Berkin Building Products Ltd. v. Prosperity Lamps &Components Ltd.

DCCJ15493/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 15493 OF 2000

__________

____________________

JUDGMENT

____________________

This is an action for price of goods sold and delivered. It is common ground that the Third Party herein was the electrical sub-contractor for project work at the Hong Kong Museum of History ("the site"). The project was supervised by an architect (of the HKSAR government) and a consultant. The Third Party required certain electrical fixtures for installation at the site as part of the project. Some time in the middle of 1997, the Plaintiff sent a written quotation to the Third Party offering to supply the required fixtures. Since the Third Party had liquidity problem, an arrangement was reached between the Third Party and the Defendant whereby the Defendant would obtain the required fixtures from the Plaintiff and supply those fixtures to the Third Party on special payment terms. Thus the Plaintiff submitted another (almost the same) quotation to the Defendant on 2 December 1997.

2. The Plaintiff's quotation dated 2 December 1997 ("the Quotation") to the Defendant is as follows:-

"Our Ref :LF-1454/97/DL
Date: 2 December 1997

QUOTATION

Dear Sirs,

Re: Hong Kong Museum of History

We refer to the captioned project and are pleased to submit our best offer as follows:-

ITEM	QTY	DESCRIPTION	AMOUNT HK$
1.	19 Sets	'Hubbell' Cat. No. RCS-400H-1T8, 1x400W MBI pole mounted fitting c/w 5.5M height lamp pole, asymmetrical reflector, tempered glass len, control gear and lamp. @HK$5,800/set (REF. LL1)	110,200.00
3.	70 Sets	'Simes" Cat. No. 4818, 1x50W 12V drive over 12 direction underground luminaire c/w diecast aluminium housing, control gear and lamp. @HK$2,200/set (REF. LL4)	154,000.00
			HK$
4.	9 Sets	'Simes' Cat. No. 4436, 1x75W PAR30 uplight c/w aluminium reflector and lamp. @HK$1,200/set (REF. LL6)	10,800.00
5.	8 Sets	'Lithonia' Cat. No. CFV9, 1x26W PLC wall mounted downlight c/w control gear and lamp. @HK$800/set (REF. A1)	6,400.00
6.	5 Sets	Same as Item A1 but c/w remote 3 hours NI-CD battery and emergency kit. @HK$1,800/set (REF. A2)	9,000.00
7.	10 Sets	'Sterner' Cat. No. SOFTFORM RAIL-LITE, 3700mm(L), 36W fluo. rail lighting fitting c/w spike box, wall mount bracket, control gear and lamp. @HK$33,300/set (REF. A3)	333,000.00
B2	1 Set	- Ditto - but 1750mm (L) @HK$15,750/set	15,750.00
			694,450.00
		LESS DISCOUNT (Only for 1 Lot)	94,450.00
		TOTAL	600,000.00
			========

Remarks:	1) Additional quantity will not have the above discount.
	2) Above offer as per whole lot consideration, partial order will not be accepted.

SALES CONDITIONS:

1) Payment terms to be discussed. (10% deposits and balance by 30 days open account)

2) Delivery approx. 14-16 working weeks after receipt of confirmed order.

3) Price valid for acceptance till 2/01/98.

4) The above price including delivery to G/F of job site in Hong Kong area only."

3. The quotation was accepted by the Defendant by a letter ("the Letter of Intent") dated 4 December 1997 in these terms:-

"Dear Sirs,

RE:	Supply and Delivery of Lighting Fixtures for Hong Kong Museum of History Letter of Intent

With reference to your quotation ref. LF-1454/97/DL dated 2 December 1997, we are pleased to inform you that your offer for supplying the lighting fixtures as stated in the said letter is accepted by our company, subject to the following terms and conditions.

1. Scope of Supply

1.1 The scope of supply of various lighting fixtures is listed as stated in your quotation ref. LF-1454/97/DL dated 2 December 1997.

1.2 The supplier shall verify the actual measurements prior to ordering and be responsible to the correct captioned supplies.

2. Purchase Price

2.1 The purchase price shall be at a sum of HK$601,900.00.

2.2 Final price shall be adjusted according to the actual ordering amount of quantity.

3. Compliance

3.1 The supplies by your company shall fully comply with the technical specifications issued by the Architectural Services Department (ASD). The final drawings for custom-made fixtures should be approved by all parties prior to fabrication.

4. Delivery

4.1 The delivery is scheduled to be executed on Early-January and deliver to the site of the titled project. Partial delivery of order should be allowed and mutually agreed by both parties prior to shipment to site.

5. Warranty

5.1 Warranty period will be of 12 months.

6. Upon acceptance of above items, this letter forms a legal bidding between your company and our company. All relevant documents in respect of the above transaction will also found to be effective.

7. If you find the above items are in order, please confirm your acceptance to the content of this letter by signing and returning the duplicate of this letter to us."

The Plaintiff has admitted that the Letter of Intent forms part of the contract between the Plaintiff and the Defendant.

4. On 8 January 1998, the Plaintiff received the following purchase order ("the Purchase Order"):-

Purchase Order

VENDER	Berkin Building Products Ltd. 19/F., Federal Centre 77 Sheung On Street Chai Wan Hong Kong
	DELIVERY TO:	Project Site (Hong Kong Museum)
	PAYMENT:
	DELIVERY DATE:	On/Before Mid-February 1998

ITEM	QTY	DESCRIPTION	UNIT PRICE (PER SET) HK$	AMOUNT HK$
1.	19 Sets	'Hubbell' Cat. No. RCS-400H-1T8, 1x400W MBI pole mounted fitting c/w 5.5M height lamp pole, asymmetrical reflector, tempered glass len, control gear and lamp. (REF. LL1)	5,800.00	110,200.00
2.	25 Sets	'Simes" Cat. No. 4929, 1x18W PLC buried uplight c/w control gear and lamp. (REF. LL3)	2,300.00	57,500.00
3.	70 Sets	'Simes" Cat. No. 4818, 1x50W 12V drive over 12 direction underground luminaire c/w diecast aluminium housing, control gear and lamp. (REF. LL4)	2,200.00	154,000.00
			HK$	HK$
4.	9 Sets	'Simes' Cat. No. 4436, 1x75W PAR30 uplight c/w aluminium reflector and lamp. (REF. LL6)	1,200.00	10,800.00
5.	8 Sets	'Lithonia' Cat. No. CFV9, 1x26W PLC wall mounted downlight c/w control gear and lamp. (REF. A1)	800.00	6,400.00
6.	5 Sets	Same as item A1 but c/w remote 3 hours NI-CD battery and emergency kit (REF. A2)	1,800.00	9,000.00
7.	10 Sets	'Sterner' Cat. No. SOFTFORM RAIL-LITE, 3700mm(L), 36W fluo. rail lighting fitting c/w spike box, wall mount bracket, control gear and lamp. (REF. A3)	33,300.00	333,000.00
8.	1 Set	Ditto - But 1750mm (L)	15,750.00	15,750.00
				696,650.00
		LESS DISCOUNT (Only for 1 Lot)		94,750.00
		TOTAL AMOUNT		601,900.00 ========

Remarks:
Item 7 REF. A3, details to be confirmed by consultant prior to fabrication

Delivery address:
Hong Kong museum of History (Site)
Science Museum Road, T.S.T.
Attn : Mr. Y.W. Wong 9088-5359
Tel : 2724-3250/2723-8428"

It is important at this stage to point out that the fixtures in dispute are only items 7 and 8 (or items 7 and B2 in the quotation). These two items were also at times referred to by the parties as the "A3" items. Items 1 to 6 in the Purchase Order are not the subject of this action. Those items have been delivered and paid for.

5. It will be seen that items 7 and 8 in the Purchase Order were to be made to order "WALL MOUNT" railings with lighting fitted but "details to be confirmed by consultant prior to fabrication". However, as revealed in subsequent correspondences, the "WALL MOUNT" railings were changed to "POST MOUNT" railings that required different accessories. The relevant correspondences are set out below in chronological order:-

(i) Fax from the Third Party to the Defendant dated 5 January 1998

"Hong Kong Museum of history
Mounting Details of Handrail Lighting 'A3'

1. We refer to your fax dated December 19, 1997 regarding the filled drawings submitted by Berkin and would like to inform you that the latest mounting method of the handrail lighting fitting is to be POST MOUNTED instead of wall mount. (basic requirement attached.)

2. Please provide revised shop drawing/information on mounting detail for our onward submission as soon as possible.

3. Thank you for your kind assistance.

Regards!

for Hugh Wong (signed)
Encl. As stated

cc - Berkin"

(ii) Fax from the Third Party to the Plaintiff dated 5 January 1998.

"Hong Kong Museum of History
Mounting Detail of Handrail Lighting 'A3'

1. Please find attached our fax ref: HKM/F-676 to Prosperity Lamps & Comp. Ltd. regarding the titled subject which is self-explanatory.

2. You are requested to provide relevant shop drawings and information as soon as possible.

3. Thank you for your kind assistance.

Regards!

(signed)
for Hugh Wong.
Encl. as stated."

(iii) Fax from the Plaintiff to the Defendant dated 7 January 1998

"Re: HK Museum of History

Regarding to your ref.: HKM/F-677, we would like to submit the attached shop drawing for your consideration. Please confirm which arrangement can be archive your requirement. Also we will according to your decision and ask for quotation from our manufacturer.

We are looking forward to receiving your final decision.

Thanks and rgds,

(signed)
Deloi Leung Berkin"

(iv) Fax from the Plaintiff to the Defendant dated 21 January 1998

"Re : Supply Hight Fitting for H.K. Museum Of History

With reference to your telefax ref: 305/98120/HKM of 19 January., 1998, please be informed our delivery schedule as below:

ITEM	QTY	DESCRIPTION	EXPECT DELIVERY DATE
1.	19 Sets	'Hubbell' #RCS-0400H + 5.5 m pole.	15 February., 1998
2.	25 Sets	'Simes' #4929	24 February., 1998
3.	70 Sets	'Simes' #4818
4.	9 Sets	'Simes' #4436
5.	8 Sets	'Lithonia' #CFV9	24 February., 1998
6.	5 Sets	- ditto - with emergency kit.

Please prepare the suitable place to receive the goods & we will inform you upon arrival. Also please be noted that the item 7 & 8 is still waiting for your confirmation to proceed order.

Rgds
(signed)
Edmond Cho/Berkin"

(v) Fax from the Third Party to the Plaintiff dated 24 February 1998

"Hong Kong Museum of History
Rail lighting 'A3'

1. Further to our fax ref: HKM/F-677 dated 5-1-98. We attached herewith exact site measurement of conduit provision for lighting fitting 'A3' for your further information and necessary action.

2. Your early reply is very much appreciated.

Regards!
(signed)
Encl. as stated.

CC - Prosperity - (Mr. Albert Chan)"

(vi) Fax from the Plaintiff to the Third Party dated 31 March 1998

"Re : HK Museum of History

Attached herewith our final details for your consideration. Pls notes that we will follow our drawing and process our order to the manufacturer. If you have any comment. Pls send us your revise drawing and confirm by your sides.

If you have any query. Pls feel free to contact us.

Rgds
Deloi Leung/Berkin"

(vii) Fax from the Third Party to the Plaintiff dated 14 April 1998

"Hong Kong Museum
Electrical Installation
Rail Lighting

1. With reference to your fax ref.: DF 180/98/DL dated 31/3/98, we have no adverse comment subject to your proposed sketches (enclosed) and you are also reminded that your offered rail lighting should fully comply with the general specification of electrical installation (1984 edition), suitable with the actual site condition and to the satisfaction of our company.

2. In addition, you are requested to urge the manufacturer to deliver the fittings & advise us the status of delivery.

(signed)
Encl: as stated

P.S.: RCL's fax ref: HKM/F-712 dated 24/02/98 enclosed for your checking."

6. There is little doubt that the change to "POST MOUNT" and the "details" for items 7 and 8 were in fact required and confirmed by the consultant. But, as can be seen from the chain of correspondences, :-

(a) The Defendant never gave to the Plaintiff the "confirmation to proceed order" in relation to items 7 and 8 requested in the Plaintiff's fax to the Defendant dated 21 January 1998.

(b) After the fax dated 24 February 1998, neither the Plaintiff nor the Third Party communicated with the Defendant on matters relating to items 7 and 8 (or "A3"); not even by copy for information.

Moreover, there is nothing in the paper trail that shows that the Defendant was informed by any party of the final "details" confirmed by the consultant.

7. Then later in 1998, two more documents issued from the Plaintiff :-

(viii) Shipment Advice by fax from the Plaintiff to the Defendant dated 14 September 1998.

"Your Order Ref: PO#HK97989 *
Project Name: HK Museum *

We are pleased to inform your that the undermentioned goods are scheduled to arrive Hong Kong on about 27 Sept. 98.

Please prepare a suitable storage area or warehouse soonest possible so as to enable us to arrange the delivery.

Item	Qty.	Description of Goods	Measurement
1.	1 sets	'Sterner' 21430 mm long rail-lite
2.	1 sets	'Sterner' 19506 mm long rail-lite

Total : 1 wooden case Size : 4.72m x 1m x 0.66m (H) Weight : 690 kgs

Should you require any further information, please feel free to contact Mr. Edmond Cho at 25581998.

Thank you for your kind attention.

Best Regards,
(signed) "

(ix) Delivery Order from the Plaintiff to the Defendant dated 5 October 1998

"Re: Hong Kong Museum of History
A3	1 set	"STERNER" RAIL-LITE 21.43M long 16x30W fluo. Post mount handrail luminaire	送：尖東科學館道 歷史博物館地盆 宏仲建築 找佑昌電器黃生 27238428 亞蒙 91097999
	1 set	- Do-but 19.50M long 14x30W
	30 nos	30W fluo. Lamp for above.
	30 nos	Fluo. Starter for above.
Payment Terms: 期數： Payment: 60 days credit

Above checked & received in good conditions by: 蓋章簽收：(signed)

銷售條例/CONDITION OF SLAES 1. 在貸款未清繳或支票未過戶前，上列貨物之擁有權仍屬本公司。 2. 送貨後，有關貨物的一切風險，概由買方負責。 3. 如有任何損壞投訴或賠償要求，買方必須在收貨後三天內以書面通知本司，否則無效。 1. The property in the abovementioned goods will not pass to the buyer before full payment has been made. 2. The goods will be at the buyer's risk after delivery to the buyer. 3. The buyer must within 3 days after delivery give notice in writing to the seller of any claim for damages or compensation.

FOR & ON BEHLAF OF BERKIN Building Products Ltd. 保堅建材有限公司 (signed) ______________ AUTHORIZED SIGNATURE

8. According to evidence for the Plaintiff, invoice for payment of the "A3" goods was not issued and sent to the Defendant until one whole year later in 1999. Evidence for the Defendant suggested that the Shipping Advice and the Delivery Order were not received by the Defendant in 1998. The first time the Defendant had knowledge of the Shipping Advice and Delivery Order was when copies of them were sent with the 1999 invoice to the Defendant. It is common ground that the Defendant upon receipt of the invoice and copies of the Shipping Advice and Delivery Order immediately denied liability and returned that set of documents to the Plaintiff. It is also common ground that the goods listed in the Shipping Advice were in fact delivered to the site and installed by the Third Party at the site. There is no suggestion that the goods did not meet the requirement or confirmation of the consultant.

The Defence

9. There is a comprehensive Defence. In summary, the Defendant contended that :-

(1) part of the contract between the Plaintiff and the Defendant relating to items 7 and 8 (or "A3") had been abandoned before the Plaintiff delivered the goods; and/or

(2) the goods delivered were not those covered by the contract; and/or

(3) there was late delivery amounting to repudiation of contract.

10. The Defendant has joined the Third Party as back-to-back defendant. However, at the trial before me, the contest was limited to that between the Plaintiff and the Defendant. Thus the court is required to determine liability as between the Plaintiff and the Defendant only. Quantum, in any case, is not disputed.

The Evidence

11. Both the Plaintiff and the Defendant at first intimated that they would call three witnesses each side. In the end, each side only called two witnesses. In my view none of the witnesses threw much light on the case. To a very large extent, the facts of the case are self-evident in the documentary exhibits.

The Contract

12. Witnesses for the respective parties stated in their evidence what they regarded were the meaning and effect of the Quotation, the Letter of Intent and the Purchase Order and how they performed pursuant to their understanding of the contract. In my review, there are obvious risks in relying on such evidence to construe contractual documents. Where the result of a case turns on the construction of contractual documents, it is not uncommon for partisan witnesses to tender conflicting evidence as to the meaning and effect of the documents. Moreover, it is trite law that subsequent action of the contracting parties cannot be taken as guide for construction of the contract between them. On the other hand, subsequent action can be evidence of consensus ad idem between the parties which should be taken into account as part of the agreement.

13. Having carefully considered the Quotation, the Letter of Intent and the Purchase Order, I am convinced that, on the true interpretation of these contractual documents, the Letter of Intent contains the general terms and conditions governing the sale of goods listed in the Quotation from the Plaintiff to the Defendant. The Letter of Intent by its name and contents indicated quite clearly that the Defendant was not "accepting" the offer in the Quotation as the final and complete contract for the purchase of all the goods listed. The Plaintiff must be taken to have the same understanding; otherwise the Plaintiff would not have issued the subsequent Purchase Order. The Purchase Order, in my view, is the actual contract for purchase of specific items on the general terms and conditions stipulated in the Letter of Intent. Furthermore, whereas items 1 to 6 in the Purchase Order were unconditionally on order, item 7 and 8, in my judgment, were yet to be confirmed. They were not items being ordered by that Purchase Order because the Plaintiff could not possibly place order with the factory for fabrication on the basis of what was vaguely stated in the Purchase Order in relation to these two items. In any event, the offer by way of the Purchase Order in relation to items 7 and 8 must be taken as cancelled or rejected once the broad specification for "WALL MOUNT" was varied to "POST MOUNT".

14. Since in my judgment the Purchase Order did not constitute a binding contract between the Plaintiff and the Defendant for the order of items 7 and 8 goods, there must be fresh offer and acceptance between these two parties in relation to those goods. The nearest to an up-dated offer for these goods are the faxes dated 7 January 1998 and 21 January 1998 from the Plaintiff to the Defendant. But still a binding agreement for the sale and purchase of items 7 and 8 was wanting for two reasons: (1) more specifications for the goods were still to come; see fax dated 24 February 1998 from the Third Party to the Plaintiff and the Defendant; and (2) none of the "details" were yet confirmed by the consultant. So the Defendant could not have bound itself to purchase items 7 and 8 by the end of February 1998.

15. Mr. Cheung, counsel for the Plaintiff, contended that the Purchase Order constituted a binding contract for the sale and purchase of items 7 and 8 and that (1) as soon as the consultant had confirmed the "details" (no matter how the confirmed details differed from those originally contemplated) and (2) provided the cost of the goods under items 7 and 8 remains $348,750 as stated in the Purchase Order, the Defendant is bound to accept delivery and pay. I have already held that the Purchase Order per se did not constitute a binding sale of goods contract in relation to items 7 and 8. But, assuming as counsel said that there was a binding contract in relation to items 7 and 8, Clause 3 in the Letter of Intend clearly stipulates that "The final drawings for custom-made fixtures should be approved by all parties prior to fabrication." The Plaintiff by its fax dated 31 March 1998 submitted "final details" to the Third Party, not to the Defendant, for approval. No approval has ever been obtained from the Defendant regarding final drawings. Mr. Cheung, quite properly, clarified in his closing submission that the Plaintiff did not treat the Third Party as agent for the Defendant for approval of final drawings. Instead, counsel for the Plaintiff contended that the Third Party was "an umpire in the form of a consultant to make decision on the details of A3". Quite frankly, I do not understand what is the point or effect of constituting the Third Party an "umpire". Nevertheless, an "umpire" cannot cure the lack of approval from the Defendant of the final drawings.

16. Once it is accepted that there was no binding contract or that the Plaintiff had not obtained approval of the final drawing from the Defendant, there was no basis for the Plaintiff to proceed with fabrication in purported performance of a contract to supply items 7 and 8 to the Defendant. It follows that even if the Defendant did in September 1998 receive the Shipping Advice or in October 1998 the Delivery Order, the Defendant had no obligation to pay any attention to them. There is no question of silence amounting to acceptance of unsolicited goods.

17. In the premises, the Plaintiff's claim against the Defendant must fail.

Abandonment

18. The law on abandonment of contract is succinctly stated in Chitty on Contracts (28th edition) para. 23-027 :-

"Abandonment. It is open to the court to infer that the parties have mutually agreed to abandon their contract where the contract has been followed by a long period of delay or inactivity on both sides. The party seeking to establish abandonment of a contract must show that the other party so conducted himself as to entitle him to assume, and that he did assume, that the contract was agreed to be abandoned sub silentio."

It goes without saying that once the parties have abandoned the contract or part thereof, neither can unilaterally revive it.

19. Mr. Hung, counsel for the Defendant, suggested by way of alternative defence that delay of delivery beyond February 1998 stipulated in the Letter of Intent and the Purchase Order until September 1998 amounted to such inordinate delay as compelling evidence that the parties had abandoned the contract. In fairness to the Plaintiff, I think it was within the contemplation of the parties that some delay was acceptable.

20. However, I note that the Plaintiff did not just delay in delivering the goods, the Plaintiff delayed in submitting final plans to the Defendant for approval. Indeed, in January and February 1998 some plans and details were submitted to the Defendant by the Plaintiff for approval. But these plans and details were clearly not final because the Third Party furnished "exact site measurement of conduit provision" on 24 February 1998. From 24 February 1998, it was incumbent upon the Plaintiff to adopt the measurement into the final plans. In fact, there were final plans submitted on 31 March 1998 to the Third Party, not to the Defendant. This submission of final plans to the Third Party rather than to the Defendant (without even copying the same to the Defendant as before) for approval and the complete lack of referral to the Defendant on the two items of fixtures in question after 31 March 1993 entitle the court to draw the inference that the Plaintiff had decided to deal with the Third Party instead of the Defendant. The Plaintiff's submission of final plans to the Third Party may also be taken as abandonment by the Plaintiff of its contract, if any, with the Defendant in relation to items 7 and 8.

21. On the other hand, the Defendant took no action at all since February 1998 in relation to those items. Counsel for the Plaintiff placed much emphasis on witnesses for the Defendant who stated under oath that, after February 1998, they continued to wait to hear from the Plaintiff regarding items 7 and 8. As I see it, the Plaintiff and the Defendant were in contact concerning items 7 and 8 for at most four months from December 1997 to March 1998. But by the time of the issue of the Shipping Advice in September 1998, the Plaintiff and the Defendant had been out of touch concerning those items for six months. There being mutual disregard of each other on the two items of fixtures in question for a period of time in excess of the length of time they had been mutually interested in them, I hold that there was also abandonment by the Plaintiff and the Defendant in respect of those two items even if they formed part of the contract between the Plaintiff and the Defendant.

Order

22. Accordingly, there is judgment for the Defendant against the Plaintiff with costs to be taxed if not agreed. There is also certificate for counsel.