Paul Y. Construction Co Ltd v. Tsoi Siu Fui

HCA000115/1976

Coram: Garcia, J. in Court

Date of Judgment: 2nd April, 1980

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JUDGMENT

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1. On the 20th day of September, 1973, the plaintiff entered into an agreement with the Government of Hong Kong to construct certain works known as "West Kowloon Corridor, Stage I - Elevated Road, Gascoigne Road and Tong Mi Road" - P.W.D. Contract No. 561 of 1972. Certain directions concerning the use of materials in the construction were specified in several annexures to the contract, and among these was Appendix G, in which was set out the following item:-

2. A few months before the said contract was concluded, details concerning the said expansion joints were set out in a drawing signed by the Chief Engineer of the Structural Design Division of the Public Works Department on 29th May, 1973 (Drawing No. S21/913A) and the following notes appear in the said drawing:-

3. Following the award of the said contract to the plaintiff, the defendant wrote to the plaintiff informing them that he was in a position to supply them with "one Waboflex SR2 steel reinforced elastomeric expansion jointing system which has been approved and specified for this project." The following information was also appended:-

After this letter was sent, defendant then went to see Mr. George Tso, the Managing Director of the plaintiff with a price list, a descriptive folder of the Waboflex SR rubber cushion expansion jointing system, and a sample of the product which he offered to supply the plaintiff. (Exh. P2).

4. Mr. Tso's evidence of that meeting is that the defendant mentioned that he would obtain the goods from the United States of America and Mr. Tso's understanding of this statement is that the goods were manufactured in that country. In addition to the statement made by the defendant, there were other grounds for Mr. Tso's belief, that is, the price list for the goods submitted by the defendant showed the prices in United States dollars, and the words "CIF Hong Kong prices" were also quoted by the defendant although these latter were eventually negotiated in Hong Kong dollars, would indicate that the goods were to be imported into Hong Kong.

5. On 19th September, 1973, the plaintiff informed the defendant that they were prepared to buy 1,887 linear feet of "Waboflex SR2 Rubber Cushion Expansion Jointing System, etc." subject to the Highway Division's specification and approval.

6. Following the receipt of this communication, the defendant brought two typewritten contracts to Mr. Tso, one for the supply of the said goods and the other for the installation of the said system at the site. In the contract for the supply of the said materials (i.e. the Materials Contract), the prices quoted were "CIF Hong Kong" and the words "shipment not later than 15th December, 1973" appeared thereon. In view of this latter sentence, Mr. Tso says that he did not, at that time, expect the goods to be delivered before February, 1974 since his understanding was that they had to come from the United States of America. The defendant denies that he had represented to Mr. Tso that the goods would be coming from the United States and he refers to the deletion of two sentences from the Materials Contract which concerned the terms of payment for the goods. What he had originally included in the Materials Contract were the following terms of payment:-

If, as has been suggested by the defendant, Mr. Tso knew that the goods were to be supplied from local sources, why were the words "shipment not later than 15th December, 1973" not likewise deleted from the body of the contract since the word "shipment" in its ordinary meaning would imply that the goods were to come from overseas? He further suggests that nowhere in the contract was there any mention that the goods were to be imported into Hong Kong from the United States of America, or for that matter, that they had to be manufactured by Watson Bowman or should be in accordance with Watson Bowman's specifications. He says that under the contract all he had to do was to supply the goods in accordance with the specifications of the Public Works Department and the sample submitted (Exh. P2). The relevant term in the Contract to which the defendant refers to, reads:-

"The seller warrants that the quality of the materials will be in accordance with the P.W.D. specification and the sample submitted."

7. The defendant seems to have lost sight of the fact that the Contract specified "Waboflex SR2 Rubber Cushion Expansion Jointing System supply only for the Government Project" and whilst he might have been able to supply a "Rubber Cushion Expansion Jointing System" which appears to be the generic name for the material specified in the Contract from local sources, "Waboflex SR2" was, as he well knew, only supplied by Watson Bowman Associates Incorporated. He had, it appears, imported this type of goods before - (page 29 of the agreed bundle) and he has admitted in evidence at the trial that he was neither the owner of the trade mark "Waboflex SR2" nor was he licensed to manufacture the said goods by the said Watson Bowman Associates Incorporated. Moreover, he states that he had placed an order for the manufacture of "Rubber Joint Seals" with the Kar Wah Rubber Manufactory of Kun Yuen Factory Bldg., 9/f., 89 Larch St., Taikoktsui, Kowloon, sometime in January, 1974 to provide the goods under the said Materials Contract. The defendant himself produced a copy of an Irrevocable Letter of Credit (Exh. Dl) issued on 8th January, 1974 and nowhere in the terms and conditions of that credit is that any reference to "Waboflex SR2", the Letter of Credit having been issued only towards meeting payments for the materials called "Rubber Joint Seals".

8. The two contracts were signed by the parties on 24th September, 1973 and 5% of the purchase price of the said goods i.e., $21,134 was paid by the plaintiff to the defendant.

9. The goods were not supplied in February, 1974 as Mr. Tso expected and sometime in April 1974 the defendant went to see Mr. Tso once again and informed him that the goods were already in Hong Kong and because he was not able to get the documents from the Bank, the goods were left in the godown and he asked for an advance in order to obtain delivery of the goods from the godown to the plaintiff. Mr. Tso refused his request drawing his attention to the terms of payment in the Materials Contract, i.e. "the balance of 95% on goods delivered to site."

10. On 18th April, 1974 part of the goods to be supplied under the Materials Contract, viz. 1,020 linear feet of jointing was delivered to the plaintiff's construction site and payment in the sum of $217,056 was made on 19th April, 1974 to the defendant. On 26th April, 1974 the balance of the same goods i.e. 867 linear feet was delivered to the same site and the sum of $184,487.60 was paid to the defendant on 30th April, 1974.

11. The goods were received and acknowledged upon delivery by the plaintiff's employees at the said site and some of the goods were installed by the defendant in accordance with the "installation contract".

12. However, on 7th February, 1975, it was discovered upon inspection by the Resident Engineer at the site that the goods supplied by the defendant did not have the mark "WABO SR2" impressed upon the surface, and on 10th February, 1975, a letter to this effect was addressed by the plaintiff's Chief Engineer to the defendant asking for an explanation for the omission, and for a confirmation in writing that the goods supplied conformed "in every respect with the product particulars given by you to the Public Works Department, Structural Design Office and on the basis of which the Waboflex joint was specified." The installation of the jointing system had meanwhile stopped pending the receipt of such explanation by the Resident Engineer.

13. The defendant, undaunted by any difficulties which he might have had to face as a result of supplying the said goods, wrote a reply on 15th February, 1975 stating in part the following:-

14. The confirmation asked for was never given and following the above quoted letter, the defendant was asked to supply the following additional information:-

15. The defendant could not obtain the necessary agreement from Watson Bowman Associates, Incorporated, despite the attempts which he says he made to secure such a licence and on 7th April, 1975 he boldly made the suggestion that the installation of the goods he supplied under the Contract should continue. This suggestion was not accepted since none of the additional documents asked for were furnished by the defendant. His proposal that he could impress the goods he supplied with the mark "Waboflex or WABO SR2" was not taken up by the plaintiff, and in any event, it would appear that in the absence of any authority from Watson Bowman Associates, Incorporated, he certainly had no right to do so. He has, of course, admitted that he never owned the trade mark "Waboflex" whether in the United Kingdom or anywhere else.

16. Meanwhile other lines of inquiry were conducted in respect of the said goods supplied by him to the plaintiff under the Contract and as a result thereof, he was charged and tried at the Victoria District Court on 23rd September, 1975 with two offences of obtaining property by deception, contrary to Section 17(1) of the Theft Ordinance, such charges relating to the payment of the sums of $217,056 and $184,497.60 respectively made by the plaintiff under the Materials Contract.

17. In the course of that trial, his counsel made the following observation: -

"It will be agreed only that Waboflex SR2 is the trade name of Watson Bowman."

I think in the circumstances outlined above, he could not have done otherwise.

18. The defendant was convicted of the said two offences and the plaintiff pleads that these convictions are relevant to the issue of the breach of the Materials Contract by the defendant, with which I agree.

19. It has now been submitted on behalf of the plaintiff that the Materials Contract was a Contract of Sale by description and sample. So far as description is concerned, there is ample evidence to show that the goods supplied by the defendant did not correspond with the description "WABOFLEX SR2". Tests carried out on the sample submitted by the defendant to the plaintiff (Exh. P2) show that the "Rubber Cushion" part of the Expansion Joint was made of neoprene whereas tests of a section of the goods supplied by the defendant to the plaintiff in purported performance of the Materials Contract show the said "Rubber Cushion" part of the joint to be "natural rubber". Here again there was ample evidence that the goods supplied by the defendant to the plaintiff did not correspond to the sample nor did it meet with the specifications set out in the drawing or in the Contract between the plaintiff and the Hong Kong Government.

20. The plaintiff's claim against the defendant now is for the return of the sums of $21,134.40 and $401,553.60 which they say were paid under a mistake of fact and misrepresentations made by the defendant and that the consideration for which such payments have been made had totally failed.

21. The defendant submits that the plaintiff accepted the goods in question and that it is unreasonable after 1½ years since the delivery of the said goods to the plaintiff for him now to claim rejection of the goods and moreover part of the said goods had already been used in the construction of the works mentioned in P.W.D. Contract No. 561 of 1972.

22. The matter of acceptance has not been pleaded even when the defendant was legally represented nor was any question put to Mr. Tso on this matter. However, Mr. Dicks submits that Section 56 of the Sale of Goods Ordinance which states:-

"Nothing in this Ordinance shall affect the right of the buyer ....... to recover money paid where the consideration for the payment of it has failed."

applies in the circumstances to this case. I think it must be agreed that a visual inspection of the goods supplied by the defendant under the Materials Contract would not have revealed that such goods did not correspond with the sample or that they did not comply with the specifications prescribed in the contract between the plaintiff and the Hong Kong Government. It was only after a laboratory test had been carried out that it was discovered the said goods were not those which the defendant was to have supplied under the contract.

23. Mr. Dicks further submits that in these circumstances there could be no acceptance whether actual or implied of the goods delivered by the defendant to the site and moreover by reason of the fact that the defendant had also entered into a contract for the installation of the said goods at the site, at the same time he signed the Materials Contract, the defendant had waived acceptance - this presumably on the ground that he would have known that he was supplying goods which would not be in conformity with the Materials Contract, yet commonced to install them at the site to the detriment of the plaintiff vis a vis the Hong Kong Government. If I understand this argument correctly it is that there can be no acceptance of the goods in question by the plaintiff until they had been installed by the defendant to the satisfaction of the Hong Kong Government.

24. Whilst there is much force in this argument, it seems only to reinforce the view in the absence of any evidence to the contrary, that there was a lack of reasonable opportunity given to the plaintiff to have the goods inspected and examined before their installation and before acceptance. Moreover, the question as to whether the plaintiff had unduly delayed rejection of the goods must depend, to a large degree, on the conduct of the defendant so far as his mispresentations and subsequent statements regarding the goods are concerned after the discovery of the breach. The plaintiff was, in my view, entitled to reject the goods supplied by the defendant even at that stage. In my judgment the consideration for which the plaintiff paid the said sums of $21,134.40 and $401,553.60 has clearly failed and there is ample authority cited by Mr. Dicks to show that the plaintiff is entitled, in such circumstances, to the repayment by the defendant of these said sums.

25. There will, therefore be judgment for the plaintiff in the sum of $422,688 with interest thereon at 8% per annum from 30th April, 1974 until payment with costs to be taxed.

Representation:

Mr. A. Dicks (J.S.M.) for plaintiff

Defendant in person