BETA ENGINEERING CO. LTD. v. TOPTECH CO. LTD.

1995, No. A12172

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. In this action, the plaintiff claims against the defendant for services rendered to the defendant by the plaintiff under a total of twelve invoices. The defendant counterclaims against the plaintiff for the price of 2,128 pieces of cutouts from Corian Top material which the plaintiff is bound to return to the defendant but which the plaintiff has failed to do.

2. The plaintiff is and was at all material times a certified fabricator of Corian Top materials which are commonly used as kitchen cabinet table tops. The defendant is and was at all material times the sole distributor of Corian Top materials in Hong Kong. By a number of purchase orders in writing, the defendant engaged the plaintiff to carry out fabrication and installation work of Corian tops at various sites. It is not in dispute that the works were carried out and completed. Out of the twelve invoices, only four are disputed by the defendant and they are 0001, 0002, 0083 and 0552.

3. Invoices 0001 and 0002 relate to mock-up work carried out by the plaintiff in Sham Tseng, which were issued on 25 June 1993. The case of the defendant is threefold. First, there are no job completion forms and purchase orders. Second, it is the internal policy of the defendant that no payment would be made in the absence of a job completion form. Third, it is a well known practice in the trade that all mock-ups are free of charge. In this connection, I accept the evidence of Mr. Chan Kim Wang that normally there were no purchase orders for mock-ups and only the first mock-up was free of charge. That was why each invoice charged the price for two mock-ups although three mock-ups were done. I accept that it is not possible and indeed unreasonable for a fabricator to supply labour free of charge for an indefinite number of mock-ups. The internal policy of the defendant is not a valid excuse for the defendant to avoid its contractual obligation. What is important is that the work was done and there is no dispute that it was done. In fact, there are two job completion forms in respect of these two invoices in the Bundle of Documents at p.39 and p.40. I reject the claim of a well known trade practice that all mock-ups are provided free of charge.

4. Invoice 0083 is for work done at the Pacific Place Road Show. A purchase order No. 7873 at p.22 of the Bundle of Documents was issued by the defendant. There was a job completion form at p.41. It is not disputed that the work was done.

5. Invoice 0552 is in respect of additional work carried out at KCRC at the request of the defendant. Mr. Lai Kam-fu, the site superintendent of the plaintiff gave evidence that he received instructions from Mr. Kelvin Hui and Mr. Ricky Lee of the defendant for the additional work. I accept his evidence. There is no dispute that the additional work was carried out.

6. On these invoices, I find, on a balance of probabilities, that the plaintiff's claim has been proved and there is no substance in the defence and the arguments the defendant raised.

7. I turn now to the counterclaim which is for a sum of $417,152.00 representing the value of 2,128 pieces of Corian cutouts and transportation charges. The factual basis of the counterclaim is fully set out from paragraphs 9 to 12 of the Amended Counterclaim which I find convenient to reproduce. It is as follows:

9. The Defendant is a company duly incorporated in Hong Kong and carries on mainly the business of (inter-alia) providing services of fabrication and installation of Corian Top for main contractor or sub-contractor of construction sites.

10. In the course of providing the said service referred to in paragraph 9 hereof, the Defendant normally engages and delegates the work required to other contractor.

11. A. On or about 21st August 1993, by a written contract dated 21st August 1993 ("the Contract") it was agreed between one Formable Industrial Ltd. ("Formable") and the Defendant (inter-alia) that the former would provide the Corian Top material for the latter to apply fabrication and installation work for a project ("the Project") at a construction site known as "Wu Kai Sha 333, at Ma On Shan, Shatin, New Territories" ("the Site").

B. In turn and separately, the Defendant and the Plaintiff entered into a written purchase order known as P.O. 7021 dated 11th October 1993 ("the Purchase Order") whereby the Plaintiff agreed to apply fabrication and installation work with the Corian Top supplied by Formable at the Site for the consideration and under the terms and conditions set out therein.

C. Prior to the conclusion of the Contract and the Purchase Order, in or about early/mid-August 1993, in a Tri-parte meeting held at the office of Formable among Messrs. Larry Cheung (the Managing Director) and Dante Mang (the Project Manager) of Formable, Mr. Kelvin Chan also known as Chan Kim Wang (the Director) of the Plaintiff and Messrs. Ringo T.M. Cheung (the Managing Director) and Kelvin Hui (the Project Manager) of the Defendant ("the Meeting") it was agreed amongst the three parties (inter-alia) that the cut-outs from the Corian Top material to be applied for the Project at the Site should be delivered back from the Plaintiff to the Defendant and then from the Defendant to Formable ("the Agreed Arrangement") and that the Agreed Arrangement should become part of the terms and conditions of the Contract and the Purchase Order.

D. Further or in the alternative, it was also an implied term under the Purchase Order that the cut-outs from the Corian Top material should be returned from the Plaintiff to the Defendant for the reasons (inter-alia):

(i) that the Corian cut-outs were having commercial value and for the sake of "business efficacy" there was an implied obligation by the Plaintiff to return the same to the Defendant;

(ii) that it was a common trade practice and/or custom; and

(iii) that the same practice and manner of dealings had been done in previous dealings amongst the same three parties in (inter-alia) two projects namely (i) the Tau Fung Shan Project and (ii) the Old Peak Road Project.

12. Wrongfully and in breach of the Agreed Arrangement and wrongfully and in breach of the said implied term pleaded in paragraphs 11C and 11D hereof respectively, the Plaintiff has failed and/or neglected to return the cut-outs from the Corian Top material totalling 2128 pieces in quantity or any part thereof despite numerous requests and demands made by the Defendant (including in two several letters respectively dated 11th November 1995 and 9th December 1995, both sent from the Defendant's Solicitors to the Plaintiff's Solicitors, both demanding the return of the said 2128 pieces of the cut-outs).

8. Mr. Cheung Tai Ming, the Managing Director of the defendant, gave evidence in terms of paragraph 11C of the Amended Counterclaim. He said that there was a three parties meeting involving the plaintiff, the defendant and Formable when it was agreed that the plaintiff should deliver the cutouts from the Corian Top material to the defendant who would deliver them back to Formable. Both Mr. Chan Kim Wang and Mr. Mang Dante, who was then the Assistant General Manager of Formable denied there was such an agreement. It is their evidence that there was not even such a meeting. Mr. Mang said that he only came to know Mr. Chan Kim Wang for the first time at about the end of 1994 or early 1995 and it was impossible for him to attend the meeting with Mr. Chan in August 1993. I believe the evidence of Mr. Chan and Mr. Mang and disbelieve the evidence of Mr. Cheung Tai-ming. Mr. Lee Chi Man or Ricky Lee also gave evidence for the defendant. He has been the Senior Department Manager of the Building Products Department of the defendant since 1995. He did not attend the meeting in August 1993 and was not told about the meeting by Mr. Cheung until after 10 April 1995. He said that he was under the impression that the defendant was not liable to return the cutouts to Formable when he wrote to them on 10 April 1995. The letter was written in response to a letter from Mr. Mang dated 1 November 1994. The letter written on the letterhead of the defendant reads:-

" Without Prejudice

Formable Industrial Ltd
6/F Cheung Lee Industrial Bldg
208 Tsat Tsz Mui Road
North Point
Hong Kong

Dear Sirs,

Re: Contract No. BPO365(R3)

We refer to the above contract and repeat once again as mentioned in our letter to you of today's date that the alteration of the contract by you unilaterally has never been agreed by us nor was it brought to the notice or knowledge to us. In fact, both parties just performed the said contract in accordance with its original terms.

However, in order to maintain the goodwill and relationship between Formable and Toptech, we hereby agree, on a without prejudice basis, to propose provided you can settle and make payment to us for the outstanding sum of HK$1,838,580.79 (the letter of credit issued by you on 4th April, 1995 in the total sum of HK$988,031.00 will be deducted) within 14 working days from today:-

(1) we will provide you with 1,064 sink cutouts and 1,064 stove cutouts by a number of shipments not later than 31st December 1995;

(2) you shall bear all the transportation costs and incidental expenses whether such cutouts are within or outside Hong Kong;

(3) the size of such cutouts will be various but with no warranty to correspond to the particulars as mentioned in your letter dated 20th March 1995; and

(4) the availability of such cutouts will be of different colours.

Should the above terms acceptable by you, please signify such agreement by signing a copy of this letter and return to us as soon as possible.

Yours faithfully,

TOPTECH CO LTD "

9. It was signed by Ricky Lee. This, in my view, is the most cogent evidence that there was never a meeting in August 1993 that Mr. Cheung Tai-ming said there was. If there had been such a meeting, Mr. Lee Chi Man must have been aware at the time he wrote the letter on 10 April 1995 bearing in mind the nature of his work and his position in the company. The only reasonable inference to be drawn from this letter is that the meeting in August 1993 was nothing more than a subsequent invention. If the cutouts were so valuable, one would expect that the disposal of them would form an important part of the contract but none of the purchase orders made any mention of this. I totally reject the evidence of Mr. Cheung Tai-ming. I also reject the evidence of Mr. Lee Chi-man where it conflicts with the evidence of the plaintiff's witnesses. I further reject the claim of any trade practice or custom for the return of the cutouts. A good example is the contract entered into between the defendant and Formable (pp.41-44 of the Bundle of Documents). At the bottom of p.44 under Debris, it is stated:-

"All cut-outs of sink, stove and strips from Corian work top shall be the properties of Toptech Co. Ltd."

The name of Toptech Co. Ltd. was crossed out and was replaced by the name of Formable Industrial Limited. Mr. Mang said that it was he who made this alteration and that is why he was accused by Mr. Ricky Lee of unilaterally altering the contract in the letter of 10 April 1995. If there had been a trade practice or custom in existence, Mr. Lee certainly did not say it. What he said instead was this:

"In fact, both parties just performed the said contract in accordance with its original terms."

10. On the evidence, I find that there is no contract, oral or written, express or implied, or any trade practice or custom which obliges the plaintiff to return the cutouts. The counterclaim must fail and is dismissed.

11. There would be judgment for the plaintiff for $386,368.24 with interest at the prescribed rate. I make an order nisi for costs for the plaintiff on both the claim and the counterclaim.