above, the time for the plaintiff to deliver the Vessel to the 1st defendant did not come before the Contract was properly terminated, the plaintiff had not acted in breach of clause 7.4 yet. 154.I therefore reject the 1st defendant’s counterclaim in relation to the pillars. 155.Further and in any event, there is no evidence as to how the addition of the pillars had caused any loss or damage to the 1st defendant. I repeat §143 above. Even if I were to hold that there was some breach of contract by the plaintiff in relation to the pillars, the 1st defendant would have been entitled to nominal damages only. H2D. Ladies’ toilet 156.It is not disputed by the plaintiff that the actual layout of the ladies’ toilet on No 2 deck is in variance with the general arrangement plans. The analysis above in relation to the pillars applies also. Even if I were to hold that there was some breach of contract by the plaintiff under this head, the 1st defendant would have been entitled to nominal damages only. H2E. Breach of statutory implied terms 157.The 1st defendant complains that the Vessel was not reasonably fit for the purpose, not of satisfactory quality, and did not correspond with the description set out in the layout plans and drawings. 158.There is simply no proper evidence in support of the first two complaints. I do not understand how, for example, the fact that there are seven pillars on No 2 deck, or the fact that the ladies’ toilet is a bit off the location stated on the plans, makes the Vessel not reasonably fit as a cruise ship with dining facilities, or not of satisfactory quality. As for the alleged failure to correspond with the description refers to the same complaints as stated in §142 above, I repeat my analysis under sections H2A to H2D above. H2F. Other complaints 159.There are other complaints by the 1st defendant in its Defence and Counterclaim which can be dealt with shortly:
160.I therefore dismiss the Counterclaim in its entirety. I. DISPOSAL 161.There are many other issues in dispute between the parties which in the end are not necessary for me to resolve, and, given the length of this judgment, I do not propose to. For example, it is not necessary for me to rule on the circumstances of the signing of the Agreement and the incorporation of the STC into the Contract, in so far as that may affect the enforceability of any exemption clauses (such as clause 12 thereof), as the 1st defendant is not entitled to any substantial damages from the plaintiff in any event. 162.I make the following orders:
163.As I ruled at §83 above, the 1st defendant is entitled to a “credit” being the value or sale proceeds of the Vessel (which would include the materials and supplies installed on the Vessel by the 1st defendant) up to the total monetary sum payable by it. I direct the plaintiff to file and serve submissions within 28 days of the date of this Judgment on how to give effect to this “credit” (for example, by agreeing to a valuation by the parties or by an independent valuation, or by agreeing on terms of sale of the Vessel). The 1st defendant shall file and serve its submissions in answer within 28 days thereafter, and the plaintiff shall file and serve its reply, if any, within 14 days thereafter. If any party has any issue about my jurisdiction to make any orders or to give any directions on this point then submissions should also be made accordingly as directed. If the parties can come to an agreement in the meantime as to how to give effect to this credit, they are to inform me by way of a joint letter. 164.The plaintiff is entitled to the costs of this action and counterclaim. The 2nd defendant is only being sued for conversion and trespass and he ought to pay for the costs therefor jointly and severally with the 1st defendant, and, on a rough and ready basis, I fix that at 5% of the total taxed costs of the plaintiff. The 1st defendant is liable solely for 95% of the taxed costs of the plaintiff in this action and counterclaim. I shall order accordingly, on a nisi basis. 165.Lastly, I thank both counsel for their assistance.
Mr Jenkin Suen, instructed by SK Wong & Co, for the plaintiff Mr Brian MW Wong, instructed by Yu Tsang & Loong, for the defendants [1] Being 427 on the main deck, 236 on No 2 deck (dining space), and 254 on No 3 deck (dining space), as stated on the general arrangement plans (總佈置圖) attached to the Technical Specification. [2] Because the 1st defendant’s case is that the contract between the parties was partly in writing, being the written Chinese Agreement dated 2 July 2008, and partly orally and partly by conduct, whereas the plaintiff’s case is that the contract consists only of the written Chinese Agreement, to avoid confusion, I shall call the written document “the Agreement”, and the contract between the parties “the Contract”, whatever it consists of. The plaintiff’s case is that the Agreement constitutes the Contract entirely, and the 1st defendant alleges that the Contract consists of the Agreement, as well as the agreements made orally and by conduct. [3] Reported at [2011] 1 HKLRD 117. [4] Reported at [2011] 5 HKLRD 718. [5] In their Defence and Counterclaim, the defendants refer to the provision that a “penalty payment at the rate of 0.1% per day shall be payable upon the outstanding balance” for delay under clause 11.4 of the Agreement, which reflects the wording of 「罰金」in clause 11.4 but of course the label or description used is not determinative. However, it has not been expressly pleaded, and no particulars were provided to support any allegation, nor is it argued at the trial, that this provision is in substance a penalty provision or otherwise unenforceable, whether generally or in specific answer to the claim of interest by the plaintiff under clause 11.4 for the 2nd, 4th and 5th instalments. The 0.1% being the agreed sum to be paid for each day of delay in payment, it is in substance agreed interest (being compensation for being deprived of the principal sum: Riches v Westminster Bank Ltd [1947] AC 390 at 400 per Lord Wright). I shall therefore not deal with the possibility of clause 11.4 being an unenforceable penalty clause but as a provision for contractual interest. [6] In fact, the Technical Specification stated that mild steel was to be used, not stainless steel. The 2nd defendant in his cross-examination accepts that it was mild steel which should be used, not stainless steel. There is no dispute that mild steel was in fact used. The issue is whether the thickness of the mild steel used is a breach of contract by the plaintiff. [7] The 1st defendant counterclaims for $12,864,000 as “the first 4 instalments paid by the 1st Defendant to the Plaintiff”. In fact only $12,860,000 had been paid. [8] The clause says 「… 在得到甲方/MD檢驗證實後 …」 which in my judgment means inspection and confirmation by the 1st defendant (being the 甲方) or the HKMD, as accepted by the 1st defendant in the pleadings and closing submissions. [9] The original Chinese text is as follows:「我們認為該船已經具備下水的條件;今年西江的水位相對去年同期差了2米,這幾天梧洲因颱風帶來降雨,西江水位有所上漲,但是該水位漲的快退的也快,因此敬請鄧先生慎重考慮,謝謝!」 [10] During his cross-examination, the 2nd defendant accepts that launching was a matter of professional opinion (「下水呢一樣嘢係個好專業嘅嘢」) and he had to trust the opinion of Grandview as to whether the Vessel could be launched. [11] 「我去問過人,佢話基本就冇乜嘢特別規限係要落水嘅,即係話要做到某樣、某樣、某樣先至落去嘅,冇特別規限嘅。」 [12] 「海龍明珠下水前未完成項目。」 [13] During cross-examination, the 2nd defendant said: 「[Peter Leung] 話唔係好多錢嘅啫,兩、三次就驗晒㗎啦 … 你口頭應承咗我哋係兩、三次,我就當十次 – 當你噏過有十次 …」 [14] 「出面人哋話 …」 [15] 「呢個行頭啲朋友喇」 [16] I note here the 1st defendant’s pleaded case that, referring to clause 14 of the STC, by commencing this action, the plaintiff has waived its right to rely on the STC, or that it would be unreasonable and/or inequitable for the plaintiff to rely on the STC. It is a self-evidently bad point, as clause 14 is only an arbitration clause. [17] It is agreed by both counsel that the SOGO is applicable to this case. [18] And see, for example, section 33(2) of the SOGO in relation to sale and delivery by instalment and payment therefor. [19] Such as in cases like Hyundai Heavy Industries Co and Stocznia Gdanska, cited by the 1st defendant. [20] As explained in Clerk & Lindsell on Torts (21st edn, 2014) at §17-09: “Anyone who without authority receives or takes possession of another’s goods with the intention of asserting some right or dominion over them, or deals with them in a manner inconsistent with the right of the true owner is prima facie guilty of conversion; provided there is an intention on the part of the person so dealing with them to negative the right of the true owner or to assert a right inconsistent therewith”. [21] Save for item 1 on Variation Order No 2, which related to the electric generators, as to which see below at §106. [22] 「查 貴公司只在2008年6月24日及7月2日的會議上對佈置上提出意見(見附件) 我司亦按 貴司所言作出修改于以配合。」 [23] Save for item 1 on Variation Order No 2. [24] The parties talked about 135 kW initially (hence such description in Variation Order No 2) but it was later confirmed that the correct figure was 136 kW. [25] When asked whether the 1st defendant had supplied the electricity requirements to the plaintiff before the Contract was made, the 2nd defendant answered: 「呢個係有提供嘅, 嗰個用量量,但係講明係唔準確嘅。」 [26] This is the reference number on Variation Order No 4. [27] And I reject the point made by the defendants in closing submissions that a wrong fax number might have been used by the plaintiff. The existence of this amended version of Variation Order No 5 suggests that somehow a copy did reach Ms Deng. [28] By taking out items 1.2, 3.4, 3.5 and 6.1, allowing half of items 2.3, 2.4, 3.2, 4.1 – 4.4, 6.2 and 7.2, and adjusting the price of items 3.1, 5.1, 5.2 and 7.1 as suggested. The plaintiff is not claiming for items 1.1 and 8 in any event. [29] The reference to the 12th inspection being on 8 February 2008 in the summary is obviously a typographical error, and should be 8 February 2010, as the 10th and 11th inspections were done on 28-31 December 2009 and 4-7 January 2010 respectively. The Contract was not even signed by 8 February 2008. [30] Lam is asked in cross-examination on a letter dated 11 May 2010 from the HKMD saying the master list had not been approved. I accept Lam’s explanation that this would not have affected the issue of licences by the HKMD. [31] (1873) LR 8 Ch App 289. [32] See also section 41 of the SOGO, which provides for a lien in favour of an unpaid seller where property has passed to the buyer. [33] Various reasons have been suggested by the parties, for example the fire that occurred at Xijiang Shipyard, alleged labour shortages, delay in the 1st defendant’s contractor to deliver kitchen equipment etc. [34] In the email dated 6 April 2010 from the 1st defendant to the plaintiff, various other deviations were referred to, but it is clear that they were not pursued as separate grounds under this head. In the closing submissions, no other complaints were made other than these four. [35] I also attach no weight to the evidence of the 2nd defendant that the capacity had been further reduced because of the cupboards for life jackets, as he accepts that that is a rough estimate. When I ask him on what basis is he giving the figure of 800, when he admits that he only saw the cabinets after solicitors for the 1st defendant had given the figure of 800 in the letter of 28 April 2010, he answers: 「所以呢個係唔準囉,所以我係話係預估嘅之嘛...我哋離開隻船之後,就冇數計㗎喇。」 Further, on 8 May 2012, the plaintiff obtained a Certificate of Survey from the HKMD which also certified the capacity of the Vessel to be 853. [36] Even though the four pillars in the kitchen were also referred to in the pleadings, the parties do not deal with them in evidence or submissions, and in any event the analysis regarding the seven pillars on No 2 deck apples to the four pillars in the kitchen. [37] ING Baring Securities (Hong Kong) Ltd v Commissioner of Inland Revenue (2007) 10 HKCFAR 417 at §137 per Lord Millett NPJ, citing Bowstead & Reynolds on Agency (18th ed, 2006) at page 1 (now 20th ed, 2014). This formulation is adopted by the 1st defendant in closing submissions. [38] In the premises, it is not necessary to decide whether the Contract was made partly in writing, partly orally, and partly by conduct, as the defendants allege, as the oral and conduct parts both relate to this agency point. There is no doubt that the plaintiff had undertaken the task of applying for licences from and liaising with the HKMD but that does not, in my judgment, turn the relationship into one of a fiduciary nature. [39] I should point out here that it is Lam’s evidence that all drawings had been provided to the supervisor of the 1st defendant, which the defendant denies. It is not necessary for me to resolve this dispute of fact. [40] See Komala Deccof & Co SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR 219. [41] This 1% above prime rate as the proper pre-judgment interest rate is also applicable to claims in tort: see for example Metal Box Co Ltd v Currys Ltd [1988] 1 WLR 175. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCA 1288/2010