SHEEN WEALTH INDUSTRIAL LTD v. GLOBAL SERVICE (PROJECT) LTD formerly known as SOUTH CHINA HOUSE OF TECHNOLOGY (PROJECT) LTD

DCCJ 56/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 56 OF 2008

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JUDGMENT

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Introduction

1. These proceedings arise from the design and installation of a home automation audio and visual system (“AV System”) at a residential property known as Flats A and B, 44^thfloor and roof top podium, Block 1, Estoril Court, Hong Kong (“the Property”).  The plaintiff is the registered owner of the Property.

2. The defendant is in the business of designing and installing audio and visual system.

3. In August 2003, the plaintiff and the defendant entered into an agreement (“Main Agreement”) whereby the plaintiff engaged the defendant to design and install the AV System for the use and enjoyment of Mr Miguel Chang and his family who are residing at the Property.  Mr Chang is the plaintiff’s director.

4. Subsequent to the Main Agreement, the plaintiff made various variations and additions to the AV System making the total contract sum under the Main Agreement to be HK$435,305.

5. The plaintiff claims damages for the alleged defendant’s failure to provide maintenance and repair services to the AV System pursuant to an oral agreement made between the parties in August 2005 (“Oral Agreement”), which I shall explain below.  The defendant denies the plaintiff’s claim and had initially made a counterclaim of HK$38,005 for alleged outstanding payment under the Main Agreement.  However, as the defendant’s counterclaim of HK$38,005 fell within the jurisdiction of the Small Claims Tribunal, at the start of the trial, the defendant properly withdrew its counterclaim. Accordingly, in these proceedings, I need only determine the plaintiff’s claim.

Respective parties’ case

6. It is the plaintiff’s case that under the Main Agreement, the defendant was required to design and install a dimming system in the living room, dining room and master bedroom of the Property and that the control of the dimming system in the dining room would be integrated into the central control system for the living room.  Mr Miguel Chang, one of the plaintiff’s witnesses, said that in or about end of 2003, he discovered that despite having previously agreed with the defendant orally, the dimming system was not included in the defendant’s main quotation no Q230321D dated 11 August 2003 which became the subject-matter of the Main Agreement.  There is no dispute that the parties subsequently agreed to include the installation of the dimming system as an additional item under the Main Agreement and that the plaintiff would pay a further sum of HK$30,000 for the additional work (quotation no Q230321Ir2 Dimmer dated 6 January 2004).

7. The installation of the AV System (save as to the speakers on the roof top of the Property (which is not relevant to these proceedings) and the dimming system in the dining room, which I shall explain below)) was purportedly completed by the end of January 2005.  There is no dispute that under the Main Agreement, a 12-month operation guarantee period for the AV System started to run.

8. According to the plaintiff, since February 2005, problems started to emerge with the AV System and various parts of the AV System were not designed or installed in accordance with the Main Agreement in particular, the plaintiff discovered that the defendant had not installed the dimming system for the dining room.

9. There were various communications between the parties on the problems with the AV System.  The longer and short of this is that this culminated in a meeting between Mr Miguel Chang and Ms Vanessa Kuo of the plaintiff and Mr Ng Hing Sunand Mr Anthony Waung of the defendant on 26 August 2005 (“26 August Meeting”).

10. It is the plaintiff’s case that during the 26 August Meeting, it was agreed between the parties that (“Oral Agreement”):-

(a)  the plaintiff would relieve the defendant of its obligations under the Main Agreement to install the dimming system in the dining room;

(b)  the plaintiff would engage its own contractor to install the dimming system in the dining room and the defendant would bear the costs of that installation in the sum of HK$29,150 which would be deducted from the contract price under the Main Agreement; and

(c)  the defendant would continue to provide maintenance and repair services for the AV System for an additional two years at no charge save and except spare parts(“the Extended Warranty”).

11. The defendant does not dispute that the parties had agreed upon the terms under paragraphs 10(a) and (b) above.  Whilst the defendant accepts that it had agreed to provide an additional two years warranty for the AV System, the defendant claims that under the Oral Agreement, the parties had agreed that the Extended Warranty would only take effect after the plaintiff had paid the outstanding balance under the Main Agreement (“Outstanding Balance”).  At the time of the Oral Agreement, and after taking into account the HK$29,150 that the defendant had agreed to pay for the installation of the dimming system for the dining room, there was an Outstanding Balance of HK$138,005.  There is no dispute that subsequently on 16 January 2006, the plaintiff made a further part payment of HK$100,000 thereby reducing the Outstanding Balance to HK$38,005 which was the subject-matter of the defendant’s previous counterclaim.  The plaintiff denies that the Extended Warranty was subject to any pre-condition.  The plaintiff contends that the Extended Warranty commenced immediately after the expiration of the 12 months operation guarantee under the Main Agreement ie from February 2006.

12. According to the plaintiff, after the Oral Agreement, there continued to be problems with the AV System and the defendant had failed to provide proper or any maintenance and repair services.

13. In about 1 June 2007, the plaintiff discovered that the dimming system in the master bedroom was not working.  The plaintiff claims that although the defendant did send a technician to the Property to look into the problem on 1 June 2007, the technician did not carry out repair work.  The defendant claims on the other hand that its technician had fixed the problem during the visit on 1 June 2007.

14. The plaintiff further contends that since 28 December 2007, the defendant had failed to carry out any maintenance and repair work. The defendant’s case is that between 2005 and 2007, the defendant had provided prompt maintenance and repair services to the plaintiff notwithstanding that the plaintiff had not paid the Outstanding Balance.  The defendant claims that it was not able to carry out maintenance and repair services after 28 December 2007 because the plaintiff had since that date refused to discuss the problems of the AV System with the defendant.

15. Although prior to the trial, the parties had agreed on a list of issues that I am required to determine, after hearing the evidence and given that the defendant had withdrew its counterclaim, as Mr Spencer Lee for the plaintiff had acknowledged, the key issues that I am now required to determine to dispose of these proceedings are effectively these:-

(a)  whether it was a term of the Oral Agreement that the plaintiff had to pay the Outstanding Balance before the Extended Warranty would take effect;

(b)  whether the defendant was in breach of the Oral Agreement in failing to provide any or proper maintenance and repair services for the AV System in particular:-

(i)  whether the defendant had rectified the problems with the dimming system in the master bedroom; and

(ii)  whether the defendant had failed to provide maintenance and repair services after 28December 2007.

Terms of the Oral Agreement

16. Following the 26 August Meeting, Mr Anthony Waung, a Business Development Manager of the defendant, wrote two e-mails to Ms Vanessa Kuo on 29 August 2005 confirming that the defendant agreed to provide the Extended Warranty at no extra charge save as to spare parts and that the Extended Warranty would commence in January 2006.  According to one of those e-mails from Mr Waung, the 12 months operation guarantee would expire at the end of 2005.  The contents of Mr Waung’s e-mails clearly contradict the defendant’s claim that it was a pre-condition to the Extended Warranty that the plaintiff had to pay the Outstanding Balance.  I was not able to hear Mr Waung’s evidence on this as the defendant did not call Mr Waung as a witness.  Mr Waung clearly had a key role to play in the subject-matter of these proceedings until he left the defendant in 2006.  During cross-examination, Mr Ng Hing Sun, director of the defendant was not able to offer any good reason for Mr Waung’s absence from the trial.

17. Further, by an e-mail and fax from Mr Waung to Ms Kuo respectively dated 24 and 25 October 2005, Mr Waung confirmed that the Extended Warranty would commence in February 2006 and expire in January 2008.  Again, there was no mention in that e-mail and fax that the Extended Warranty would only take effect after the plaintiff had paid the Outstanding Balance.

18. In his evidence, Mr Ng Hing Sun said that during the 26 August Meeting, he had specifically raised with Mr Miguel Chang and Ms Vanessa Kuo that if the plaintiff paid the Outstanding Balance, the defendant would provide the Extended Warranty.  In my judgment, if that were true, in particular that an agreement had been reached between the parties that the payment of the Outstanding Balance would be a pre-condition to the Extended Warranty taking effect, the defendant would have recorded this in the correspondence that followed after the 26 August Meeting.  I have not seen any evidence of this.  The defendant’s explanation for such absence of written record is that the Outstanding Balance was not a significant sum and thus the defendant chose not to chase the plaintiff for payment in writing.  I do not accept this.  I note that prior to the 26 August Meeting, there were two separate e-mails from Mr Waung to Mr Howard Chang (Mr Miguel Chang’s son) and Ms Kuo respectively dated 24 May 2005 and 25 July 2005 in which the defendant chased the Outstanding Payment.  If the defendant were chasing payment in writing prior to the 26 August Meeting, there is no reason to suppose that the defendant would not continue to do so after that Meeting.  This would be particularly so in the light of the matters that I shall discuss in the paragraph below.

19. Mr Ng tried to explain the terms of the defendant’s fax to the plaintiff dated 25 October 2005 referred to in paragraph 17 above by suggesting that since the 26 August Meeting, Mr Anthony Waung had repeatedly chased Ms Vanessa Kuo and Mr Miguel Chang for the Outstanding Payment and Ms Kuo/Mr Chang said that they would only arrange payment after the defendant had given a written confirmation on the terms of the Oral Agreement.  I have not heard evidence from Mr Waung regarding this.  Further, I do not believe Mr Ng’s assertions because if his assertions were true, in my view, Mr Waung would have issued written reminders to the plaintiff for payment of the Outstanding Balance given that he had done so prior to the 26 August Meeting.  I have not seen such documentary evidence. In the course of Mr Ng giving oral evidence, I have found Mr Ng to be evasive in his response.  I find myself unable to rely on the evidence of Mr Ng where it conflicts with the evidence of the plaintiff.

20. In her evidence, Ms Kuo said that the first time the defendant raised that payment of the Outstanding Balance was a pre-condition to the Extended Warranty taking effect was in the e-mail from Mr Waung to Ms Kuo dated 24 March 2006 which attached a Service Agreement Proposal for the Extended Warranty.  Clause 1 of the Proposal provided that the Service Agreement would only take effect after all outstanding bills had been settled by the plaintiff.  The Proposal was not signed by the plaintiff as it did not accept such term.  Ms Kuo said that prior to the Proposal, at no time did the defendant suggest that the plaintiff had to pay the Outstanding Balance before the defendant would provide the Extended Warranty.  I accept Ms Kuo’s evidence which is supported by the contemporaneous documents as I have explained above.  I have found Ms Kuo to be honest and reliable.  Ms Kuo left working for Mr Miguel Chang since the end of April 2008 and had since returned to Taiwan.  She had specifically returned to Hong Kong on this occasion to give evidence.

21. Mr Miguel Chang also confirmed in his evidence that the defendant had never raised that payment of the Outstanding Sum was a pre-condition to the Extended Warranty taking effect.  I believe Mr Chang.  Having heard Mr Chang’s evidence and seen his demeanour in Court, I find Mr Chang to be a reliable witness.

22. During the trial, the defendant also called its manager, Mr Chu Kar Cheong as a witness.  Mr Chu asserts that it was a pre-condition to the Extended Warranty that the plaintiff had to pay the Outstanding Balance.  I place no weight on Mr Chu’s assertion.  During cross-examination, Mr Chu admitted that he was not involved in the subject-matter of these proceedings until November 2007 and have no personal knowledge of the 26 August Meeting.

23. For the above reasons, I find that it was not part of the Oral Agreement that the plaintiff had to pay the Outstanding Balance before the Extended Warranty would take effect.  Accordingly, the Extended Warranty took effect from February 2006 to January 2008.

Whether the defendant provided maintenance and repair services after the Oral Agreement

24. The plaintiff’s case is that after the Oral Agreement, there were continuous problems with the AV System and the defendant was either slack in providing and/or had failed to provide maintenance and repair services in particular, in respect of the malfunction of the dimming system in the master bedroom in June 2007.

25. In her evidence, Ms Vanessa Kuo said that there were continuous problems with the AV System and the defendant would only attend the Property to check and repair after repeated requests and reminders from the plaintiff.

26. In my judgment, the plaintiff’s case is supported by the contemporaneous documents.  It is evident from the following of the plaintiff’s letters (“Plaintiff’s Letters”) that the plaintiff had been experiencing continuous problems with the AV System and that the defendant had not been providing proper or any maintenance and repair services to the plaintiff:-

(a)  in the plaintiff’s letter to the defendant dated 27 June 2006, the plaintiff complained that the replaced remote control in the master bedroom was not functioning properly;

(b)  in the letter from the plaintiff to the defendant dated 15 December 2006, the plaintiff complained that the defendant had continuously failed to adjust and tune the speakers for the karaoke speaker system.  In that letter, the plaintiff also complained of the outstanding installation of a mixer.  The plaintiff followed up on this with a reminder letter to the defendant on 19 December 2006;

(c)  in the plaintiff’s letter to the defendant dated 20 December 2006, the plaintiff expressed disappointment with the defendant’s services;

(d)  by the plaintiff’s letter to the defendant dated 27 December 2006, the plaintiff complained that there were many problems with the AV System which had yet to be fixed including the outstanding installation of the mixer referred to above;

(e)  in the letter from the plaintiff to the defendant dated 15 March 2007, the plaintiff was again complaining about the outstanding problems to the AV System which the defendant had yet to attend, including tuning the speakers in the living room and to the karaoke speaker system and  interference problems in the master bedroom system;

(f)  in the plaintiff’s letter to the defendant dated 15 June 2007, the plaintiff was again complaining about the defendant’s services.  In that letter, the plaintiff mentioned that despite the defendant having attended the Property to inspect the malfunction of the dimming system for the master bedroom, the defendant had failed to carry out repairs; and

(g)  by the plaintiff’s letter to the defendant dated 21 November 2007, the plaintiff continued to complain of the slack maintenance and repair services of the defendant including the defendant’s failure to repair the dimming system in the master bedroom and malfunction of the audio system in the living room.

27. From the evidence, I have only seen two letters in reply from the defendant dated 22 December 2006 and 18 December 2007.  In those defendant’s letters, the defendant merely asserted that they had been providing maintenance and repair services notwithstanding that the plaintiff had not yet paid the Outstanding Balance.  The defendant’s letters did not respond to the specific problems that the plaintiff had encountered with the AV System as referred to in the Plaintiff’s Letters.

28. Insofar as the malfunction of the dimming system in the master bedroom is concerned, following the defendant’s attendance at the Property on 1 June 2007, it is apparent from the Plaintiff’s Letters that the problem remained unfixed.  The defendant has not adduced any evidence to show that the problem had been fixed by its technician.  During cross-examination, Mr Ng Hing Sun admitted that he had no knowledge of the problem with the master bedroom dimming system.  Mr Chu Kar Cheong said that he had only heard about the problem from his colleagues but was not able to elaborate on this as he said he was not involved in the technical side.

29. In its defence, the defendant pleaded that it did not receive the plaintiff’s letter dated 15 June 2007 chasing the defendant to repair the dimming system for the master bedroom.  I do not believe this.  The plaintiff had adduced a fax report confirming that the plaintiff’s letter of 15 June 2007 was successfully transmitted to the defendant.  In any event, even if the position was that the defendant did not receive the plaintiff’s letter of 15 June 2007, by the plaintiff’s letter dated 21 November 2007, the plaintiff had again chased the defendant to repair the dimming system.  The defendant’s letter dated 18 December 2007 purportedly in reply to the plaintiff’s letter of 21 November 2007 did not make any reference to the dimming system.  If the position was as suggested by the defendant that it had repaired the dimming system, no doubt, the defendant would have raised this in its letter of 18 December 2007.  In my judgment, the truth is that the defendant had refused to fix the problem due to the Outstanding Balance.

30. On 20 December 2007, the plaintiff’s solicitors wrote to the defendant demanding that the defendant fix the problems with the AV System including the dimming system for the master bedroom by 28 December 2007.  There is no dispute that the defendant attended the Property on 28 December 2007.  The plaintiff claims that the defendant only inspected the AV System and did not carry out any maintenance or repair work and that the defendant had since failed to approach the plaintiff to follow-up on the problems.  In its defence, the defendant alleges that after the inspection on 28 December 2007, the defendant said that it would later send its software engineer or programmer to follow-up on the problems. However, the defendant claims that it was subsequently unable to attend at the Property as the plaintiff had refused to discuss the problems with the defendant.  The defendant has not adduced any evidence on this.  Mr Ng Hing Sun admitted in cross-examination that he had no knowledge of the matters relating to the inspection on 28 December 2007.  Mr Chu Kar Cheong also admitted that he had no personal knowledge of the inspection on 28 December 2007 although he was told about this by his colleagues.  Mr Chu said that however, he was not able to elaborate on this as he was not involved on the technical aspect.

31. Following the inspection on 28 December 2007, the plaintiff’s solicitors wrote to the defendant on 29 December 2007 complaining that apart from identifying defects in the AV System during the inspection on 28 December 2007, the defendant did not proceed to repair the same.  Although the defendant had instructed its previous solicitors to issue a letter dated 3 January 2008 purportedly in response to the plaintiff’s solicitors’ letter of 28 December 2007, the crux of that letter was only to chase for the Outstanding Balance.  That letter did not mention the inspection on 28 December 2007, not to mention that there was no reference to the defendant agreeing to subsequently send its programmer or software engineer to look into the problems.

32. In my judgment, after 28 December 2007, the defendant refused to attend the Property to carry out maintenance and repair work as there remained the Outstanding Balance.

33. For the above reasons, I find that the defendant was in breach of the Oral Agreement in failing to provide maintenance and repair services.

Relief

34. As the parties have agreed the plaintiff’s damages to be HK$82,600, I give final judgment in favour of the plaintiff as follows:-

(a)  the defendant shall pay the plaintiff in the sum of HK$82,600 with interest at prime plus 1% from the date of the writ of these proceedings, 5 January 2008;

(b)  the plaintiff’s costs of this action be borne by the defendant.

35. Orders as to costs and interest shall be on a nisi basis.