IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 3970 OF 2011
||MITSUBISHI ELEVATOR HONG KONG
||MARRIOT ENGINEERING &
||CONSTRUCTION COMPANY LIMITED
|Before: Deputy District Judge J. Chow in Court
|Date of Hearing: 6 – 8 and 12 September 2016
|Date of Assessment of Damages: 15 September 2017
ASSESSMENT OF DAMAGES
1. This is an assessment of damages arising from a breach of contract. Leave was granted on 5 July 2012, interlocutory judgment was entered against the defendant leaving damages to be assessed; The defendant’s counterclaim was dismissed. It was agreed interest of the damages assessed shall be paid by the defendant to the plaintiff from the date of this judgment at judgment rate.
2. The issue in dispute is whether such damages shall be assessed by way of a contract for sale of goods as defined in the Sale of Goods Ordinance, Cap 26 (“the Ordinance”) or by way of contract for goods and services.
3. The plaintiff is a supplier of lift and elevator. The defendant was the main contractor and engineer of a renovation works carried out in a premise located at 8 – 12 Peak Road, Hong Kong. On 11 April 2006, the defendant awarded the plaintiff a sub contract to supply and install a Nexway S Model lift (“the Lift”) in the premise at a lump sum price of $598,000.
4. The payment terms of the contract were as follows:-
(i) 20% on signing the letter of intent or award of sub-contract ($119,600) whichever is earlier;
(ii) 20% on receipt of shipping advice ($119,600);
(iii) 35% on arrival of equipment in Hong Kong ($209,300); and
(iv) 25% on completion of the installation and issuance of a lift certificate by relevant authorities ($149,500).
5. The defendant had only paid $114,600, $5,000 short of the 1st payment. Subsequently, as the defendant was no longer engaged by the owner of the premise to carry renovation works, no payment was made to the plaintiff.
6. On 14 December 2006, the plaintiff accepted the defendant’s breach of the contract.
7. On 17 October 2011, the plaintiff commenced this action. The plaintiff obtained leave to adduce expert evidence on the market value of the Lift in the assessment of damages.
What the plaintiff is claiming
8. The plaintiff submitted the contract was a contract for sale of goods. The plaintiff claim it has suffered loss and damages, which shall be assessed under section 52 of the Ordinance:-
“52. Damages for non-acceptance
(1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance.
(2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract.
(3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the neglect or refusal to accept.”
9. The plaintiff’s damages are particularized in the amended statement of claim filed on 17 July 2015 as follows:-
(i) warehouse storage expenses of $119,265.80 (later revised as $104,785.80) ;
(ii) disposing the lift as a scrap which was only valued at $4,125;
(iii) giving credit to part payment of the contract price at $114,600;
(iv) the aggregate damages at $598,000 - $114,600 + $104,785.80 - $4,125 = $584,060.80.
10. The plaintiff pleaded an alternative calculation in its reply, where damages can also be assessed in accordance with the common law principles. Mr Kwok, counsel for the plaintiff submitted, the computation of the damages would be essentially the same as those be assessed under the Ordinance.
What the defendant is disputing
11. The defendant said the plaintiff should be entitled to nominal damages only. Mr Francis, solicitor for the defendant submitted, the nature of the contract is a contract for goods and services, which fell outside the ambit of the Ordinance. This sub contract was not a contract relating to a “goods” as defined in section 2 of the Ordinance because it involved supply and installation of a complex and sophisticated lift device, including other tasks in substantive design, drawings, installation, testing and licensing.
12. Mr Francis also criticized the plaintiff’s failure to plead specifically in the amended statement of claim the plaintiff’s claim for damages pursuant to section 52 of the Ordinance. Be it the plaintiff had subsequently pleaded it in its reply, he invited the court not to consider it as the plaintiff’s pleaded case.
13. The plaintiff called (i) Lee Kwok Li (“Lee”) the senior manager of its Hong Kong Projects Division, (ii) Leung Yuk Kum (“Leung”), the deputy senior manager of the plaintiff and (iii) Yu Po Leung (“Yu”), the chief engineer of Techfaith Engineering Limited, the plaintiff’s expert to give evidence. The defendant has no witness to call.
The plaintiff’s evidence
14. Lee said, the plaintiff is and was a company specialized in supplying vertical transportation systems, i.e. lifts and elevators. Apart from manufacturing, to ensure quality of its products, which is different from other lift retailers, the plaintiff was responsible to install and maintain its end products.
15. Lee explained, the Lift was one of “Mitsubishi”, all computer controlled passenger lift. It was a kind of tailor made lift. The plaintiff submitted the layout drawing of the design of the Lift to the defendant. It was only after the defendant’s approval on 5 July 2006, the plaintiff proceeded with its manufacturing. The design of the lift was unique and one of a kind. It was oval in shape with an oval liftwell, oval machine room, specified finishes and semicircular glass rear car wall. Most components were tailor-made to suit the design. For this reason, the lift itself and the components were not capable to be resold to other end users, it has no second...