TAIGO LTD v. KWOK KWAI CHUEN SIMON t/a JADE TOP DESIGN & ENGINEERING CO

HCA 4296/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4296 OF 2003

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J U D G M E N T

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I.  Introduction

1.  Master Au-yeung entered partial final judgment in Taigo’s favour for $680,233.  Jade Top appeals against the Master’s decision. 

2.  Taigo filed no Respondent’s Notice.  But at the hearing before me, Taigo stated that it wished to cross-appeal against the master’s refusal to grant final judgment for the whole of the monies claimed by it.  Jade Top did not object to the late cross-appeal.

3.  The main issue before me is whether the Master was right.

II.  Background

4.  Unicorn sub-contracted certain construction works at Tsing Yi and Cyber-Port to Hamker.  Hamker sub-contracted the supply of racking systems and locking pins (together, “the goods”) for the works to Jade Top.  Jade Top in turn engaged Taigo to supply the goods to Hamker.

5.  Taigo claims $1,026,575 from Jade Top.  That sum is the outstanding balance due on 36 invoices for the sale and delivery of the goods.  Jade Top denies liability. 

6.  Jade Top says that Taigo orally agreed in mid-October 2002 that the goods would be paid on the basis of weight: $5.20/kg for deliveries to Hamker, $5.40/kg for deliveries to Hong Kong.  Jade Top alleges that Taigo also orally agreed that payment would only be made upon:-

(1)     the approval of Unicorn’s quantity surveyor;

(2)     Jade Top’s final measurement of the weight of the goods actually delivered; and,

(3)     the completion of the whole of the Tsing Yi and Cyber Port projects. 

None of the conditions for final payment having yet been met, Jade Top says that no money is due to Taigo.

7.  In any event, Jade Top claims that it is entitled to set off $346,342 against Taigo’s claim.  That sum represents amounts claimed by Taigo under items 1, 3, 6, 7 and 8 of an Invoice No.3452.  Jade Top says that the locking pins corresponding to those invoiced items were never delivered.

8.  Jade Top further claims to set off its counterclaim for $267,000.  Locking pins not having been delivered, Jade Top could not deliver them to Hamker which (Jade Top says) holds Jade Top liable for that amount in damages.

9.  The amount awarded to Taigo by the Master was calculated by deducting the $346,342 invoiced for the locking pins from the total of $1,026,575 sought by Taigo.  Taigo cross-appeals against the deduction.

III.  Discussion

A.  Jade Top’s appeal

10.  Jade Top raises 3 broad grounds of defence:-

(1)     No monies are yet payable.

(2)     The amount of Jade Top’s counterclaim should be set off against any amount payable.  At any rate, there should be a stay of execution of the Master’s judgment up to the amount of the counterclaim.

(3)     Interest was wrongly awarded by the Master.

A.1  Whether any monies payable

11.  The crux of Jade Top’s pleaded case is that Taigo orally agreed to treat a document entitled “Standard Method of Measurement” (SMM) as part of its contract.  SMM is said to provide for payment only upon final measurement by Jade Top, approval by Unicorn and completion of the projects. 

12.  I reject this case for the reasons which I set out below.

13.  First, I can find no term in the relevant extract of the SMM exhibited by Jade Top which stipulates as it alleges.

14.  Second, written sales contracts and supplementary contracts between Jade Top and Taigo for the delivery of the goods, all of which have been signed by Jade Top, do not refer to the SMM.

15.  Some contracts refer instead to accounts being “settled once every half month” and Jade Top having to “pay within 30 days after settlement [of an account] is completed”. 

16.  Some supplementary contracts go so far as to refer to “immediate payment” upon inspection and receipt of relevant goods and to a “detention fee” of 3% of the contract price being imposed on Jade Top for late payment.  Immediate payment is to be reinforced by “deposit of a post-dated cheque and guarantee that it can be honoured”.

17.  Mr Ma (for Jade Top) suggests that the written agreements neither reflect nor supersede the terms orally agreed between Jade Top and Taigo.  Mr Ma invites me to ignore any written terms that contradict the alleged oral agreement.  But it is unclear on what basis I can ignore the clear terms of the written agreements.  Mr Ma has been unable to point me to any cogent extrinsic evidence which even suggests that the written agreements should not be read at face value.

18.  Third, none of the written contracts provide for payment in accordance with weight.  Instead the contracts stipulate for payment by reference to a piece, group, unit or set of a relevant good or component supplied.  Jade Top’s bare assertion apart, there is no basis for concluding that Taigo was to supply goods for a price assessed by weight.

A.2  Whether set-off or stay available

19.  The counterclaim amount alleged to be due as damages to Hamker is purely theoretical.

20.  There is no evidence that Jade Top has paid any amount to Hamker by way of damages.  All that has happened is that Hamker has intimated a claim for an unspecified amount.  Jade Top acting of its own motion assesses that claim to be $267,000.

21.  In essence Jade Top seeks an indemnity against such amounts which Hamker may seek (and Jade Top pay) in the future as damages.  The counterclaim only relates to a potential liability in the future. 

22.  An indemnity sought here would not give rise to a defence of set-off.  The indemnity would arise from matters referable to the agreement between Hamker and Jade Top.  Those matters would be extrinsic to the agreement between Taigo and Jade Top.

23.  Further, despite pleading a certain amount, the counterclaim is in fact wholly unliquidated and the pleaded amount of $267,000 is only speculative at this stage.

24.  Accordingly, there is no basis here for a defence of set-off, whether legal or equitable.

25.  The Court normally stays indemnity claims pending the outcome of future proceedings brought by a third party (such as Hamker).  The Court usually proceeds to try all other claims in an action.  If a plaintiff is successful, then in the absence of compelling circumstance, the Court does not stay execution of his damages, even though the question of an indemnity for the defendant remains open.  To do otherwise may be unfair to a plaintiff.  The plaintiff might be deprived of the fruits of victory for a possibly indefinite period during which a third party may not even mount proceedings against the defendant.

26.  I do not see any circumstance in this case which justifies a set-off. 

27.  The case for a set-off or stay fails.

A.3  Whether interest erroneous

28.  Invoices were received by Jade Top from Taigo in 2 batches. 

29.  Mr Ma argues that interest should only be payable from the time when invoices were received, not from the individual dates on the face of each invoice.  There should also be a grace period of 15 days to reflect the fact that, under the written contracts, Jade Top had half a month to verify and assess the amounts invoiced.

30.  I do not believe that the Master made a mistake on interest.  Jade Top’s liability to pay for the goods arose at the time of their sale and delivery by Taigo.  The invoice dates reflect such date.  The fact that the invoices were only delivered in batch at a later date does not affect the obligation to pay.  Interest would strictly be chargeable from the date of invoicing.

31.  Nor does the allowance here of half a month to assess the amounts invoiced, necessarily mean that interest ceases to run during that period.  Monies falling due at the time of sale and delivery, the verification period did not suspend the obligation to pay.

B.1  Taigo’s cross-appeal

32.  Ms Chan (for Taigo) says that it is clear from Jade Top’s own documents dated 16 and 17 April 2003 that the locking pins said to have been undelivered, were actually delivered by Taigo and held to Jade Top’s disposal.

33.  But I do not think that I can decide the correctness of Ms Chan’s contention in the absence of a trial. 

34.  Jade Top does not dispute that some or all of the disputed items were tendered for inspection.  Jade Top’s point is that the purported delivery came too late.  Jade Top says that it pressed Taigo to deliver the items earlier, but in vain.  By the time the items were tendered, Hamker had cancelled Jade Top’s contract because of late delivery.  The items were consequently useless.

35.  Ms Chan may be right in questioning Jade Top’s allegations.  She suggests that Jade Top’s case is contradicted by the documents.  My only point is that the discrepancies may still be plausibly explicable when put in cross-examination to Jade Top’s witnesses at trial.  Thus, I cannot resolve this dispute now.

III.  Conclusion

36.  The result is that the appeal and cross-appeal fail.  Each is dismissed.  I shall now hear counsel on costs.