XCHRX KOOLDUCT LTD. v. AMEC ELECTRICAL AND MECHANICAL ENGINEERS LTD.

1997, No. A5661

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

______________

JUDGMENT

______________

These Proceedings

1. The plaintiff issued a writ against the defendant on 28 May 1997. The statement of claim alleged that the defendant was indebted to the plaintiff in the sum of $842,594.86 in respect of goods sold and delivered by the plaintiff to the defendant as reflected in 10 invoices dated between 30 June 1995 and 27 July 1996.

2. In its defence, the defendant pleaded that it was a term of the contract between the parties that "Invoice for your material must be c.c. copy to M/S Ideal Mechanics Engineering Ltd for signature, we will not pay for any invoice without Ideal Mechanic's approval." The defendant denied that any of the goods concerned had been delivered to the defendant or Ideal Mechanics, and alleged that Ideal Mechanics had not approved any of the invoices. As to one invoice, numbered PY0101/95 dated 30 December 1995 in the sum of $127,008.10, the defendant alleged that these goods were ordered by Ideal Mechanics, not by the defendant.

3. Thereafter, the plaintiff applied for summary judgment under Order 14. This was granted by the Master in the sum of $715,586.76, and he gave unconditional leave to defend in respect of invoice PY0101/95.

4. The defendant now appeals against the decision. The plaintiff seeks judgment for the whole amount claimed.

The Plaintiff's Case

5. On 13 September 1994, the parties entered into a contract to supply and deliver ductworks and accessories. The quantity was stated to be 23,100 square metres at $152 per square metre, giving a total of $3,511,200. This was said to be indicative only with the actual quantity being based on "material request forms issued by [the defendant's] sub-contractor and against [the plaintiff's] invoice and delivery note.". The relevant special terms of the contract were -

"8. Responsibility of design, co-ordination, quality inspection/control, site measurement, site production in respect of fabrication of "Koolduct" to suit site situation shall be undertaken by our sub-contractor M/S Ideal Mechanics Contracts & Engineering Ltd and supplier "Koolduct" Ltd.

9. AMEC is not responsible for any mistake in all aspects specified in item 8 above.

10. Supplier are responsible for handling and removal of their surplus/waste material on site.

13. Invoice for your material must be c.c. copy to M/S Ideal Mechanics Engineering Ltd for signature, we will not pay for any invoice without Ideal Mechanic's approval."

6. In an affidavit filed on behalf of the plaintiff, Mr Leung Tak Tong says that orders were received from Ideal in pursuance of this contract, and goods were delivered to the site between September 1994 and July 1996. There were over 100 deliveries. Each delivery was inspected and approved by Ideal on site. All the delivery notes and order requisition forms were initialled by Ideal's "site representative and/or stamped 'Inspected' by Ideal Mechanic's site representative.".

7. Mr Leung says that standard items were delivered to the site and delivery notes signed "and/or" chopped. Custom made items were assembled on site by the plaintiff and Ideal's order requisitions signed and chopped after inspection. Invoices were then issued. These methods were used throughout the project. Between 28 October 1994 and 27 June 1996, 25 invoices were issued by the plaintiff, 15 of which were paid by the defendant leaving the 10 concerned in this action. There is nothing, Mr Leung says, to differentiate between these two sets of invoices. Mr Leung says that copies of the invoices were sent to Ideal, that Ideal did not complain about the invoices and that the defendant did not object that Ideal had not approved the invoices.

8. Regarding invoice PY0101/95, Mr Leung says that this was initially addressed to Ideal in error. When the error was discovered, the invoice was sent to the defendant.

9. In the plaintiff's reply, as unamended and filed before Mr Leung made his affidavit, it says that "In fact, none of the invoices issued by the plaintiff under the agreement were copied to Ideal.". As to the defendant's allegation that the invoices were not approved by Ideal, the plaintiff's amended reply pleads "approval of the plaintiff's invoices has or is deemed to have been given by Ideal Mechanics upon Ideal Mechanics acceptance and use of the goods without objection and upon plaintiff providing Ideal Mechanics copies of the invoices and no objection was raised thereto by Ideal Mechanics within a reasonable time.".

The Defences Raised

10. Mr Fu See Kwong, a director of the defendant, has filed an affidavit. Mr Fu quotes clause 13 of the contract and says "It is principally in reliance on this special condition that AMEC has refused to pay the amount claimed by the plaintiff.".

11. Mr Fu challenges Mr Leung assertion that there had been no objections to the invoices. He produces three letters in support of what he says.

12. The first of these is from Ideal to the plaintiff and is dated 12 July 1995, but, because the letter refers to an invoice dated 20 March 1996, or, possibly, 27 June 1996 and its reference includes that year, the letter must have been written on 12 July 1996. Indeed, the third letter mentioned below refers to this letter as being dated 12 July 1996. At that stage, all the invoices concerned in this matter had been issued, but the letter refers to only three invoices and says, with respect to them, "NO our staff's endorsement on delivery notes to support the goods shown on your attached delivery notes were delivered to site.".

13. The second letter is also from Ideal to the plaintiff and is dated 22 July 1996. This says "All signatures shown on all delivery notes were not our staff's signature specimen" and refers to only one invoice dated 27 June 1996. The letter refers to another invoice that is irrelevant to this action, but the comment in relation to it shows that Ideal regarded signing and chopping the delivery notes as significant.

14. The third letter is by the defendant to the plaintiff and is dated 16 July 1996. This letter refers to Ideal's letter written on 12 July 1996 and says, in essence, that the plaintiff should give the required information to Ideal so that settlement could proceed.

15. Mr Fu then describes the difficulties in measuring the materials supplied by the plaintiff and estimates that only 22,932 square metres of Koolduct were supplied by the plaintiff.

16. Regarding invoice PY0101/95, Mr Fu says that the goods concerned were ordered directly by Ideal and Ideal is liable. Mr Fu produces a letter from the plaintiff dated 15 July 1996. In this the plaintiff says, in essence, that the defendant owes the money claimed on this invoice, although it was charged to Ideal. Mr Fu does not produce any reply to this letter by the defendant in which it denies liability for this invoice. Mr Fu does not raise any specific defence to the claim that these goods were ordered by Ideal for this project. Mr Fu seems to be saying that because Ideal ordered the goods, Ideal is liable, but, of course, under the contract, Ideal ordered all the goods. The defendant seems to rest its defence on the fact that the invoice was originally addressed to Ideal.

The Plaintiff's Response

17. Mr Leung filed an affidavit in response to that of Mr Fu. He concedes that the letters produced by Mr Fu show that there were objections, but he says that the plaintiff was not aware of any outstanding complaints. He says that the complaints in Ideal's letters of 12 July and 22 July 1996 were dealt with. He produces a letter from the plaintiff to Ideal dated 18 July 1996 in which it is said that "there is your staff's endorsement on our delivery records for our invoices". Ideal's letter of 22 July 1996 seems to have accepted this save in relation to one invoice.

18. Regarding Mr Fu's estimate of Koolduct installed, Mr Leung says that the defendant is liable for what Ideal ordered, not what was installed.

A Credible Defence?

19. In this application, the defendant does not seek to persist in the denial in the defence that the goods were delivered.

20. I should also say here that Mr Shaw does not suggest that, if copies of invoices were not sent to Ideal, this constitutes a defence.

21. From my exchanges with Mr Shaw, it was clear that the defendant's plea raising clause 13 was limited to the requirement of Ideal's approval. Mr Shaw did not suggest that this approval required any formality; even an oral approval would be sufficient. So the defendant's defence is that Ideal did not approve the invoices in any way. One would have expected that evidence as to this would have been obtained by the defendant from Ideal, which was the defendant's sub-contractor. I asked Mr Shaw where was the evidence to support the defence that Ideal had not so approved. He was able only to point to the three letters produced by Mr Fu. Apart from this, Mr Shaw concedes, Mr Fu does not say anything about whether or not Ideal approved the invoices; not even in hearsay form. Mr Fu contents himself with pointing out that Mr Leung was wrong to say that Ideal and the defendant had not objected in the past. Mr Fu does even suggest that this evidence that Ideal and the defendant had objected in the past was relevant to whether or not Ideal had approved the invoices subsequently. As far as approval by Ideal is concerned, only the two letters by Ideal are relevant, and all they establish is that, on 22 July 1996, by which time all the relevant invoices had been issued, only one invoice was being queried. If it were so that Ideal continued to withhold its approval of this single invoice after 22 July 1996 to the present time, I would have expected someone, on behalf of the defendant, to say so. No one does. One must also bear in mind here that the defendant was a sub-contractor on this project and Ideal was a sub-sub-contractor. If it were so that the plaintiff failed to perform its contract, there would have been consequences flowing from this in respect of the ability of Ideal and the defendant to obtain payment through the chain. There is no suggestion at all by the defendant that, because the plaintiff did not perform its obligations properly, the employer did not pay.

22. The defendant also has the problem that it is unchallenged that the deliveries under first 15 invoices were dealt with in the same way as those under the last 10. Why were the first 15 paid, but not the last 10? There is no explanation for this from the defendant, although Mr Shaw seeks to argue, without evidence to support him, that this was because the defendant had already paid more than the amount estimated in the contract. He says this although the contract says that the quantities stated there were merely indicative.

23. In my view, this is not a case of their being no credible evidence to support the defendant's case that the invoices were not approved by Ideal so that there is an issue fit for trial. The position is that there is no evidence at all adduced by the defendant to support this defence.

24. Mr Shaw recognised that I might well find that this part of the defendant's defence was without merit, but he says, in effect, that the defence has more body when one considers what he refers to as the "wastage" aspect of the matter. The substance of this point is that the plaintiff is not entitled to be paid for what it delivered, whether or not Ideal approved the invoice, but only for what was installed. Mr Shaw accepts that this point was not raised in the defendant's filed defence. The fact is that it is not raised by the defendant's evidence either.

25. In support of this argument, Mr Shaw says that Mr Leung's evidence shows that the plaintiff put together material supplied on site. He also points to clauses 8, 9 and 10 of the contract, which, he argues show that the plaintiff was, in some way, responsible for installation. I do not accept this. In the first place, Mr Fu himself does not suggest that the plaintiff had any responsibility for installing the ductwork. Mr Leung explains that "For items that were custom made ductwork items, these were manufactured by the plaintiff's technical staff on site based on specifications set out in Ideal Mechanics' order requisition forms." That is quite clear, and Mr Fu says not one word to contradict this. Clause 8 lumps together the responsibilities of Ideal and the plaintiff, but it is quite clear from reading the contract as a whole, and from all the evidence, that the plaintiff's obligation was to supply the material so that Ideal could install it. If one assumes that the plaintiff had the obligation to install the material as well as supplying it, one must wonder what on earth there was left for Ideal to do. I do not see that clauses 9 and 10 make any difference to this assessment.

26. So, as far as this aspect of the defence is concerned, there is no evidence from the defendant to support it, or even to suggest that Mr Shaw's ingenious version of the plaintiff's obligation was the defendant's understanding of the situation. Also the evidence of the plaintiff that this was not the case is uncontradicted by the defendant.

27. The only remaining matter to consider is whether the defendant has advanced any credible defence to the claim under invoice PY0101/95.

28. I have already recited the evidence on this aspect of the case. Firstly, Mr Fu says that the goods were ordered by Ideal. Well, this says nothing of any relevance because Ideal ordered all the goods concerned. Secondly, Mr Fu says that the plaintiff wrote claiming payment under this invoice although it stated that it was charged to Ideal. Mr Fu does not say that, on receiving this, the defendant denied liability. This also says nothing to set up a defence. Thirdly, Mr Fu says the invoice was originally addressed to Ideal, but this is a perfectly reasonable error in the light of the fact that Ideal ordered the goods. Mr Fu does not raise any specific defence that raises an issue fit for trial. Apart from this, the invoice lists material similar to material listed in other invoices for work on the site. In these circumstances, the defendant must raise some particular defence such as - "Although this invoice relates to material ordered by Ideal, as it was authorised by us to order all the other materials used on site, we are not liable to pay it because . . ." No such defence is raised and nothing is advanced that makes an issue fit for trial.

Result

29. In the result, I am satisfied that the defendant has not raised an issue fit for trial. Accordingly, the plaintiff is entitled to judgment as claimed, with interest at the judgment rate from the dates 60 days after the date of each invoice until payment, together with the costs of the action and this application before me and the Master.

JK FINDLAY

Judge of the High Court
Court of First Instance