IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 1478 OF 2004
Coram: Deputy District Judge C.M. Leung in Court
Date of Hearing: 8-10, 13-14 March 2006
Date of Handing Down Judgment: 30 May 2006
1. In this action, the Plaintiff claims against the Defendant for the final instalment of the contract price for the supply and installation of a synthetic soccer pitch surface.
2. The defence is that the work had not been completed. The Defendant also counterclaims against the Plaintiff on the basis of alleged defects in the work done.
3. The soccer pitch in question was part of the construction project of the sports ground of Lingnan University (“the University”) at Tuen Mun, New Territories, carried out in 2003. The University appointed Pionic Unit Construction Company Limited (“Pionic”) as the main contractor of the project. The University also appointed Chan Partners (Projects) Limited as the project architect (“the Architect”).
4. Pionic subcontracted to the Defendant, among other things, the supply and installation of the artificial turf and synthetic track surface at the sports ground.
5. In November 2001, the Plaintiff sent to the Defendant its quotation for the supply and installation of the synthetic soccer pitch and track surface.
6. After negotiation, the Defendant finally subcontracted to the Plaintiff the supply and installation of a POLIGRAS synthetic soccer pitch surface but not the track surface. On 7 March 2003, the Defendant sent a purchase order (No.005873) to the Plaintiff (“the PO”). The PO was amended on 11 March 2003.
7. The contract price was HK$1,665,302 which was payable by 3 instalments by way of letter of credit. The Plaintiff has received payments of the first 2 instalments. The outstanding final instalment in the sum of HK$333,060.40 is the amount of the claim.
8. The above background is not in dispute.
9. The Plaintiff’s case is that pursuant to the contract, the final instalment of the contract price was payable upon completion of the work. It contends that this happened on or about 8 September 2003.
10. The Defendant contends that the work was not completed because the Plaintiff has not secured a completion certificate issued by the Architect (“the Architect’s Certificate”) pursuant to the contract. Further, the numerous defects discovered in September 2003 but never rectified by the Plaintiff also entitled the Defendant not to pay the final instalment or alternatively, to counterclaim for loss and damage.
11. The major issues are:
(1) whether pursuant to the contract, completion of the work was conditional upon the Plaintiff’s presentation of the Architect’s Certificate;
(2) whether there were the defects as alleged by the Defendant;
(3) whether the Plaintiff has completed the work so as to entitle it to the payment of the final instalment of the contract price; and
(4) whether the Defendant is entitled to its counterclaim.
12. The Plaintiff called the following witnesses:
(1) Simon Richard Ruxton Bach (“Bach”), General Manager of the Plaintiff; and
(2) Chung James Chung (“Chung”), Regional Sales Manager of the Plaintiff at the material time.
13. The Defendant called the following witnesses:
(1) Cheung Hei Shun (“Cheung”), Assistant Sales and Marketing Manager of the Defendant;
(2) Mak Wai Yi, Purchasing Officer of the Defendant;
(3) Wong Kam Fat Albert (“Wong”), Contract and Engineering Manager of the Defendant; and
(4) Lai Tsz Fai (“Lai”), Project Officer of the Defendant.
14. The Plaintiff also relied on the evidence of John Dunlop (“Dunlop”), Executive Director of Acousto-Scan Pty Limited (“Acousto-Scan”). Proper notice has been given in respect of the use of his witness statement as hearsay evidence. The Defendant raised no objection to this subject to any argument as to its weight.
15. The Plaintiff’s case is that the contract was in writing and evidenced by the PO.
16. The Defendant’s case is that the PO was only one of 5 documents evidencing the contract between the parties. 2 of them were dated before and 2 of them were dated after the PO. They were:
(1) the Plaintiff’s quotation dated 24 April 2002;
(2) the record of telephone conversation between Bach and Cheung on 2 December 2002;
(3) the draft written contract prepared by the Plaintiff and sent to the Defendant on or about 20 March 2003; and
(4) the letters of credit dated 11 April 2003.
17. The Plaintiff denies the contractual nature of these 4 documents. It also relies on the Defendant’s fax to the Plaintiff dated 14 August 2003. It is averred that by this fax, the Defendant represented to the Plaintiff that the PO was the contract between the parties and the Defendant is estopped from denying that.
The Plaintiff’s quotation
18. The Plaintiff’s quotation dated 24 April 2002 was apparently a revision of the earlier one dated 26 November 2001. The payment terms contained in this quotation read as follows:
With these new prices we require, under local LC:
30% Deposit with order
50% Materials to Site
20% at completion”
The record of telephone conversation between the parties
19. What the Defendant referred to was the Defendant’s copy of the Plaintiff’s quotation mentioned above. Apparently, Cheung jotted down thereon a note of the telephone conversation between him and Bach on 2 December 2002. The note on its face confirmed that the prices quoted in April 2002 were still valid. Apart from that, the note added nothing to the payment terms cited above.
20. The PO expressly confirmed in details the Defendant’s order with the Plaintiff for the supply and installation of the synthetic soccer pitch.
21. The payment terms contained in the PO read as follows:
||30% Deposit with order
||50% Material to site
20% Project completion”
22. The payment terms in the PO were in line with the Plaintiff’s quotation. The Plaintiff also signed the PO to signify its acceptance of the same. The PO became so far the first document bearing the necessary features of a contract between the parties.
The draft written contract
23. The draft written contract was prepared by the Plaintiff and sent to the Defendant on 20 March 2002.
24. Referred to the PO, the draft written contract contained some 20 clauses of terms defining the parties’ respective rights and obligations. Clause 20 read as follows:
|By irrevocable Letter of Credit, payable as
||30% Deposit HKD 499,590.60
||Payable on invoice presented upon
opening of letter of credit
||50% Materials to Site HKD 832,651.00
||Payable on presentation of stipulated
||20% Project Completion HKD 333,060.40
Payable on presentation of Certificate
of Practical Completion, Warranty Certificate and Maintenance Manual”
25. Insofar as the 3 instalments of the contract price are concerned, the payment terms contained in the draft written contract were practically the same as those in the PO. What the draft written contract sought to specify additionally were the document(s) which would need to be presented for payment of each instalment. For the payment of the final instalment, among others, a certificate of practical completion would need to be presented.
26. There is dispute as to what this certificate meant. However, whatever the parties might have intended the term to mean, the fact was that the Defendant never accepted the terms of the draft written contract. Neither party is in a position now to rely on selective terms of the draft written contract, which was never concluded, to define the contractual relationship between the parties.
Letter of credit
27. The documents specified in the draft written contract were supposed to be presented to the bank which would pay each instalment of the contract price in accordance with the terms of the letter of credit.
28. The letter of credit was issued by the Defendant’s bank on 11 April 2003 (“the LC”). The LC contained, among others, the following provisions:
HK$499,590.60 – 30% against invoice as deposit payment
HK$832,651.00 – 50% materials to site against cargo receipts
AND THE RELATIVE REQUIRED DOCUMENTS AS STIPULATED IN THIS CREDIT
HK$333,060.40 – 20% at practical completion against certificate completion. Certificate issued by Architect – Chan Partners (Projects) Ltd and accomplished with warranty certificate and maintenance manual.”
29. Among the 5 documents relied on by the Defendant, the LC was the only one which specified that the completion certificate had to be the Architect’s Certificate.
30. Before the LC was opened, the Defendant sent to the Plaintiff a draft application for the letter of credit with an attached sheet stipulating the terms of the letter of credit including the payment instruction cited above. The drafts were produced during the trial. They were apparently sent for the Plaintiff’s comment. The Plaintiff then returned to the Defendant the drafts with its comments marked therein. The returned amended drafts were also produced during the trial. The compelling inference from the corrections and markings by the Plaintiff on the drafts is that the Plaintiff signified its agreement that the certificate of completion to be presented for payment under the letter of credit to be opened should be the Architect’s Certificate. The Defendant applied for the...