YICK HING CONSTRUCTION CO LTD v. GOLIK STEEL CO LTD

DCCJ2057/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2057 OF 2005

D E C I S I O N

1.  The plaintiff applies for summary judgment against the defendant for breach of contract to supply steel bars between January 2002 and December 2005 under a sales agreement dated 14 January 2002 and a letter dated 31 December 2003.

2.  Up to June 2004, the defendant supplied 1,195 tonnes of steel to the plaintiff for which the plaintiff settled full payments. 

3.  On 7 July 2004, the defendant alleged that the plaintiff had committed a breach of clause 4 of the agreement by removing the steel delivered on 29 June 2004 for use in other sites, and subsequently ceased further steel supply to the plaintiff under the said agreement.  Clause 4 of the sales agreement provided: 

“The abovementioned commodities are to be used for the project contract no. DC2000/06, Yuen Long/ Kam Tin/Ngau Tam Mei and Urban Drainage Improvement Works, New Territories, only unless otherwise agreed by the sellers.” 

4.  Due to the defendant’s failure to supply further steel to the plaintiff, the plaintiff had to buy steel from other sources at an inflated price, and the plaintiff therefore claims against the defendant for damages suffered  because of the defendant’s breach of the sales agreement. 

5.  The plaintiff denied that it had used the steel bars delivered on 29 June 2004 by the defendant for its other projects.  The plaintiff relied on the joint site inspection by the defendant and the plaintiff’s representatives, after which the defendant had written to the plaintiff accepting the heat tags and bar patterns on the steel at storage yard had matched the steel supplied by the defendant, and the quantity and number of piles also tallied with the quantity that the defendant supplied to the plaintiff. 

6.  The plaintiff further relied on the requirement set out by the Hong Kong Government under General Specification for Civil Engineering Works, Volume 2, section 15: 11, where the steel bars used in a government project have to be submitted to the engineer with the mill’s certificate from the manufacturer setting out certain specifications of the steel supplied.  It is not disputed by the parties that those specifications and requirement of a mill’s certificate from the manufacturer applied only to government projects. 

7.  The plaintiff further submitted that it would not be possible for the plaintiff to have used the steel in the plaintiff’s other sites because, around the time, it had only projects on slope prevention works which required a very different type of steel bars. 

8.  The defence had exhibited a list of government projects which showed the plaintiff’s 2004 and 2005 projects involved only slope slide-prevention works. 

9.  The defendant’s defence is that the plaintiff had breached clause 4 of the agreement on information that it received:  that on 29 June 2004 after the defendant’s delivery of the steel bars to the site, it had found the plaintiff had transferred the steel bars to two other warehouses.  The defendant therefore queried the reason why the plaintiff should remove the steel bars from the site that it was intended to work on.  The plaintiff’s answer was that the site was too small to hold the steel bars.  It was the plaintiff’s submission that the agreement did not specify where the plaintiff should store the steel bars. 

10.  The defendant further queried the rusty condition of the steel bars at the joint inspection on 9 July 2004, and the red paint painted on some of the rusty bars.  The defendant queried whether they were the same steel bars that the defendant delivered to the plaintiff on 29 June 2004. 

11.  The plaintiff denies that the defendant’s allegation of the steel bars inspected on 9 July 2004 were from different batches.  The plaintiff also admitted to have painted the red paint on the re-bar’s ends; at the same time, emphasised the correct method of identifying the steel bars is to check the  mill’s certificate and the heat tags, rather than by the appearance of their rusty condition.

12.  Mr Rehman, counsel for the plaintiff, submitted that the plaintiff had no other projects which required the same type of steel bars, and the defence did not allege the plaintiff of selling the commodity to a third party in the defence.  Therefore, the defendant can not raise the issue of the plaintiff might have sold the steel bars to a third party at today’s hearing.  In any event, it is the plaintiff’s case that it had an urgent need for the steel bars and deadline to meet to complete the project works. 

13.  Mr Shum, counsel for the defendant, on the other hand insisted that it is for the plaintiff to prove the steel bars were used for the project named under clause 4 of the agreement at the trial. 

14.  Those who allege must prove.  In paragraph 4 of the defence, the defendant alleged that the plaintiff had used the steel bars on other projects.  The defendant in its affirmations have failed to pinpoint which were the projects the plaintiff had used the steel bars on.  All the defendant was able to show was the rusty condition of some of the steel bars and the red paint on some of the steel bars to be different from what it had delivered on 29 June 2004.

15.  In answer, the plaintiff explained that the steel bars were found to be slightly rusty at the point of shipment from Russia, and that the red paint was painted by the plaintiff after delivery. 

16.  On the defendant’s own admission, the defendant was motivated by information it had received.  Unfortunately, the defendant failed to pinpoint and specify who supplied the information.  The suspicion may be completely fanciful, or maybe it was a figment of someone’s imagination.  It nevertheless spurred the defendant into inspecting the steel bars at the yard on 9 July 2004 and accused the plaintiff of removing the steel from the site, this was the excuse the defendant used to stop supplying further steel bars to the plaintiff. 

17.  I consider the defendant’s defence to be shadowy.  But, on the other hand, the evidence as to what happened at the inspection is not complete. 

18.  It is not intended that today’s hearing should be a trial on affidavits. 

19.  Because of the force of the plaintiff’s case, I find the defendant’s defence to be shadowy.  I grant conditional leave to the defendant on condition that the defendant pay the sum claimed of $701,241.09 into court. 

(Discussion re payment into court)

20.  On condition that the defendant pays the sum of $701,241.09 into court within 14 days hereof.   Leave to the defendant to defend.

(Discussion re costs)

21.  Costs in the cause with certificate for counsel.