TSE SIU KWAN AND OTHERS v. CHANG KOK SENG t/a HIP CHEONG PLATING ENGINEERING CO

1989, No. A4293

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. I am indebted to counsel as well as the defendant for their patience and co-operation for all the interruption caused by the intervening proceedings. The defendant has given me the best assistance he could, unaided. He has had his case fairly presented. Mr Ismail, counsel for the plaintiff, is only too conscious of the fact that the defendant is acting in person and counsel has acted as leniently as he possibly could.

2. The dispute between the plaintiff and the defendant involves an electro-plating machine which had to be specially manufactured in Hong Kong because of the size and dimensions needed for its capability which the plaintiff had desired.

3. The plaintiff was then an sole proprietorship. Mr Tse was the sole proprietor. He was subsequently joined by two partners. Mr Tse himself ordered the machine from one Mr Chan Man-tung, trading as Man Tung Metal Tech. Asia Co. Mr Chan was later joined by one Mr Wong but that is a matter which has no bearing in these proceedings. Mr Tse Siu-kwan contacted Mr Chan Man-tung in 1986 and ordered the machine in question. Delivery of the machine was delayed. Mr Chan testified that the late delivery was due, inter alia, to shortage of manpower and numerous modifications requested by Mr Tse. Delay was as much as 4/5 months. There were allegations and counter-allegations but the net result was that after delivery of the machine, Mr Tse kept it underlock without making payment to Mr Chan. The matter seemed to have rested there for a considerably long time resulting in a legal action instituted by the plaintiff against Mr Chan for damages and other relief.

4. Mr Chan's business operation ceased. He joined the defendant. The plaintiff subsequently came to know of the association of Mr Chan with the defendant company. Pressure was brought to bear on Mr Chan to bring the matter to a conclusion.  Through him the plaintiff company came to meet the defendant. The defendant impressed upon Mr Chan to be cautious and wished to be assured that the machine, then in the custody of the plaintiff, could be remedied to the plaintiff's satisfaction. Mr Chan gave his assurance. Motivated by an intention to keep Mr Chan out of the legal entanglement and for what must have been regarded as a fair remuneration, a Sales Contract was signed between the plaintiff and the defendant for the purposes of remedying the machine under consideration.  It is to be remembered that the machine was one made to order by Mr Chin and the items agreed to be remedied/repaired by the defendant must have been the only outstanding items to be put right before the electro-plating production line could begin to operate. The Sales Contract was thereupon signed in August 1988, containing a categorical reference to 19 outstanding items. The price was $114,417.00, half to be paid as deposit, 30% to be paid upon installation, and 20% to be paid after what has been described as the Acceptance Test. It was specifically put in the remark column of the Sales Contract that "acceptance test base (sic) on the machine can apply the plating operation". There was a further provision that the machine was to be maintained free of charge for a year by the defendant. It is reasonably clear therefore that by the Sales Contract the defendant undertook to remedy the defects of the said machine and put it into operation.

5. Commencement of the contract fell on the 23rd August 1988 when the 50% deposit became payable. It was paid. A period of six weeks from the 23rd August 1988 would bring it up to the 4th October 1988. The machine was finally installed on the 5th December 1988. Thus there was a period of delay of two months. That is not a matter disputed by the defendant. When the machine was delivered on the 5th December, according to the defendant, payment was made on the same day of installaton. The mixing of chemical for the purposes of putting the machine into motion commenced between the 5th December to the 10th December. In any case problems were detected by the defendant before the 10th December. At a meeting in a Canteen on or about the 10th December, the defendant urged the plaintiff to sign a document releasing the defendant from all responsibility for delay, which the plaintiff declined to sign.

6. On or about the 16th December, the defendant left Hong Kong with his wife for a vacation in Indonesia. When he returned, more problems surfaced. It was found that the copper cylinder for plating suffered damage from the hard holders in the process. These holders are in fact what have been called "connectors". Some 20 odd connectors were found to have to be replaced. The defendant supplied the first replaced connector free of charge. Upon demand being made of the plaintiff to either pay for or secure the rest of the connectors which had to be replaced, the plaintiff allegedly refused to yield.   The defendant stopped work except for minor chores. When the workmen of the defendant returned for tools and to work on one small aspect of the machine, the door of the plaintiff's premises in which the machine had been installed was found to be locked.

7. Mr Chan told the court that he was utterly disillusioned with the attitude and manner of Mr Tse. The plaintiff and the defendant did not liaise. Ultimately these proceedings were instituted by the plaintiff against the defendant.

8. Matters stood still, but the plaintiff did not seek professional guidance on the condition of the machine until the 21st March 1989 when a Survey Report was obtained. Mr Tong was the surveyor consulted. He has been criticised for lacking in knowledge pertaining to electro-plating machinery, but the survey was a survey for mechanical defects in the component parts and the machine's failure to function.

9. I have had the advantage of reading the Survey Report dated the 23rd March 1989 and been assisted by Mr Tong Siu-wing, the surveyor in person in court. For the matters examined on his inspection and outlined in his Survey Report, I have no hesitation in concluding that he has the expertise and the experience and the qualification. Among items reported, counsel relies on items 4, 6, 10, 12, 14 and 15 of his report. The conclusions reached on some items are marginal insofar as they tend to suggest omission or default on the part of the defendant. But the item 6 defect has been virtually admitted by the defendant - a pump not installed, located on the floor; item 10 is a clear finding of wrong position in installation; and item 4 is a sufficient verification for a defective heater in an overall unit.

10. In addition to these damaging items against the defendant in the Survey Report, it is common ground that at the time of delivery, the machine in question was not functional in the sense that electro-plating could not be done on it. According to the terms and tenor of the Sales Contract signed between the plaintiff and the defendant, it is quite clear that the Acceptance Test had not been passed. But the defendant maintained that on the delivery of the machine on the 5th December 1988, the machine was checked according to its own guidelines before payment was made by the plaintiff on the same day. Such payment was, according to the defendant, indicative of the plaintiff's acceptance of the machine as having passed the Acceptance Test. It was acknowledged by the defendant that on the 5th December, there was no attempt whatsoever to put the machine to any running test. Understandably, it was merely a delivery and installation. Whatever checking on those self-devised guidelines of the defendant's cannot be said to be tentamount to an Acceptance Test as envisaged by the Sales Contract.

11. Payment of an additional 30% of the contract price was expressly stipulated for by the Sales Contract. 30% had simply to be paid by the plaintiff to the defendant on installation. In all the circumstances, payment on the 5th December can, in no way, be taken as evidence of approval. There was no Acceptance Test on that day and certainly there was no acceptance on the part of the plaintiff of any test on that day. Checking, if done, must have been a procedure voluntarily assumed by the defendant. The only contractual obligation then was installation. Upon installation, the defendant must be paid an additional 30%.- This is precisely what was done.

12. I have endeavoured to comment on the Survey Report and the items therein clearly prejudicial to the defendant. I have directed attention to the consensus that the machine was never functional after installation. Evidently the defendant, whatever sympathy this court feels for him, was in breach of the Sales Contract.

13. What then are the proper damages? The plaintiff had chosen to solicit professional assistance only on the 21st March when Mr Tong was invited to inspect. From the date of installation to the 21st March, if my calculation is correct, there was a span in total of 106 days. Mr Ismail, counsel for the plaintiff, has almost conceded that this period of delay of 106 days should not be made the responsibility of the defendant's. The machine was finally made operational, at additional expenses, by Wing Shing on the 31st May 1989. From the 5th October, the expiration of the six weeks' period under the sales contract to the 31st May 1989, the date of completion of repair by Wing Shing, the total delay incurred was 239 days. From this alleged period of 239 days must, therefore, be deducted 106 days. The net delay for which the defendant can be held responsible is 133 days. There is little disagreement on the pre-estimated quantum of damages at $1,500 per day. 133 days times $1,500 would yield a net total of $199,500. Survey fee was paid at $4,000. Repair costs by Wing Shing were charged at $32,000. In addition, Wing Shing would have tote paid $20,000 for one year's maintenance. All these outlays have duly been proved by documents in the Bundle of Documents.

14. The defendant was not paid the final 20% under the Sales Contract. 20% under the Sales Contract is $22,883.40. The additional repair costs of $32,000 must take into consideration this 20% under the Sales Contract, that had not been paid to the defendant. That would leave only a balance of $9,116.60 ($32,000 - $22,883.40). The defendant was to be provided free service by way of maintenance for a year. The $20,000 charged by Wing Shing for giving the same facilities must also be reimbursed by the defendant as an item of damages in these proceedings. The plaintiff has abandoned their claim for loss of use of the machine.

15. The net result is : liability has been established against the defendant and the defendant shall have to pay $199,500 for a delay of 133 days; $4,000 survey fee;$9,116.60 by way of extra repair costs; and $20,000 one year maintenance charges. The aggregate of these sums is the judgment sum that I would award against the defendant. I give judgment accordingly against the defendant in that aggregate sum plus costs in favour of the plaintiff.

16. On my findings, the Counterclaim of the defendant cannot be sustained and the Counterclaim is likewise dismissed with costs.

17. I order :

18. Mr Ismail seeks interests on survey fee, surplus repair costs, and service maintenance charges from the date of writ to today. Counsel is prepared to forego interests on the quantum awarded for the 133 days' delay. I am prepared to accede to his request that interests on $4,000, $9,116.60 plus $20,000 at 8% per annum from the date of the writ to today be adjudged also against the defendant.