Leung Wing t/a Leung's Tailors v. Hon Sang Metal Window Factory

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 707 OF 1972

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BETWEEN

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Coram: D. Cons, D.J. in Court

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JUDGMENT

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1. The plaintiff in the action is a tailors cutter. In November of last year he had in mind to open his own tailoring business and accordingly negotiated for the lease of a half shop in the rear lane of Buckingham Building, Kowloon. The intending lessor was one Mrs. Fung, whom the plaintiff first met on his visit to the premises in the afternoon of the 23^rd. At that meeting it was verbally agreed, amongst other matters, that the plaintiff would take a 3 years lease commencing from the 1^st of December but that the agreement should be subject to a written lease to be drawn up on the following evening and upon condition, in effect, that the intending lessor would be able to show a good title.

2. About 3 hours later, i.e. at about 6 o’clock that evening, the plaintiff returned to the premises and was there introduced by a third party to the defendant as being an interior decorator able and willing to put the premises into a condition suitable for the plaintiff’s purpose. The general plan was agreed, measurements were taken and the defendant promised to let the plaintiff have some sketches of the proposed work within a few days. The parties then adjourned to a nearby restaurant for tea over which the defendant put forward his estimate for the total work in the sum of $6,200 which was accepted by the plaintiff. He immediately drew and handed to the defendant a cheque for $2000 against a temporary receipt. The plaintiff intimated to the defendant that the was anxious for the work to proceed as soon as possible.

3. The following morning at about 10 o’clock the plaintiff and the defendant again met, the defendant having already cashed the plaintiff’s cheque. The temporary receipt was exchanged for a formal document Ex.2 and the defendant gave to the plaintiff also an itemized bill of work Ex.1. Both these documents were at that time made out in the name of “Shun Cheung”. The plaintiff changed the name on each to “Leung’s Tailors” added what now appears as clause 7 to Ex.1. The parties then separated.

4. On the evening of the same day, i.e. the 24^th, the plaintiff met the husband of the intending lessor with a view to signing the lease, but as the husband was unable to produce the head lease the plaintiff refused for the time being. The head lease was in fact produced to him at lunch time the following day, i.e. on the 25^th, but on discovering that it was itself only a sublease and for a mere term of 2½ years the plaintiff declined to complete.

5. However in the meantime the defendant had entered into contracts with 3 subcontractors to carry out the work for which he himself had been commissioned. The subcontracts were made verbally on the afternoon of the 24^th and were confirmed in writing and by the payment of deposits at somewhere between 9 and 10 o’clock on the morning of the 25^th. The three subcontractors had attended at the premises in the rear lane of Buckingham Building for that very purpose. Upon receipt of his deposit each subcontractor left to purchase the necessary materials for his part of the redecoration. At that time the defendant had brought with him 2 casual coolies for the purpose of demolishing the existing fittings within the shop but was refused admittance by a person who appears to have been the current tenant. Having tried unsuccessfully to contact the plaintiff during that day the defendant returned with his 2 coolies on following morning but again was unable to obtain admittance and again was unable to make contact with the plaintiff, who in his turn was equally unsuccessful in contacting the defendant to notify him of his failure to secure the desired lease. This was eventually implied in a letter from the plaintiff’s solicitors to the defendant written on the 1^st of December.

6. These are the facts of this matter as I find them. There are not many points in actual contradiction within the evidence of the 2 parties, although such as they are important. In particular the plaintiff says that the agreement made with the defendant on the evening of the 23^rd, if it was an agreement at all, was to take effect only upon approval by him of the sketches for the proposed work and that his money should be returned to him if the proposed lease should fall through. Both these conditions he said were especially agreed between him and the defendant. The defendant denies these suggestions and on this aspect I prefer his evidence. It seems to me that there was little scope for variation with regard to the basic design of the projected showcases. All that might have remained would have been small details of design as the work progressed, not sufficiently important for the plaintiff to have based his whole agreement thereon. Moreover no mention was made of this aspect in any way until the plaintiff was actually in the course of giving evidence. Secondly I think it unlikely that if the plaintiff had seriously contemplated at that time that the lease might fall through he would either have not paid the money or he would have made some mention of it on Ex.1 at the time that he added the clause with regard to the time for completion.

7. It is submitted on behalf of the plaintiff that no valid or binding contract was made between the parties on the evening of the 23^rd. I am not very clear as to what sort of transaction the plaintiff suggests it was, but I have no hesitation in finding that it was indeed a contract. As I see it the defendant offered to carry out certain specific works for the plaintiff for a specified sum and the plaintiff agreed, confirming that agreement by the payment of part of the contract price. This is clearly stated in the receipt which he accepted without query the following morning. It is not correct to say that the consideration has wholly failed. Certain work has been done under that contract. His claim for the return of money on this basis therefore fails.

8. As a second string the plaintiff says that the contract was frustrated at lunch time on the 25^th when negotiations for the lease collapsed. I do not think that this is a correct interpretation of the situation because nothing intervened between the time that the contract was made until the time that its performance became impossible. The circumstances which ultimately led to its non-performance were in existence and in the contemplation of the plaintiff before the contract was made. They altered at no time thereafter. They cannot be said to be an extraneous event for which he was in no way responsible and against which he could not have been expected to guard. His current pretence that he did so guard makes this even more evident. In my opinion the contract was not frustrated, but was broken by the Plaintiff, for which he naturally must be liable in damages.

9. It is perhaps not very important in the circumstances of this case whether I am correct in this opinion or not, for the defendant would be entitled in either event to recover the expenses which he had already incurred. (Law Reform Frustrated Contracts Ordinance Cap. 25). But expenses would not have included his loss of profit and the order as to costs might have been different.

10. I have found myself in some difficulty in assessing the damages in this case. Included in the counterclaim is a specific sum of $3,400.00, the total of the deposits paid by the defendant to the subcontractors. Presumably this is based upon the defendants evidence that he particularly informed the plaintiff that he intended to employ the sub-contractors, thereby bringing the deposits within the plaintiff’s special contemplation. I take leave to doubt whether such express mention was made, but in any event I do not think that that by itself could reasonably have led the plaintiff to contemplate that the defendant would spend more by way of deposit or part payment to the sub-contractors than the amount which the plaintiff himself had handed over. Moreover the defendant appears to have made little or no attempt to mitigate his damages. Each of the sub-contractors said in evidence that he was not willing to return any part of the deposit paid to him. But I think each would be in difficulties had the defendant chosen to bring action against him. The performance of the sub-contracts was made impossible by circumstances which could not be laid at the door of either party and each sub-contractor would have been required to account for that part of the deposit which had not been properly expended in attempted performance. These amounts I have calculated as best I have been able on the vague evidence before me as follows:

11. The deposit of the electrician was $400 which he said was expended in purchasing materials. These were not unusual materials in any way but would have been stock in excess of what he would otherwise have wished to carry. He could therefore have easily disposed of them by re-sale to those from whom he had purchased or elsewhere, losing probably only the retailer’s normal profit for 33 1/3% i.e. a loss of $133. In addition he would have incurred expenses in transport and labour which I assess at $50, making a total of $183;

12. A deposit of $1,500 was paid to the metal worker who said that most of the material purchased had been worked upon and could only be used elsewhere at a considerable loss. I estimate that perhaps two-thirds of the material would be wasted and add 10% to this figure to represent the labour expended upon it. This gives a total of $1,100;

13. A deposit of $1,500 was also paid to the carpenter. From his evidence it would seem that the wastage would be much lower than that in the case of the metal and glass of the previous sub-contractor and I estimate the wastage in this instance as only one-third i.e. $500. I am not satisfied that the carpenter had expended anything substantial by way of labour.

14. These three figures give a total of $1,783 which is the amount for which the defendant should be liable to his sub-contractors. To this must be added the profit which he would otherwise have gained namely $220 giving a grand total of $2,003 which I assess to be the damages that he had suffered by reason of the plaintiff’s breach of contract. Against this must be set off the $2,000 which the plaintiff had already paid.

15. Judgment is therefore entered for the defendant upon the claim with costs; and for the defendant upon the counterclaim in the sum of $3 with costs accordingly.

Mr. Mak of Mak & Co. for Plaintiff

Mr. Wong of K.L. Wong & Co. for defendant