Berkin Building Products Ltd. v. Prosperity Lamps &Components Ltd.
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DCCJ015493/2000 DCCJ15493/2000 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 15493 OF 2000 __________
__________ Coram: H.H. Judge LI in court Date of Trial: 20 - 23 February 2001 Date of Handing Down Judgment: 20 April 2001 ____________________ JUDGMENT ____________________ This is an action for price of goods sold and delivered. It is common ground that the Third Party herein was the electrical sub-contractor for project work at the Hong Kong Museum of History ("the site"). The project was supervised by an architect (of the HKSAR government) and a consultant. The Third Party required certain electrical fixtures for installation at the site as part of the project. Some time in the middle of 1997, the Plaintiff sent a written quotation to the Third Party offering to supply the required fixtures. Since the Third Party had liquidity problem, an arrangement was reached between the Third Party and the Defendant whereby the Defendant would obtain the required fixtures from the Plaintiff and supply those fixtures to the Third Party on special payment terms. Thus the Plaintiff submitted another (almost the same) quotation to the Defendant on 2 December 1997. 2.The Plaintiff's quotation dated 2 December 1997 ("the Quotation") to the Defendant is as follows:-
QUOTATION
3.The quotation was accepted by the Defendant by a letter ("the Letter of Intent") dated 4 December 1997 in these terms:-
The Plaintiff has admitted that the Letter of Intent forms part of the contract between the Plaintiff and the Defendant. 4.On 8 January 1998, the Plaintiff received the following purchase order ("the Purchase Order"):- Purchase Order
It is important at this stage to point out that the fixtures in dispute are only items 7 and 8 (or items 7 and B2 in the quotation). These two items were also at times referred to by the parties as the "A3" items. Items 1 to 6 in the Purchase Order are not the subject of this action. Those items have been delivered and paid for. 5.It will be seen that items 7 and 8 in the Purchase Order were to be made to order "WALL MOUNT" railings with lighting fitted but "details to be confirmed by consultant prior to fabrication". However, as revealed in subsequent correspondences, the "WALL MOUNT" railings were changed to "POST MOUNT" railings that required different accessories. The relevant correspondences are set out below in chronological order:-
"Hong Kong Museum of History
"Hong Kong Museum of History
"Hong Kong Museum
6.There is little doubt that the change to "POST MOUNT" and the "details" for items 7 and 8 were in fact required and confirmed by the consultant. But, as can be seen from the chain of correspondences, :-
Moreover, there is nothing in the paper trail that shows that the Defendant was informed by any party of the final "details" confirmed by the consultant. 7.Then later in 1998, two more documents issued from the Plaintiff :-
8.According to evidence for the Plaintiff, invoice for payment of the "A3" goods was not issued and sent to the Defendant until one whole year later in 1999. Evidence for the Defendant suggested that the Shipping Advice and the Delivery Order were not received by the Defendant in 1998. The first time the Defendant had knowledge of the Shipping Advice and Delivery Order was when copies of them were sent with the 1999 invoice to the Defendant. It is common ground that the Defendant upon receipt of the invoice and copies of the Shipping Advice and Delivery Order immediately denied liability and returned that set of documents to the Plaintiff. It is also common ground that the goods listed in the Shipping Advice were in fact delivered to the site and installed by the Third Party at the site. There is no suggestion that the goods did not meet the requirement or confirmation of the consultant. The Defence 9.There is a comprehensive Defence. In summary, the Defendant contended that :-
10.The Defendant has joined the Third Party as back-to-back defendant. However, at the trial before me, the contest was limited to that between the Plaintiff and the Defendant. Thus the court is required to determine liability as between the Plaintiff and the Defendant only. Quantum, in any case, is not disputed. The Evidence 11.Both the Plaintiff and the Defendant at first intimated that they would call three witnesses each side. In the end, each side only called two witnesses. In my view none of the witnesses threw much light on the case. To a very large extent, the facts of the case are self-evident in the documentary exhibits. The Contract 12.Witnesses for the respective parties stated in their evidence what they regarded were the meaning and effect of the Quotation, the Letter of Intent and the Purchase Order and how they performed pursuant to their understanding of the contract. In my review, there are obvious risks in relying on such evidence to construe contractual documents. Where the result of a case turns on the construction of contractual documents, it is not uncommon for partisan witnesses to tender conflicting evidence as to the meaning and effect of the documents. Moreover, it is trite law that subsequent action of the contracting parties cannot be taken as guide for construction of the contract between them. On the other hand, subsequent action can be evidence of consensus ad idem between the parties which should be taken into account as part of the agreement. 13.Having carefully considered the Quotation, the Letter of Intent and the Purchase Order, I am convinced that, on the true interpretation of these contractual documents, the Letter of Intent contains the general terms and conditions governing the sale of goods listed in the Quotation from the Plaintiff to the Defendant. The Letter of Intent by its name and contents indicated quite clearly that the Defendant was not "accepting" the offer in the Quotation as the final and complete contract for the purchase of all the goods listed. The Plaintiff must be taken to have the same understanding; otherwise the Plaintiff would not have issued the subsequent Purchase Order. The Purchase Order, in my view, is the actual contract for purchase of specific items on the general terms and conditions stipulated in the Letter of Intent. Furthermore, whereas items 1 to 6 in the Purchase Order were unconditionally on order, item 7 and 8, in my judgment, were yet to be confirmed. They were not items being ordered by that Purchase Order because the Plaintiff could not possibly place order with the factory for fabrication on the basis of what was vaguely stated in the Purchase Order in relation to these two items. In any event, the offer by way of the Purchase Order in relation to items 7 and 8 must be taken as cancelled or rejected once the broad specification for "WALL MOUNT" was varied to "POST MOUNT". 14.Since in my judgment the Purchase Order did not constitute a binding contract between the Plaintiff and the Defendant for the order of items 7 and 8 goods, there must be fresh offer and acceptance between these two parties in relation to those goods. The nearest to an up-dated offer for these goods are the faxes dated 7 January 1998 and 21 January 1998 from the Plaintiff to the Defendant. But still a binding agreement for the sale and purchase of items 7 and 8 was wanting for two reasons: (1) more specifications for the goods were still to come; see fax dated 24 February 1998 from the Third Party to the Plaintiff and the Defendant; and (2) none of the "details" were yet confirmed by the consultant. So the Defendant could not have bound itself to purchase items 7 and 8 by the end of February 1998. 15.Mr. Cheung, counsel for the Plaintiff, contended that the Purchase Order constituted a binding contract for the sale and purchase of items 7 and 8 and that (1) as soon as the consultant had confirmed the "details" (no matter how the confirmed details differed from those originally contemplated) and (2) provided the cost of the goods under items 7 and 8 remains $348,750 as stated in the Purchase Order, the Defendant is bound to accept delivery and pay. I have already held that the Purchase Order per se did not constitute a binding sale of goods contract in relation to items 7 and 8. But, assuming as counsel said that there was a binding contract in relation to items 7 and 8, Clause 3 in the Letter of Intend clearly stipulates that "The final drawings for custom-made fixtures should be approved by all parties prior to fabrication." The Plaintiff by its fax dated 31 March 1998 submitted "final details" to the Third Party, not to the Defendant, for approval. No approval has ever been obtained from the Defendant regarding final drawings. Mr. Cheung, quite properly, clarified in his closing submission that the Plaintiff did not treat the Third Party as agent for the Defendant for approval of final drawings. Instead, counsel for the Plaintiff contended that the Third Party was "an umpire in the form of a consultant to make decision on the details of A3". Quite frankly, I do not understand what is the point or effect of constituting the Third Party an "umpire". Nevertheless, an "umpire" cannot cure the lack of approval from the Defendant of the final drawings. 16.Once it is accepted that there was no binding contract or that the Plaintiff had not obtained approval of the final drawing from the Defendant, there was no basis for the Plaintiff to proceed with fabrication in purported performance of a contract to supply items 7 and 8 to the Defendant. It follows that even if the Defendant did in September 1998 receive the Shipping Advice or in October 1998 the Delivery Order, the Defendant had no obligation to pay any attention to them. There is no question of silence amounting to acceptance of unsolicited goods. 17.In the premises, the Plaintiff's claim against the Defendant must fail. Abandonment 18.The law on abandonment of contract is succinctly stated in Chitty on Contracts (28th edition) para. 23-027 :-
It goes without saying that once the parties have abandoned the contract or part thereof, neither can unilaterally revive it. 19.Mr. Hung, counsel for the Defendant, suggested by way of alternative defence that delay of delivery beyond February 1998 stipulated in the Letter of Intent and the Purchase Order until September 1998 amounted to such inordinate delay as compelling evidence that the parties had abandoned the contract. In fairness to the Plaintiff, I think it was within the contemplation of the parties that some delay was acceptable. 20.However, I note that the Plaintiff did not just delay in delivering the goods, the Plaintiff delayed in submitting final plans to the Defendant for approval. Indeed, in January and February 1998 some plans and details were submitted to the Defendant by the Plaintiff for approval. But these plans and details were clearly not final because the Third Party furnished "exact site measurement of conduit provision" on 24 February 1998. From 24 February 1998, it was incumbent upon the Plaintiff to adopt the measurement into the final plans. In fact, there were final plans submitted on 31 March 1998 to the Third Party, not to the Defendant. This submission of final plans to the Third Party rather than to the Defendant (without even copying the same to the Defendant as before) for approval and the complete lack of referral to the Defendant on the two items of fixtures in question after 31 March 1993 entitle the court to draw the inference that the Plaintiff had decided to deal with the Third Party instead of the Defendant. The Plaintiff's submission of final plans to the Third Party may also be taken as abandonment by the Plaintiff of its contract, if any, with the Defendant in relation to items 7 and 8. 21.On the other hand, the Defendant took no action at all since February 1998 in relation to those items. Counsel for the Plaintiff placed much emphasis on witnesses for the Defendant who stated under oath that, after February 1998, they continued to wait to hear from the Plaintiff regarding items 7 and 8. As I see it, the Plaintiff and the Defendant were in contact concerning items 7 and 8 for at most four months from December 1997 to March 1998. But by the time of the issue of the Shipping Advice in September 1998, the Plaintiff and the Defendant had been out of touch concerning those items for six months. There being mutual disregard of each other on the two items of fixtures in question for a period of time in excess of the length of time they had been mutually interested in them, I hold that there was also abandonment by the Plaintiff and the Defendant in respect of those two items even if they formed part of the contract between the Plaintiff and the Defendant. Order 22.Accordingly, there is judgment for the Defendant against the Plaintiff with costs to be taxed if not agreed. There is also certificate for counsel.
Representation: Mr. Timothy Cheung instructed by Messrs. Richard Tai & Co. for the Plaintiff. Mr. Andy Hung instructed by Messrs. Leonard K L Heung & Co. for the Defendant. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||