DECOR FLOORS ENGINEERING LTD v. YUEN HUNG WAI t/a TIM LEE CONSTRUCTION CO

cacv 219/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 219 of 2004

(on appeal from DCCJ NO. 1637 of 2003)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This is an appeal from a judgment of HH Judge H C Wong given on 4 May 2004.  The matter before the judge was a claim for the sum of $144,172 in respect of the unpaid portion said to be due on a contract for the supply and laying of a carpet.  The judge gave judgment for the plaintiff and dismissed the defendant’s counterclaim.  At the conclusion of the hearing of this appeal this court dismissed the appeal with reasons to be given in writing.

Background

2.  The claim in this action is quite straightforward.  There was a contract between the parties which was in writing and the judge held that it had been concluded on 30 August 2002.  The contract provided for the supply and laying of a specified form of carpet.  The relevant terms, as they had been translated in the certified translation, are as follows:

“Delivery:	Order: 6 to 8 weeks after the receipt of the order from the buyer and deposit confirmation
Payment:	30% deposit shall be paid by way of L/C upon confirmation of the order
	40% of the payment shall be paid by way of L/C upon delivery of the product to the site
	30% balance shall be paid within 14 days from completion of work”

3.  Although a copy of the letter of credit was apparently faxed at the same time that the contract was faxed to the plaintiff the original copy was sent by courier on 3 September 2002.  The letter of credit required the following documents namely a signed commercial invoice (an original and a copy) and

“original clean cargo receipt issued and signed by (the defendant) … certifying that the goods have been received in good order and conditions in trust for the Bank of China (Hong Kong) Ltd indicating date of receipt of goods, description and quantity of goods received, invoice value and ….”

4.  On 6 September 2002 the defendant sent a cargo receipt to the plaintiff to enable the plaintiff to draw down on the letter of credit.  The plaintiff then attempted to do so by, on the next day, preparing a collection order and presenting it together with the bill of lading and cargo receipt to HSBC for payment under the letter of credit.  However some 5 days later the plaintiff was informed by the bank that payment had not been received due to discrepancies in the bill of lading, it was short drawn and the cargo receipt did not show the quantity of goods received and that they were in trust for the Bank of China (Hong Kong) Limited.  On, or certainly not before 24 September 2002, the plaintiff received notification from HSBC that the 30% deposit namely $65,142 had been received.  The judge found as a fact that the plaintiff must have obtained the assistance of the defendant in securing the payment of the 30% initial deposit.

5.  The argument on behalf of the defendant in this court appears to have been a little different from the argument below and it may be summarised that the deposit which was required under the contract was constituted by the provision of the letter of credit and the letter of credit simply had to be able to provide for the payment of 70% of the contract amount when the goods were delivered.  On that hypothesis the relevant date for the commencement of the 8-week period for delivery would have commenced on 3 September 2002. 

6.  That appears to have been a different commencement date from that argued in the court below which was either 26 August 2002, being the supposed date of the contract, or 28 August or finally 30 August.  The judge, in my view, correctly rejected all those dates.  Relying on a number of cases such as 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 AG 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 the judge held that the words deposit confirmation meant that the money had to have been deposited in the payee’s bank.

7.  In my view the judge was correct.  The contract laid down a clear timetable that consisted of 3 payments.  The first was a 30% deposit, which would be “paid” when the order was confirmed.  The second was a further 40%, which would be “paid” when there was delivery of the product of site and the final 30% was to be “paid” within 14 days from completion.  The difficulty in the case really arose from the way in which the letter of credit had been framed.  The requirement that there should be an original clean cargo receipt issued and signed by the defendant certifying that the goods had been received in good order and condition in trust for the Bank of China (Hong Kong) Limited caused the difficulty because the contractual delivery time was to be 8 (6 to 8) weeks after the contract had been signed and the deposit had been confirmed.

8.  Hence on a pure question of construction of the agreement it appears to me that the plaintiff must be correct that the 8 weeks could not start running before the date of the deposit confirmation from the plaintiff’s bank, the provision of the letter of credit on its own was not a deposit confirmation nor was it payment and hence time could only have started running from 24 September 2002. 

9.  Mr Harris, who appeared on behalf of the defendant, conceded that if his argument were wrong and that the relevant starting date were 24 September 2002, it would have to be taken that the carpet had been delivered within the contractual time.  It will be noted that he conceded for the purposes of argument that the carpet had been delivered on 4 November 2002.  The plaintiff was not paid under the letter of credit because it had expired on 30 October 2002.

10.  Mr Harris sought to argue that there should have been other adjustments in the amount owing.  Those related to whether the plaintiff was entitled to payment at the rate of $50 per hour for the work or at the rate of $35 per hour.  Since the matter had not been raised in the notice of appeal, nor had notice been given to the plaintiff prior to the hearing of the appeal and, furthermore, the passages in the transcript to which this court’s attention was drawn did not appear to provide any support for Mr Harris’s argument in this respect, further argument along those lines was not permitted.

Hon Le Pichon JA:

11.  I agree.

Hon Tang J:

12.  I agree and have nothing to add.