Mitsubishi Elevator Hong Kong Co Ltd v Marriot Engineering & Construction Co Ltd

CourtDistrict Court (Hong Kong)
Judgment Date30 April 2015
Judgement NumberDCCJ3970/2011
Subject MatterCivil Action
DCCJ3970A/2011 MITSUBISHI ELEVATOR HONG KONG CO LTD v. MARRIOT ENGINEERING & CONSTRUCTION CO LTD

DCCJ 3970/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3970 OF 2011

____________

BETWEEN

MITSUBISHI ELEVATOR HONG KONG COMPANY LIMITED Plaintiff
and
MARRIOT ENGINEERING & CONSTRUCTION COMPANY LIMITED Defendant

____________

Before: Deputy District Judge Winnie Tsui in Chambers (open to public)
Date of Hearing: 10 March 2015
Date of Decision: 30 April 2015

_______________

DECISION
_______________

1. This is the hearing of the plaintiff’s application to amend the Statement of Claim pursuant to RDC Order 20 rule 5.

THE CLAIM

2. The action concerns an alleged breach of contract.

3. The following facts are common ground.

4. In April 2006, the plaintiff and the defendant concluded a contract for the supply and installation of a “Mitsubishi” lift. The plaintiff was the supplier and the defendant the buyer.

5. The lift was to be installed in a house which was to be constructed at 8-12 Peak Road. The defendant was a contractor on that site.

6. The total contract price was $598,000. Payment was to be made by four instalments:

(a) 20%, ie, $119,600, “on signing of Letter of Intent or award of contract, whichever is the earlier”;

(b) 20%, ie, $119,600, “on receipt of shipping advice”;

(c) 35%, ie, $209,300, “on arrival of equipment in Hong Kong”; and

(d) 25%, ie, $149,500, “on completion of the installation and issuance of the Lift Certificate by relevant Authorities. In any case, the payment shall be made within 9 calendar months after the arrival of the equipment”.

7. Shortly afterwards, the defendant paid a sum of $114,600 to the plaintiff pursuant to the contract. That is the only sum of money paid to date by the defendant to the plaintiff under the contract.

The plaintiff’s case

8. It is the plaintiff’s case that the above sum was $5,000 short of the first instalment (ie, $119,600 - $114,600). Further, following receipt of the shipping advice, the lift equipment arrived in Hong Kong in September 2006. Despite the plaintiff’s demands, the defendant failed to pay the second and third instalment sums of $119,600 and $209,300. By then, the outstanding sum due from the defendant amounted in total to $333,900 (“the Outstanding Sum”).

9. On 7 December 2006, the plaintiff wrote to the defendant demanding that the Outstanding Sum be paid within 7 days, otherwise the plaintiff would terminate the contract forthwith and hold the defendant liable for all loss and damage sustained as a result.

10. The defendant did not pay as demanded. On 19 December 2006, the plaintiff informed the defendant that the contract was terminated on 14 December 2006.

11. In the Statement of Claim, the plaintiff claims the Outstanding Sum and a sum of $8,013.60 representing the warehouse expense incurred for storing the lift equipment (the “Original Storage Expense”).

Statement of Claim

12. In order to fully appreciate the basis of the plaintiff’s application, it is necessary for me to set out the relevant paragraphs of the Statement of Claim and the prayer for relief in full:

“11. By a letter from the Plaintiff to the Defendant dated 19/12/2006, the Plaintiff informed the Defendant that as the Defendant had failed to pay the sum of HK$333,900.00, the said sub-contract had been terminated on 14/12/2006.

12. Subsequently, the Plaintiff has incurred further expenses on warehouse storage of HK$8,013.60.

13. As a result of the Defendant’s breach of the said sub-contract, the Plaintiff suffered loss and damages, in the total sum of HK$341,913.60 (HK$333,900.00 + HK$8,013.60).

And the Plaintiff claims against the Defendant:-

(a) The said sum of HK$341,913.60;

(b) Interest;

(c) Further and/or other relief; and

(d) Costs of this action.”

13. I pause here to make a few preliminary observations on the plaintiff’s claim.

14. First, although §13 of the Statement of Claim alleges that the plaintiff suffered loss and damage as a result of the alleged breach, §(a) of the prayer seeks relief for a fixed sum, which is the aggregate of the Outstanding Sum and the Original Storage Expense.

15. Secondly, on the front page of the writ, where the plaintiff was required to fill in the box entitled “Claim nature” in accordance with §7 of Practice Direction 24.1, the plaintiff’s solicitors classified the claim as “DEBT”.

16. Thirdly, Form No 16 was attached to the writ. This is the form to be filled in by a defendant in the case of admission in respect of a claim for a liquidated amount of money. Form No 16C should be attached instead where the claim is for damages.

17. It is difficult to see how the claim for the Original Storage Expense can be raised as a liquidated claim, as the amount was not fixed in the contract. However, in view of the above, it would seem that on the whole the plaintiff is making a liquidated claim, rather than a claim for unliquidated damages.

18. That said, however, as will be seen below, on the contrary, the plaintiff’s position is that it has all along intended to claim unliquidated damages in this action.

Defence and Counterclaim

19. The gist of the defence is that in accordance with the terms of the contract, the plaintiff was required to submit drawings to the defendant for approval before fabricating the lift. The plaintiff did not obtain such approval and is therefore in breach of the contract. As a result of the breach, the defendant says it is entitled to, and therefore counterclaims, the return of the sum of $114,600.

Reply and Defence to Counterclaim

20. In its reply, the plaintiff alleges that it had obtained such approval in accordance with the contract and denies the counterclaim.

HISTORY OF THE PROCEEDINGS

21. Notwithstanding that the plaintiff had on 19 December 2006 terminated the contract (see §10 above), it did not proceed to issue the writ until October 2011, almost five years later.

22. The filing of the Defence and Counterclaim and the Reply and Defence to Counterclaim took place shortly afterwards in late 2011.

23. Then, in June and early July 2012, there was a flurry of activities by both sides in the action. As it will become clear below, some of what was said and done during this period has an important bearing on the merits of the defendant’s opposition in the present application. I therefore set out below a chronology of relevant events during this period:

(a) On 1 June 2012, the defendant’s solicitors wrote to the plaintiff’s solicitors making, amongst others, two points, namely, first, that the plaintiff was not entitled to claim the contract price and that if it had a claim it would be for damages; secondly, that the plaintiff had a duty to mitigate. I shall refer to these two points below as “the defendant’s contention on the measure of damages”. The defendant’s solicitors wrote:

“Where a contract is terminated for breach and not further performed, the claimant’s remedy is damages not the contract price. In this case the Plaintiff retained (at least in December 2006) the goods (a lift) which were the subject of the contract. Delivery of the goods to the Defendant never took place. Therefore, it is now not open to the Plaintiff to claim the contract price. If the Plaintiff has a claim it is for damages, the basic principle being it is entitled to recover such sum as is necessary to put it in the position it would have been had the contract been performed.” (emphasis added)

(b) On 8 June 2012, the defendant’s solicitors served on the plaintiff a Notice of Sanctioned Offer pursuant to RDC Order 22 rule 5. The terms of the Notice are of importance in the context of the present application. The...

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