Chan and Wong Ltd t/a Luen Wah Machine Welding & Iron Works v. Vic-form Co Ltd

DCCJ 4023/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4023 OF 2006

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BETWEEN

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Coram: Deputy District Judge W.C. Li in Chambers

Date of Hearing: 24^th November 2006

Date of Handing Down Decision: 5^th December 2006

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DECISION

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1.This is an application for summary judgment pursuant to RDC Order 14 taken out by the Plaintiff against the Defendant. By the Defendant’s 4 Purchase Orders made on divers dates between 19.04.2005 and 08.12.2005, the Plaintiff contracted to sell, installed and paint, and the Defendant contracted to buy stainless steel doors (the goods”).  The goods were duly delivered, installed and painted by the Plaintiff pursuant to the order of the Defendant. Five invoices, on divers dates between 30 November 2005 and 11 February 2006, were presented by the Plaintiff to the Defendant for payment and the Defendant had paid a substantial part of the amounts on these invoices. Only $310,777.00 remained outstanding from the contract price of $1,239,390.00. Of this $310,777.00, $279,820.00 were for the sale and delivery of stainless steel doors. The balance of $30,957 were for the part of the contract that involved some installation and painting works required to be done by the Plaintiff. This application for summary judgment was taken out before the Defendant filed its Defence. No draft Defence was submitted by the Defendant in its affirmation.

2.The Plaintiff’s case was that payment for the goods sold and delivered were due on delivery and presentation of the invoices for payment. As for the part of the goods that required installation and painting of the stainless steel doors, the Plaintiff said these doors were delivered, installed and painted, and the Defendant had accepted the goods, therefore payment for them were also due and outstanding from the Defendant. There were no complaint of the quality of the goods delivered and the workmanship of the installation and painting until the Plaintiff took out proceedings for the recovery of the balance of the contract price some 6 months after the 5 invoices were issued to the Defendant.

3.The Defendant contended that the sale and purchase of these stainless steel doors was subject to the “trade practice and custom of the construction site industry” which enabled the Defendant to retain 10% of the contract price until the site had been finished and handed over to the Defendant’s client, 7.5% of the contract price to be held pending any remedial works to be carried out, and 2.5% of the contract price to be withheld until a 12 months maintenance period had expired. The site in question, a Kowloon Canton Railway Corporation (“KCRC”) site, was handed over by the Defendant to the KCRC in October 2006.  The Defendant contended that on 30.08.2006, remedial work estimated at $164,550.00 were required to be done on the work completed by the Plaintiff, and that on 01.09.2006, 6 stainless steel doors were found to have rusted, and they suspected that the 160 stainless steel doors supplied by the Plaintiff were not made of stainless steel and the estimated cost of replacing these doors was $992,000.00.

4.Sec. 30 of the Sale of Goods Ordinance, Cap. 26, provides that payment and delivery are concurrent conditions. Sec. 30 reads “Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods”.

5.Sec. 51(1) of the Sale of Goods Ordinance, Cap. 26, provides that “Where, under a contract of sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods”.

6.Sec. 37 of the Sale of Goods Ordinance, Cap. 26, provides “(1) Subject to Subsection (2), the buyer is deemed to have accepted the goods- (a) when he intimates to the seller that he has accepted them; or  (b) when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller. Sec. 37(2) reads “Where goods are delivered to the buyer, and he has not previously examined them, he is not deemed to have accepted them under subsection (1) until he has had a reasonable opportunity of examining them for the purpose – (a) of ascertaining whether they are in conformity with the contract; and (b) in the case of a contract for sale by sample, of comparing the bulk with the sample”. Sec. 37(4) also provides “(4) The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them”. Sec. 37(5) reads “The questions that are material in determining for the purposes of subsection (4) whether a reasonable time has elapsed include whether the buyer has had a reasonable opportunity of examining the goods for the purpose mentioned in subsection (2)”.

7.The Plaintiff was a supplier of metal products and the contract here between the Plaintiff and the Defendant was one for the sale and purchase of stainless steel metal doors. It was basically a contract for the sale and purchase of goods, save that for a small part, the Plaintiff had to install and paint the metal doors. The contract was evidenced by the Defendant’s own purchase orders. There were no terms or conditions stated in the purchase orders that the contract was subject to the trade practice and customs in the construction site industry. The Defendant’s alleged trade practice and custom in the construction site industry did not appear to be applicable to the Plaintiff who was only a seller of metal products and the Plaintiff was not in the construction industry. Not a single piece of evidence was adduced by the Defendant to show that there were any special conditions or that the contract was subject to any trade practice and customs. No express terms could be seen, nor were there any written note or correspondence to this effect shown by the Defendant. This was only a bare assertion made by the Defendant. The Defence was effectively relying on a collateral, oral agreement. In this case, the Defendant has the onus to prove strictly the collateral oral agreement. (Bank of India  v.  Surtani Murlidhar Parmanand (t/a Ajanta Trading Corp.) (1994) 1 HKC 7). That onus, approved by Lord Goff in Universal Dockyard Ltd  v  Trinity General Insurance Co Ltd (1989) 2HKLR 160, was propounded in the following way by Lord Moulton in Heilbut, Symons & Co  v  Buckleton  (1913)  AC 30 at 47-48: “such collateral contracts, the sole effect of which is to vary or add to the terms of the principal contract , are therefore viewed with suspicion by the law. They must be proved strictly. Not only the terms of such contracts, but the existence of an animus contrahendi on the part of all the parties to them, must be clearly shown. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and more especially would have the effect of lessening the authority of written contracts by making it possible to vary them by suggesting the existence of verbal collateral agreements relating to the same subject matter”. It is trite law that mere assertion in an affidavit of a given situation does not, ipso faco, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his defence is reasonably capable of belief.  (HK White Book 2006 at 14/4/9). The defendant further contended that (1) the Plaintiff and the Defendant had one previous dealing where the contract price was settled with a lesser payment; and (2) in one of these payments in the present contract, the Defendant had issued a letter of credit in the Plaintiff’s favour and the Plaintiff had only withdrawn an amount of approximately 80% of the sums due leaving a balance in the letter of credit; and these two event would show that the present contract was subject to the trade practice and customs in the construction industry. These arguments were neither here nor there. The previous dealing between the Plaintiff and the Defendant was not expressly stated to be subject to the said trade practice and customs, and a settlement in that only previous dealing between the Plaintiff and the Defendant would not help the Defendant here in any way. As for the latter argument, the Defendant did not explain if the Defendant was only liable to pay 80% of the sums due in accordance with the said trade practice and customs, then why did they issue a letter of credit far exceeding the required 80% in the first place. That argument therefore was unconvincing at all to show that the present contract was subject to the alleged trade practice and customs.  The Defendant further showed to the court a letter written by a Mr. M.Y, Li who was said to have more than 30 years experience in the construction industry, and who opined that it was very reasonable for the contract between the Plaintiff and the Defendant to be subject to the alleged trade practice and customs. I did not quite understand why the Defendant produced this letter to the court as Mr. Li’s personal opinion whether it was reasonable or not was irrelevant. There was simply no ground shown for the Defendant’s trade practice and customs argument. The Defendant has simply not shown a credible case that the contract with the Plaintiff was subject to the alleged trade practice and customs of the construction industry.

8.The delivery of the goods and the services rendered in installation and painting of some of the goods were completed many months before the Plaintiff’s action. The Defendant had ample time and opportunity to inspect the goods delivered, installed and painted. Installation and painting work were easy to inspect and there was no doubt at all that the Defendant had accepted the goods delivered, installed and painted. Acceptance was also seen in the fact that the Defendant had paid a substantial part of the contract price with no complaint raised whatsoever during all relevant period before the issuance of the Writ. In this case, I was satisfied that payment for the goods was due on delivery under Sec. 30 of the Sale of Goods Ordinance, Cap. 26, (“the said Ordinance”) as there were no contrary agreement as to payment. The property in the goods had also passed to the Defendant under Sec. 51(1) of said Ordinance and the Defendant had the right to sue for the price of the goods. More than 6 months had elapsed after the Defendant had been invoiced. The long lapse of time after delivery of the goods deemed the Defendant to have accepted the goods under Sec. 37(4) of the said Ordinance. The Defendant’s argument that a complaint was in fact raised by the Defendant by their letter dated 15 June 2006 about the goods delivered was in fact a misleading argument. Counsel for the Defendant also conceded that this was bad. On careful reading of that alleged complaint letter, it was found that it was not a complaint letter at all and had no relevance to the present claim. The Defendant’s argument about remedial work and rusty doors were also bare assertions and these claims were only raised after legal action been taken out by the Plaintiff in August 2006. Paragraph 12 of the Defendant’s affirmation (Affirmation of Wong Ching Kwong) reads “Even worse, without an opportunity to explore a possibility of settlement, the Defendant received a Statement of Claim on 16^th. August 2006, i.e. 5 days after the issuance of the demand letter. The Plaintiff’s action is unreasonable and abusing the process of the court. The Defendant confirms that before it has received the Statement of Claim, no negotiation or effort to sort out the differences between the parties is tried by the Plaintiff”.  After the Plaintiff had issued the writ, the Defendant asserted that they then found 6 rusty doors and held a suspicion that all 160 steel doors were not made of steel.  The Defendant’s assertions were simply unbelievable . They did not have a defence at all and was simply hoping to make a bargain with the Plaintiff. Improbable allegations were made by the Defendant. This appeared no more than a futile attempt by the Defendant to delay the fulfillment of their legal obligation under the contract with the Plaintiff and to force the Plaintiff to accept a lesser payment.

9.At page 589G of the judgment of Hunter J.A. in Murjani BK  v.  Bank of India (1990) 1HKLR 586, it was said “Order 14 r3 put an onus upon a defendant…“to satisfy the court with respect to the claim….that there is an issue or question in dispute which ought to be tried”. It might be described as a threshold onus upon a defendant to show that there is a triable issue in the case. That onus can only be satisfied on the balance of probabilities, and this is the only way in which a court can consider it”. This is an appropriate case for the Plaintiff to take out Order 14 application for summary judgment on the whole outstanding amount of $310,777.00 as the defence put forward by the Defendant was frivolous and unbelievable. I therefore enter judgment in favour of the Plaintiff against the Defendant for the sum of $310,777.00. I also order that interest at judgment rate is to be paid by the Defendant to the Plaintiff on the said judgment from 16 August 2006, i.e. the date of the writ, to the date of handing down of this decision, and further interest at judgment rate be payable by the Defendant to the Plaintiff from the date of handing down to the date of full satisfaction of the judgment sum. I also order that the defendant is to pay the Plaintiff’s costs of this action, to be taxed if not agreed. This is a cost order nisi that is to be made absolute 14 days after handing down.

The Plaintiff: represented by Miss Yanky Lam instructed by Messrs. Lau & Ngan, Solicitors.

The Defendant: represented by Mr. Tommy Wong instructed by Messrs. Lee, Mok & Wong, Solicitors