Canyon Development Ltd v. China Link Construction Co Ltd
Read the full judgment text of HCA 3271/2002 on BabelCite. This High Court CFI judgment was delivered on 17 November 2005.
1. This action arises from the supply of scaffolding equipment by the Plaintiff, Canyon Development Limited, to the Defendant, China Link Construction Company Limited.
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HCA 3271/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 3271 OF 2002 ____________ BETWEEN
____________ Before: Mr Recorder J Fok, S C in Court Dates of Hearing: 31 October, 1 and 2 November 2005 Date of Judgment: 17 November 2005 ______________ J U D G M E N T ______________ Introduction 1.This action arises from the supply of scaffolding equipment by the Plaintiff, Canyon Development Limited, to the Defendant, China Link Construction Company Limited. 2.The Plaintiff supplied scaffolding equipment to the Defendant for use at a construction site at Hok Yuen Redevelopment, Phase 1, KIL 11056 (“the Site”), at which the Defendant was a sub-contractor. The Plaintiff’s case is that this supply was pursuant to 3 agreements in writing contained in or evidenced by 3 quotations dated respectively 10 April 1996, 13 April 1996 and 5 August 1996 (“the Hiring Agreements”). 3.The main contractor on the Site was Far East Wagner Construction Limited (“Far East Wagner”). Far East Wagner and the Defendant had entered into an agreement dated 26 February 1996 for the construction of the superstructure works at the Site. 4.After the 1st and 2nd quotations were each signed by the Defendant to indicate its acceptance of their terms, the Plaintiff commenced the supply of scaffolding equipment to the Defendant at the Site. Although the 3rd quotation was not signed by the Defendant, the Plaintiff’s case is that materials were ordered by the Defendant pursuant to that quotation, so that it was accepted by the Defendant by its conduct. Two types of scaffolding equipment were involved, namely components of the “Toyo” Scaffold system, a light duty frame, and components of the “Acrow” Shorbrace system, a heavy duty frame. The initial supply of scaffolding equipment consisted of components of the Toyo system. It was only from about November 1996 that the Plaintiff began to supply components of the Acrow system to the Site. 5.The earliest delivery of scaffolding equipment took place on 18 April 1996 and by an invoice No. 9604041H dated 30 April 1996 the Plaintiff charged the Defendant a sum of HK$21,830.56 by way of hire charges and transportation charges. This invoice was duly paid by the Defendant on 8 August 1996. Two further invoices were also paid by the Defendant to the Plaintiff on 8 August 1996, namely (i) invoice No. 9605056H dated 31 May 1996 in the sum of HK$69,815.88, and (ii) invoice No. 9606046H dated 30 June 1996 in the sum of HK$79,491.01. 6.By the end of 1996, 6 further invoices had been issued by the Plaintiff to the Defendant (all in respect of components of the Toyo system). These were:-
7.Towards the latter part of 1996, the Plaintiff delivered components of the Acrow system to the Defendant at the Site. For reasons that are not material to the issues in this action, the Plaintiff had initially been unwilling to do so but eventually agreed to supply this equipment. The earliest supply of Acrow system components took place on 16 November 1996 and the Plaintiff issued two invoices in respect of that equipment, namely (i) invoice No. 361123H dated 30 November 1996 in the sum of HK$7,173.86, and (ii) invoice No. 361209H dated 31 December 1996 in the sum of HK$25,134.80. There was evidence from the Plaintiff that due to an internal error various items of Acrow system equipment were omitted from the invoices. However, the Plaintiff indicated that it was prepared to waive any claim in respect of those additional items and it is therefore unnecessary to consider them further. 8.Differences arose between the Defendant and Far East Wagner as a result of which Far East Wagner, as main contractor, terminated the sub-contract with the Defendant in respect of the Site. As a result of Far East Wagner’s termination of the Defendant’s sub-contract, on 14 January 1997 Far East Wagner, the Plaintiff and the Defendant entered into an agreement (“the Novation Agreement”). The recitals to the Novation Agreement provided as follows:-
9.The operative parts of the Novation Agreement provided as follows:-
10.Although the Novation Agreement, by clause 1, contemplated that Far East Wagner, the Plaintiff and the Defendant should ascertain the outstanding amount due to the Plaintiff from the Defendant, it is contended by the Defendant that no such tri-partite exercise was undertaken. There are, however, two manuscript pages attached to the Novation Agreement (“the Equipment Lists”), which are respectively stated to be stock takings conducted in respect of light duty frame and heavy duty frame at the Site (to which I shall respectively refer in this judgment as “the Toyo Equipment List” and “the Acrow Equipment List”). Each of the Equipment Lists is signed by representatives of the Defendant and Far East Wagner. The status and effect of the Equipment Lists is in issue between the parties. 11.It is the Plaintiff’s case that, based on the Toyo Equipment List, it issued a further invoice No. 9701036H in respect of Toyo equipment for hire charges for one day, 1 January 1997, and for “Charges for loss on hire items” in the sum of HK$798,096.83. The date stated on the face of this invoice is 2 January 1997 but there is a dispute as to whether it was actually sent on that date or was created after the Novation Agreement was executed and back-dated to that date. 12.On 22 January 1997, the Defendant paid the sum of HK$93,607.42 by way of cheque. There is a dispute as to the purpose of this payment. The Plaintiff’s claims 13.The Plaintiff’s claims in this action are for the payment of the outstanding invoices referred to above, namely:-
The Defences 14.As I understood Mr Chiu, counsel for the Defendant, the Defendant disputes its liability in respect of any of the above outstanding invoices on the following bases:-
The effect of the Novation Agreement 15.It is common ground between the parties that, as a result of the Novation Agreement, liability in respect of any scaffolding equipment supplied by the Plaintiff to the Site was assumed by Far East Wagner as from 14 January 1997 and that the Defendant would be liable for the scaffolding equipment supplied to the Site, including the hire charges for that equipment, prior to that date. 16.However, the Defendant’s case is that, on a proper construction of clause 1 of the Novation Agreement, “the outstanding amount due” in respect of which it would remain liable was to be ascertained and paid within one month of the date of that agreement. The Defendant maintained that as no stock taking exercise was conducted after 14 January 1997, the date of the Novation Agreement, there was no outstanding amount due to the Plaintiff ascertained in accordance with clause 1 and so no “outstanding amount due” from it to the Plaintiff. Furthermore, under clause 3 of the Novation Agreement, the Plaintiff released and discharged the Defendant from all future claims and demands whatsoever in respect of the Hiring Agreements. 17.This argument depends on the premise that no exercise to ascertain the outstanding amount due was in fact conducted in accordance with clause 1 of the Novation Agreement, to which question I now turn. 18.Mr Tsui Yat Kwong, the Defendant’s general manager who gave evidence on its behalf, maintained that the Equipment Lists did not constitute or evidence an actual stock taking exercise. According to him, given the large size of the Site and the then ongoing construction works as shown in the photographs of the Site taken in mid-December 1996, it would have been very difficult if not impossible to perform a stock taking exercise of scaffolding equipment at the Site at all, let alone an accurate one. He maintained that the Equipment Lists were based on figures supplied by the Plaintiff which were intended to form the starting point of a future exercise to be conducted by all three parties after 14 January 1997. Thus, he said, the Equipment Lists were dated before the date of the Novation Agreement on 14 January 1997 and the Plaintiff was not involved in their preparation. He referred to the fact that certain of the figures in the Toyo Equipment List were inaccurate based on a comparison of the scaffolding equipment eventually returned to the Plaintiff by Far East Wagner at the end of the construction at the Site: it appears that, although it did not order any further scaffolding equipment from the Plaintiff, Far East Wagner returned a larger quantity of various items than were accounted for in the exercise reflected in the Toyo Equipment List. 19.I do not doubt that conducting a stock taking exercise in respect of the scaffolding equipment on the Site as at early January 1997 would have been a tall order. However, the Equipment Lists are expressed in clear terms to be stock taking exercises and, like the Novation Agreement to which they were attached, they are both on the letter paper of Far East Wagner and appear to have been physically part of the Novation Agreement. The exercises reflected in the Equipment Lists were each respectively conducted over a period of days: in the case of the light duty frame, the stock taking was stated to have taken place from 6 January 1997 to 7 January 1997; in the case of the heavy duty frame, the stock taking was stated to have taken place from 8 January 1997 to 11 January 1997. Both Equipment Lists contain the statement “The representatives of the stock taking were appointed by both companies” above the signatures of two representatives of each of Far East Wagner and the Defendant respectively. There is no evidence of the Defendant having raised any complaint or dispute over the statements contained in Equipment Lists at the time the Novation Agreement was executed. 20.Mr Chong Kwok Lai, a director of the Plaintiff who gave evidence on its behalf said that, following the conducting of the stock taking exercise in early January 1997 and once the Novation Agreement had been signed, albeit later than originally envisaged, the Plaintiff issued its final invoice No. 9701036H dated (on its face) 2 January 1997, which enclosed a computer print out showing the breakdown of the invoiced amount, and also issued various return receipts all dated 1 January 1997 to reflect the items transferred to Far East Wagner pursuant to the stock taking exercise reflected in the Toyo Equipment List. Although the invoice and the return receipts were dated 2 January 1997 and 1 January 1997 respectively, his evidence was that they were not created until after the Novation Agreement was executed and were backdated to these earlier dates because the Plaintiff had agreed with the Defendant only to charge up to and including 1 January 1997 and because the Plaintiff was content to waive any hire charges for the 13 day period to 14 January 1997. 21.Although the Equipment Lists were dated prior to the execution of the Novation Agreement, there was evidence that the parties had been discussing the arrangement for Far East Wagner to assume the Defendant’s liabilities under the Hiring Agreements earlier in January 1997. I accept the evidence of Mr Chong that the original cut-off date that was intended to be the effective date of the Novation Agreement was 1 January 1997. It makes perfectly good sense that the originally intended cut-off date would be 1 January 1997. The Defendant had already been excluded from the Site since before the end of December 1996; evidence was given of an injunction order obtained by Far East Wagner against the Defendant on 27 December 1996. I also accept Mr Chong’s evidence that the final invoice, computer print out and delivery receipts were not in fact created until after the Novation Agreement was executed and were back-dated to the beginning of January 1997. His evidence was supported by the fact that one of the manuscript return receipts on which the computer print out supporting the final invoice was based contains a correction of the quantity of A-1219 frames from 6,086 (which was the figure according to the Plaintiff’s records) to 4,940 (which was the figure for these components shown in the Toyo Equipment List). This correction is carried through to the computer print out on which the final invoice was based and supports the fact that the return receipt in question and the computer print out could not have been generated before 6 January 1997 and 7 January 1997, when the Toyo Equipment List was compiled, and also the fact that the return receipt and computer print out cannot have been actually dated 1 January 1997 and 2 January 1997 respectively, but must have been back-dated to those dates. Although Mr Tsui asserted in his evidence that the final invoice was received before the execution of the Novation Agreement, no corroborating evidence of the actual date of receipt was provided by way, for example, of any records of acknowledgment of receipt issued by the Defendant and I reject Mr Tsui’s evidence in this regard. 22.I do not overlook Mr Chiu’s argument that the Novation Agreement does not state that the Equipment Lists are appended to that agreement, which would have been a simple thing to do, if they were intended to be the contemplated ascertainment exercise. He referred to the fact that recital (2) to the Novation Agreement stated that a copy of the 10 April 1996 quotation was annexed to the agreement. However, I do not think this point is decisive. A possible explanation for the omission to refer to the Equipment Lists in the text of clause 1 is simply because the Novation Agreement was originally intended to reflect a cut-off date of 1 January 1997 and to have been executed earlier than 14 January 1997. 23.More importantly, there is no reason why, as a matter of construction of the Novation Agreement, the ascertainment exercise contemplated in clause 1 might not be undertaken in two stages by the three parties concerned with the first stage being the stock taking exercise conducted by the Defendant and Far East Wagner and the second stage being the actual calculation of the final invoice by the Plaintiff based on that stock taking exercise. In other words, even if the Equipment Lists were compiled before the execution of the Novation Agreement, this would not mean that the final invoice was not the ascertainment of the outstanding amount due from the Defendant to the Plaintiff as ascertained by the Plaintiff, the Defendant and Far East Wagner. 24.For the above reasons, I find as a fact that the Equipment Lists attached to the Novation Agreement followed by the issue of the Plaintiff’s final invoice constituted the ascertainment exercise contemplated by clause 1 of that agreement and therefore, I reject the Defendant’s argument that there was no outstanding amount ascertained to be due under the Novation Agreement. Whether or not there is an outstanding amount which remains due, and if so what amount, is a separate issue of fact with which I shall deal below. 25.In any event, even if I had not found that the Equipment Lists and final invoice constituted the ascertainment exercise contemplated by clause 1 of the Novation Agreement, I would have rejected the Defendant’s argument of release and discharge. 26.The intention behind the Novation Agreement was self-evidently to provide for the Defendant to withdraw from the Site and its contractual arrangements with Far East Wagner and for Far East Wagner to assume the role of the Plaintiff’s counter-party in respect of the Hiring Agreements. It is clear, in my opinion, that the intention of clause 1 of the Novation Agreement was to provide a cut-off date after which Far East Wagner would be liable for the scaffolding equipment on the Site but before which the Defendant would remain liable for such equipment. The obvious purpose of the ascertainment exercise contemplated by clause 1 was to determine how much equipment was on the Site as at the material date so that the parties would know (i) for how much equipment Far East Wagner was to assume the hiring liability going forward from that date, and (ii) for how much, if any, lost equipment the Defendant was to be responsible up to that date. Although there were benefits to all three parties in conducting the ascertainment exercise, the exercise was of particular benefit to Far East Wagner. This was because Far East Wagner would not know how much equipment had already been delivered to the Site before the Novation Agreement. In contrast, the Plaintiff and the Defendant would already know how much equipment had been delivered to the Site as this was the equipment for which the Plaintiff had issued its monthly invoices up to 31 December 1996. Furthermore, without the ascertainment exercise, any items lost whilst in the custody and care of the Defendant during its period of sub-contract at the Site would otherwise become the responsibility of Far East Wagner under the Novation Agreement. 27.On the Defendant’s argument, if the events contemplated by clause 1 did not transpire, the Defendant would be released from liability. Yet the Defendant itself could cause the events in question not to occur: for example, by refusing to take part in the ascertainment exercise or even by simply refusing to pay the outstanding amount ascertained to be due within one month. In my view, it cannot be a proper construction of clause 3 that, if the ascertainment exercise were not conducted, the release and discharge obligation would nevertheless be operative. Although clause 3 of the Novation Agreement operates to release and discharge the Defendant from liability under the Hiring Agreements, that release and discharge is expressly subject to the provisions of the Novation Agreement, including in particular clause 1. If the events in clause 1 did not occur, then the release and discharge would not be operative. 28.Therefore, even if the contemplated ascertainment exercise were not in fact conducted pursuant to clause 1 of the Novation Agreement (contrary to my finding above), I would not have concluded that clauses 1 and 3 of the Novation Agreement, properly construed, result in the Defendant’s prior liabilities under the Hiring Agreements necessarily being released and discharged. In such circumstances, there would, in my opinion, need to be something more for the release and discharge to come into effect. The effect of the payment of HK$93,607.42 29.As I understood it, the Defendant’s argument was that the payment on 22 January 1997 of the sum of HK$93,607.42 was the contemplated payment under clause 1 of the Novation Agreement. Therefore, by virtue of having made payment of that sum to the Plaintiff, the Defendant was released and discharged from all further liability under the Hiring Agreement pursuant to clause 3 of the Novation Agreement. 30.There is no evidence that the payment of HK$93,607.42 on 22 January 1997 by the Defendant was made as a result of that sum having been found to be the “outstanding amount due” in accordance with the ascertainment exercise contemplated by clause 1 of the Novation Agreement. Indeed, on the Defendant’s own case no such exercise was conducted. There is no evidence to indicate that the Defendant was tendering this sum in full and final settlement of all outstanding amounts due to the Plaintiff under the Hiring Agreements. 31.Instead, the evidence shows that the amount of the payment was the precise sum of the oldest of the then outstanding invoices issued by the Plaintiff to the Defendant, namely invoice No. 9607058H dated 31 July 1996. That invoice was for hiring charges for the month of July 1996 only and did not cover any other part of the period up to the end of 1996, for which period the Defendant was expressly to remain liable notwithstanding the transfer of liabilities to Far East Wagner under the Novation Agreement. The receipt issued by the Plaintiff for the cheque payment of HK$93,607.42 is expressly stated to be related to that invoice and that invoice alone. 32.The Defendant’s argument based on the payment of the HK$93,607.42 is without merit and affords no defence to the Plaintiff’s claim. Estoppel 33.This argument was introduced by way of amendment to the Defence after the luncheon adjournment on the first day of the trial. It was not addressed in any detail by Mr Chiu in his closing submissions and certainly was not advanced with any vigour by him. 34.As I understand the plea in the Amended Defence, the estoppel argument is put thus. The Plaintiff (i) entered into the Novation Agreement, (ii) made no demand for payment of the sum claimed in this action until its then solicitors’ letter before action dated 3 July 2002, and (iii) commenced an action against Far East Wagner in March 1998 for outstanding payment under the project at the Site. Relying on these matters, the Defendant reached a full and final settlement with Far East Wagner in September 1999 regarding its outstanding entitlements in respect of its sub-contract at the Site in the sum of HK$7,250,000 in which no account was taken of any outstanding liability to the Plaintiff. The Defendant further pleaded that it relied on the matters in question to its prejudice by reason of the fact that its staff employed at the Site had left its employment since 2002 if not earlier and could not now be located. 35.In the present case, I have no hesitation in rejecting the late plea of estoppel. The acts of the Plaintiff said to found the estoppel in no way constitute a clear and unequivocal representation that the Plaintiff would not seek to claim the amounts now claimed in this action from the Defendant. Although the Plaintiff has not actively pursued the claim at all times since the Novation Agreement, there is no evidence that it abandoned the claim or made any representation to the Defendant to that effect. On the contrary, there is evidence that monthly statements of account showing the outstanding amounts claimed in the action were sent by the Plaintiff to the Defendant. Mr Tsui accepted that the Defendant had received at least some of these statements of account. The commencement of the action by the Plaintiff against Far East Wagner has nothing whatsoever to do with the Defendant’s liability. Under the Novation Agreement, any claim by the Plaintiff against Far East Wagner would relate to liabilities under the Hiring Agreements after the cut-off date in the Novation Agreement. 36.Even if the Defendant relied on the matters in question in acting as it did in settling with Far East Wagner, I do not consider that any such reliance on the part of the Defendant was reasonably founded on any representation by the Plaintiff. The plea of prejudice by reference to its staff who had left its employment was simply not supported by any evidence. What sum, if any, remains outstanding and due to the Plaintiff? 37.It is convenient to deal with the Plaintiff’s claims under the three heads identified by Mr Chiu in his closing submissions: (i) the outstanding hire charges, transportation charges and repair charges claimed for the Toyo equipment; (ii) the loss on hire charges for Toyo equipment, and (iii) the outstanding hire charges for Acrow equipment. Outstanding hire and repair charges for Toyo equipment 38.These charges are included in the Plaintiff’s invoices referred to in paragraph 6(2) to 6(6) above and also in the final invoice back-dated to 2 January 1997. 39.Mr Chiu relied on three principal grounds to challenge the accuracy of these invoices. First, there were no corresponding written orders for a number of deliveries by the Plaintiff and so it is to be inferred that these deliveries were not requested. Second, the Defendant’s payment of the April, May and June invoices does not indicate acceptance of the number of items of equipment ordered or delivered. Third, some signatories on the delivery receipts purportedly signed on behalf of the Defendant were not known to the Defendant. 40.In support of the first argument, the Defendant relied upon Schedule 2 to the supplemental witness statement of Mr Tsui. That schedule showed that, although various items were recorded in delivery receipts as having been delivered to the Site between 18 April 1996 and 17 June 1996, there were no corresponding delivery orders amongst the documents. This is demonstrably the case by reference to the bundle of documents. However, the items without delivery orders were all charged for in the invoices dated 30 April 1996, 31 May 1996 and 30 June 1996, which invoices were settled in full by the Defendant. If the items had really not been ordered, it is very odd, to say the least, that there is no evidence of any challenge to those invoices. Each of the invoices in question was accompanied by a computer print out of the individual items charged and it would have been a simple matter for the Defendant to query any item if it considered that the item had been wrongly included in the invoice. The fact that the items were covered by delivery receipts, of which the Defendant had copies, provides further evidence in any event that the items were in fact delivered. 41.Mr Tsui sought to avoid any inference that it had accepted the correctness of the invoices by asserting that the payments made by the Defendant against the April, May and June invoices were merely interim payments on account. Mr Tsui claimed that final payment would only be made in accordance with quantities ascertained or measured by a Quantity Surveyor in keeping with the practice adopted at most construction sites in Hong Kong. Whilst I have no difficulty in accepting the theoretical possibility that the parties might have agreed payment terms that called for the Defendant to make interim payments and for a final account to be adjusted by way of measurement at the conclusion of the contract, the problem for the Defendant, in my opinion, is that the parties simply did not agree such terms. There is no reference to any such procedure in the Hiring Agreements. On the contrary, the payment terms are stated to be within 30 days against the Plaintiff’s invoice. Furthermore, I do not accept that the Defendant was acting in accordance with any such procedure in making payment of the first three invoices: the exact amounts under those invoices were paid, rather than a round sum; one might have expected to see some documentary evidence to indicate that the Defendant was making those payments by way of interim payment on account, but there is none. Finally, there is force in the point put by Mr Lee to Mr Tsui in cross-examination, namely that a final measurement would not be of any assistance in relation to a hiring arrangement: a final measurement at the end of the project could not, for instance, indicate whether an invoice for the hire of equipment on the Site at an earlier stage of the project was accurate. 42.Mr Tsui’s evidence concerning the delivery receipts was that, apart from a Mr Chow, whose signature appeared on 5 of the delivery orders, the Defendant could not recognize the signatories on the other delivery orders. That may be so but this fact does not, in my judgment, dilute the value of the delivery orders as evidence of the actual delivery to the Site of the items identified in them. Mr Tsui acknowledged that one copy of each of the delivery orders was sent to the Defendant after delivery of the equipment to the Site and there is no evidence of the Defendant having raised any dispute as to the authority of any particular signatory to acknowledge receipt of the equipment. 43.I am satisfied on the evidence that the items of Toyo equipment for which the Plaintiff has invoiced the Defendant for hire and other charges in the Plaintiff’s invoices referred to in paragraph 6(2) to 6(6) above and hire charges for 1 January 1997 in the final invoice back-dated to 2 January 1997 are properly supported by the various delivery orders, which in turn are reflected in the computer print outs attached to each of the invoices in question, and are due and owing by the Defendant to the Plaintiff. Loss on hire charges in respect of Toyo equipment 44.The Plaintiff’s claim for loss on hire charges relates only to Toyo equipment and is based solely on the Toyo Equipment List attached to the Novation Agreement. In issuing its final invoice back-dated to 2 January 1997, the Plaintiff used the figures in the Toyo Equipment List to calculate a notional return of the items in question against the items on hire as at 1 January 1997. 45.The Defendant challenges the Plaintiff’s entitlement to charge loss on hire charges. It also maintains that the Toyo Equipment List is inaccurate and cannot therefore reliably form the basis of a claim for loss on hire charges. 46.As to the entitlement to charge loss on hire charges, the Defendant contends that no liability for such charges arises until the very end of the hiring of the equipment after all the equipment has been returned to the Plaintiff’s depot. In support of this contention, the Defendant refers to clauses 1 and 6 of the Plaintiff’s Standard Conditions of Hire.
47.The Defendant further contends that as the equipment deployed at the Site was only returned to the Plaintiff after 14 January 1997, with 2 minor exceptions in respect of returns on 31 December 1996, no liability for loss on hire charges had accrued under the Plaintiff’s Standard Conditions of Hire as at 14 January 1997. 48.Mr Chiu also contended that, as a matter of construction of clause 1 of the Novation Agreement, the phrase “outstanding amount due” could only refer to outstanding hire charges and not loss on hire charges. 49.I do not accept the Defendant’s contentions in relation to the Plaintiff’s entitlement to levy loss on hire charges. Under the Novation Agreement, it was clearly intended that there be a termination of the hiring of equipment by the Defendant and a commencement of a new hiring arrangement by Far East Wagner. This was intended to take effect as a “clean break”, meaning that the equipment was to be treated as having been returned to the Plaintiff by the Defendant and then re-hired by the Plaintiff to Far East Wagner. Although the equipment did not physically go back to the Plaintiff’s depot, the intended effect of the Novation Agreement was that it should be treated as if it had. Hence, the ascertainment exercise contemplated by clause 1 was for the purpose of identifying how much equipment Far East Wagner was to hire as from 14 January 1997 and, correspondingly, how much equipment was to be treated as being returned by the Defendant to the Plaintiff. If the Defendant’s contention were correct, it would mean that however many items had been lost by the Defendant, the Plaintiff could not recover any loss on hire charges because of the Novation Agreement. I do not think that this was either the intended, or the actual, effect of the Novation Agreement. 50.I have already found above that the Toyo Equipment List was compiled pursuant to the ascertainment exercise contemplated by clause 1 of the Novation Agreement. Accordingly, in my judgment, it forms the proper basis for the Plaintiff’s loss on hire charges. 51.Nevertheless, Mr Tsui produced a schedule to his supplemental witness statement, Schedule 4, which shows that in respect of five items of Toyo equipment listed in the Toyo Equipment List, Far East Wagner eventually returned a larger number of those items than it took over pursuant to the Novation Agreement. Given that it was accepted by Mr Chong that Far East Wagner did not order any further equipment from the Plaintiff, this point does appear to support the Defendant’s case that the Toyo Equipment List is not accurate. Four of the five items are items of Toyo equipment for which the Plaintiff has raised charges for loss on hire. Mr Chong did not have any explanation for this other than the rather unlikely possibility that Far East Wagner had purchased additional equipment from another source, which was not supported by any evidence. 52.However, I have already found that the Equipment Lists constituted the stock taking that was a necessary part of the ascertainment exercise contemplated by the Novation Agreement. The Equipment Lists are part of a contractual document by which the Defendant is bound. It must have realised the Equipment Lists were intended to have contractual consequences when its representatives signed it. 53.Nevertheless, I have been troubled by the error in respect of one item of equipment, namely the A-1219 frames. According to the Equipment List, 6,086 of these were taken over by Far East Wagner yet, according to the Plaintiff’s records, only 4,940 of such frames were hired to the Defendant. As I have already mentioned, the Plaintiff accepted that the Toyo Equipment List included an erroneous count in respect of that item and reduced the number of these frames in the return receipt. Mr Chong gave evidence in his witness statement that a possible explanation for this error was that the representatives of Far East Wagner and the Defendant had mistakenly counted some of the A-1217 frames as A-1219 frames, the two frames being difficult to distinguish. This explanation is certainly consistent with the fact that the Equipment List shows Far East Wagner taking over 759 A-1217 frames, whereas the Plaintiff’s records show that 2,850 such frames had been hired to the Defendant. If Mr Chong’s explanation is correct, and there is no evidence to the contrary, then the 1,146 excess A-1219 frames recorded in the Equipment List should in fact have been recorded there as A-1217 frames so that, instead of showing a total of 759 such frames, the Equipment List should have shown a total of 1,905 A-1217 frames. 54.At the Court’s request, the Plaintiff provided a revised calculation of its loss on hire charges on the basis that 1,905 A-1217 frames were in fact taken over by Far East Wagner and that the shortfall for which the Defendant was being charged was the difference between 2,850 and 1,905 (i.e. 945) rather than 2,850 and 759 (i.e. 2,091). This results in a revision to the loss on hire charge in the final invoice of HK$793,589 minus HK$97,410, a revised total of HK$696,179. 55.I am satisfied that the Plaintiff is entitled to look to the Defendant for loss on hire charges based on the quantities of Toyo equipment shown in the Toyo Equipment List, subject to the correction in respect of the A-1217 frames referred to above. Accordingly, I am satisfied that the sum of HK$696,179 is due and owing to the Plaintiff in respect of loss on hire charges. Outstanding hire and repair charges for Acrow equipment 56.These charges are simply the amounts shown due in the two invoices referred to in paragraph 7 above. The Plaintiff does not seek to recover any loss on hire charges relating to the Acrow equipment and so it is not necessary to consider the Acrow Equipment List. However, I would note that the Acrow Equipment List does refer to the existence of heavy duty frame (i.e. Acrow) equipment belonging to Plaintiff on the Site, thus providing evidence that the Plaintiff had supplied items of such equipment to the Site. 57.The only defence to this claim is that there are no corresponding written orders for any of the deliveries by the Plaintiff. However, the delivery of the items for which hire charges have been raised is supported by the Plaintiff’s delivery receipts, copies of which were sent to the Defendant’s offices. There is no evidence of any query or complaint being raised by the Defendant in respect of those delivery receipts and I am therefore satisfied that the invoiced amounts for hire and transportation in respect of the Acrow equipment are properly due and owing to the Plaintiff. The sums due and owing to the Plaintiff 58.On the basis of my findings and conclusions above, I consider that the following charges are properly due and owing to the Plaintiff from the Defendant:-
59.The total of the above invoices is HK$1,372,813.55 for which sum there will be judgment for the Plaintiff against the Defendant. Interest 60.There is no contractual rate of interest specified in the Hiring Agreements. However, at the bottom of each of the invoices in the trial bundle it is noted that “3% interest will be added for overdue 45 days”. This provision is too vague, in my judgment, to found a claim for contractual interest. It does not state for what period the 3% interest rate should apply and accordingly, I decline to award interest on that basis. In any event, the Plaintiff has not claimed interest on a contractual basis in the Statement of Claim. 61.The Plaintiff sought, in the alternative, an award of interest under s. 48 of the High Court Ordinance, Cap. 4, at a commercial rate (i.e. prime lending rate plus 1%) as from a date 30 days after the dates when each of the invoices should have been paid. For his part, Mr Chiu submitted that, if interest is to be awarded under s. 48, it should only be awarded from the date of the writ because of the Plaintiff’s delay in issuing these proceedings. 62.In my discretion, I award interest to the Plaintiff on the judgment sum at the prevailing prime lending rate plus 1% as from 11 July 2002 until judgment and thereafter at the judgment rate. I do so for the following reasons. There is no doubt that there has been considerable delay on the part of the Plaintiff in instituting this action. That delay was a deliberate choice on the part of the Plaintiff. Mr Chong explained that the reason the Plaintiff did not chase the Defendant for payment of the outstanding invoices after the Novation Agreement was that the Plaintiff wanted to maintain a good relationship with the Defendant whilst it was suing Far East Wagner. As he put it in cross-examination, “Therefore for a period of time we did not chase them for the sum.” It was only on 3 July 2002 that solicitors acting for the Plaintiff issued a demand letter to the Defendant. That demand letter sought the payment of the amount of the outstanding invoices and threatened that, unless the Defendant paid within 7 days, the Plaintiff would issue proceedings for the recovery of the outstanding sum with interest and costs. In other words, so long as the Defendant paid the outstanding sum within 7 days and before the commencement of proceedings, no interest was being sought. Finally, although the invoices were payable within 30 days of presentation, the Plaintiff did not pursue the Defendant for any interest on the late payments of the invoices for April, May and June 1996 which were only paid on 8 August 1996. In the circumstances, I consider that the fair result is that interest should be awarded as from 11 July 2002, that being the date after the expiry of the 7 day period mentioned in the Plaintiff’s then solicitors’ letter dated 3 July 2002. Conclusion 63.For the above reasons, I grant judgment for the Plaintiff against the Defendant in the sum of HK$1,372,813.55. I award interest on that sum at the prevailing prime lending rate plus 1% from 11 July 2002 until judgment and thereafter at the judgment rate until payment. 64.I see no reason why the Plaintiff’s costs of the action should not be borne by the Defendant to be taxed, if not agreed, and I make an order nisi to that effect.
Mr S W Lee, instructed by Messrs W H Chik & Co., for the Plaintiff Mr M C Chiu, instructed by Messrs Ho & Yip, for the Defendant |