Cheng Wo Hung t/a Hung Yick Knitting Factory v. Yip Shing Diesel Engineering Co Ltd

HCA019252/1999

HCA 19252/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 19252 OF 1999

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Coram: Hon Chung J in Court

Dates of Hearing: 18, 19 and 21 August 2003

Date of Handing Down Judgment: 12 December 2003

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J U D G M E N T

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Introduction

1.The plaintiff commenced this action claiming damages against the defendant. The following facts are undisputed.

2.The plaintiff was at the relevant time carrying on a garment knitting business in Shi Wan Zhen, Boluo County, Guangdong Province (廣東省博羅縣石灣鎮) whereas the defendant was a supplier of electricity generators. The parties entered into an agreement in December 1997 whereby the defendant was to supply to the plaintiff an electricity generator under the name CUMMINS ONAN 310 DFCC NTA855-G4.

3.The generator was delivered to the plaintiff and installed inside a generator room at the end of December 1997. According to the plaintiff, the generator was only for back-up purpose and was operated when there was a power failure. The generator was under warranty for a period of one year commencing 14 days after its delivery: para. (6), Amended Defence. However, it is common ground that the defendant only attended the plaintiff's premises for repair work. Routine maintenance was undertaken by the plaintiff.

4.A fire broke out at the plaintiff's premises on about 18 November 1998 (that is, nearly 11 months after the generator was installed).

5.The cause of action relied upon by the plaintiff is breach of implied term of the sale contract on the defendant's part, namely, the generator was not fit for the purpose for which it was sold and/or not of merchantable quality. In essence, it is the plaintiff's case that there were defects in the generator and that those defects started the fire which burnt down the plaintiff's premises.

6.The trial before me is limited to the issue of liability. Further, Hong Kong law is agreed to be the applicable law.

The Issues

7.In the Statement of Claim, the averment regarding the defendant's alleged breach is pleaded as:-

"The contact point between the carbon brush and bearing [of the engine of the generator] was uneven or unsmooth, by reason whereof sparks were created" (the particulars of para. 6 thereof).

It is probable the above averment was based on the fire investigation report compiled by the fire department in the mainland. By the time of trial, however, the plaintiff no longer contended that the spark was so caused. The plaintiff's own expert accepts that the generator was of brushless design. Instead, the plaintiff's expert contends that fuel leakage from the generator onto its exhaust manifold was the cause of the fire. No objection was however raised by the defendant regarding this departure from pleading.

8.Further, the Statement of Claim avers that:-

"On or about 18th November 1998, when the [generator] was operated for the first time a fire broke out by reason of sparks created as aforesaid and the [plaintiff's premises were] burnt down" (para. 7 thereof).

At trial, the evidence adduced by the plaintiff was in short that the generator has already been put to use before November 1998. However, nothing of significance arises out of this departure from the plaintiff's pleading.

9.The Amended Defence denies the claim. Further, the defence contends that:-

(a)	the source of fire was unknown;
(b)	the fire (and the resultant loss of the plaintiff) was caused, or contributed to, by the plaintiff's act, omission or negligence.

10.As stated above, the cause of action relied upon in this action is breach of contract. There can be no dispute (and none has been raised by the parties) that the burden is on the plaintiff to establish such cause of action. Negligence on the defendant's part has not been relied upon by the plaintiff. Even if it had been, because it has not been alleged (or proved) that this is a case where res ipsa loquitur should apply, the burden to prove negligence should also lie with the plaintiff.

The Evidence

11.The plaintiff called the following witnesses:-

(1) Mr Cheng Wo Hung, its sole proprietor ("Cheng");

(2) Mr Li Mei Kong, its electrical technician ("Li");

(3) Mr Lam Hon Nam, an expert in the mechanical engineering area ("Lam").

On the other hand, the defendant called the following witnesses:-

(a) Mr Lui Chi Hang, Wemmick, its sales manager ("Lui");

(b) Mr Lau Ming Chi (also known as Magic Lau), its service manager at the relevant time ("Lau");

(c) Mr Huen Chi Hang, its assistant service engineer at the time (now its service manager) ("Huen");

(d) Mr John Zheng, an expert in the electrical engineering area ("Zheng").

12.Documentary evidence was also produced by way of copy documents contained in the bundle of exhibits used at trial. The fire investigation report of the mainland fire department dated 2 December 1998 said this:-

"由于[原告]發電機房的柴油發電機（發電機房進門右邊那一台）在進行過程中，柴油發電機的炭刷與滑環接觸不平或不圓產生火花引燃周圍長期積累的油積灰塵而導致發生火災。燒毀柴油發電機兩台，綿紗一批等物品。"

Witnesses' Testimony and Findings of Fact

13.Cheng's testimony is in gist related to the background facts. The premises in question were a 3-storey factory building constructed in 1994. They were let to the plaintiff in late 1994. On the ground floor was a storeroom (for storing raw materials). An office and a workshop were respectively located on the first and second floors. A portion of the storeroom was partitioned off to house two generators (the additional generator was purchased earlier from the defendant). Cheng was not present when the fire broke out. His testimony about this is therefore hearsay in nature. When he was cross-examined, Cheng denied that the place which housed the generator was dirty or was full of oil stain.

14.Li was the only witness who was present when the fire broke out. In his witness statement (adopted as part of his testimony), Li said that:-

(a)	he was responsible for the daily maintenance and repair of the electrical appliances and generators in the plaintiff's premises;
(b)	among other things, he was also responsible for the daily operation of the generators;
(c)	he maintained the generators according to the directions given by the defendant and has gained knowledge and experience for doing so as a result;
(d)	the defendant was responsible for the maintenance and repair of the generator but it sent staff to do so only when requested by the plaintiff;
(e)	the two generators were only operated when there was a power failure or when necessary (the necessity was not specified by Li);
(f)	the generators have been operating normally save some small problems such as difficulties in ignition or over-heating.

Li described the fire as follows. At about 8 am on 18 November 1998, Li was working on the 2nd floor. The lights of the workshop suddenly went out. Li immediately went down to the generator room. He found that the generator on the right was on fire and a lot of smoke was coming out from the room ("the Genevator"). Because of the severity of the fire and the smoke, Li was unable to see from which part of the Generator the fire started. At the time, the Generator was in operation.

15.Li also claimed that the Generator has a carbon brush and the interior of the generator room was clean.

16.The contents of the fire investigation report from the mainland are initially undisputed by the plaintiff. In fact, at least at one stage, the plaintiff relied on its contents to commence this action. The fire investigation report attributed the cause of the fire to the oil stains and dirt (or dust) being ignited by sparks from the Generator. This contradicts the testimony of Cheng and Li that there was no oil stain inside the generator room and the room has been kept clean before the fire.

17.When the above contradiction was put to the plaintiff's witnesses in cross-examination, Cheng explained that he did not correct that part of the fire investigation report because he was busy with other things at the time. Li in effect denied that part of the report. I do not find this part of their testimony credible and therefore reject their testimony regarding this aspect. Further, I find that there were oil stains and dirt inside the generator room. It is quite possible that the oil stains and dirt resulted from the lack of proper care and attention regarding the cleanliness of the generator room. I also find that it is quite possible the Generator was not properly looked after either.

18.Lam, the plaintiff's expert, concluded that:-

"... it was much more likely that the cause of the fire was due to spraying of diesel fuel onto the hot surface of the exhaust manifold as a result of failure at pipe joints or pipe fracture occurring along the fuel injection pipe probably due to excessive machine vibration or mechanical faults" (p. 23, bundle of witness statements).

Lam's conclusion about the above "... much more likely ... " cause of the fire resulted from his comparison of the likelihood between the above cause and the theory that the fire could have been caused by the ignition of diesel vapour (diesel fuel was used by the generator) from a leaking flexible rubber pipe.

19.To the extent that the fire was very probably caused by some substance having first been ignited by the Generator (whether the substance was still inside the Generator or was only ignited outside it is unknown), I accept Lam's opinion. However, Lam's opinion sheds no light on what caused the inflammable substance(s) to be ignited. In other words, there is no evidence from Lam whether the ignition was caused by the defect(s) of the Generator, or by the improper use and/or lack of care of the Generator.

20.Lam appears to have based his above conclusion on the potentially unsafe design and/or construction of the Generator. In particular, he said:-

"... the potential fire hazard due to diesel fuel leakage from fuel injection pipe was well recognized and different designs of mechanically sheathed concentric injection pipe were available to contain any diesel fuel leaking from the inner pipe so as to reduce fire risk ... " (emphasis supplied) (p. 23, bundle of witness statements).

21.Two observations can be made about this. One, theoretically any machine can be made more safe by better design and/or construction. However, merely because a machine could have been made safer does not by itself make the machine in its present state not reasonably safe. Two, even Lam himself has not said that the Generator was reasonably unsafe, whether by reason of design and/or construction.

22.More importantly, Lam's above conclusion is expressly based on the assumption of "excessive machine vibration or mechanical faults". There is no evidence as regards either matter. Hence, his conclusion regarding the leakage of fuel at the pipe joints or pipe fracture is factually not established, and remains a theory.

23.On the other hand, the defence has adduced evidence relating to the following:-

(a)	the fuel injection pipe was located on one side of the Generator while the exhaust manifold was located on the other side and the two parts were some distance apart: Zheng's report;
(b)	the use of double sheathed tubing was not necessary because the Generator's PT fuel system used low fuel pressure whereas double sheathed tubing has been used for high-pressure injection pump systems: Zheng's report;
(c)	the fuel lines were well secured to the cylinder block and were immune to vibration: Zheng's report;
(d)	a fuel leakage would have led to the lowering of fuel pressure which, by virtue of its design, would have caused the Generator to stop its operation: Zheng's report;
(e)	the defendant's generators enjoy a 65% market share in South China. About 35% of the units sold were the same model as the Generator. The defendant has never been sued for fire loss due to defects of its generators: Lau's testimony;
(f)	the design and construction of the Generator comply with a number of international standards: Lau's testimony.

24.In the above circumstances, I find that the cause of the fire has not been established and is unknown. The alleged pipe joint leakage and pipe failure has not been proven. Whether the alleged breach of contractual terms by the defendant has been established will be dealt with under the next heading.

Is the Defendant Liable?

25.The implied term relating to fitness for purpose relied upon by the plaintiff is founded on s. 16(3), Sale of Goods Ordinance (Cap. 26) the relevant parts of which read:-

"Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known to the seller any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied ... ".

The implied term relating to merchantable quality of the Generator is founded on s. 16(2), Cap. 26 which provides:-

"Where the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality ... ".

26.Benjamin's Sale of Goods (2002) 6th Ed., para. 11-052 states that:-

"In principle durability is an aspect of quality on delivery: goods are not of satisfactory quality at that time unless they are capable of enduring for a period reasonable in the circumstances, and the fact that they seriously deteriorate or ... break down during such a period is evidence that they were not of satisfactory quality ... [The] fact that the goods do not last the period which might be expected is no more than a symptom of their inappropriate quality, state of condition at the time referred to in paragraph 11-062 ... there will in many cases be difficulty in proving that the lack of durability resulted from a defect in the goods themselves rather than from the way in which they have been treated, used and maintained ... " (emphasis supplied).

The reference in para. 11-052, Benjamin to para. 11-062 should be related to the following passages in para. 11-062:-

"It is not clear exactly at what time the goods must be of satisfactory quality. The same problem arises, subject to one slight difference, in connection with [s. 16(3)] and what follows applies in general to both [ss. 16(2) and 16(3)]. Some authority (necessarily on the 'merchantable' standard) refers to the time of sale, which should on the general principles of the [Sale of Goods Ordinance] be the time at which the property passes, at which time the risk prima facie passes also ... " (emphasis supplied).

The above observations relating to merchantable quality are equally applicable to fitness for purpose: Benjamin, para. 11-083.

27.In view of the findings made above, in particular, the Generator has been put in essentially uneventful use for about 11 months already before the fire, I am not satisfied that the plaintiff has established that the fire was caused by the defendant's breach of the contractual terms.

28.The plaintiff's claim is accordingly dismissed.

Costs

29.There will be a costs order nisi that the costs of this action are to be paid by the plaintiff to the defendant to be taxed if not agreed.

Representation:

Mr Shum Ka Hei, instructed by Messrs Dominic Y K Lai & Co., for the Plaintiff

Mr Erik Shum, instructed by Messrs Hobson & Ma, for the Defendant