Taiwan High Court finds Sho-Lin Construction Company, Ltd. liable for damages in a Fair Trade Law case

Taiwan

Case:

Taiwan High Court finds Sho-Lin Construction Company, Ltd. liable for damages in a Fair Trade Law case

Key Words:

Sho-Lin Construction Co., Ltd.; liability for damages; bridge expansion joints

Reference:

Taiwan High Court Civil Judgment (89) Shang Tzu No. 565

Industry:

Road construction (3802)

Relevant laws:

Articles 24 and 31 of the Fair Trade Law

Summary:

1. Background:

The appellant in this case, Sho-Lin Construction Co., Ltd. ("Sho-Lin"), alleged that the respondent, the Construction and Planning Administration of the Ministry of the Interior, violated Article 24 of the Fair Trade Law regarding conduct sufficient to affect the trading order when it rejected the use of domestically-produced bridge expansion joints in construction of the Tainan Kuan-miao highway section under the no. 5 bid for the east-west freeway. The contractor for the above construction, Kuang Sheng Company ("Kuang Sheng"), agreed to subcontract to the appellant a length of 448 meters of expansion joints at a cost of NT$13,000 per meter, for a total cost of NT$5.82 million. However, the respondent required the use of imports rather than domestic products, allegedly causing Kuang Sheng to cancel that order with the appellant and select another firm to fill the order, at a loss to the appellant of NT$1,836,800. Based on Articles 24 and 31 of the Fair Trade Law, the appellant sought damages of NT$1,836,800 plus legally stipulated delay interest. The respondent's defense was based on the premise that Kuang Sheng originally wanted the appellant to use imported products in filling the bid and not domestic ones, and since Kuang Sheng had requested the use of imports, the appellant did not provide the relevant supplementary documents to Kuang Sheng, making Kuang Sheng unable to subcontract the work to the appellant, so that fault should therefore be attributable to the appellant. Even if the appellant suffered damages, no causal link could be established between the damages and the respondent's restrictions. Therefore, the appellant had no grounds for seeking damages from the respondent.

2. Grounds for disposition:

(1) Investigation found that Kuang Sheng had requested the appellant to produce an estimate for the given bridge expansion joints, clearly stating that original-producer imports were to be used. Following the submission of the construction plan for the expansion joints by the appellant, the construction plan was approved by the respondent, and the respondent notified Kuang Sheng in Memo No. (87) Kuan Pei T05B-008 that construction was to be done according to paragraph 25 of the general specifications under design diagram 1/S. Kuang Sheng then on 10 February 1998 faxed the appellant, notifying it to promptly provide the necessary supplementary information, which can be seen from copies of the fax (see page 12 of the court files for the first hearing), Letter (88) Kuang Tien Ying Tsao Tzu No.36 of 14 September 1999 and the attached construction plans, and the respondent's memo (see Letter No. 36, following page 79 of the files for the first hearing, which already states "Explicitly notified to use original-producer imports.") The subject heading of the aforementioned fax from Kuang Sheng states, "Expansion-joint construction plans under bid T05B have received the contractor's approval; details in the attachment. Please submit the following supplemental information: company brochure for the foreign producer of the bridge expansion joints; documents proving previous construction of bridge expansion joints; country-of-origin certificate for original producer; quality inspection certificate for original producer; and bank letter of credit and foreign exchange settlement receipt. If the construction plans have not been reviewed and approved by the contractor prior to the 27 February 1997 deadline, another firm will be chosen for the construction." The appellant's claim that Kuang Sheng had originally requested only domestic products is not credible, whereas the respondent's claim that Kuang Sheng had requested the appellant to use only original-producer imports should be deemed a true one.

(2) Articles 24 and 31 of the Fair Trade Law clearly provide that enterprises may not engage in obviously unfair acts capable of affect the trading order, and enterprises that violate the Fair Trade Law in a way that injures the rights and interests of others shall be responsible for compensation. Article 31 stipulates responsibility for compensation without mentioning whether the injury was intentional or not. This no-fault liability, however, depends on establishing a significant causal link between the occurrence of injury and the acts committed in violation of the Fair Trade Law. A causal relationship is established by observing whether the acts of the infringer create an objectively existing condition, and whether such objective condition, according to common knowledge and experience, would normally create the possibility of such injury. As described above, the respondent did reject the use of domestically produced expansion joints in violation of Article 24 of the Fair Trade Law. However, the contractor for the respondent had originally also requested imported expansion joints and not domestic ones, and the reason Kuang Sheng selected another firm for the job was due to the appellant's inability to provide the necessary supplementary documents rather than the aforesaid acts of the respondent in violation of the Fair Trade Law. The appellant's claim that it suffered damages from losing the subcontracting work as a result of the respondent's violation of the Fair Trade Law clearly does not meet the requirement of a causal link as judged under the principles of ordinary experience. Whether Kuang Sheng should bear liability for nonfeasance, that is, responsibility for compensation for reliance interests, for the failure to enter into a contract for the subcontracted work (such as fees for drafting of contracts, costs involved in preparing to perform the contract, or the resulting loss of other business opportunities; see Supreme Court precedent (51) Tai Shang Tzu No. 2101) is a separate legal issue. The award of damages sought by the appellant for contractual interests (performance interests) would have been predicated on the appellant's ability to establish occurrence of an effective juristic act. Consequently, there was no legal basis for seeking compensation from the respondent for the losses the appellant alleges to have occurred and there were no grounds for the appellant to seek payment of NT$1,836,800 plus delay interest based on Articles 24 and 31 of the Fair Trade Law. As a result, the appeal was rejected. As the judgment is against the appellant, no grounds existed for the request for provisional execution. .

Appendix: Sho-Lin Construction Co., Ltd.'s Uniform Invoice Number: 05008017

Summarized by Chia-Ching Lai;

Supervised by Rong-Ging Wang