Hung Hing Engineering Co Ltd v. Hung Wai Ming and Another

DCCJ 3959/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3959 OF 2014

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JUDGMENT

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1.This is a case of goods sold and delivered. The plaintiff sued the two defendants for unpaid balance due under 12 invoices[1]. Shortly before trial, two more of them[2] were paid and the remaining 10 invoices totaling $554,317.12 (the 10 subject invoices) form the subject matter of this trial. Save for 3 out of them, namely, invoices Nos.HHA120661, BAL 120066 & DEP 120066-2 (the 3 subject invoices), the defence put forwards a simple denial to the remaining 7 invoices (the 7 remainder invoices).

2.For the 3 subject invoices over 2 projects, the defendants alleged that the plaintiff had, in breach of agreements for the 2 projects, failed to supply original manufacturer’s certificates known as “Mill Certificates” (MC) for goods sold and delivered under the 2 projects as agreed and that payments were not due until their delivery. They counterclaimed, inter alia, delivery of original MCs, indemnity and damages for breach of contract.

Failed amendments

3.At pre-trial review, this court once gave conditional leave to defendants to amend their amended defence and counterclaim to accommodate certain unpleaded contents of their witness statements but they had not fulfilled the required condition. Hence this trial proceeded without those draft amendments[3]. For details of this futile exercise, I refer to my reasons for decision dated 19 Jan 2017.

4.As a result, much unpleaded evidence in form of various passages or paragraphs in both parties’ witness statements became irrelevant and inadmissible at this trial. While parties are ordered to have them removed by agreement, they were unable to reach full agreement by the 1^st day of this trial.

5.Fortunately, after counsel Mr Justin Ho for plaintiff (Mr Ho) and counsel Mr Derek Fung for defendants (Mr Fung) finished opening their respective cases[4], they managed to come to full agreement.In consequence, witnesses of both parties adopted in chief edited version of their filed witness statements, with irrelevant and inadmissible parts or passages expunged by agreement.

Background facts

6.The following facts are either admitted on pleadings or not disputed on the evidence before me and I find them proven.

7.The plaintiff company was set up 25 years ago. Its director was and is one Mr Raymond Chui (Chui) who gave evidence before me. At all material times in 2012 to 2014, it had its office at Yuen Long[5] and it also owned a factory in Huizhou, PRC (the PRC factory), which employed one Mr Lai Xiang Ping (Lai), a PRC resident, as one of its employees up to May 2014. Lai gave evidence before me as a defence witness.

8.The two defendants as partners traded in the name of Wui Tung Metallic Engineering Company (the firm). The firm was set up in or about 2007 and it carried on a contractor business undertaking, inter alia, structural steel works. One of its partners was and is 1^st defendant (D1) who gave evidence before me.

9.At all material times in 2012 to 2014, the firm rented its office in Yuen Long from plaintiff at a location directly opposite that of plaintiff’s office[6] at a walking distance of 15 steps. D1 has been acquainted with Chui for over 20 years. The firm has been in business with plaintiff since its set-up. They had more frequent business since about Apr 2012.

The 7 remainder invoices

10.Evidenced by the 7 remainder invoices and divers delivery orders, various goods were sold and delivered from plaintiff to the firm in 2013 and 2014, and the unpaid amount is $190,820 in total.

The Park project

11.In 2012 and 2013, the Architectural Services Department (ASD) on behalf of the government awarded a project at Ko Shan Road Park, Kowloon (the Park and the Park project) to Shui On Building Contractors Ltd (Shui On) as the main contractor. The Park project is therefore a public project. Shui On subcontracted to one company called City Link, which subcontracted to one Luen Lam Engineering Company (Luen Lam).

12.The sole shareholder and director of Luen Lam is one Mr Shek Hau Tong (Shek), who gave evidence before me as a defence witness. Luen Lam in turn subcontracted such works, including structural steel works, of the Park project to the firm.

The 3 Park quotations

13.Evidenced by 3 quotations No.A120291 dated 30 Aug 2012, No.A120462 dated 25 Oct 2012 and No.A120318-1 dated 25 Oct 2012 (the 3 Park quotations), the plaintiff sold goods below to the firm and delivered them to the Park for the Park project.

(1)  The goods under quotation No.A120291 (the rain shelter frame quotation) was galvanized steel rain shelter frame (鉛水鐵雨篷架) in the sum of $260,056.50;

(2)  Those under quotation No.A120462 (the mullion quotation) was galvanized steel mullion (鉛水企柱) in the sum of $9,020; and

(3)  Those under quotation No.A120318-1 (the railing & handrail quotation) was aluminum railing (鋁欄河) and stainless steel handrail (不鏽鋼扶手)  in the respective sums of $363,022 and $39,650.

The 2 unpaid Park invoices

14.Out of all invoices issued under the 3 Park quotations, only 2 invoices remain unpaid by the firm so far. They are Invoices No.DEP 120066-2 in sum of $140,466 and No.BAL120066 in sum of $110,031.12 both dated 21 Mar 2013 (the 2 unpaid Park invoices). They were both issued under the railing & handrail quotation.

15.Evidenced by divers delivery orders, the goods under the 2 unpaid Park invoices had all been delivered by the plaintiff to the firm at the Park in 2013.

16.MCare documentary proof issued by manufacturer or mill factory of structural steels that give the sizes of the batch of steelwork supplied, their grades and standards, their chemical composition and the test results of their mechanical properties.

17.By 2 letters both dated 5 Jun 2013, the plaintiff had supplied, and the firm acknowledged receipt of, certified MCs, for goods supplied under the rain shelter frame and the mullion quotations. But it had not supplied any MC at all to the firm in respect of goods supplied under the railing & handrail quotation.

18.By Sept 2016, the Park project has been completed and the Park open to public use, as was evidenced by some photos of the Park taken by plaintiff in Sept 2016 produced before me.

The Clearwater Bay project

19.In 2012 and 2013, there was a private project at Clearwater Bay, Sai Kung (the Clearwater Bay project). Its main contractor is one Creative Engineering Co. (Creative). Creative sub-contracted certain works of the Clearwater Bay project to the firm.

The CWB quotation

20.Evidenced by plaintiff’s quotation No.A120876 dated 30 Mar 2013 (the CWB quotation) and divers delivery orders, the plaintiff sold and delivered metal folding sliding doors (黑鐵摺趟門) & metal sliding doors (黑鐵大趟門) to the firm at Clearwater Bay for the Clearwater Bay project in 2013.

The unpaid CWB invoice

21.For such aforesaid delivered goods, plaintiff’s invoice No.HHA120661 dated 18 Mar 2013 in sum of $113,000 remains unpaid by the defendants so far (the unpaid CWB invoice).

22.For goods sold and delivered by the plaintiff to the firm under the unpaid CWB invoice, no MC was ever supplied by the plaintiff to the firm at all.

The 3 subject invoices

23.The unpaid CWB invoice and the 2 unpaid Park invoices form the 3 subject invoices at this trial.

The May 2014 meeting & aftermath

24.On an evening in May 2014, Chui, D1 and Shek met for dinner at a Chinese restaurant in Yuen Long. The three of them had discussion about, at least, outstanding balance due from the firm to the plaintiff and they came to a deal (the deal).

25.In line with the deal, Luen Lam drew 2 cheques each in sum of $10,000 in favour of plaintiff and they were paid into plaintiff’s account in June & July 2014 respectively. Later, Luen Lam paid another $10,000 into plaintiff’s account in Aug 2014. All 3 sums totaling $30,000 were paid by Luen Lam to plaintiff in discharge of outstanding balance due from the firm to plaintiff. And plaintiff issued 3 receipts to the firm for the said 3 sums.

26.However, on 24 Sept 2014, plaintiff’s solicitors wrote separately to the 1^st and 2^nd defendants demanding each to settle within 5 days outstanding balance for goods sold and delivered in total sum of $575,317.12 for the 12 subject invoices or else proceedings would be taken out.

27.On 17 Oct 2014, plaintiff’s solicitors issued the writ in this action.

28.On 11 Nov 2014, Messrs. Michael Pang & Co. on behalf of Luen Lam wrote to the firm demanding 3 MCs particularized therein for the Park project or else proceedings taken to recover loss and damage suffered. But Luen Lam never took out any proceedings against the firm and it ceased business in Dec 2016.

Analysis

29.I have fully and carefully considered all evidence, submissions and authorities before me.

30.As shall be seen below, I do not find it necessary to resolve all factual disputes between the parties or among the witnesses. I have confined myself to decide if the defendants have managed to prove their defence and counterclaim on the alleged ground of plaintiff’s failure to provide original MCs.

Witnesses

31.Having carefully observed the demeanors of each of the witnesses giving evidence before me, Chui impressed me as a rather defensive witness. He often did not answer defence questions directly and even asked Mr Fung questions in return.

32.As for D1, he is a witness who often contradicted himself in the box. Even a simple background question that the plaintiff was and is a “supplier” of metallic products was first admitted by him[7] (and I so find) but later denied by him, who claimed it a “contractor” instead. I do not find D1 a credible or reliable witness.

33.Lai is, I note, an interested witness with a possible motive to serve that he tried to hide. After leaving the PRC factory, he went into business in Hong Kong together with D1 but he never disclosed that in his witness statement. That was only revealed after Mr Ho’s cross-examination.

34.Shek’s evidence has, I think, only a limited role to play at this trial. Shek could not, and did not, give evidence on contractual relationship between plaintiff and the firm I have to decide. While one expects him to give evidence on contractual relationship between the firm and Luen Lam, and between Luen Lam and City Link, no supporting document was forthcoming from him at all.

Claim on the 7 remainder invoices proven

35.No positive defence having been raised to them and the sale and delivery of the goods concerned having been proved before me, judgment should at least, I think, be given on the remainder 7 invoices against defendants in the total sum of$190,820.

The 3 subject invoices

Defence & Counterclaim

36.Regarding the 3 subject invoices, the defence contended that the parties had entered into 2 agreements over the 2 projects (the 2 agreements). The 3 Park quotations were issued pursuant to one global or umbrella agreement over the Park projectentered on or about 30 Aug 2012 (the Park agreement). And the CWB quotation was issued pursuant to another over the CWB project entered on or about 30 Mar 2013 (the CWB agreement).

37.The express clauses of such quotations issued under the 2 agreements, it was said, did not fully set out all the terms of the 2 agreements, which also incorporated other documents and/or had other terms orally agreed upon and/or terms implied by law.

38.It is defence case that the 2 agreements had terms obliging the plaintiff to provide the firm original MCs for all goods sold and delivered under the 2 agreements and/or that payment shall be subject to the provision of such original MCs upon delivery (the MC term).

39.For the Park agreement, the MC term is pleaded to arise by way of 1) incorporation of other documents, 2) oral agreement, and 3) implication of law.

40.For the CWB agreement, it is pleaded to arise by way of 1) incorporation of other documents, and 2) implication of law[8].

Plaintiff’s reply

41.In reply, the plaintiff pointed to express clauses of the 3 Park quotations and the CWB quotation having no MC term at all. It disputes alleged incorporation of MC term from other documents, alleged oral agreement or implication of the same at law. It says it had no contractual obligation to provide original MCs to the firm, which had never requested for the same.

42.Plaintiff further says that each one of the 3 Park quotations & the CWB quotation is a standalone sale and purchase agreement between the parties, and that all their terms are fully set out in the express clauses of each of them.

Each of 3 Park quotations standalone agreement

43.This issue needs only to be resolved with the Park agreement the defence contended as there was only the CWB quotation issued under the CWB agreement the defence contended.

44.Mr Fung made no submission on this point at his closing address.

45.Instead, Mr Ho pointed out that each of the 3 Park quotations was separately chopped and signed by the parties. No cross-reference was made in one quotation to the other quotation(s) or goods under the same. The same common statement in Chinese on the face of the 3 Park quotations i.e.“跟附傳真圖紙資料及規格，報價如下：”(the statement) refers to some separate drawings or specifications for each of them and does not refer to some overall or common drawings or specifications for all of them.

46.Having carefully considered, I agree with Mr Ho and find each of the 3 Park quotations a standalone agreement between the parties. Indeed, D1 agreed under cross-examination that each of 3 Park quotations was separately negotiated and agreed upon, and was an independent contract from one other.

Incorporation of MC term from other documents

The Park project

47.Mr Fung explained and submitted in his closing address that, after a set of 11 no. of DDA drawings of the Park project (the D drawings)[9] were delivered from the firm to plaintiff, by reason of the statement on the face of the 3 Park quotations[10], the D drawings formed part of plaintiff’s offer to D1, which D1 later accepted by putting the chop of the firm on the right bottom of each quotation.

48.And by virtue of “General Notes”[11] & “General Notes Structural Steelwork”[12] in English (GN and GNSS) at top left and top middle on p.1 of the D drawings, a number of additional documents[13], including entire General Specification for Building 2007 (GSB 2007), were incorporated into the Park agreement. And under section 15 of GSB 2007, the defence relies on clauses 15.02[14], 15.13[15] and 15.17[16].

49.In reply, the plaintiff denied receipt of the D drawings from the firm. If received at all, Mr Ho submitted that the various documents referred to in the GN & GNSS, including entire GSB 2007, had not been incorporated into the parties’ contract at law.

D drawings delivered to plaintiff

50.Mr Ho rightly, I think, first pointed out that there is no document plaintiff acknowledging receipt of the D drawings, whose delivery from the firm to the plaintiff forms the backbone of defence case here.

51.The oral evidence defence sought to rely upon, I also agree with Mr Ho, is not entirely satisfactory. It was pleaded that the D drawings were delivered to plaintiff on or about 2 Aug 2012[17]. But para 11 of D1’s 1^st witness statement recorded: “On or around 11 Aug 2012, Wui Tung passed the DDA drawings to Hung Hing for negotiation of the steelwork supply contract (italics supplied)”. On top of this difference in date, the identity of the giver of the firm and that of the recipient in plaintiff are not made known in the witness statement.

52.For Lai, he made only general reference at para 7 of his witness statement of receiving drawings in general (not the D drawings) from the firm through Mr Yeung Wing Fai of plaintiff’s Hong Kong office (Yeung). It was only under cross-examination that D1 and Lai for the first time claimed respectively that D1 gave the D drawings to Yeung and that Lai received them from Yeung.

53.It was admitted on pleadings and by Chui that plaintiff did receive from the firm in or about early Aug 2012 another set of 18 no. of drawings called TCT-072 design proposal of the Park (the T drawings)[18]. But Chui denied receiving the D drawings from the firm.

54.In term of inherent probabilities, it is D1’s evidence, and Mr Fung had sought to demonstrate by his cross-examination of Chui, that the plaintiff cannot, without the D drawings, get to know the cross-sectional dimensions of the divers structural members of the covered walkway of the Park project to prepare the contents of its quotations[19] and to price the same.

55.Without the D drawings, the plaintiff, it was further said by Lai and put by Mr Fung to Chui by way of cross-examination, cannot prepare its shop drawings[20] to fabricate the required members at the PRC factory and cannot assemble them at the Park on site by reference to the shop drawings alone.

56.As such, like the T drawings, the D drawings, it was strongly submitted by Mr Fung, must have been passed from the firm to the plaintiff. I find such submission very forceful.

57.Nevertheless, only the dimensions of the structural members stated in the contents section of the mullion and the rain shelter frame quotations matched those stated below “member schedule” at p.1 of the D drawings. Such matching does not occur in the case of the railing & handrail quotation (whose invoices are the only ones unpaid by the defendants).

58.And, under cross-examination, D1 agreed that Chui could do on-site measurement at the Park to get to know measurements of goods to be sold under the railing & handrail quotation. He further agreed that plaintiff could, without the D drawings, price this quotation using the T drawings and such on-site measurements.

59.Also, plaintiff’s shop drawings, as was said by Lai and pointed out by Mr Ho, were prepared in implementation stage and not during negotiation stage of a quotation. Mr Ho rightly submitted, I think, at law that notice of contractual term must be brought to the attention of the other party prior to or at the conclusion of contract: Olley v Marlborough Court Ltd [1949] 1 KB 532.

60.However, in terms of timing, the railing & handrail quotation was not the earliest among the 3 Park quotations. The earliest is the rain shelter frame quotation dated 30 Aug 2012, whose contents matched the dimensions of the “member schedule”[21] at p.1 of the D drawings. All things considered, I do not think such matching a mere coincidence; no on-site measurement was agreed possible for the goods under this quotation.

61.On balance, I believe that the D drawings had been supplied by the firm to the plaintiff prior to the conclusion of the mullion quotation. I accept defence evidence, and reject contrary plaintiff’s evidence, in this respect.

MC term not incorporated

62.Still, at law, the plaintiff (or defendants) must either be subjectively aware that other documents contain contractual term of the parties’ contract or that reasonably sufficient steps had been taken to give plaintiff (or defendants) notice of such term in the other documents in order for them to become contractual term of the parties’ contract: Parker v South Eastern Railway (1877) 2 CPD 416.

63.To start with, though the defence principally relies on 3 clauses in section 15 of GSB 2007 for the alleged MC delivery requirement, the breadth of incorporation it contended for is much wider and, I think, unrealistic: it contends for incorporation of all documents referred to in GN and GNSS on p.1 of the D drawings and, among them, the entire GSB 2007 and not simply section 15 or certain clauses in section 15 thereof.

64.In opposition, Chui maintained that he had no knowledge of GSB 2007, let alone section 15 thereof. Such denial was not challenged by defence and I accept that. D1 also agreed that he had never supplied any copy of GSB 2007 to Chui in about Aug 2012.

65.Furthermore, such extract of section 15 of GSB 2007 before me is in English and it suggests GSB 2007 is no short document. Chui, D1 and Lai all, I note, required interpreter’s assistance at trial to understand GN and/or GNSS on the D drawings and such clauses in section 15 of GSB 2007 relied upon by the defence. Such language difficulty of them militates against, I think, alleged incorporation contended for by the defence.

66.While Lai claimed to have known of alleged MC delivery requirement from the D drawings provided to the firm by getting hold of English GSB 2007 online and having them translated online for his “self-learning”, I note he first volunteered and wrongly claimed para 5 of GNSS to provide for MC delivery when such words nowhere appear there (Lai later changed his answer to para 1 of GNSS which again refers to section 15 of GSB 2007 only; the words “MC” nowhere appear on either GN or GNSS at all).

67.For the above answer, I find Lai’s alleged knowledge of GSB 2007 unreliable and incredible. In any event, I also reject Lai’s evidence on this point on the ground below that I do not believe him being the person in plaintiff allegedly responsible for negotiating, and agreeing, with D1 on the terms of the parties’ contracts.

68.As to steps taken to bring home plaintiff notice of other documents allegedly incorporated, D1 confirmed that he did not specifically refer Chui to para 1 of GNSS or its details at p.1 of the D drawings in about Aug 2012 when the 3 Park quotations were issued.

69.While D1 claimed to have reminded Yeung and Chui to follow the notes on the D drawings, he himself was, he agreed, unfamiliar with GNSS on the D drawings or GSB 2007 referred therein. His vague claim of reminding Yeung or Chui to “follow the notes” on the D drawings was raised for the first time under cross-examination and is nowhere pleaded. I disbelieve D1 on it. In any event, it is not sufficiently clear in my view.

70.While the D drawings were, I find, passed from the firm to the plaintiff prior to 20 Aug 2012, such delivery alone is, I think, insufficient to bring home to plaintiff contents of all documents referred therein in GN and GNSS are to be incorporated.

71.Such delivery alone may, I think, incorporate, or may simply provide, the dimensions of the divers structural members therein to enable the plaintiff to prepare its quotations, to price them and to prepare shop drawings. It by no means follows from it that all GN & GNSS on p.1 of the D drawings are to become terms of parties’ contract, let alone certain documents referred to in certain para of these GN & GNSS. The D drawing itself bear no writing at all to say that the GN and GNSS, or that documents they refer to, are to become contractual terms of the parties’ contract.

72.Did the statement achieve such purpose of incorporating all documents referred to in GN & GNSS as Mr Fung submitted?  Mr Fung translated the statement as “Based on the fax, drawings, information and specifications provided, the quotation as follows: (italics supplied by him)”. Mr Ho instead put his emphasis on the Chinese words of “跟附傳真” and his translation becomes: “The attached drawings, information, specifications to the fax, quotation as follows (emphasis indicated by italics)”.

73.I do not find it necessary to resolve the above dispute but I would answer my question posed in the negative in either case. Mr Fung’s translation, if correct at all, does not expressly say to the effect that such fax, drawings, information and specifications provided are to become contractual terms of the parties’ contract. The statement also does not spell out clearly which fax, drawings, information and specifications were provided by the firm to plaintiff. The D drawings, the GN, the GNSS, the documents they referred to, including GSB 2007, had not been specifically referred to in the statement itself when one imagines it could have been so done if incorporation was desired.

74.On Mr Ho’s translation, D1, I note, agreed that no document was attached to the 3 Park quotations when defendant received them from plaintiff for chopping to signify its acceptance.

75.Hence, on either translation, I do not think that reasonably sufficient steps had been done in all the circumstances to bring to notice of plaintiff (or defendants) that such other documents were part of the contract between the parties.

76.In any event, D1 agreed that section 15 of GSB 2007 (headed “structural steel work”) only applies to structural steel and those under the railing & handrail quotation is not structural steel to which the section applies. D1 further agreed that clauses 15.02, 15.13 & 15.17 of GSB 2007 basically do not apply either. Clause 15.02 on its terms does not involve MC. Clause 15.17 is not a mandatory term obliging one to provide MC. Finally, none of them provide for final payment due upon delivery of original MCs as alleged.

77.For the above reasons, I find against incorporation of MC term into the 3 Park quotations or the Park agreement as contended for by the defence.

The Clearwater Bay project

78.Mr Fung explained and submitted in his closing that D1 had specifically told Lai that the Clearwater Bay project should “follow ASD requirements” and thus Lai prepared the CWB quotation with grades[22] and standards[23] of goods specified at its contents section. By reason of that and also the statement on the face of the CWB quotation, the CAD drawings of the Clearwater Bay project (“the CAD drawings”) and the entire GSB 2007, including clauses 15.13 & 15.17 thereof, were incorporated into the CWB agreement.

79.The above factual premises and analysis at law is disputed by Mr Ho for the plaintiff and his witness.

80.Unlike the D drawings, Chui answered he did not know if the CAD drawings were given to plaintiff by the firm. But he maintained having no knowledge of GSB 2007 and denied its incorporation into the CWB quotation.

81.As far as defence evidence is concerned, D1 claimed in the box to have sent the CAD drawings to Yeung at a time he cannot recall but he made no reference of such supply at all in his witness statements. No copy of the CAD drawings was produced at this trial. D1 claimed at first in the box to have given his copy to his lawyers but he later changed his answer and claimed to have kept no copy after allegedly given his copy to Yeung.

82.Again, Lai’s witness statement makes no reference of his receiving the CAD drawings in the form of AutoCat file by way of email from D1 as he claimed in the box.

83.For the above reasons, I do not feel able to find on the balance that the CAD drawings had been supplied by the firm to the plaintiff as the defence alleged.

84.In any event, unlike the D drawings, D1 admitted under cross-examination that the CAD drawings had no GN or GNSS thereon. If so alleged at all, no copy of the CAD drawing was produced at this trial to substantiate their existence and I would not find that either. As such, one fails to see how entire GSB 2007 could allegedly be incorporated into the parties’ contract.

85.And, for same reasons I give on the same point for the Park project above, the statement on the face of the CWB quotation does not assist the defence on this incorporation issue. Equally, D1 agreed that no document was attached to the CWB quotation he received. And the specification of standards and grades on the face of this quotation does not, I think, advance the matter either.

86.The CWB project being a private project, the suggestion that D1 had specifically told Lai that it should “follow ASD requirements”, including GSB 2007, is wholly unpleaded and not open to defence on the pleadings. In any event, I disbelieve such evidence as being afterthought and inherently improbable.

87.Hence, the defence case of MC term being incorporated by way of other documents into the CWB quotation or the Clearwater Bay agreement also fails.

Oral agreement of MC term

The Park project only

88.Mr Fung submitted and asked this court to accept that Lai and D1 had orally agreed upon the MC term for the Park agreement. While defendants would pay for earlier deliveries to the Park, final payment would, he submitted, not be due until provision of original MCs for all goods delivered.

89.In contrast, Plaintiff says that the 3 Park quotations were negotiated between Chui and D1, that such negotiation was never the responsibility of Lai, and that plaintiff and defendant had never orally agreed upon MC term as alleged.

90.There could, I think, be no doubt that Lai was involved in the making of the 3 Park quotations. He signed on all of them and he put plaintiff’s chop on all of them. Looking at exhibit “P-1” [24], I find it likely that the 3 Park quotations were, as was said by Lai, sent to Hong Kong by fax or email for the firm to accept after Lai had signed and put plaintiff’s chop on them.

91.But it by no means follows that Lai was the one in plaintiff responsible for negotiating with, and who had agreed with, D1 leading to conclusion of the 3 Park quotations.

92.The foremost difficulty defence encounters here is that nowhere in his witness statement did Lai say he had orally negotiated and agreed with D1 to provide for MC delivery for the Park agreement. He claimed it for the first time upon denying the contrary case put to him by Mr Ho on cross-examination.

93.By way of background, it must be recalled that the offices of plaintiff and of the firm were very close to each other, and that Lai was at all material times resident in PRC and stationed at the PRC factory. D1 also agreed with Mr Ho that he often went over to plaintiff’s office opposite the firm to place orders. Such evidence points against Lai in PRC negotiating with D1 in Hong Kong.

94.Further, Lai was, according to his own witness statement, at material times a section head of the PRC factory responsible for all fabrication of products and technical matters of contracts entered into by plaintiff. He was the one who prepared the shop drawings and his name was on them. He was therefore not responsible for sales or marketing as such.

95.On the face of the 3 Park quotations, Lai was only stated to the person responsible for “follow-up” the order (工程跟進員). Another person was stated to be the one responsible for “giving the quotation” (報價員). In the box, Lai also admitted he could not quote price himself as he was not the boss. On price, he said he must get approval (審核) from Chui (the suggestion at para 7 of his witness statement that he needed only to consult (諮詢) plaintiff’s Hong Kong office on price to be quoted appears to me an under-statement).

96.Moreover, Lai occurs to me biased in favour of defence and unreliable to be acted upon. For example, he went as far to claim under cross-examination that MC is also required for items not involving structural steel, which assertion is contradicted by Shek at para 16 of his witness statement.

97.For all the above reasons, I do not believe in Lai’s evidence that he was the one in plaintiff responsible with, and the one who had negotiated with, D1 leading to the conclusion of the 3 Park quotations. I disbelieve his evidence that he had orally negotiated and agreed with D1 the MC term over the Park agreement or the 3 Park quotations as defence alleged.

98.D1’s credibility fared no better than Lai, and I do not believe in his evidence, on this point either.

99.This ground of alleged oral agreement of the MC term also fails for the Park project.

Implication of MC term at law

The 2 projects

100.Mr Fung submitted that the 3 Park quotations and the CWB quotation consist mainly of pricing information of the goods sold. As such, the 2 agreements are, he submitted, uncertain and inadequate. They do not have term to ensure steelwork quality compliance with such requirements of the 2 projects. To ensure business efficacy, terms should, he submitted, be implied to make the 2 agreements certain and enforceable.

101.Among those pleaded, the 2 following MC terms should, he submitted, be implied: (1) all original MCs should be provided by plaintiff upon delivery of steelwork; (2) final payment by defendants is subject to provision of all original MCs.

102.Mr Fung emphasized that it is reasonable and equitable for the above 2 terms to be implied to meet ASD requirements. They are necessary for MCs are normally expected in government and private projects for steelworks. A reasonable bystander would also, he submitted, agree to these 2 terms, which are capable of clear expression and which do not contradict any express terms.

103.Mr Ho disputes implication at law of these 2 alleged terms into the parties’ agreements.

104.It is a question of law whether the alleged 2 terms should be implied or not. The requirements for implying a term into a written contract were set out by Lord Simon in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hastings (1978) 52 ALJR 20 at 26D:

“Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express.  In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied : (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

This statement was applied by Ribeiro PJ in the Court of Final Appeal in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at para 59.

105.Assuming that there was indeed MC delivery requirement as proof of quality compliance for structural steelwork for the contractors in the Park project (a public project) as claimed by Shek and D1 (who both produced not a single contractual document[25] to support such claim), the plaintiff was, I note, not a contractor by business but a supplier of metallic products. Its contracts with the firm were not subcontracts but supply contracts. It did not have back-to-back subcontracts with the firm with same alleged obligation of ensuring quality compliance like other subcontractors in the Park project.

106.Hence, while it is desirable from the firm’s perspective for the alleged 2 implied terms to be added, one thinks the matter could, and should, be left to plaintiff to bargain with the firm and to decide whether to take on such specific or extra obligation.

107.While there is no suggestion of difficulty on its part getting hold of MC, it costs more for plaintiff to do so according to Chui in his witness statement. The same is not disputed and I accept it. It is, I think, reasonable and equitable to leave to the parties to bargain and to decide by agreement whether original MCs should be provided by the plaintiff supplier at extra costs.

108.The same applies equally to standards and quality of the goods supplied. Again, they are, I think, matters peculiar for parties’ agreement which affects the pricing of the goods supplied. The parties had, I note, already seen fit to specify in the CWB quotation the standards and grades of the goods concerned but they did not see fit to do so for the 3 Park quotations[26].

109.The undisputed facts I accept are that the firm had already received such goods ordered by it from the plaintiff for the 2 projects and had applied them towards the 2 projects without making any complaint of their quality to plaintiff. Neither had the firm ever rejected or attempted to reject them to the plaintiff.

110.Furthermore, MC provision is, I accept from Shek at para 16 of his witness statement, not a must in every project, not even for all government projects as some may involve metalwork and not structural steelwork at all. Indeed, both D1 and Shek agreed that the goods in the railing & handrail quotation are not structural steels for which no MC is required.

111.Unlike the Park project, the Clearwater Bay project is a private project with which Shek was not involved. Save the bare assertion of D1, there is again not a single contractual document before me to suggest that MC was required from the firm by Creative.

112.It was suggested to Lai that whether MC is required or not depends on need in the case of private projects but Lai disagreed, giving the excuse that Hong Kong is a metropolitan city. That excuse makes no sense to me at all. Afterwards, Lai added in the box that MC was provided after communication with, and demand by, customers. But he still disagreed with, I think, the self-evident that no MC is provided unless customers require the same. I disbelieve Lai’s evidence that MC provision is a must for every project.

113.Assuming that MC was required from the firm by Luen Lam and Creative in the 2 projects, one thinks there is still room for plaintiff and defendants to make their own choice whether or not original MC is required for each and every good ordered to be supplied, and how payment are to be made for the goods pending their delivery.

114.For the above reasons, I agree with Mr Ho that the parties’ agreements over the 2 projects i.e. the CWB quotation and the 3 Park quotations could still be effective and workable as supply contracts without the alleged 2 implied terms. Such alleged terms are not, I think, necessary to give business efficacy to such supply contracts. They are not reasonable or equitable by all means. And the reasonable bystander would not agree to their inclusion when asked.

115.Furthermore, I do not agree with Mr Fung that the parties’ supply contracts over the 2 projects are unenforceable for uncertainty. The CWB quotation and the 3 Park quotations have unqualified provisions for payment in full[27] or by part payments[28]. The 2^nd alleged term would, in my view, contract such express terms and should for this additional reason not be implied.

116.All in all, this last ground of implication ofMC term to the 2 projects also fails. The parties’ bargain should not, I think, be improved with hindsight for them.

Defence & Counterclaim fails

117.Accordingly, the defendants have failed completely to prove their defence and counterclaim on alleged ground of plaintiff’s failure to provide original MCs. There is, I conclude, no longer any defence to plaintiff’s undisputed claim for unpaid total balance due on the 10 subject invoices.

Disposition

118.The plaintiff’s claim therefore succeeds, and I give final judgment in plaintiff’s favour, in the total sum of $554,317.12 claimed. I order the 1^st and 2^nd defendants do jointly and severally pay this sum of $554,317.12 to the plaintiff.

119.I further order the 1^st and 2^nd defendants to pay interest on the said sum of $554,317.12 to the plaintiff at the best lending rate from time to time of the Hong Kong and Shanghai Banking Corporation Ltd from 29 Sept 2014 until the date of this judgment.

120.And I dismiss the counterclaim of the 1^st and 2^nd defendants against the plaintiff.

Costs

121.For costs, I make an order nisi that the 1^st and 2^nd defendants do jointly and severally pay plaintiff costs of its claim and of their counterclaim (including all costs reserved and with certificate for counsel for this trial), such costs are to be taxed if not agreed. The said order nisi shall become absolute if none applies by summons within 14 days hereof to vary the same.

122.Finally, I thank Mr Ho and Mr Fung for all their assistance at this trial.

Mr Justin HO, instructed by Fred Kan & Co., for the plaintiff

Mr Derek FUNG, instructed by Tung, Ng, Tse & Heung, for the 1^st and 2^nd defendants