IN THE DISTRICT COURT OF HONG KONG
HOLDEN AT KOWLOON
ACTION NO. 6965 OF 1971
Sang Cheong Artistic Wooden Furniture Company (a firm)
James Julius Killough III Ltd.
Coram: Judge Davies in Court.
Date of ruling: 20 March, 1972
R U L I N G
1. In this proceeding, I am being asked to review and set aside a judgment delivered by me on 2.11.71, in which I found for the plaintiffs in the full amount of the claim – i.e. $3,078.00.
2. The defendants had admitted liability to the plaintiffs in the sum of $978.00, but claimed to be entitled to set-off $2,100.00 against the $3,078.00 claim of the plaintiffs.
3. The circumstances in which the parties came into contract are already set out in the judgment, and it is at this stage necessary only to re-iterate that the terms of their agreement are embodied in the purchase order Ex. P1.
4. The clause in that document which has given rise to the present dispute between the parties is contained in the final paragraph of Ex.P1, and reads: “It is herewith agreed and signed by both parties, Killough and Hui, that this work will be completed and ready to be picked up by the shipping agents 35 days, thirty five days, after the placement of the order 3 February 1971 that is, the work must be completed by five o’clock on 10 March 1971. This work must be satisfactorily completed by this date. Every day late after this, HK$100.00 will be deducted from the total amount due and every day that the work is completed earlier than this HK$100.00 will be added to the total amount due to Mr. Hui, Sang Cheong.”
5. As in my judgment, I will hereinafter for ease of reference call this “the penalty clause”, though this is not intended in any way to indicate that as a matter of law I have necessarily decided that the sum provided for is a penalty as opposed to liquidated damages.
6. This question of whether or not the defendants are entitled to set-off is the only issue in the case. The sum of $2,100.00 arises from invocation of the penalty clause, it being the case for the defendants that the plaintiffs failed to complete the contract work until 31st March 1971, i.e. 21 days after the date prescribed in the penalty clause.
7. In my judgment, I did not proceed to determine the question of law as to whether the penalty clause was enforceable or otherwise.
8. This was rendered unnecessary by reason of a finding made earlier, namely that “……. the onus is clearly upon the defendants to prove a breach of the condition in the original contract, and I find that this onus has not been discharged.”
9. The condition to which I was referring is, of course, that the work was to be satisfactorily completed by 10th March 1971.
10. My view of the evidence before me at the original hearing was that it did not establish a balance of probability that the plaintiffs had failed to meet the completion date. The whole position appeared so complicated by reason of two additional orders placed by the defendants with the plaintiffs, also in relation to the subject matter of Ex.P1, that I was quite unable to ascertain where one job of work ended and another began.
11. Notwithstanding that, however, I also reached the conclusion that the defendants, by conduct, had implied waived the condition of completion by 10th March 1971, and for this reason should not be permitted to invoke the penalty clause.
12. At the original hearing, the defendants were not legally represented.
13. At the outset of this review proceeding Mr Winter, for the defendants, made an application to call further evidence which, it is claimed, reveals the facts of the matter in a different light.
14. There was no suggestion that this evidence was not available at the original hearing, but only that Mr. Killough, unrepresented as he then was, did not appreciate the importance of giving and/or calling such evidence.
15. Though I am somewhat doubtful whether this is a good ground for reopening the case on the merits, I decided to hear the additional evidence, which was followed by an address from the solicitor on each side.
16. Mr. Winter has submitted that the additional evidence clearly shows that the plaintiffs were in default of completion of the purchase order Ex. P1 by the 10th March, and also establishes that Mr. Killough, sole proprietor of the defendant firm did not at any stage waive that completion date or such rights as the penalty clause may have given him.
17. Mr. Bryson for the plaintiffs has urged upon me that the additional evidence has not disclosed any new matter, and the parties are still seen to be in substantially the same position as they were at the end of the original hearing.
18. To my mind, the additional evidence has been valuable in that I do now have Mr. Killough’s case on the progress of the work before me in logical sequence and far less confused than it was at the original hearing.
19. In effect, there are 3 questions to be answered in deciding whether the defendants are entitled to set-off.
20. They are:
1) Did the plaintiffs fail to meet the completion date? If the answer to this is affirmative,
then 2) Did Mr. Killough waive such failure?
21. If the answer to this is negative,
then 3) Is the penalty clause enforceable?
22. 1). The defence account of the progress of the work specified is Ex.P1 emerges by reference to certain visits paid by Mr. Killough and/or his employee, to the plaintiff’s workshop.
23. Mr. Killough recorded his own visits in a diary from which he has frequently refreshed his memory during this evidence. His clerk, Mr. Kwong Kwok Ning has given evidence that he too visited the plaintiff’s workshop, alone, on a number of occasions but he cannot be certain of the dates on which most of these visits were made.
24. It appears that no-one from the defendant firm visited the plaintiffs on the 10th March itself; the only contact between the parties on that day was by telephone, to which I will refer later.
25. The last visit prior to the 10th March was on the previous day, 9th March.
26. According to Mr. Killough, he went to the plaintiff’s premises on that day, accompanied by one of his customers.
27. He has said that as at that visit, the state of progress in the work was such that two more days of reasonably energetic application would have seen it completed. Some of the work still outstanding at that time was the correction of certain faults which Mr. Killough pointed out to Mr. Hui (sole proprietor of the plaintiff firm) during a visit on 7th March, two days previously.
28. The evidence is that inter alia, Mr. Killough was dissatisfied with the shelves on the back of the doors of the liquor cabinet. When he put pressure on them with his hand to test their strength, they gave way, which indicated to him that they would not be strong enough to hold bottles. Mr. Hui had evidently though that they were only intended to carry glasses. Indeed, I am not sure why it was intended to...