BRIGHTFORD LTD. v. SAM TAT MACHINERY CO. LTD.

HCA 4439/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4439 OF 1994

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J U D G M E N T

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1. These proceedings arise out of a Leasing Agreement involving a 70 ton crawler crane to be used during the construction of the Macau Airport. This crane, when assembled, had a boom of 36m in length - the equivalent of a twelve storey building.

2. The Agreement was entered into between the Plaintiff, which carries on the business of leasing construction machinery and equipment, and a Macau construction company Guan Li Companhia De Obras Limitada ("Guan Li").

3. The Agreement was dated 24 December 1993 but was signed by Guan Li on 4 January 1994. Both an English and a Chinese agreement were signed that day, but it was an express term of the Chinese Agreement that the terms of the English version should prevail. On the same day, the Defendant, a Hong Kong Company, guaranteed the obligations of Guan Li under the Leasing Agreement in a document dated 4 January 1994.

4. The crane in question was delivered to Macau on 7 January 1994. The Plaintiff concedes that the crane needed minor repairs on arrival in Macau. It had wished to effect those repairs in Hong Kong before shipment. But at the request of Guan Li which had already made shipping arrangements, it was agreed that these repairs would be carried out in Macau. Although it maintains that the crane was in fact operational considerably earlier than that, the Plaintiff is prepared to concede for the purpose of this claim that it was functioning from 18 February 1994. There is no dispute that the 1st month's rent and transportation charges were paid by Guan Li. The Plaintiff accepted that the rental period should commence on 18 February 1994. Guan Li failed to pay any rental thereafter and only re-delivered the crane back to the Plaintiff in Hong Kong late on 30 July 1994.

5. The Plaintiff had by a letter dated 31 March 1994 purported to terminate the Agreement on 14 April 1994.

6. The Plaintiff claims against the Defendant as guarantor of Guan Li's obligations under the Agreement and by virtue of its agreement to return the crane on the termination of the lease, in respect of

1)	outstanding rental from 18 March 1994 to 14 April 1994, the date of termination of the Agreement,
2)	interest on the overdue rental at the contractual rate,
3)	damages for loss of rental of the crane from 15 April to 30 July 1994 when it was re-delivered to Hong Kong.

7. The Defendant's principal defence rests on an allegation that on 19 December 1993 (i.e. before Guan Li signed the written Leasing Agreements), Mr Lee Sze Woo, a director of the Plaintiff company, during a visit to the airport site made an oral representation to Mr Ieong Un Chun, on the part of Guan Li that the crane would be capable of being driven on its caterpillar tracks to the working site which has been described as the "upper platform". This was a very large area which was to form the runway of the airport. Evidence was called that this area measured approximately 4km by 100m and was 7-8m higher than the surrounding area.

8. The Defendant says that contrary to Mr Lee's representations, the crane was incapable of moving on its own tracks to the "upper platform" and was thus unfit for the purpose Guan Li required it. The Plaintiff was therefore in breach of contract and Guan Li accepted that breach. The principal submission for defence is that this breach discharged Guan Li from its obligations under the Leasing Agreement and therefore released the Defendant of any obligations under the guarantee.

9. The first issue to be decided is one of fact namely, whether this representation was ever made by Mr Lee.

10. There is no dispute that there was a visit by Mr Lee Sze Woo of the Plaintiff to the airport site in December 1993 when he met Mr Ieong Un Chun of Guan Li. Both men have given evidence of what occurred at that meeting 6 years ago. Mr Ieong said that he had pointed out the platform to Mr Lee and told him that the crane would be required to travel to and work on the "upper platform" and lift a machine which would vibrate the sand. He said that Mr Lee had said that there would be no problem and that the machine would be able to do that. Mr Ieong's evidence was that since the area consisted of sand reclamation which was still loose only vehicles on caterpillar tracks could move on its surface. Other kinds of vehicles would be unable to do so. He maintained that the working site of Guan Li was confined to this upper level and that the crane would not be required to work elsewhere.

11. Mr Lee Sze Woo gave a quite different version of this meeting. He said that Mr Ieong had told him the crane would first be used at the shore to lift materials to the shore and would later be used at an elevated area some distance away which he pointed out. Mr Lee maintained that at this meeting Mr Ieong had only referred to the lifting duties the crane would be required to perform and had not mentioned the vibration work. He agreed that they had talked about transporting the crane to its place of work but Mr Ieong had said that there would be a low back trailer which would transport the crane there. He had not given any assurance to Mr Ieong that the crane itself could be driven up the slope.

12. Mr Lee gave a number of reasons for this visit which he said only lasted about 10-15 minutes. He said that it was to see if there was a suitable place for rigging up the crane, to inspect the road along which the crane would be transported and, based upon difficulties sometimes experienced in Hong Kong, to see if there was enough space for a machine to work. He also said that it was Mr Ieong who had arranged the meeting "to see the place, otherwise the crane would be transported to the wrong place".

13. Both men were giving evidence of an oral conversation many years ago. I consider bearing in mind the circumstances that it is probable that Mr Ieong did inform Mr Lee of the nature and location of the work that the crane would be required to perform, namely vibration work on the platform, and that he formed the impression from his conversations with Mr Lee that the crane was capable of performing the work. After the vibration work was done in one location on the "upper platform", the Defendant would obviously require the crane to move on its tracks so that the vibration work could be done in the next location on the platform. I accept that Mr Ieong was probably assured by Mr Ieong expressly or by implication that this could be done. Indeed, there is no suggestion that if it had been possible to transport the crane to the platform the crane would not have been able to do such work.

14. When it comes to the question of whether an assurance was given by Mr Lee that the crane could reach the platform under its own power and, if such an assurance was given, the nature of it, I am far less clear. On Mr Ieong's evidence, there were already a number of cranes of various sizes operated by another contractor doing vibrating work on the platform. It had obviously been possible for those cranes to reach the platform. The platform was only 7-8m above the surrounding reclamation. The gradient to the slope up to the platform could easily be altered with the assistance of a bulldozer.

15. Since Mr Ieong said that the platform was the only working site, it would not have been necessary for the crane to go or to be taken up to the platform on more than one occasion. I consider that might well be the case that, having described the nature of the work that the crane would be required to do and the location and received an assurance from Mr Lee that there would be no problem, he had assumed that there would be no problem in the crane moving to the platform on its own tracks. I considered Mr Lee may well have assumed, if he is mistaken when he says that he was told this expressly, that the crane would be transported on a trailer. Trailers would in normal circumstances be the usual means of transporting such a crane, at least by road. It must be remembered by the terms of the written contract, the responsibility for transporting the crane after delivery to Kowloon Waterfront laid with hirer.

16. My doubts as to whether there was an express assurance that the crane could move up the slope of its own motion is reinforced by the fact that in none of the faxes sent by Guan Li after they found on 18 February 1994 that it could not move up the slope, did they refer to an express assurance by the Plaintiff. One might have expected them to refer to such an assurance if there had been one. In their fax of 22 February 1994, they simply referred to the fact that 8 other cranes were capable of climbing the short slope and that they wanted a crane that worked normally and properly. In their fax of 4 March 1994, having received the fax of the Plaintiff stating that the crane was "structured for ordinary lifting usage not for climbing up slopes", they did not as one might have expected if they had been given such an assurance refer to an express assurance they had received to the contrary. Instead they merely said that they were still waiting for a crane operating normally in all aspects. Even in that letter in the letter from their Macau lawyers, Goncalves, Pereira and Rato of 9 May 1994, there is no reference to any express assurance.

17. I am not satisfied on the balance probabilities that there was such an express assurance or term.

18. The Defendant's case is that there was in the alternative and implied term that the crane was capable of being driven on its caterpillar tracks to this location. It is well settled law that the court will only imply a term if it is one that must necessarily have been intended by the parties. Here there is no such necessity. Cranes and even crawler cranes are frequently transported to sites that are otherwise inaccessible to them. Although attempts were made on 18 February 1994 to drive it up with the aid of a bulldozer having made the slope less step, there was no convincing evidence that the crane could not have been moved up the slope by adopting one or more of the suggestions of Mr Lee. These were derigging the crane by removing the boom and counterweight (which would have reduced its weight to 43 tonnes), levelling the slope still further, pushing the crane by another machine or using other cranes. Mr Ieong said that he had not thought of using other cranes for the purpose even though by the end of January, his company had three other cranes on the platform. Even though the sand might have been relatively soft, I consider it probable that means could have been devised transport the crane onto the platform.

19. I am, therefore, satisfied that there was no express or implied term such as that suggested by the Plaintiff.

20. I would add that even if I had found there was an assurance or term as alleged by the Defendant, such assurance or term made no reference as to whether it related to a rigged or de-rigged crane. There is no evidence that the crane would not have been able to move of its own motion onto the platform in a de-rigged state.

21. The Defendant has not pursued the allegation in paragraph fifteen of the defence that there was an agreement to terminate the Lease Agreement.

22. It is unnecessary for me to resolve the dispute as to the stage prior to 18 February 1994 that the crane was in working condition. Even Mr Ieong had no reason to suppose that, apart from its capacity to climb slopes, the crane was not in working order by that date. I find by 18 February 1994, it was in working order.

23. I find therefore that there was no breach which would have entitled Guan Li to repudiate their contract.

24. I find that Guan Li is liable for outstanding rent for the period from 18 March 1994 to 14 April 1994, the date of termination of the Lease Agreement in the sum of $85,866.67 (i.e. $92,000 x 28/30).

25. As guarantor, I find that the Defendant liable to the Plaintiff for this sum.

26. The Plaintiff's remaining claim against the Defendant is in respect of loss of rental for the crane at the monthly rate of $100,000.00 from 15 April 1994 until 30 July 1994, the date the crane was returned to Hong Kong by the Defendant.

27. The figure of $100,000.00 rather than the contractual rate is claimed on the basis of evidence (which I accepted) that another company Bachy Soletanche had agreed to rent the crane for this period at a $100,000.00 per month if it had been available.

28. It is argued on behalf of the Plaintiff that the Defendant is liable for damages at this rate because Guan Li had in correspondence repudiated the contract and that such repudiation was accepted by the Plaintiff by its fax of 31 March 1994 giving 14 days' notice of termination of hire. The Defendant, having guaranteed the performance of the contract by Guan Li, is liable for damages for breach.

29. The Defendant on the other hand argues that the Plaintiff's fax of 31 March 1994 was not a letter accepting Guan Li's repudiation of the Agreement, but amounted to the Plaintiff itself terminating the Agreement under the terms of the contract. Since the Defendant was only guaranteeing Guan Li's performance of the contract, it cannot be liable for events after the Plaintiff had terminated the contract.

30. While I found that the correspondence from Guan Li prior to 31 March 1994 might have been able to be construed as a repudiation by them of the contract, I consider that it would be artificial to construe that the Plaintiff's fax of 31 March 1994 as an acceptance of such repudiation. The termination of the contract is expressed to be the wish of the Plaintiff rather than as a result of any conduct of the Defendant. For there to be an acceptance in law, the innocent party must agree to the contract being put to an end subject only to the retention by him of his right to bring an action in respect of such wrongful repudiation. In their fax of 31 March 1994, the Plaintiff was still insisting on the observance by Guan Li of certain of the conditions of the contract. I do not find therefore that the fax amounted to acceptance of a repudiation by Guan Li.

31. I find that the contract between the Plaintiff and Guan Li was terminated by the Plaintiff's fax of 31 March 1994. While that fax may have terminated the Defendant's responsibilities as guarantor, I find that under the terms of the agreement of 4 January 1994, the Defendant undertook primary responsibility to transport the crane back to Hong Kong on termination of the agreement. That undertaking would obviously be subject to an implied term that the Defendant be allowed a reasonable time for so doing. Bearing in mind on one hand that 14 days had to be given for termination of the contract and on the other hand that an export licence had to be obtained before it could be shipped from Macau, I am satisfied that the period of 21 days after the expiry of the notice would be a reasonable period for that purpose.

32. I am satisfied that the Defendant is liable for loss of rental of the crane occasioned to the Plaintiff from 6 May 1994 until 30 July 1994 at $100,000.00 per month ($100,000.00 x 2-24/30) = $280,000.00.

33. I give judgment for the Plaintiff in the sum of $365,866.00 plus interest on the sum of $85,866.00 at 2% per month from 1 April 1994 until today and thereafter judgment rate until payment and interest on the sum $280,000.00 at 9% per annum from 30 July 1994 until today and thereafter at judgment rate until payment.

34. I make the following order nisi as to costs that unless either party applies to be heard on the question of costs within 14 days from today the Plaintiff's costs are to be taxed and paid by the Defendant.