TRIFAIRCO ENGINEERING CO. LTD. v. WISHING STAR LTD.

HCA9563/96

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9563 OF 1996

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J U D G M E N T

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The Claims

1. The Plaintiff claims the sum of $976,000 being the balance of the purchase price of two gondola systems sold by the Plaintiff to the Defendant. The two gondola systems were installed respectively on Blocks A and B of a building in Wo Yi Hop Road. The total price of the two gondola systems were $1,220,000. A deposit of $244,000 was paid by the Defendant.

2. The Defendant counterclaims the sum of $597,780 in the Amended Defence and Counterclaim. On the first day of trial, this sum was reduced to $555,070. The Defendant conceded judgment in the sum of $420,930, which was the difference between $976,000 and $555,070.

Trial on liability

3. The parties agreed that the trial should deal with the question of liability first, and the quantum should be assessed by the Master after my determination on liability.

Delay and Defect

4. It is not disputed that the two gondola systems had been delivered and installed. The issue in this case is whether the Defendant has suffered damages by reason of the Plaintiff's delay in installing and handing over the gondola systems and defects in one of the system.

Plaintiff's case

5. According to Mr Lim Ka Thiam ("Mr Lim"), the Executive Director of the Plaintiff, the quotation of the gondola systems was sent to the Defendant on 25th September 1995.

6. In late September 1995, there were telephone conversations between him and Miss Carol Wen ("Miss Wen") of the Defendant on the time that was needed to complete the installation of the gondola systems. On 29th September 1995, the Plaintiff sent the Defendant a programme ("the first programme") on the time required for the installation of the gondola systems. In this programme, the Plaintiff suggested seven months and two weeks after the award of contract to complete the job. However, Miss Wen informed Mr Lim that the time was not acceptable. As a result, the programme was revised to six months and one week ("the second programme"). The second programme was sent to the Defendant on 30th September 1995. In the fax dated 30th September 1995, the Plaintiff informed the Defendant that :

"Unfortunately we are not able to deliver the equipment on the time you request. Please understand our situation that the manufacturer in Holland has to test the machine, to make sure the machine is safe for usage before they can ship out to H.K. Also, if you need some temporary gondolas, we will be able to provide you our best offers.

Again, please note that we only quote for what we would provide!"

However, the time schedule in the second programme was again rejected by Miss Wen and she demanded an earlier date. Mr Lim informed her that the Plaintiff would negotiate with the manufacturer in Holland to see if an earlier date could be reached but he told Miss Wen that he could not guarantee any given date than what was given by the manufacturer.

7. The next thing that happened was on 6th October 1995, when a formal confirmation from the Defendant was received by the Plaintiff. The Plaintiff, on 23rd October 1995, prepared the contract. The contract was signed by the Defendant on 24th October 1995.

8. After the Plaintiff had made inquires with the manufacturer, it informed the Defendant by a letter dated 23rd November 1995 that :

"We have received a fax yesterday from the manufacturer in Holland. Regretless (sic) to say that the roof carriages will be ready for shipment in the beginning of Feb. 96 and will be arriving at H.K. in March 96. It is due to the long Christmas breaks in Holland.

We apologize for the delay of the shipment. As you understand that this is out of our control. Should you have any queries, please don't hesitate to contact us. Thank you."

The gondola systems were delivered to the site on 28th March 1996. Afterwards they were installed and according to the Plaintiff, the two gondola systems were handed over to the Defendant on 22nd May 1996.

The Defendant's case

9. According to Miss Wen, the Director of the Defendant, the Plaintiff promised to deliver the gondolas by the end of January 1996. Miss Wen said that after she received the quotation of 25th September 1995, she asked the Plaintiff for the schedule of delivery. At that time, she needed the gondolas, at the latest, by the end of January 1996. The Defendant was a curtain wall contractor. Apart from buying the gondolas on behalf of the owner of the buildings for the purpose of cleaning the curtain wall of the buildings in the future, the Defendant further required the gondolas for its own use in installing glass panels. The Defendant was informed by the Architect of the building project that the scaffoldings to the buildings would be removed by mid January 1996, and thus the Defendant required the gondolas, by the latest, the end of January 1996.

10. After Miss Wen received the second programme, she telephoned Mr Lim and informed him that the Defendant could not accept the Plaintiff's delivery time. Miss Wen told him about the removal of the scaffolding in mid January and the requirement of the gondolas by the end of January. She further told him that although the Plaintiff's price was right, the Defendant would not use the Plaintiff if it could not meet the schedule. Mr Lim then told her that he knew there were stocks available at the factory of the manufacturer and the transportation would take one month. She believed in what Mr Lim said, and from her experience of purchasing glass from European manufacturers, the transportation would take one month to arrive in Hong Kong. She then suggested that the Plaintiff should amend the programme. Mr Lim, however, said that he needed some "cushion" and asked Miss Wen to believe him that he would be able to deliver at the end of January. Miss Wen believed him. Shortly thereafter, she provided the confirmation to the Plaintiff.

11. When Miss Wen received the Plaintiff's fax on 23rd November 1995. She immediately called up Mr Lim and expressed her concern as what the Defendant should do before the gondolas would arrive in March 1996. Mr Lim's reply was that he would negotiate with the manufacturer.

Mr Lim's response

12. Mr Lim denied that he had agreed to deliver the gondolas at the end of January 1996. He said he did not know the gondolas were required at the end of January 1996 and he also said that he could not recall Miss Wen saying that the gondolas were required at the end of January 1996.

No agreement

13. I am unable to accept the Defendant's evidence that there was an agreement by the Plaintiff to install and hand over the gondola systems at the end of January 1996. There were simply too many inconsistency in the Defendant's case on the time of delivery.

14. The pleaded case of the Defendant in the Amended Defence and Counterclaim is that "the Plaintiff estimated that the installation of the gondola system will be completed in or about four months time counting from the date the sub-contract was awarded to the Plaintiff. The sub-contract was awarded (to) the Plaintiff on 23rd October 1995". This time estimate was repeated in the Further and Better Particulars of the Defence. Miss Wen blamed the solicitors who handled the case for the mistake. She claimed that a number of solicitors had handled the case and they had been dismissed from the employ of the Defendant's solicitors. If Miss Wen was implying that the handling solicitors were dismissed for being incompetent, then clearly there is no evidence on this point. I am unable to accept that the blame lies with the solicitors. The Defendant is still represented by the same firm of solicitors. The solicitors must have been given some instruction before they could even begin to draft the Defence.

15. When the Plaintiff demanded payment of the balance of the purchase price, Miss Wen, on behalf of the Defendant, responded by a letter dated 10th June 1996 which stated, inter alia,

"The reason for our delay in payment are as follows :-

1. The gondola delivered much later then the promised date."

16. Miss Wen did not state that the Plaintiff had agreed to deliver the gondolas by the end of January 1996.

17. While Miss Wen in her oral evidence said that she told Mr Lim that the scaffolding had to be removed in mid January and the Defendant would require the gondolas, by the latest, end of January, her Witness Statement on this point is quite different. At paragraph 11, it is stated that :

"The Plaintiff stated on their programme that the delivery date of the gondolas would be 4 months. I considered this to be too late and I informed Mr Alex Lim that I needed the gondolas by early January of 1996 because the scaffoldings would be dismantled by then. Alex Lim of the Plaintiff replied that the programme was only a reference point but that actual delivery of the gondolas on site would be in January of 1996." (emphasis added).

While in paragraph 15 of her witness statement, Miss Wen did say that the parties were operating on the basis that the gondolas should be received at the site by the end of January 1996, the point is that in paragraph 11 when she told Mr Lim that the Plaintiff's programme was too late, she told him that the gondolas are required by early January of 1996 instead of what she now alleged in her oral evidence.

18. Miss Wen's oral evidence that Mr Lim told her that stocks were available is not something referred to in her Witness Statements nor put to Mr Lim in his cross-examination.

My view

19. In my view, what had happened is that after Miss Wen received the first programme of 29th September, she called up Mr Lim and requested an earlier delivery date for the two gondola systems. The reference in the fax of 29th September 1996 from the Plaintiff to "delivery time for the gondola is about 4 months" must be read in the context of the first programme, namely, seven months and two weeks. In response to the request, Mr Lim altered the time for the delivery in the second programme. After Miss Wen received the second programme, she still asked for an earlier delivery. It might well be that in the conversation she had referred to delivery in January, but I find that Mr Lim had not agreed to delivery in January. It is apparent from the two programmes that the time required for the manufacturing and transportation of the two gondola systems to the site remained the same, namely, four and half months.

20. I do not accept that after Mr Lim had delivered the second programme he would suddenly promise Miss Wen that the gondolas would be delivered at the end of January 1996. I accept Mr Lim's evidence that he told Miss Wen that the Plaintiff would negotiate with the manufacturer to see if an early date could be reached. However, he also told Miss Wen that he could not guarantee any earlier date than what was given by the manufacturer.

21. After this discussion, I find that Miss Wen placed the confirmation. Mr Lim did contact the manufacturer and the letter of 23rd November 1996 from the Plaintiff apologizing for the delay is not an indication that Mr Lim had promised to deliver the gondolas by the end of January 1996. Rather, I accept Mr Lim's evidence that he apologized because the Plaintiff could not do the Defendant a favour in shortening the delivery time.

22. The contract of 23rd October 1995 was silent on the date of installation of the gondolas. I find that the parties proceeded on the basis of the delivery time in the second programme. I further accept Mr Lim's evidence that this programme was attached to the contract. Mr Lim accepted that the delivery of the two gondola systems needed to suit the master building plan. However, the schedule of the master plan was simply not an issue in the contract in question. Mr Lim, as was conceded by Mr Anthony Chan, Counsel for the Plaintiff, was not the best of the witnesses. At times he gave the impression that he was unaware of the things that took place in his company. However, all-in-all, his case is consistent and I accept him to be a truthful witness. There were no doubt some inconsistencies in the evidence of Mr Lim, but they do not in the whole cast doubt on the truthfulness of his evidence.

Subsequent delay

23. The contract was signed by the Defendant on 24th October 1996. Following the schedule of the second programme, the gondolas should have been delivered to the site on about 23rd/24th March 1996. Instead the gondolas were only delivered on 28th March 1996 and Mr Lim was unable to tell whether all the spare parts of the two gondola systems were delivered at the same time. However, the Defendant had not raised any issue before that only a part of the materials was delivered to the site. Whilst there might be delay in the delivery of the materials to the site, this did not have an overall effect on the schedule of delivery because the materials were not hoisted to the roof immediately. The duty to hoist up the materials, however, was with the Defendant. The Defendant also was obliged under the contract to provide a platform for the installation of the two gondola systems and the Defendant did not build the platform until 27th April 1996.

24. Miss Wen suggested that the Plaintiff had a duty to remind the Defendant to build the platform. I do not see how such a duty would arise if the obligation was on the Defendant to build the platform. In any event, the installation of the two gondola systems were completed in early May 1996. It was tested by a public surveyor on 8th May 1996 and the certificates of testing were issued on 10th May 1996. The gondolas were handed over to the Defendant on 22nd May 1996. The slight delay in handing over the gondolas (which according to time schedule in the second programme should be early May 1996) was caused by delay on the Defendant's part in having the equipments hoisted and in building the platform.

25. In the circumstances, I do not accept the Defendant's contention that the Plaintiff had delayed in installing or handing over the two gondola systems.

Defects

The pleaded case

26. The pleaded case of the Defendant on defects is that the two gondola systems were defective and could not be used for the purpose they were bought for. The particulars that were given for defects are :

"a) by a letter dated 17th June 1996 from the Plaintiff to Ronald Luk and Associate, the Defendant notified the said Ronald Luk and Associates that they did not recommend the end-user to use the Gondola System.

b) The Gondola System installed at Tower B of the Site cannot move as the motor does not function.

c) the Gondola System installed at Tower A of the Site cannot function properly as it has difficulties in shifting the gondola to move upward or downwards.

d) The Plaintiff has failed to rectify the defects notwithstanding the defects were occurred within the defect liability period."

Case at the trial

27. On the first day of the trial, the Defendant conceded that it was not relying on the defects of the gondola system in Block B. It was only relying on the defects of the gondola system in Block A. In the course of Miss Wen's evidence, she said that the defects in respect of the gondola system in Block A had been repaired in January 1998.

Burden on the Defendant

28. The gondola systems had been tested to be satisfactory by a public surveyor and also later in the presence of the representative of the Defendant and the Architect. The gondola systems were inspected by the public surveyor on 8th May and were found to be in good design and construction of adequate strength, made of sound material and properly installed. They were also found to be in safe working order. A challenge was raised that the surveyor did not properly test the gondola systems. In my view his evidence could not seriously be faulted.

29. In relation to the allegation of defects, the burden of proving defects must be with the Defendant. What is apparent from this case is that apart from some very vague allegations of the gondola being stuck in the air, there really is no evidence from witnesses who witnessed the defects (apart from one incident in which Miss Wen said that she saw the gondola got stuck) and how the defects occurred. Even given due regard to the fact that a witness may not remember details of events or may have mistaken in their recollection, the overall picture that emerged from the evidence is that Miss Wen was ready to lay blame when problems had not even occurred. The example that immediately comes to mind is the response by the Defendant to the Plaintiff's solicitor's demand for payment. In the letter dated 10th June 1996, the Defendant stated that the reason for delay in payment included, among other things, "upon testing, the performance was found to be unsatisfactory". The evidence of Miss Wen in fact was that the defect occurred after the Defendant received the keys to the gondola systems on 14th June 1996.

30. Miss Wen stated that her complaint was that the testing of the gondola systems on 3rd June 1996 in the presence of the Architect and the Defendant was done cursorily. This is far removed from the suggestion that their performance was unsatisfactory. I am not convinced that Miss Wen's command of the English language was so inadequate that she could not express her intentions clearly. An indication of the mind set of Miss Wen is found in the same letter at paragraph 5 in which it is stated that :

"In the industry, it is against trade practice to copy the letter urging us to pay directly to the Architect as the contract was signed between our 2 parties. We think that from the above 5 points, Trifairco is not entitled to have the said Invoice settle at this point, they should be paid when we received payment first. Meanwhile if we again learnt that they copy the letter for settlement to our Architect or Client, we shall claim for 'loss of face' compensation." (emphasis added).

First incident of defect

31. Miss Wen in her Witness Statement said that after 14th June 1996, the Defendant tried to use the gondola in Tower A, and it was found that it got stuck and the gondola could not move up or down. The Plaintiff was informed of these defects but persistently failed to rectify them. Miss Wen stated that the cradle stopped on the 8th Floor. She did not refer to a specified date in which the gondola got stuck. The Defendant did not call any witness who had witnessed this incident. Notwithstanding the allegation that the Plaintiff failed to rectify them, Miss Wen, in her evidence, stated that Jones Lang Wootton, the Management Company of the buildings, had notified the Plaintiff and the defect was repaired.

32. The Defendant relied on a letter from Jones Lang Wootton dated 17th July 1996 in which it referred to the defects of, among other things, the gondola system. It was stated that among other things defect items :

"1. To adjust & check the micro switch of the cage were required because the operation of up & down control was found occasionally function only."

This document was introduced by way of hearsay evidence, the person who prepared this report was not called. The Defendant accepted that the letter from Jones Lang Wootton was not tendered by way of an expert opinion. I cannot attach any weight to this letter as evidence that the gondola in Tower A was not fit for the purpose.

The second incident

33. The second incident relied on by the Defendant was that the gondola got stuck on 24th Floor in August 1996. Miss Wen complained that despite requests by the Defendant to the Plaintiff to lower the gondola, the Plaintiff failed to response and the gondola remained in their position for a month until the Architect demanded the Plaintiff to lower the gondola because of the typhoon season.

34. The Plaintiff's case is that it had not received calls from the Defendant requiring it to lower the gondola. Mr Lim's evidence is that he attended the site with a technician on 22nd August 1996 and they discovered :

"...that the reason why the gondola hung in the air was because the workers of the Defendant had not checked the electrical cables properly and had operated it wrongly. Besides, the workers from the Defendant who had operated the gondola did not know how to lower the gondola manually and are not workers with proper training in operating Gondola system. I asked the technician to replace a damaged part of the gondola system and I told people from the management office that they shall only allow workers with proper training in Gondola system to operate the gondola."

Mr Lim is the only witness who dealt with the inspection of the gondola on 22nd August. I accept his evidence. The Defendant have failed to substantiate the allegation of defect in respect of this incident.

The third incident

35. According to the letter dated 15th October 1996 from Jones Lang Wootton "the gondola system is remained outstanding for use." It is not clear from the letter whether Jones Lang Wootton were referring to both systems.

36. By a letter dated 26th October 1996, the Defendant informed the Plaintiff that in respect of Tower B the motor of the gondola could not be moved and in respect of Tower A, the gondola had problems in moving up and down. The letter stated that it was suspected that this was "due to the balance of the mercury".

37. Mr Lim was unable to tell how the Plaintiff responded to this letter, but Miss Wen said that the defects had been repaired by the Plaintiff. Miss Wen stated that there was no further problem with the gondola in Tower B.

38. In relation to the "balance of the mercury", some information can be gathered from DW2, Mr Tony Chan, the expert called on behalf of the Defendant. He said that there was a mercury gauge in the cradle of the gondola for the purpose of balancing the cradle. If the level of the mercury became tilted, then the cradle would not be able to move and the level could be readjusted by pressing the button. There is no evidence adduced by the Defendant on the cause of the defects which rendered the gondola unfit for its purpose.

The fourth and fifth incidents

39. Miss Wen said that at the end of 1996, the cradle again could not be lowered and it remained hanging in the air when the Defendant tried to operate the gondola. In the beginning of 1997, a public surveyor was instructed to inspect the gondola and the surveyor was of the view that the gondola was defective. The Defendant chose not to call the surveyor who inspected the gondola to give evidence. Although a statement from the firm of surveyor which inspected the gondola was included in the Witness Statement bundle, no hearsay notice was served in respect of this statement. Although Miss Wen said that the Plaintiff was aware of this defect and it came to rectify the defect, in the end there was no evidence on the cause of the defects.

Mr Tony Chan

40. The Defendant instructed an expert Mr Tony Chan to inspect the gondola in Tower A on 28th June 1997. Mr Chan said that there was no response on all electrical switches on the cradle. Although Mr Chan had attempted to offer some explanation as to why the electrical switches could not work, the truth of the matter is that he was simply not in a position to tell why the switches could not work. His view was that the cradle, including all systems, needed to be thoroughly checked and adjusted after the electrical system had been fixed since the equipment has not been in use and was not under the proper maintenance for some time. When Mr Chan inspected the gondola, it was not covered up. It was over one year since the system had been installed, and according to the Plaintiff, handed over to the Defendant in May 1996. In the circumstances, the malfunction of the cradle might well due to factors such as lack of maintenance other than to the defects in the system itself.

Mr Tsui Wai Hung

41. Further according to Mr Tsui Wai Hung, an electrician of the Plaintiff, the problems he found on the two gondola systems could easily be remedied. He inspected the two gondola systems on 29th August 1997. In Tower A, he found that the cradle could not be lifted from the roof. Upon examination he found that the "limit switch", a safety devise of the gondola was depressed. This caused the cradle not to move upward and downwards. He injected some oil to lubricate the "limit switch", and after that the switch was found to be in proper working order and the cradle could then be moved upward and downward. He also inspected the gondola system in Tower B. He found that the cradle could be moved upward and downward. He then tested the roof car and found that a motor could not work. He found that the brake of the defective motor had not been released and still applied to the defective motor; this affected its function. Mr Tsui released the brake and found that the brake had not been maintained properly, and there was dirt inside the motor which caused the brake not to be released. He cleaned the brake and the components of the motor and re-installed the motor. After that, the motor was found to be in proper working condition.

Mr Lim's inspection

42. Mr Lim inspected the two gondola systems on 1st September 1997 and found them to be in sound working order. Mr Lim was accused by the Defendant of tampering the evidence. Although Mr Lim gave the rather odd answer that he could not recall why he attended the premises on 1st September 1997, there is no doubt in my mind that his visit was connected with the litigation between the parties.

43. Although it was suggested that the technician visited the premises in order to repair the gondolas, I do not find that was the purpose of the visit. The visit was to inspect the gondolas for the purpose of the case. When Mr Tsui discovered that the gondolas were unable to work, he found out the cause and was able to render the gondolas operational without much effort.

Malfunction

44. From the evidence adduced, it is apparent that the gondolas had indeed malfunctioned at times. However, the Defendant had not been able to establish the cause of defects or that the malfunction was such that it rendered the gondolas not fit for their purposes. It appeared that the Defendant had taken a rather cavalier attitude towards this matter. Despite its claims that the public surveyor had certified that the gondolas were defective at the beginning of 1997, no repair was carried out on the system until the beginning of 1998. This leaves one in serious doubt about the genuineness of the Defendant's complaint about defects in the two systems.

Other matters

45. Evidence was adduced about the uneven surface of the roof and its effect on the gondola systems. This is not really germane to the issue on the question of defects. The Defence referred to a letter dated 17th June 1996 from the Plaintiff to the Architect where it was said that it did not recommend the end-user to use the gondola systems. The letter is actually dated 17th July 1996 and what the letter really said is as follows :

"Upon testing the roof trolleys, we have discovered that the slabs of the roof top for both blocks were not smooth enough to enable the gondola systems to travel on a safety condition. These systems are recommended to travel on a smooth surface for safety reason. Should the surface of the slab not smooth enough, we as gondola supplier, will not recommend the end-user to operate the machine."

The evidence reveal that at some stage the surface of the roof was in fact flattened. It did not appear that the Defendant had really relied on this letter by not moving the gondolas along the roof of the two towers.

Conclusion

46. In the end, I find that the Defendant had not established its defence on delay and defects. I find for the Plaintiff on liability. The Plaintiff is entitled to judgment as claimed with interest at judgment rate from the date of the service of the writ to judgment. The Counterclaim is dismissed. There shall be costs nisi of the action to the Plaintiff.