LEIGHTON CONTRACTORS (ASIA) LTD v. TUNG WING STEEL CO LTD

CACV000133/1989

IN THE COURT OF APPEAL 1989, No. 133
(Civil)

BETWEEN

LEIGHTON CONTRACTORS (ASIA) LTD. Plaintiff

AND

TUNG WING STEEL CO. LTD. Defendant

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Coram: Hon. Cons, V.-P., Clough, J.A. & Nazareth, J.

Dates of Hearing: 13 and 14 February 1990

Date of Judgment: 14 February 1990

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JUDGMENT

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Cons, V.-P.:

1. This is an appeal against the refusal of Hooper, J. to strike out the plaintiff’s Statement of Claim except to some extent. The basicfacts are not in dispute and fall within a small compass.

2. The plaintiff is a building and civil engineering contractor. He contracted to purchase steel bars from the defendants by a contractmade on 13th May 1987. The contract provided for partial deliveries of the steel bars on instructions of the plaintiff. There isonly one clause that I think needs to be quoted verbatim, that is clause 9. In effect, it contains three provisions, which, for convenience,although they are not to be found in the original, I have given numbers.

“(1) Payment for each delivery is to be effected within 30 days from the date of delivery.

(2) Overdue payments are subject to interest at two percent per annum (2% p.a.) above prevailing prime lending rate quotedby The Hongkong and Shanghai Banking Corporation.

(3) At the discretion of the Sellers, the Agreement is determined upon non-payment of invoice beyond the stipulated payment period.”

3. Many calls were made by the plaintiff and many deliveries made under the contract. None of them seem to have been paid for on time,that is within the 30 days specified in provision (1).

4. On 20th November there was a substantial amount owing by the plaintiff to the defendant for deliveries already made more than 30days before, so that the defendant wrote to the plaintiff in these words:

“We write to inform you that in view of your failure to make payment of overdue invoices despite our repeated demands and, in accordancewith Terms and Conditions No. 9 of the Sales Agreement Ref: SC-870508/EL, we, hereby, terminate the said Sales Agreement immediatelyeffective 20 November 1987.”

The defendant refused thereafter to make any further deliveries. There was further correspondence, but I think it is relevant onlyto show, which is not denied, that the defendant was subsequently pressing for payment of interest together with the purchase priceunder provision (2) of clause 9. The defendant also took out an action for recovery of the monies due, which has subsequently beendiscontinued.

5. We are concerned today with a later action taken by the plaintiff. In substance it is for damages for breach of contract. The Statementof Claim is based on wrongful repudiations but includes, as it were by way of anticipation, answers to defences that could be expectedfrom the defendant upon the lines that the defendant was entitled to determine the contract under clause 9.

6. The answers may be put under three heads: (1) election; (2) implied term and (3) course of dealing between the parties. The judgestruck out the claim as far as it was under implied term or course of dealing between the parties and no Respondent’s Notice hasbeen filed.

7. The argument for election has been advanced in two completely separate ways said to be reflected, albeit it appear to me to be rathermurkily so, in paragraph (8) of the Statement of Claim. That reads:

“(8) Alternatively, the Defendant elected to levy interest on the sums outstanding and to continue with the Contract by

(a) notifying the Plaintiff of its intention to charge interest;

(b) making further deliveries of steel under the Contract.

8. The first argument is based on the suggestion to be found in paragraph (5) of the Statement of Claim that clause 9 effectively putthe defendant to election between provisions (2) and (3), that is between interest and determination, it being said that those twoprovisions were mutually exclusive.

9. At first glance I would not think that to be so; the intention of the parties would seem to have been that the remedies should beindependent. Mr. Bell, who appears for the plaintiff, as he did below, has advanced argument that that cannot be so for the reasonthat the rights to future interest must necessarily fall with a determination of the contract. That raises fascinating and esotericquestions of law with regard to when those rights might actually have been created, questions upon which we have hardly touched,if at all. For that reason I prefer to. express no opinion on this aspect of election.

10. The alternative approach was not dealt with by the judge below and I venture to wonder, though with respect to counsel, whether itwas put to him then as clearly as it has been put to us. The submission is, and I hope I paraphrase correctly Mr. Bell’s argument,’where a party to a contract has acquired for some reason a right to terminate the contract, he cannot take advantage of that rightif, before attempting to do so, he has deliberately acted in a manner which unequivocally indicates that he intended to keep thecontract alive.’

11. Support for the proposition is said to be found by analogy to the position of the innocent party to a contract where the other partyis guilty of anticipatory repudiation, in comments from textbooks and in parts of judgments delivered in Mardorf Peach and Co. Ltd. v. Attica Sea Carrier [1977] AC 850, The Athos [1983] 1 Lloyds L.R. 127 and The Mihalios Xilas [1979] 1 WLR 1018.

12. The unequivocal act in the present instance is said to be available in a further delivery of steel bars on 19th November after theright to determination had become available to the defendant by non-payment of monies due at the latest on 18th November. So thatthere can be no misunderstanding I note that the appeal has been argued throughout on this basis and with no reference, other thanmerely and expressly in passing, to any right to determine that might have arisen with regard to payment due on 20th November withrespect to an invoice number 6009.

13. It is further submitted that in applying the principle contended for there is no requirement, as there is in other forms of estoppel,that the other party should in some way have relied or acted upon the act in question, should have been unfairly treated or suffereddetriment; but that if there be some such requirement, then the position of the plaintiff for the few days as from 19th November,in what is said to have been a widely fluctuating market, is sufficient to meet the requirement.

14. Whether that could be so seems to me very much a matter for examination at a trial, which I take as factor number one. There mayalso, in the circumstances, be room for evidence and argument as to what would have been a reasonable period to allow the defendantto make up his mind. That I take to be factor number two. And thirdly, looking at the authorities drawn to our attention, and theremay be, perhaps, others which ought to be considered as well, I am not persuaded that the law is inevitably against the plaintiff.

15. Having regard to those three factors, I am satisfied the judge was right not to strike out the plaintiff’s claim and I would dismissthe appeal.

Clough, J.A.:

16. I agree and have nothing to add.

Nazareth, J.:

17. For the reasons succinctly given by my Lord, the Vice-President, I, too, agree that the appeal must be dismissed.

(D. Cons)

(P.G. Clough)

(G.P. Nazareth)

Vice President

Justice of Appeal

Judge of the High Court

Representation:

Geoffrey T.L. Ma (M/S Szeto & Yeung) for Defendant/Appellant

Adrian Bell (M/S Masons & Marriott) for Plaintiff/Respondent