TAM PAK LUN TRADING AS CREATION COMPANY v. TAHAN ENGINEERING LIMITED

1987 No. A3397

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. I read all the papers. At the inception, with the consent of Mr Tsang, counsel for the plaintiff, I invited Mr Wong to assist me on issues the defendant limited company was to advance in resistence to the plaintiff's application for judgment.

2. This action involves a cheque for the remaining 10% of the purchase price, in the sum of $66,916.20. The plaintiff claims this sum against the defendant company together with interest from the date of the writ until payment.

3. By a contract dated the 7th October 1986, the plaintiff agreed to supply to the defendant company four transformers. The defendant company had use of these ordered transformers in Guilin, China. The building project with which the defendant company was involved, had retained consultants who supervised, inter alia, the specifications of these four transformers. The consultants whom I shall call "PBA", supplied trade drawings and technical specification to which I shall refer collectively as "Specifications."

4. Between the plaintiff and the defendant company, there had been some disagreement as to what changers or switches were to come with these four transformers. The plaintiff suggested that under the Specifications of the consultant PBA, he was to supply one type of such changer or switch, and the defendant company took the view that another type of changer or switch had to be delivered. The precise terminology or description in technical terms of such changer or switch is not of any great significance. What is important to note is that throughout the plaintiff and the defendant company had taken dissimilar views as to what type of changers or switches should be supplied.

5. In the course of such protracted disagreement, shop drawing was supplied by the plaintiff to the defendant company for PBA's approval. There was on the 30th of October 1986. PBA's approval came on, I am now told, the 10th of November, but when approval of the consultant was faxed by the defendant to the plaintiff on the 14th of November, the existing disagreement between the parties was not highlighted. The faxed message simply confirmed the contract with the plaintiff for the supply of the four transformers subject to PBA's Specifications. A copy of the consultant's specification was also enclosed. But there was hardly any misunderstanding. The disagreement was left unresolved because upon receipt of the approval of the consultant, the plaintiff faxed the defendant on the 3rd of December 1986, and in that fax message in reply, the plaintiff categorically warned the defendant company as follows:-

"Please note :one-action lockable off-load rack and pinion type tape changer may be provided additional price per unit : DM1,650.00."

6. It is undeniable that the plaintiff openly drew the defendant's attention to the unsettled dispute as to the type of changers or switches to be supplied even after the consultant's approval. There can be no doubt that even at that stage the plaintiff clearly informed the defendant that the transformers were to come with only changers or switches as per their understanding and not those contended by the defendant unless an extra DM1,650.00 per unit was to be paid in addition. How more explicit could the plaintiff be?

7. The cheque for the 10% in question was given to the plaintiff on the 5th of January 1987 and, as provided for in the contract, postdated to the 31st of March 1987.

8. The transformers with the changers and switches of the plaintiff's notion, arrived in Hong Kong sometime in February. Delivery was ultimately taken of these transformers by the defendant in March. These transformers thereafter arrived at site in Guilin, so I am told by Mr Wong, counsel for the defendant, some time in March 1987. Counsel has no instructions as to whether these transformers have been installed and if so, whether they have been tested or commissioned. In this direction, one of the terms in the contract between the plaintiff and the defendant for the supply of the four transformers is pertinent. It would be convenient for that condition to be set out seriatim:-

"Balance 10% of the total amount will be paid against completion of testing and commissioning. The testing and commissioning must be completed within eight working weeks after the equipment arrival at site in Guilin. If the completion of the testing and commissioning is delayed more than eight working weeks from the equipment arrival at site, the buyer will agree to pay the Seller the balance 10% through your company Postdated cheque dated 31st March, 1987 and the cheque should be in our hands in advance within 30 days from the contract is signed."

9. When the matter came before the learned Master, there was only the affidavit of the defendant's Project Manager, one Mr Li Kwai Leung. Unconditional leave was given by the Master to the defendant company to defend, I am told, principally on the construction of the quoted condition I have just set out in full. The Sales Executive of the plaintiff, Mr Lau Chin Hung, Jackson has now filed an affirmation disclosing most of the information that I have referred to. The defendant's Mr Li has also, this time, affirmed an affirmation in reply.

10. Counsel for the defendant objected to the introduction of the plaintiff's further affirmation. Mr Wong referred me to a passage in Vol. 1 of the 1985 White Book with marginal reference 58/l/2 at p. 795. Counsel invited me to exercise my discretion in refusing to entertain the affirmation filed on behalf of the plaintiff by its Sales Executive, Mr Lau. Very little is known of what precisely transpired before the Master. In Mr Lau's affirmation on behalf of the plaintiff, it is complained that the plaintiff's fax of the 3rd of December 1985 was referred but not shown to the learned Master. In the absence of information as to what precisely transpired before the Master and in view of the defendant's failure to disclose this fax of the plaintiff of the 3rd December 1986, I can find no justification for exercising my discretion in favour of the defendant company by rejecting the affirmation filed on behalf of the plaintiff by its Sales Executive, Mr Lau Chin Hung, particularly when the merits as now disclosed are all one way.

11. Counsel for the defendant submitted that the first sentence in the quote condition in the Contract dated the 7th October 1986 was of relevance. Counsel contended that that first sentence related to testing and commissioning anywhere, including Hong Kong upon arrival of the transformers. That interpretation would, in my view, do violence to the language of that first sentence, particularly in the context of the entire quoted condition. On the basis that Mr Wong's interpretation had some substance, the court enquired from counsel as to whether or not testing had been conducted. Counsel for the defendant stated that the transformers were indeed tested, though visually, soon after their arrival in February. The quoted condition in its proper construction would, in my view, entitle the plaintiff to obtain payment under the cheque in question for the remaining 10% either upon satisfactory testing and commissioning of the transformers at site in Guilin, China or in the event of delay within 8 weeks after the transformers' arrival at site. The transformers arrived at site in February. Eight weeks have now elapsed. Counsel has no instructions as to whether these transformers had been installed, tested or commissioned in Guilin. Counsel was virtually driven to argue that indeed that these transformers were tested in Hong Kong in February 1987 soon after their arrival. Counsel discreetly steered clear of the provision for commissioning. Counsel informed the court that upon testing of these transformers in February, the "correct" changers or switches, according to the defendant's notion, were found missing. Counsel concluded therefore that the February testing was thus unsatisfactory; hence the 10% cheque was not payable. Therefore the defendant company must have unconditional leave to defend.

12. On the assumption that the first sentence in the quoted condition is susceptible of the meaning suggested by Mr Wong, counsel for the defendant, and on the assumption that testing was unsatisfactory without those changers and switches as understood and demanded by the defendant, the defendant company nevertheless accepted delivery without reservation on the 13th March 1987. In Mr Li's affidavit, the Project Manager of defendant company deposed to the fact, in paragraph 26, that the defendant took delivery of the transformers. In that paragraph, the motive of the defendant for taking delivery was disclosed. It was because of the defendant's imminent commitment to the Guilin Hotel Project. In the draft Defence of the defendant, paragraph 13, it is proposed to plead:-

"Because of the commitment in its said Guilin Hotel project which is known to the plaintiff and in order to minimize the loss occasioned by the plaintiff's said breaches the defendant took delivery of the transformers without the tappings on or about 13th March 1987."

13. It is evidence that in the Draft defence the defendant's taking of the delivery of the transformers in March was, as pleaded, an unconditional acceptance. There was no qualification or reservation. Counsel for the defendant rallied to its support and submitted that should there be any shortfall in the draft Defence which would require remedial clarification, the same could be introduced with ease in time to come when the Defence is filed. Counsel contended that although there was no specific intimation to the plaintiff as to the nature of the defendant's acceptance and although the defendant's Project Manager's affidavit and the proposed draft Defence both related to why as opposed to how the transformers were accepted, the defendant's case is one of conditional or qualified acceptance. Upon being pressed by the court as to whether the same facts in the proposed draft Defence, paragraph 13, would likewise be relied on, counsel replied affirmatively. On those facts, it is inescapable that what is being sought to aver by the defendant company is why they accepted the transformers, the motive for the action they took, and not how acceptance was taken. The nature of acceptance as accorded by the defendant to the four arrived transformers cannot be turned into one of a qualified acceptance by these alleged facts.

14. Goods were ready for delivery and in my view were clearly accepted without any reservation. Tested, as it is now claimed, the transformers without the "right" changers or switches were accepted by the defendant. Testing in the quoted condition was allegedly done, and its result must have given way to the unconditional acceptance on behalf of the defendant company on or about the 13th of March 1987. Unqualified acceptance of the four arrived transformers must fix the defendant company with liability to pay the cheque in question.

15. There can be, in my view, no triable issue as far as the cheque is concerned and the defendant must suffer judgment on the said cheque in favour of the plaintiff.

16. Matters before the learned Master were differently broached without the facts and information I now possess. The Master only had the defendant's Project Manager's affidavit for his assistance. The Master did not have the benefit of the defendant's Project manager's subsequent affirmation nor the affirmation of the Sales Executive of the plaintiff. The Master probably came to a right conclusion on the matters then placed before him. This case is now being contested on its full facts in a completely different light. Subject to what counsel have to say, I propose to allow costs to the plaintiff against the defendant for the proceedings before me today and in the action, save for the application before the learned Master. Costs before the learned Master, in my view, should go to the defendant against the plaintiff. Subject to what counsel have to say, claimed interest not being contested, I order

(Arguments on Costs)

17. I have listened to arguments on costs. It is unkind if not unjust to suggest that the Master came to a wrong conclusion. One of the grounds in support of the application for unconditional leave to defend before the learned Master was total failure of consideration. With Mr Li's affidavit then being the only crucial evidence before the learned Master, it would not be right for me to conclude that a wrong decision was arrived at. In fact, my impression is to the contrary that the Master was correct in his then assessment on the merits. A fair order, in my view, would be that as I proposed that costs before the learned Master should be costs to the defendant to be paid by the plaintiff with, I am reminded by Mr Wong, a certificate for counsel as certified fit by the learned Master. I order accordingly.