Success Reward Engineering Ltd v. Ever-cold Refrigeration Trading Co Ltd
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DCCJ 5479/2004 & 5871/2004 (Consolidated) IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NOS. 5479 AND 5871 OF 2004 ____________ BETWEEN
____________ Coram: H.H. Judge Chow Hearing dates : 21st to 24th January, and 11th February 2008 Date of handing down Judgment : 18th April 2008 JUDGMENT
1.In this action the Plaintiff claims against the Defendant for $211,900, being the difference between the sums of a sales contract($705,000.00), a variation order ($58,300.00) dated 22 July 2003 and a variation order ($17,000.00) dated 30 July 2003 (“Sales Contract”) dated 9 January 2003 and the sums paid by the Defendant totaling $568,400.00 under the Sales Contract. On the other hand, the Defendant counterclaims against the Plaintiff in the sum of $320,200.00, being damages for breach of the Sales Contract by the Plaintiff, particularized as follows: -
Background 2.On or about 9 January 2003, the Plaintiff and Ever-Cold Engineering Company Limited (“ECE”) entered into the Sales Contract in the contract sum of HK$705,000.00, whereby the Plaintiff had to supply control panels to the Defendant for use in a project at Tseung Kwan O (“the Project”). On 4 April 2003, ECE was deregistered in the Companies Registry, whereupon the Defendant took over ECE’s rights and obligations under the Sales Contract. 3.Between late May and late August 2003, the Plaintiff made deliveries of the items under the Sales Contract to the Defendant at the site of the Project, namely, Area 73A at Tseung Kwan O for Phase 3 and Phase 4 (“the Site”). 4.On 22 and 30 July 2003 respectively, the Plaintiff made quotations to the Defendant for two Variation Order items of $58,300.00 and $17,000.00 respectively. On 10 September 2003, the Plaintiff delivered the Variation Order items to the Defendant at the Site. 5.Between September and October 2003, the Plaintiff issued invoices to the Defendant in respect of the items under the Sales Contract and the Variation Order items, totaling $779,900.00. So far, the Defendant has made payments to the Plaintiff totaling $568,400.00 pursuant to the Sales Contract. The Plaintiff’s evidence 6.Mr. Yuen Lik Hang (“Yuen”) testified on behalf of the Plaintiff. At the material times, he was responsible for the Project. On or about 9 January 2003, a Sales Contract was entered into between the Plaintiff and one Ever-Cold Engineering Company Limited (“the Sales Contract”). Ever-Cold Engineering Limited was a sub-contractor of the Project at the Site, and the Plaintiff was engaged by Ever-Cold Engineering Limited to supply and deliver pump control panels and fire alarm equipments as specified in the Sales Contract for the use of the Project. The Sales Contract was entered into by one Mr. Lam Wai To (“Lam”) for and on behalf of the Ever-Cold Engineering Company Limited. 7.Within 2 months after entering into the Sales contract, Yuen handed over the following diagrams to Mr. Lam for their further submission to the Housing Authority for approval:
8.The Plaintiff had in the past provided for control panels of the main buildings for the Hong Kong Housing Authority. With such experience, the Plaintiff supplied the drawings for control panels of the main block which was in fact the standard drawing for the Hong Kong Housing Authority. It provided materials and equipments to Ever-Cold Engineering according to those standard specifications. 9.Apart from the said Housing Authority Standard Drawing for control panels of the Main Block, the Plaintiff was responsible for drafting all other panels diagrams and the same were handed over to Lam for further submission to the Housing Authority for approval. Upon being notified by Lam of the approval by the Housing Authority of the other panels diagrams and endorsement on the said diagrams of the approval by Lam, the Plaintiff proceeded to produce the relevant pump control panels and fire alarm control panels. 10.From about 30 May 2003, the Plaintiff started to deliver the assembled control panels to Ever-Cold Engineering. All the relevant control panels were delivered by 10September 2003. Upon delivery of batches of the assembled control panels, Ever-Cold Engineering would install the same together with the connection of electricity and connection of the panels to other parts of the relevant buildings. Every time after Ever-Cold Engineering had finished installing the control panels, Lam would notify the Plaintiff to conduct tests and commissioning (“T&C”) for the control panels. 11.Various T&C were conducted with the Fire Services Department in Yuen’s presence for approval of the completed work by the Fire Services Department. 12.In about early July 2003, Yuen received a telephone call from Lam, saying that the Front Panel Covers of 2 fire alarm panels installed in the secondary schools for Phase 3 and 4 required replacement. However, due to the fact that T&Cs by Fire Service Department were scheduled for 15 July 2003 and 16 July 2003 for the secondary school in Phase 3, Lam requested the Plaintiff to replace the said front panel covers after completing the T&Cs by Fire Services Department for the relevant panels. 13.Lam requested them to supply extra panel equipments for their project. Quotations of prices for these extra equipments were passed to Lam for his approval. 14.By way of a variation order dated 22 July 2003, Ever-Cold Engineering ordered from the Plaintiff extra panels equipments in the agreed price of HK$58,300.00 (“the 1st VO”). Since further panel equipments were required, Ever-Cold Engineering further ordered from the Plaintiff more panel equipments in the agreed price of HK$17,000.00 by way of a second variation order dated 30 July 2003 (“the 2nd VO”). 15.After receiving the 1st VO and 2nd VO, the Plaintiff proceeded to assemble or produce brand new Front Panel Covers for the 2 fire alarm panels and delivered the same to the Ever-Cold Engineering on 10 September 2003 for installation according to the instructions of Lam. 16.A T&C was conducted by Fire Services Department for the completed work in the secondary school in Phase 3 from 15 July 2003 to 16 July 2003. 17.The 1st T&C was conducted by Fire Services Department for the completed work in the secondary school in Phase 4 and the main block form 15 October 2003 to 17 October 2003 and on 20 October 2003. 18.Then, another T&C was conducted by the Fire Services Department for the completed work in the main block from 22 October 2003 to 24 October 2003 and on 17 October 2003. 19.In or about mid November 2003, Mr. Lam informed the Plaintiff that the Fire Services Department approved the Plaintiff’s work on all of the above 3 T&Cs. 20.Payment for the outstanding prices of the Sales Contract and the said 1st VO and 2nd VO were overdue. The payment should have been made upon delivery of the equipments. The Plaintiff made repeated requests for payment by various telephone calls and sending of monthly statements, but Ever-Cold Engineering still failed to settle the balanced sum of $211,900.00. It was not until about the morning of 7th March 2004 that ECE responded to their request for payment for the first time. In that morning the Plaintiff received a telephone call from Lam, alleging that there was a defect list in respect of equipments supplied by the Plaintiff. In or about the afternoon of 7 March 2004, Yuen attended the office of Ever-Cold Engineering at Wanchai to obtain the said defect list. He noticed that the defect list was issued by the Hong Kong Housing Authority to Hsin Chong Construction Company Limited, the main contractor of the projects. The date of the said letter was 1December 2003. On or about 11March 2004, Yuen went to the office of Ever-Cold Engineering, bringing along 2 letters previously prepared by them. In the letters the Plaintiff proposed to rectify all the alleged defects in the defect list within 1 week, and it requested inspection of the rectification work and payment of the outstanding amount within 1 week of the completion of the rectification work. But Lam did not agree to the proposal. 21.All along, the Plaintiff had not been given any opportunity to inspect or examine the alleged defects listed in the said defect list and were therefore not in a position to verify or to rectify them. The evidence of the Defendant 22.Lam Wai To (“Lam”), a director of the Defendant, testified for the Defendant. He said that before the execution of the Sale Contract, a conference was held between the Project employer the Hong Kong Housing Authority and Siemens Ltd. in about December 2002 or early January 2003 to discuss detail of the Project, particularly the model and requirements of pumping equipment and fire alarm control panels. Since the Plaintiff had better knowledge of such model and requirements, the Plaintiff was requested by the Defendant’s agent to attend the Conference on behalf of the Defendant’s agent. After the Conference, Yuen expressed to Mr. Chan of the Defendant’s agent that the Plaintiff was able to supply the models of water pump control panels and fire alarm control panels for the Project which shall pass the testing and commissioning of the Hong Kong Housing Authority and Fire Service Department as prescribed in the Project and urged the Defendant’s agent to execute the Sale Contract with them. 23.It is the evidence of Lam that:-
24.In or about the end of 2003/beginning of 2004, Lam was informed by Treasure Marble Limited that the HKHA had issued Defect Lists regarding the defective equipment supplied by the Plaintiff and the failure of such equipment in compliance with the specifications of the HKHA. Shortly thereafter, he orally notified Yuen about the Defect Lists and the defects concerned and requested the Plaintiff to rectify the defects as soon as possible. At the beginning of 2004, the Defendant gave the Plaintiff a copy of the compliant letter issued by Siemens to Treasure Marble Limited with respect to the equipment supplied by the Plaintiff for the Plaintiff’s immediate rectification. Therefore he repeatedly requested and demanded the Plaintiff to rectify such defects and to finish the incomplete work under the Project. A copy of the said Defect Lists issued by the HKHA and those issued by Siemens were given to the Plaintiff by the Defendant at the beginning of 2004. At the beginning of 2004, Yuen attended the site to discuss with the staff of HKHA about the defects of the equipment which were supplied by them and he expressed to Lam that the defects could be fixed shortly. However, such defects still remained unfixed by the Plaintiff. 25.On or about 13 March 2004, two unsigned letters dated 11 March 2004 (“the Letters”) were sent to the Defendant by the Plaintiff, stating that the Plaintiff shall fix the defects upon the Defendant agreeing to pay the balance of the contract sum forthwith after such defects have been fixed by the Plaintiff in 7 days. Since it was an express term in the Sale Contract that 20% of the contract sum shall only be paid after the T&C of the Project has been passed which shall be conducted by HKHA, the Defendant did not accept the Plaintiff’s proposal in the Letters and sent a letter dated 13 March 2004 to the Plaintiff to request them fix the defects as soon as possible. Analysis of evidence 26.The Sales contract expressly provides as follows:-
27.There is no reference whatsoever of “HKHA” in the Sales Contract. Therefore it is simply incorrect for Lam to say that “Further, it was an express term in the Sale Contract that 20% of the contract sum shall only be paid to the Plaintiff after the equipment supplied by the Plaintiff under the Project have passed the T&C of the Project which shall be conducted by the HKHA.” 28.Lam said that in or about the end of 2003 and the beginning of 2004 he orally informed Yuen about the Defect Lists and the defects concerned and requested the Plaintiff to rectify the defects as soon as possible. Thereafter he repeatedly requested and demanded the Plaintiff to rectify the defects and to finish the incomplete work under the project. Lam said that a copy of the Defect Lists issued by the HKHA and those issued by Siemens were given to the Plaintiff by the Defendant at the beginning of 2004, and at the beginning of 2004, Yuen attended the site to discuss with the staff of HKHA about the defects of the equipment supplied by them, and said that the defects could be fixed shortly. 29.It is not disputed that two unsigned letters dated 11March 2004 were written by the Plaintiff. If the evidence of Lam is correct, it is more than 2 months (from beginning of 2004 to March 2004) that the Plaintiff issued the two letters. According to Lam’s evidence, Yuen expressed to him that the defects could be fixed shortly. Then after more than 2 months, the Plaintiff suddenly sent to the Defendant the said letters. The Plaintiff was clearly concerned that it should receive payment from the Defendant as soon as possible. It is not credible that Yuen would send the two letters to Lam after 2 months of being notified of the Defects lists. Delay in rectifying the defects means delay in getting payment. I do not accept that the Plaintiff would only send the two letters to the Defendant after having been notified the defects 2 months ago earlier. 30.Lam refused to sign the letters because “Since it was an express term in the Sale Contract that 20% of the contract sum shall only be paid after the T&C of the Project has been passed which shall be conducted by HKHA, the Defendant did not accept the Plaintiff’s proposal in the Letters and sent a letter dated 13 March 2004 to the Plaintiff to request them fix the defects as soon as possible”. The Sale Contract does not contain the alleged express term. The Defendant’s evidence in this regard is simply untruthful. 31.I reject Lam’s evidence in this regard. Yuen’s evidence is credible. I accept his evidence. I find that what he said is what actually happened. 32.Regarding the 2nd VO for $17,000, Lam said that the 2nd VO was ordered because the Plaintiff had made mistakes on the markings of the front panel. This was not raised in the pleading. According to Lam, the HKHA had accepted work relating to the goods delivered under the 2nd VO. Further the Defendant had not adduced evidence to show the value of the goods to be deducted because of the mistake (if any). Accordingly I reject the Defendant’s submission that $17,000 for the 2nd VO was to be deducted form the Plaintiff’s claim. The Counterclaim 33.It is Lam’s evidence that the defects were to be rectified by the Plaintiff. In fact according to the Defendant it called upon the Plaintiff to do so. On the other hand, the Plaintiff admitted that there would be defects in the work done by them. The question is that the Defendant did not ask the Plaintiff to examine and to rectify the defects listed in the Defect List before the Plaintiff was given the Defect List. So it was not verified whether the defects did exist, and if so, to what extent. The Plaintiff could not enter the construction sites for the rectification work unless with the written permission of the Defendant. But the Defendant had engaged other constructors to do the alleged rectification work before the Plaintiff had the opportunity to verify the same and to rectify them. Therefore the Plaintiff was not liable for such rectification work. 34.In respect of the 10 transformers, these transformers were not included in the Sales Contract or the 2 variation orders, so the deduction of payment by the Defendant is not justified. 35.Due to the reasons above-said, I enter judgment in favour of the Plaintiff in the sum of $211,900, with interest thereon at judgment rate from 18th October, 2004 until satisfaction. I dismiss all the counterclaim. Costs 36.I make an order nisi for costs, to be made absolute in 14 days’ time, that the Defendant do pay costs to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel.
The Plaintiff : Represent by Mr. Leung Hing Fung, instructed by M/S Yip, Tse & Tang. The Defendant: Represented by Mr. Vincent Chin, instructed by M/S K.Y. Lo & Co. |
Further hearings and rulings under DCCJ 5479/2004