DECOR FLOORS ENGINEERING LTD v. YUEN HUNG WAI

DCCJ1637/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1637 OF 2003

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JUDGMENT

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1. The Plaintiff is a company in the business of interior decoration and carpet supply. The Defendant is in the business of construction.

2. In this action, the Plaintiff claims against the Defendant for the balance of payment of the supply and installation of 'Flotex tile' an environmentally friendly carpet manufactured in the United Kingdom.

3. The Defendant claims that the Plaintiff failed to deliver the carpet within 6 to 8 weeks of confirmation of the contract and therefore, was in breach of the contract, causing damage and loss to the Defendant. The Defendant further claims that due to the failure of the Plaintiff to conduct a re-measurement of the carpet after installation, the exact size of the carpet supplied was never established. The Defendant counterclaims against the Plaintiff for loss suffered due to the delay of delivery of the carpet.

The Contract

4. The Plaintiff sent a quotation for the supply and installation of 620 sq. m. of 'Flotex tile' to the Defendant on 19th August 2002. In late August 2002, the Defendant signed the quotation, indicating he had accepted the price and delivery terms and conditions therein and faxed it back to the Plaintiff (the said contract).

5. It is a term of the contract contained in the signed quotation that the contract price for 620 sq. m. of Flotex tile including installation and removal of existing old carpet and labour was $217,140. It further stipulated that delivery would be made within 6 to 8 weeks of the confirmation of order and confirmation of deposit.

6. It is a term of the said contract that payment of contract price would be made by 3 instalments: 30% of the contract sum to be payable upon confirmation of order by letters of credit; 40% to be payable upon delivery to site by letters of credit; and the remaining 30% to be payable within 14 days of completion of work. It is a further term of the said contract that payment would be charged in accordance with the footage of carpet actually supplied and measured at the site.

The Plaintiff's Case

7. The Plaintiff's sales executive Mr. Tam Kin Hing (PW1) gave evidence on behalf of the Plaintiff. It is his evidence that the signed quotation was faxed back to the Plaintiff by the Defendant on or about 30th August 2002. Before receiving the same, he was informed by Mr. Yuen Kwong Ming (DW2) over the telephone that the Defendant would accept the quotation, this was on or about 28th or 29th August 2002.

8. Upon receiving the signed quotation from the Defendant, he commenced the ordering process with the UK manufacturer. On 3rd September 2002, he received by courier from the Defendant the letters of credit No. G-01-U-BA535 (the L/C) issued on 29th August 2002. He noticed that the date of delivery on the L/C specified the date of delivery as 20th October 2002 which he considered to be inconsistent with the contractual delivery date of 6 to 8 weeks of confirmation of order and initial deposit. He called up Mr. Yuen Kwong Ming and a Miss Wong of the Defendant and enquired about the delivery date stated on the L/C. They promised him that they would talk to the Bank of China which issued the said letters of credit.

9. On 6th September 2002, the Defendant sent the cargo receipt to the Plaintiff. On 7th September 2002, the Plaintiff prepared a collection order and presented it together with the bill of lading and cargo receipt to the Hong Kong Bank for payment under the said letters of credit. On 12th September 2002, the Plaintiff was informed by the Hong Kong Bank that due to discrepancies in the bill of lading (shortdrawn) and the cargo receipt had failed to show the quantity of goods received the money would not be paid. The Plaintiff notified the Defendant to follow up the matter immediately, as a result, payment of the 30% initial deposit was not received until 24th September 2002.

10. On 28th October 2002, the Plaintiff invoiced the Defendant for the 2nd payment of 40% of the contract price reminding the Defendant to supply the Plaintiff with cargo receipt etc. to facilitate payment under the L/C.

11. It was Mr. Tam's evidence that on 28th or 29th October 2002, he had informed the Defendant's Yuen Kwong Ming the carpet would be arriving in Hong Kong on or about 1st November 2002 and the Plaintiff would be ready to install the carpet. Mr. Yuen told him that he would consult the Civil Engineering Department. They eventually agreed that the carpet would be delivered on 4th November 2002 and installation would be completed on 8th November 2002.

12. Mr. Tam claimed that the carpet was delivered to site on 4th November 2002 and installation work started soon after, but the Defendant failed to acknowledge and confirm the receipt of carpet until 7th November 2002.

13. The Plaintiff claimed that the 2nd instalment payment of 40% had not been paid at the time the carpet was installed and after measurement of the exact footage installed and the reduction of the original 620 sq. m. by 22.36 sq. m. supported by the inwards return, the total amount that remained outstanding is $144,172.

The Defence Case

14. The evidence of the Defendant Mr. Yuen Hung Wai was that the Plaintiff had demanded payment of the first and second instalments by letters of credit. Though it was a more expensive mode of payment, the Defendant nevertheless agreed to it. It had involved the Defendant depositing the total amount to be paid at the bank before letters of credit could be issued.

15. It is the Defendant's evidence that as the agreement was signed on 26th August 2002, delivery should be made within 6 to 8 weeks from 26th August 2002 and no later than 21st October 2002. As the Plaintiff failed to deliver the carpet to the site until 7th November 2002 the Plaintiff was in breach of the agreement. Further, no re-measurement had ever taken place, therefore, exact payment was never ascertained.

16. The Defendant counterclaims for loss suffered at $2,200 per day including wages paid to a foreman, a site quantity surveyor and a site clerk together with food and travelling expenses of the site staff and the foreman's mobile phone expenses, totalling $39,000 for a period of 18 days delay.

17. The Defendant's brother Yuen Kwong Ming gave evidence and claimed he was unable to recall any telephone conversation with the Plaintiff's Mr. Tam Kin Hing (PW1) over the stated date of delivery on the said L/C or that he had agreed to talk to the Bank of China over the discrepancy of the date of delivery.

Findings

18. The parties included a large number of documents and correspondence in the agreed bundle, the majority of these were referred to in the witness statements of the parties' witnesses.

19. These documents revealed that the parties had engaged in protracted arguments before legal representations were retained. The more important documents, however, are those issued between August and November 2002. They gave assistance to clarify and support the oral evidence given by witnesses.

The Agreement

20. The first important document is the 'Quotation' signed by the Defendant and returned to the Plaintiff on p. 85 of the bundle. This document is a faxed document with the date and time of transmission appearing on the top the document as '30 August 2002 16:57'. The document was signed and dated by Mr. Yuen Hung Wai, the Defendant. The date that he wrote under his signature was '26 August 2002'. There was further a 'received' chop with the date of 30 August 2002 at the top of the document.

21. This document, therefore, supports the Plaintiff's claim that it had only received confirmation of acceptance of the quotation from the Defendant on 30th August 2002. Though Mr. Tam (PW1) admitted to have called the Defendant's Mr. Yuen Kwong Ming (DW2) and was told the Defendant accepted the quotation one or two days before written confirmation was received on 30th August 2002.

22. Accordingly, I am satisfied that the quotation was confirmed and accepted by the Defendant in writing on 30th August 2002.

Payment of Deposit

23. There were disputes as to whether there had been any negotiations over the quotation for the supply of the carpet between the parties and if there was an earlier quotation sent to the Defendant. There were also disputes as to which party had suggested the use of letters of credit for settlement of the first and second instalments. I consider these to be issues of minor importance. Save as to say that without prior communications, the delivery terms and mode of payment set out in the 19 August 2002 quotation would not have appeared on the said quotation and the Defendant would not have signed it without alterating any of the terms set out therein.

24. The Defendant insisted in his evidence in Court that delivery of the carpet should be 6 to 8 weeks from the date of his signing the agreement. It is trite law that a contract only becomes a binding contract after its acceptance has been communicated. The formal communication of the Defendant's acceptance of the terms and conditions of the Plaintiff's offer contained in the 19 August 2002 quotation was undoubtedly 30th August 2002 when it was sent by fax to the Plaintiff.

25. The delivery date of the carpet according to this document is '6 to 8 weeks after the receipt of the order from buyer and deposit confirmation'. The Plaintiff claims that as the deposit under the L/C was not received until 24th September 2002, the 6 to 8 weeks delivery time should not start to run until 24th September 2002.

26. The Defendant, on the other hand, claimed the Plaintiff had confused the word 'confirmation' with 'paid'. Therefore, the 6 to 8 weeks delivery date should not start to run on 24th September 2002.

27. I reject the Defence's argument that the delivery date started to run either on 26th August 2002 or 28th August 2002. Neither should it run from 30th August 2002. The reason being that the terms set out in the agreement signed by the Defendant stated that two conditions had to be satisfied under 'Delivery' :

(1) receipt of the order from the buyer and;

(2) deposit confirmation.

The receipt of the Defendant's formal acceptance in writing by the Plaintiff on 30th August 2002 satisfied the first condition only.

28. As to the definition of 'deposit confirmation', Mr. Hui, Counsel for the Plaintiff, relied on a number of authorities, all of them relating to the use of the term in banking. These are Spectros International plc v. Madden [1997] STC 114, 70 Tax Case 349; R.v. Christopher Karl Frier [1997] NSW Lexis 91; the Hong Kong case of A.G.v. Van Sou Leng [1989] 1 HKC 27 and the Australian case In the Marriage of G and M Atkinson & ors 21 Fam. LR 279.

29. I accept the interpretation by the Court in the aforesaid authorities, that upon the deposit of the money into the payee's bank account, the payee's bank would then issue a deposit confirmation.

30. The Plaintiff did not receive the cargo receipt from the Defendant until 6th September 2002. The cargo receipt issued by the Defendant bears this out for it is dated 6th September 2002 (p. 102 of bundle). This is supported by the receipt dated 6th September 2002 issued by the Plaintiff (p. 103) and the collection order sent by the Plaintiff to its own bank, Hong Kong Bank (HSBC), dated 7th September 2002 (p. 104).

31. For reasons set out in the rejection of application documents from HSBC (p.p. 106-107), payment was not made until 24th September 2002. These documents do not support the Defendant's allegation that it was the Plaintiff which failed to obtain payment from the Defendant's banker, the Bank of China. The documents clearly showed that the delay in payment was due to reasons of 'shortdrawn' and the date of delivery was wrong and clarifications have to be made by the Defendant.

32. It must be apparent to the Defendant early on that with the complications of the stated date of delivery and amount of payment on the L/C would lead to delay in payment of the initial deposit which in turn would result in late delivery. Though the Defendant's brother Mr. Yuen Kwong Ming had no recollection of the request from Mr. Tam over the clarifications of the delivery date on the L/C, I am satisfied that the Plaintiff must have obtained the assistance of the Defendant before the 30% initial deposit was finally paid on 24th September 2002. Before the 24th September 2003 payment, it cannot be said in any way that the deposit had been confirmed, particularly when documents such as the cargo receipt had to be executed by the Defendant. Adopting the definition of 'deposit confirmation' applied by the courts in the cases referred to above, I am satisfied that delivery should take place 6 to 8 weeks after 24th September 2002.

33. Consequently, the last date of delivery should be 8 weeks from 24th September 2002, taking it to 18th November 2002. It follows that whether the Plaintiff delivered the carpet at site on 4th November 2002 (the delivery date the Plaintiff claimed) or 7th November 2002 (date acknowledged by the Defendant), the Plaintiff was still within 6 to 8 weeks of the confirmation of deposit on 24th September 2002.

34. As to the payment of the second instalment, the Plaintiff sent to the Defendant a commercial invoice dated 28th October 2002, the Defendant faxed it back on 1st November 2002 with an endorsement that the goods had not yet arrived at site (p. 111 of bundle). By this commercial invoice the Plaintiff requested payment of the 2nd instalment of 40% of the invoiced price at $86,856. Mr. Tam claimed that this invoice was issued in anticipation that the carpet would be delivered shortly for the 2nd instalment was to be paid at delivery of the carpet at site (p. 39 of the bundle).

35. Clearly the Plaintiff's delivery note was wrongly dated to 2nd December 2002 since the Defendant acknowledged its receipt on 7th November 2002. Further, the date of delivery stated on the document was '4/11/2002(一)'. According to Mr. Tam, the (一) after 4/11/2002 meant Monday in Chinese. This document bears evidence showing that it was not until 14th November 2002 that the Defendant faxed the delivery note back to the Plaintiff. It follows that the Plaintiff would not be able to obtain payment until after 14th November 2002 under the L/C. In any event, if the date of delivery on the L/C remained unamended at 20th October 2002 and its validity expired on 30th October 2002, it is unlikely that the Plaintiff would be able to obtain payment of the second instalment of 40% after 30th October 2002. As I have heard no evidence adduced that the validity of the said L/C had been extended to beyond 30th October 2002, I assume it was never extended and the Plaintiff could not have obtained any payment of the 2nd instalment under the said L/C.

The Re-measurement of Carpet

36. The Defendant claimed that final payment is subject to re-measurement of the exact footage of carpet installed, as no formal re-measurement took place, the Defendant is not liable to pay the Plaintiff. He relied on clause 3 of the terms and conditions of the agreement (p. 35 of bundle).

37. On 18th November 2002, the Plaintiff issued and delivered to the Defendant a 'return inwards', setting out the shortfall between the carpet ordered and the actual carpet installed to be 22.36 sq. m. (p. 128 of bundle). This was accepted by the Defendant because the Defendant amended the Plaintiff's commercial invoice reducing the footage of carpet installed to 597.64 sq. m. (p. 181 & p. 49 of bundle). The Defendant admitted that the amendment was made by him. He had sent this document together with his letter to the Plaintiff on 22nd January 2003.

38 ． The condition relied on by the Defendant under clause 3 of the agreement (p. 35 and p. 94 of the bundle) is as follows:

"3) The quantity stated in this contract shall be subject to the actual area measured at the spot."

39. On the evidence before me referred to above, it is quite clear the Defendant had accepted the actual area of carpet measured at site to be 597.64 sq. m. Clause 3 did not require a joint re-measurement to be performed or that it should be measured by an independent third party such as a surveyor. It only provided that the quantity of carpet sold to be subject to the actual size of carpet installed measured at site.

Conclusion

40. Based on the reasons set out above, I am satisfied the Plaintiff was not in breach of the agreement and the Plaintiff has proved its claim against the Defendant on a balance of probability. I reject the Defendant's counterclaim and order that the Defendant to pay to the Plaintiff the judgment sum of $144,172. I give judgment in favour of the Plaintiff.

41. The Defendant shall pay to the Plaintiff interest on the said judgment sum from date of writ to date of judgment at half judgment rate and thereafter at judgment rate until full payment.

42. Costs nisi - costs to follow the event and shall be borne by the Defendant to be taxed if not agreed with certificate for Counsel.