Echelles Riffaud S.A. v. The Secretary for Justice

HCA 1841/2011

[2024] HKCFI 1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1841 OF 2011

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.In 2008, the Plaintiff successfully obtained, after tenders, 2 contracts (“Contracts A and B” respectively) from the Defendant (“Government”) to manufacture and supply hydraulic platforms (“HPs”); and another contract (“Contract C”) to manufacture and supply turntable ladders, for use by the Fire Services Department (“FSD”).

2.In respect of Contract A, the HPs had gone through factory acceptance tests (“FAT”) and local commissioning tests (“LCT”). Defects discovered had been purportedly remedied by the Plaintiff and the Government had paid the price for Contract A in full, except for what were called “New Devices”. The warranty period had also expired.

3.In respect of Contract B, the HPs had undergone FAT and were shipped to Hong Kong for LCT and a deposit had been paid.

4.Meanwhile, on 24 May 2010, an incident occurred whereby one HP of Contract A was damaged in the course of a training operation (“May Incident”). The Government engaged independent experts to investigate. Defects were discovered and continued to emerge despite purported rectification. They led the Government to reject the HPs and terminate Contracts A and B on 30 September 2011.

5.On 13 October 2011, the Government also terminated Contract C, claiming that the Plaintiff had failed to deliver the parameters for FAT and to deliver the goods under Contract C on the due date.

6.The Plaintiff denies that there were defects, that they were critical or latent, that there were Non-Critical Defects, or that the Government was entitled to terminate Contracts A and B. The Government had accepted the HPs. At best the Government was entitled to claim damages for breach of warranty subject to payment of amounts due under Contracts A for New Devices and Contract B. In respect of Contract C, the Plaintiff claims that it had supplied FAT parameters to the Government but it was the latter who had failed to approve the FAT parameters and repudiated Contract C.

7.The Plaintiff seeks payment of the price for the New Devices under Contract A, the balance of the price under Contracts B and C and a series of declarations for each Contract. The Government counterclaims for damages under all 3 Contracts.

B. UNDISPUTED OR INDISPUTABLE FACTS

8.The following facts are either undisputed or are supported by documentary evidence and I find the same to be true.

B1. Contracts A and B

9.The Government had never purchased HPs from the Plaintiff (a manufacturer in France) before. The Plaintiff’s HPs had novel features not found in any aerial platforms in the fleet of FSD at that time.

10.One Mr Gordon Tsang was the representative of China Youth Trading Limited (“China Youth”), the Hong Kong agent appointed by the Plaintiff.

11.Contracts A and B are summarized as follows:

	Contract A	Contract B	Contract C
Letter of award	15 May 2008 7 Sept 2009 for New Devices	19 Dec 2008	10 Dec 2009
Goods	• 9 HPs • New Devices	8 HPs	6 turntable ladders
Price	• US$4,581,000 • €73,000	US$4,848,000	US$4,737,600
FAT	• 06-10 July 2009 • report on 10.07.2009	• 12-16 April 2010 • report on 16.04.2010
Delivery of HPs to FSD in HK	29 August 2009	10 June 2010
LCT	2-6 Nov 2009; report on 17.12.2009	Nil
Letter of termination from Govt	30 Sep 2011	30 Sep 2011	13 Oct 2011
Payment made	Full payment save for the New Devices	40% deposit	39.8% deposit

In the following paragraphs, the suffixes “/A”, “/B” or “/C” shall refer to “Contracts A, B or C” respectively.

12.Contracts A and B contained similar provisions. FATs were stipulated in Clause 6 of the Special Conditions (“SCC”). The Plaintiff was to carry out the tests at the witness of representatives of the Government prior to shipment of the HPs. It was the parties’ intention that all functional and performance testing had to be carried out during FATs to ensure practical completion before shipment.

13.Under Clause 7 of the SCC, pre-delivery inspection and local commissioning tests (“LCTs") were to be carried out in Hong Kong.

14.A meeting in Hong Kong in July 2008 was attended by representatives of the Plaintiff (Mr. Courtot) and those of FSD. There was a discussion at the meeting of, amongst others, Water System Diagram (E1/14/259) provided by the Plaintiff at the tender stage, on or around 28 January 2008 at the request of the Government.

15.On 11 to 12 May 2009, FSD (Mr Gary Yang and Mr SC Lau) attended a meeting with the Plaintiff (Mr Courtot and 4 others) to inspect the “head of series” of the HPs. A report of inspection was prepared and signed by the parties. It led to the subsequent purchase of the “New Devices” under Contract A.

16.The FSD Team (including Mr Gary Yang, Mr SC Lau and Mr YM Lau) attended the FAT/A at the Plaintiff’s factory for all 9 HPs for 5 days from 6-10 July 2009, together with Mr Courtot and 4 others of the Plaintiff, and Mr Gordon Tsang. Stability tests on the HPs were carried out.

17.The FAT/A Report dated 10 July 2009 was signed by Mr Gary Yang and Mr SC Lau for FSD, by Mr Courtot and Mr Camus for the Plaintiff, and by Mr Gordon Tsang. It recorded that the HPs/A had been “thoroughly inspected and tested” and that all 9 HPs were found substantially completed and ready for shipment, save for “minor” items listed therein to be rectified by the Plaintiff before shipment or followed up by China Youth, FSD agreed to “accept” the HPs/A for shipment but they would be re-examined in LCT.

18.During the LCT/A in Hong Kong in 2-6 November 2009, 2 of the HPs/A (F342 and F353) were tested and the water pumps thereof were found incapable of meeting the requirement of delivering a flow of not less than 4,000 litres per minute (“1pm”) at 10 bar at 3m suction lift (“the 4000 lpm Requirement”). This was the 1^st “milestone” which marked the beginning of a series of alleged defects that emerged. The hydraulic motor of F353 even stopped functioning and became damaged.

19.By 17 December 2009, the Plaintiff had modified the HPs/A by replacing the hydraulic motor with one that could drive the water pump to 4,000 1pm, and changing the cooling system to a higher-rated cooling system, i.e a change from an air-cool to a water-cool system.

20.A further LCT meeting took place attended by, amongst others, Mr Courtot, and Mr Joe Chan and Mr KW Chan for FSD. The LCT Report/A was signed by Mr Courtot for the Plaintiff and Mr. KW Chan for the FSD.

21.In or around December 2009, and subsequent to the modification works on the hydraulic motors, operations and mechanical maintenance training was carried out by the Plaintiff’s representatives with the FSD.

22.By late February 2010, based on the information available to it at the time about the HPs/A, FSD was of the view that all issues with the HPs/A that had been identified from the previous inspections and tests were rectified. It internally recommended release of the balance payment to the Plaintiff and commencement of the 12-month warranty period from 1 March 2010.

23.Full payment had been made under Contract A in 3 tranches (40% deposit on 19 January 2009, 40% after FAT, and 20% on 24 March 2010).

24.Contract B contained basically identical terms as for Contract A. The Government has paid the initial deposit of 40% of the purchase price on 24 January 2010.

25.In late March 2010, FSD discovered another alleged problem which they termed the “simultaneous operation” problem, ie when the water pumps were engaged, the aerial platforms could not function properly. FSD informed China Youth. Mr Gordon Tsang inspected one of the HPs/A (F350) and emailed the Plaintiff, requesting to have this solved, as “second costs life”. (This was a prelude to the pleaded Critical Defect of water pressure fluctuation.)

26.As the HPs/B had the same design as those for Contract A, FSD made it clear to the Plaintiff that any problem with simultaneous operation with Contract B had to be solved.

27.FAT/B was done on 12-16 April 2010, with Mr Joe Chan and Mr IC Un attending on behalf of FSD, together with Mr Courtot and 4 others on behalf of the Plaintiff. China Youth did not attend.

28.The FAT/B Report dated 16 April 2010 was signed by Mr Joe Chan and Mr IC Un (for FSD) and Mr. Courtot, Mr Camus and Mr Dalmaso (for the Plaintiff). It contained a record similar to the FAT/A Report set out in paragraph 17 above. There was a statement about the FAT team validating a proposal which allowed manipulating the boom even during the priming phase and even through there was a loss of water performance each time the operator is using the boom.

29.On 17-18 May 2010, assuming that HPs/A were free from defects, FSD placed 3 HPs into commission at 3 fire stations.

B2. The May Incident

30.On 24 May 2010 (ie before the HPs/B were delivered to Hong Kong), during operation by FSD officers for training purposes, the May Incident occurred. One HP/A (no. F349) was damaged, in that there was a breakage of 2 supporting brackets of the telescopic waterway attached to the booms. The Plaintiff was notified on the same day.

31.The Government suspended the operation of all HPs.

32.A meeting was held on 1 June 2010 about the May Incident between representatives of the parties, including Mr SC Wong, Mr WC Shum, Mr KS Yip, Mr Joe Chan, Mr WH Or, Mr Courtot and 2 others of the Plaintiff, and Mr Gordon Tsang.

33.On 2 June 2020, Mr WH Or discovered a “popping sound” (a prelude to the pleaded Critical Defect of buckling) when the boom was in operation in 2 HPs/A (F351 and 352). He also discovered a number of alleged defects, in particular, sudden water pressure fluctuation during simultaneous operation of the boom and pump.

34.The HPs/B were delivered to FSD on 10 June 2010.

35.By a letter dated 15 July 2010 to the Plaintiff, the Government Logistics Department (“GLD”) unequivocally referred to defects and problems then found in the HPs/A and the engagement of Associated Professional Engineers Ltd (“APEL”) to investigate the defects. GLD stressed that it should not be considered as having accepted the HPs/B:

“The Government hereby expressly stated that the 8 units of aerial platform in the second batch will be subject to inspection and testing by the Government. These appliances are not yet accepted by the Government unless and until the Government Representative issues an acceptance note under Clause 5(a) of the General Condition of Contract [B].” (underline added)

An acceptance note has never been issued.

36.By letter dated 2 August 2010, the Plaintiff chased the Government for payment of US$1,939,200 (the second 40%) under Contract B, on the basis that the 8 units were thoroughly inspected and tested and were found substantially completed and ready for shipment.

37.At a meeting held on 27 August 2010, the Plaintiff’s officers explained that gearboxes on HPs/A had reached their power limit and it would be impossible to install a hydraulic pump with higher capacity to increase the total hydraulic power for simultaneous operation of the water system and the boom/cage system.

38.On around 6 September 2010, the Plaintiff’s technicians travelled to Hong Kong to implement agreed modification works on the HPs/A.

39.On 29 October 2010, FSD examined one HP/B (F359) and found that it had the same defects as those found in the HPs/A.

40.On 31 October 2010, Mr Joe Chan informed the Plaintiff about FSD’s inspection results and emphasized that the Government would defer payment of the further deposit of 40% under Contract B. This 40% and the final tranche of 20% have never been paid.

41.The Government carried out internal investigation which led to 2 Draft Incident Reports.

42.FSD instructed APEL to inspect another HP/B (F354). APEL informed FSD on 11 November 2010 that defects found in the HPs/A were bound to exist in the HPs/B.

43.APEL issued its final report on 22 November 2010 on defects in the HPs/A. Relevant to this trial were the statements that there was only a single hydraulic drive system driving both the water pump and the boom cage (prelude to Critical Defect E), that there was a simultaneous operation problem and buckling problem.

44.Separately, the Government engaged Professor Wu to provide an independent opinion on the structural integrity of the HPs/A. His Final Consultancy Report dated 17 December 2010 found there to be a buckling problem and that the HPs were structurally unstable, unsafe and should not be used for operation.

45.On 22 December 2010, Mr WH Or inspected 7 of the HPs/A and found that they had buckling problem, ie 6 of them generated popping sound from the 3^rd boom section when the boom was extending and retracting at boom angle 55° and cage load of 300 kg.

B3. Termination of Contracts A and B

46.Just to sum up and put the reader in the proper prospective, from November 2009 (LCT/A) to the end of 2010, the following alleged defects (in the order in which they emerged), had been discovered: (i) water pump incapable of meeting the 4000 lpm Requirement; (ii) the change to a more powerful hydraulic system led to overheating of hydraulic oil; (iii) simultaneous operation problem; (iv) breakage of 2 supporting brackets of the telescopic waterway attached to the booms at the May Incident; (v) popping sound produced when the boom was in operation; and (vi) water pressure fluctuation in the operation of the boom cage. Some of these were later pleaded by FSD as “Critical Defects”. There were also alleged Non-Critical Defects. I pause to say here that the term “Critical Defects” was coined by the Government’s expert, Mr Fuhrmann, to identify defects which were serious. It of course remains for the Court to find if the alleged Defects existed and were critical.

47.The Plaintiff denied the existence of defects and liability over them. However, it is fair to say that regardless of whose liability it was, the Plaintiff had tried to remedy the alleged defects on all of the HPs for about a year, without variations to Contracts A and B and without additional payments from the Government, before the Government terminated Contracts A and B. On the other hand, the Government had always insisted on complete rectification before full payment.

48.By letters dated 30 September 2011 (“Termination Letters/A and B”), GLD informed the Plaintiff that Contracts A and B were terminated pursuant to GCC Clauses 3(a), 6 and 8.

49.The Government purchased replacement goods.

B4. New Devices under Contract A

50.By a letter dated 7 September 2009 from FSD, FSD accepted the Plaintiff’s quotation of 27 July 2009 for the supply and installation of New Devices for 9 HPs/A as therein mentioned (“New Devices”), at a total amount of EUR73,000.00. The Government did not pay, but the parties have come to terms by the time of the trial.

B5. Contract C

51.On 10 December 2009, the Plaintiff was , after tender, awarded Contract C with a contractual delivery date of 9 February 2011. Under Contract C, the Plaintiff was required to submit FAT/C Parameters to the FSD (as the Government Representative) for approval.

52.In around late March 2011 or early April 2011, FSD made a payment of US$1,876,090 (being 99% of the first 40% instalment of US$1,895,040 under Contract C) and subsequently paid US$9,457.20 (0.5% of the 40%) to Plaintiff by telegraph transfer, thereby making a total payment of US$1,885,565.2. The 0.5% discount was disputed.

53.There is dispute as to when the Government had first received the FAT/C Parameters. The Plaintiff’s case was on 24 September 2010 or about 30 September 2010. The Government’s case was 21 June 2011.

54.By a letter dated 8 July 2011 to the Plaintiff, FSD sought documents and information in relation to the FAT/C Parameters. By a letter dated 15 July 2011 the Plaintiff stated that it had provided the FAT/C Parameters to the Government prior to 21 June 2011.

55.The Government terminated Contract C by a letter dated 13 October 2011 on the ground that the Plaintiff had failed to submit the necessary documents to enable the Government to assess whether the FAT/C Parameters were acceptable and failed to deliver the goods by the delivery date. The Government purchased replacement goods.

56.In mitigation, the Plaintiff sold 4 out of the 6 turntable ladders that were supposed to be supplied under Contract C, after modifications.

C. PARTIES’ CASES

C1. Plaintiff’s Case

57.Under Contract A, the Plaintiff’s pleaded case is that:

(1) There was full completion, inspection and acceptance by the Government of the HPs/A, which were in order. The Government wrongfully terminated Contract A over 18 months after full payment.

(2) There were no Critical Defects, nor were they latent.

(3) Existence and impact of the Non-Critical Defects are denied.

(4) Any alleged breach of Contract A, even if established, gave no right under the contract or at law to terminate the contract or treat it as having come to an end, but only a claim in damages for breach of warranty.

(5) The Plaintiff claims for the price of the New Devices.

58.Under Contract B, the Plaintiff’s pleaded case is that:

(1) Paragraphs 57(1) to (4) similarly apply to Contract B save that the Government had failed to pay the balance of the contract price and wrongfully terminated Contract B, 15 months after delivery.

(2) The Government was under an implied duty to cooperate in the implementation and performance of Contract B, but it wrongfully prevented the carrying out of the LCT due to unjustified allegations about the HPs/B and issuance of the Termination Letters/A and B.

(3) Contract B was not severable. Any breach, even if established, could only be treated as a warranty.

(4) The Government had wrongfully repudiated Contract B, which was accepted by the Plaintiff.

(5) The Plaintiff seeks 60% of the unpaid contract price.

59.The Government’s case on Contracts A and B is summarized as follows:

60.The FAT/A and LCT/A did not constitute “final” completion or inspection or acceptance of the HPs/A as being of satisfactory quality or in compliance with the contractual requirements.

61.For FAT/A, the Plaintiff could not provide suitable facilities at the time to test the 4000 lpm Requirement under Specifications/A. The same had to be done at LCT in Hong Kong, during which HPs/A were found not to be compliant with the Specifications. The Plaintiff accepted that the HPs/A were non-compliant and modified the hydraulic drive system by replacing the hydraulic motor with a more powerful one. However, that modification led to overheating of hydraulic oil. The Plaintiff then modified the cooler from fan-cooling type to water-cooling type in early February 2010 so as to increase the cooling capacity.

62.According to the Specifications/A and B, the HPs shall be designed to allow simultaneous operation of the aerial platform and water pump (“simultaneous operation”). The Government discovered that the boom cage could not be operated when the water pump was engaged. The Plaintiff accepted the existence of such problem and in about April 2010 modified the hydraulic drive system in an attempt to allow simultaneous operation.

63.The modification created further defects in that there was drop in water pressure of the water pump when the boom-cage was in operation. When the boom-cage was stopped, the water pressure of the water pump would surge suddenly and fluctuate before returning to normal level. This would endanger firemen in operation and affect fire-fighting operation. The Plaintiff had failed to remedy the water pressure fluctuation.

64.The May Incident was one during which the first aluminum alloy waterway bracket (counting from the bottom of the telescopic boom) broke; the first section of the telescopic waterway became detached and slid along the second waterway bracket and caused breakage.[1] The Plaintiff tried to rectify by changing the material from aluminum alloy to steel and uninstall resurfaced webs.

65.As a result of the May Incident, the Government conducted a survey of the rest of the HPs and discovered distortions of various degrees at their waterway brackets.

66.In view of the series of defects discovered and that HPs/B were of the same design, the Government engaged independent experts to examine the HPs. The examination revealed what later became the 6 pleaded Critical Defects and a list of Non-Critical Defects in the HPs/A&B. The Critical Defects were latent and not discoverable in FAT or LCT.

67.The Plaintiff breached the express/implied terms of Contracts A and B, in that the HPs were not of merchantable quality, not fit for the purpose of fire-fighting and high level rescue operation and not in compliance with the Specifications. As a result, the Government was entitled to and did reject the HPs and terminate Contracts A and B.

68.The Government purchased goods in replacement of HPs/A&B and counterclaims for damages:

(a) In respect of Contract A, effectively refund of the contract sum, less US$91,620 which the Government had forfeited;

(b) In respect of Contract B, refund of the 40% deposit less US$96,960 which the Defendant had forfeited.

(c) In respect of Contracts A and B, damages and various expenses.

69.The Plaintiff denies the existence of any defects in the HPs or that they were latent.

(1) There was no request from FSD for testing the 4000 lpm Requirement and no problem in conducting such test in FAT/A at the Plaintiff’s factory. In any event, the Plaintiff supplied a water pump as required by contract.

(2) The Government misquoted the contractual specification which required only a flow rate of not less than 2,270 lpm for the water line and the Specifications only required maximum water discharge at the cage of 2,250 lpm. These were tested at FAT/A.

(3) The Government introduced the 4000 lpm Requirement, which was a new test, during LCT/A in Hong Kong, which was not in the Specifications/A and insisted that the Plaintiff must modify the HPs/A. The modifications were implemented at the Government’s own risks.

(4) The requirement of simultaneous operation was derived from a wrong interpretation of Contract A; alternatively it was a new specification. Any modification implemented by the Plaintiff was to increase the water flow rate, not for the simultaneous operation as requested by the Government.

(5) The alleged problem of water pressure fluctuation occurred in the context of the Government’s insistence on having simultaneous operation. Such modification was implemented at the risk of the Government.

(6) There was no industry standard as alleged by the Government. All the HPs/A and B were manufactured and designed in strict compliance with European norms applicable at the time and were referred to in Contracts A and B.

(7) The Plaintiff was only informed of the May Incident afterwards, without any report or survey from the Government until the disclosure in this action in June 2013 of a draft incident report. The May Incident was caused by misuse or mis-operation by FSD’s officers who failed to follow instructions in the training documents and the Operation and Maintenance Manual (“O&M Manual”).

(8) Any of the defects complained of could have been discovered with the exercise of reasonable due diligence during FAT/LCT.

70.The Government’s case on Contract C is that:

(1) The Government only first received from the Plaintiff the FAT/C Parameters by an email from the Plaintiff dated 21 June 2011.

(2) Those Parameters were inadequate or insufficient for the Government to assess whether the proposed FAT Procedures were acceptable. The Plaintiff failed to provide further documents pursuant to the Government’s request on 8 July 2011.

(3) The Plaintiff failed to deliver the goods on or before 9 February 2011. The Government never affirmed Contract C.

(4) The Government made a deposit within 20 days of the receipt of a revised invoice, so it was entitled to a 0.5% discount.

(5) The Government purchased replacement goods and counterclaims for expenses incurred, price difference between the contract goods and replacement goods.

71.The Plaintiff’s case on Contract C is that the termination was wrongful because:

(1) The FAT/C Parameters were delivered to the Government by various means at the tender stage and between 24 September 2010 to 21 June 2011. They were based on substantially the same format or layout as those for Contracts A and B.

(2) The Government had an express or implied duty to give approval under Clause 5(d) of SCC/C so that FAT could be organized. Despite the Plaintiff’s reminders, the Government has failed to do so, which in turn caused the non-delivery of Contract C units. The Government wrongfully terminated Contract C.

(3) Given its insistence on continuous performance by the Plaintiff, the Government had elected to affirm Contract C. The Government was precluded from relying on the lack of delivery by the original delivery date to terminate Contract C, or it had waived the requirement that time was of the essence.

(4) The Government was precluded from relying on Clause 24(a) of the SCC/C to terminate Contract C.

(5) To mitigate its loss, the Plaintiff sold 4 out of the 6 turntable ladders after modification. It seeks damages.

(6) The Government was not entitled to the discount as it did not pay within 20 days of the date of the original invoice.

72.For all the Contracts, the Plaintiff has provided Advance Payment Bonds (“the Bonds”). The Plaintiff seeks to restrain the Government from calling upon such Bonds and to have them returned to the Plaintiff for cancellation. The Plaintiff seeks various declarations as to wrongful termination which will lead to release of the Bonds.

D. ISSUES

73.The parties have agreed upon a list of issues (“LOI”) summarized as follows:

(1) Whether Contracts A and B contained the pleaded terms that the HPs should be of merchantable quality, be reasonably safe and fit for the purpose of fire-fighting and high level rescue operation; and whether those terms were breached (item 1 of LOI, “Implied Terms Issue”);

(2) Whether the Critical Defects were latent defects that existed under Contracts A and B, which rendered them unsafe, unfit for purpose or unmerchantable (items 2 and 4 of LOI, “Critical Defects Issue”);

(3) Whether the Non-Critical Defects existed under Contracts A and B, were in breach of specifications or standards or unmerchantable (items 3 and 4 of LOI, “Non-Critical Defects Issue”);

(4) Whether as regards Contract A, the purported rejection by the Government was legitimate, (items 5 and 7(a) of LOI, “Termination of Contract A Issue”)

(5) Whether as regards Contract B, (i) there was an implied term that the parties were to cooperate in the implementation and performance of Contract B and (ii) whether the purported rejection by the Government was legitimate (items 6 and 7(b), “Termination of Contract B Issue”);

(6) Whether the Government is entitled to damages under Contract A/B and how much (item 9 of LOI, “Government’s Damages Issue”);

(7) Whether the Plaintiff is entitled to relief for Contract B (item 10 of LOI, “Plaintiff’s Relief Issue”);

(8) In respect of Contract C, (i) whether the Plaintiff had provided the Government with the FAT/C Parameters, and in sufficient details; (ii) whether the Government had affirmed or waived any rights in relation to Contract C; and (iii) whether the Government’s termination of Contract C was wrongful (items 11-14 of LOI, “Contract C Issues”).

74.In relation to item 8 of LOI, it is agreed that the Government would pay €67,500 for the New Devices for Contract A.

75.In the following analyses, I shall first explain my approach to the factual and expert evidence and make findings on the relevant terms of contract, and the existence of the Critical Defects before I analyze the agreed issues one by one in Sections K to N below.

E. APPROACH TO FACTUAL EVIDENCE

76.The material events happened between 2008 and 2013. Due to the technical nature of the goods, various officials involved on both sides, the parties’ operation in 2 jurisdictions, matters were heavily documented. There were over 9,000 pages of documents in the trial bundles.

77.Great weight must be put on contemporaneous documents due to the lapse of time. This applied not only to documents passing between the parties but also internal documents of a party. That, however, is not to say that if something was not recorded in writing, it necessarily meant that it did not happen. Documentation was often not “perfect”. In this case, there was lack of important documents e.g. the request for testing the 4000 lpm Requirement, and the email containing the FAT/C Parameters allegedly first sent by the Plaintiff. There were emails sent to the wrong addresses. The Court must have regard to all the circumstances pertaining to the factual disputes when assessing the credibility of a party’s case or a witness’ evidence.

78.Insofar as witnesses were concerned, the Court considers the inherent probabilities and logicality in a witness’ evidence and whether his/her evidence was contradicted in a material way by other undisputed or indisputable evidence and whether a witness has been discredited over one or more matters to which he has given evidence using the above tests. Memory may be fallible, if the relevant events have happened a long time ago. The Court will place more weight on contemporaneous documents. See Chan Pak Hung v Keung Lai Nor Winnie [2022] HKCFI 1264 at §§43-45.

79.The conduct of a party is also relevant to the assessment of his credibility. It would be relevant to have regard to factors like evasive and argumentative answers, tangential speeches avoiding the question, shortcomings in a party’s disclosure and evidence, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure etc. See Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 2923 at §§53-62, Coleman J.

80.Mr Courtot gave evidence on behalf of the Plaintiff. Over 10 officers from FSD, GLD and Electrical and Mechanical Services Department (“EMSD”) gave evidence on behalf of the Government. Understandably, the Government’s purchase of goods had to go through different departments to take account of the needs and expertise of end-users (in this case, the firemen) and advisers (e.g the engineers). The main witnesses for the Government were Mr Gary Yang and Mr Joe Chan. They were engineers and not career firemen. Mr Gary Yang was principally the person left to formulate the Specifications for Contract A, which formed the bases for those for Contract B. Mr Joe Chan was heavily involved in Contract B.

81.In relation to Mr Gary Yang, his role was to invite tenders for new HPs to replace the old ones. He was left largely in charge of the tender evaluation process, an exercise which he clearly carried out conscientiously over several months, without technical input from the frontline firemen. He apparently did not receive instructions on the practical needs of FSD nor input from the frontline firemen on the technical side of the HPs offered by the Plaintiff. In Contrast, the tender arrangement for the replacement contracts (as shown in Katherine Chan-WS[2], §6) placed emphases on the technical aspect.

82.The purchasing side of the exercise was in the hands of GLD rather than FSD. The tenders were invited on an international basis rather than from suppliers who had previously worked with FSD. There were new features in the HPs produced by the Plaintiff.

83.Mr Houghton points out that when problems in the HPs surfaced, the Government was heavily criticized by the press (on 6-7 April 2010) about the purchase of the HPs and the buying strategy behind them. Questions were raised in Legco. An internal investigation was commenced with a very senior panel of officers appointed to look into the purchase of the HPs and the way in which they had been examined pre-delivery. Mr Houghton submits that when accountability was to be ascertained, it would not be uncommon for there to be excuses and shifting of responsibility.

84.Having heard the Government witnesses, I do not share Mr Houghton’s view. Rather, I find that each of them has tried his/her best to present the facts to the Court.

85.There were assertions by one party as to “admissions” purportedly made by the other in the course of investigation. By way of example, Mr Moreau (not a witness) of the Plaintiff emailed Mr Joe Chan and Mr Gordon Tsang on 28 May 2010 about his technical analyses of the May Incident. He concluded that the situation was a combination of 3 critical parameters: operation process, lack of training and lack of detailed procedures in the O&M Manual. The Plaintiff was ready to assume its responsibility and admitted that they should have insisted more on the training and the particular technical specifications of this new HP. The Plaintiff understood the negative impact that such technical failures might have caused to the FSD and was willing to provide its full technical support in order to adapt their appliances to Hong Kong standards of operations.

86.I treat these early “admissions” with caution. It could be seen that at the early stage of the investigation, both parties were acting in good faith in trying to find out the cause and to have the defects fixed so that the HPs could be put to use as soon as possible. It would come as no surprise that the cause of the May Incident became clearer as the investigation progressed but then more Critical Defects were discovered. Therefore unless otherwise stated, I do not place much weight on these “admissions”.

87.In this case, two terms have been frequently used. The term “modification” was used by the Plaintiff as if a thing done to the HPs was to meet a new requirement of the Government. The term “rectification” was used as if the Plaintiff fell short of the Specifications and remedied the defect. In this judgment, I shall use both terms interchangeably to show that the Plaintiff did some remedial work to deal with the alleged defects. Afterall, whether the Plaintiff met the contractual requirements did not depend on what it defined as the nature of the remedial work but whether it actually breached the Specifications, and consideration of all the relevant circumstances.

F. INTERNAL INVESTIGATION BY THE GOVERNMENT

F1. Investigation by FSD

88.FSD carried out an internal investigation as a result of the May Incident. The 1^st Draft Incident Report was prepared by Mr KS Yip and 2 university professors on about 29 July 2010. It laid blame on the low standards of the material, workmanship and grip of the aluminum brackets and unintentional retraction of booms performed by trainees and the cage operator in the HP operation training.

89.The undated “Incident Report on Breakage of Waterway Bracket of F349 at about 1430 hours on 24.5.2010” (“2^nd Draft Incident Report”) was prepared by Mr WH Or, Mr KS Yip and another.

90.More facts were discovered. Amongst others, it was found that:

(1) Shortly upon the gate valve being fully opened, the pump operator heard some metal impact sound. The waterway bracket had broken off.

(2) There was a difference in the old O&M Manual provided by the Plaintiff at FAT/A and the new one provided on 28 May 2010.

91.This Report recorded, based on firemen from the FSD Team, that the Plaintiff never indicated at FAT/A that it was necessary to fully open the monitor valve before retracting the boom, the possibility of firemen retracting the boom inadvertently causing sudden built up of pressure inside the waterway which resulted in the breakage of the waterway bracket and design faults.

92.Mr WH Or recommended that it was imperative to ascertain whether it would be safe to use the HPs for rescue and firefighting and that all HPs of the same design and specifications be suspended from operation with immediate effect until it was confirmed safe to use (§12).

93.As explained by Mr WH Or, Mr KS Yip was an FSD officer without technical background. Therefore, although Mr KS Yip said that he understood Mr WH Or’s complaints, he did not know how to write the Incident Report. That was why Mr WH Or wrote the 2^nd Draft Incident Report. In fact, Mr WH Or himself told Mr Joe Chan (by email dated 23 July 2010) that “it [was] too early and risky to have any conclusion at this moment on the root cause of the broken brackets.” Mr WH Or stated that he preferred to make use of the report to be prepared by APEL to complete the case.

F2. Investigation by independent consultant

94.APEL (with Mr Nelson Yu in charge) was instructed to “investigate the [HP]s in accordance with the procurement specifications and related international standards with respect to quality, reliability and safety”. APEL produced a Preliminary Investigation Report on 26 June 2010, a Report of Tests on 12 July 2010, and a Final Report on 22 November 2010.

95.In the 2^nd Memorandum on Reply, the Plaintiff addressed APEL’s report dated 12 July 2010. In particular, the Plaintiff (i) confirmed that the design of the HPs/A was that the hydraulic power would be supplied to drive both the pump and the boom; (ii) explained that the water pressure fluctuation arose because “the loss of pressure and then reduced jet force [was] automatic due to the priority given to boom and reduction of power to the water pump”; (iii) claimed that such a design had been “validated” by FSD in FAT/B, so it had been implemented on all HPs/A afterwards; and (iv) claimed that nothing in the tender documents asked for a simultaneous use of boom and pump”.

96.The Plaintiff’s position in the 2^nd Memorandum was a drastic departure from its stance earlier after discovery of the simultaneous operation problem on 31 March 2010.

F3. The Effect of the Draft Incident Reports and APEL’s Reports

97.Mr Houghton’s cross-examination on the 1st Draft Incident Report was aimed at showing that it was due to misoperation of F349 by FSD officers that led to the May Incident. However, as shall be explained in Section J below, misoperation was not the cause of the May Incident or the Critical Defects.

98.Mr Houghton submits that the 2^nd Draft Incident Report was “unilaterally culled by Mr WH Or to denude the importance of any error on the part of the trainee firemen”.

99.I do not agree with the Mr Houghton’s characterization of Mr WH Or’s conduct. Different people may hold different views and that was why a team of FSD officers and relevant academics needed to be involved. I do not place much weight on these Incident Reports either, as they were drafts only. No agreed view was formed even internally. As with many incidents, views may change as more facts were discovered upon investigation.

100.The importance of these Reports was that they recorded, at an early stage after delivery of the HPs, the facts (not opinion) of there being defects and the date(s) of discovery. The opinions were to show that the Government made a rational decision to suspend using the HPs. Whilst the initial views of the investigation might be different from subsequent ones, that did not mean the Government lied or exaggerated its case, or sought to wriggle out of a bad deal. Some of the defects were later found to be Critical Defects by the Government’s experts.

G. EXPERT EVIDENCE

G1. The 3 experts

101.Mr Seidl has given expert evidence on behalf of the Plaintiff, and Professor Wu and Mr Fuhrmann on behalf of the Government. The suffixes “ER", “SER”, “JER” and “SJER” represent Expert Report, Supplemental Expert Report, Joint Expert Report and Supplemental Joint Expert Report respectively.

102.There had not been joint inspection of the HPs by 3 experts. The SJER (the last report) was filed only during the trial on 28 November 2022. Instead of a joint summary of the expert opinions on each Critical Defect, the Court was given a list of page references of the relevant parts of the expert reports in 3 bundles. I have read those references together with the JER and SJER. I shall only set out the gist of the relevant expert evidence that affects my decision.

G2. Pleading Point

103.§49 of Mr Houghton’s opening submission submitted that the Government has sought to adduce expert evidence on unpleaded issues. There was only one reference to European standard under Critical Defect F (high risk of overturning) and that was all the references to “standard” in the re-amended defence and counterclaim (“RADCC”). All of the other Defects, critical or not, were premised only on alleged breaches of the express provisions of Specifications/A and B. Mr Houghton submitted that it was not open to the experts to expand on the issues in dispute and he would hold the Government to its pleadings. (“Pleading Point”)

104.In the end, Mr Houghton conceded, through Ho & Ip’s letter dated 25 November 2022, that the Pleading Point would not be pursued. In particular, references to the standards listed in the JER (with annexures) signed by the experts, Seidl SER, Wu SER, and Fuhrmann ER “may be relied on by the parties in relation to the existence or otherwise of the alleged Critical Defects or Non-Critical Defects. The parties shall remain entitled to make submissions on other matters in relation to such standards, including as to substantive relevance to the pleaded Defect(s), weight of such evidence, and/or compliance (or otherwise) with such standards.”

105.I consider that concession to be properly made having regard to the fact that:

(1) The Government has never changed its pleaded case on Critical Defects and Non-Critical Defects.

(2) Professor Wu prepared his first expert report (Wu ER) as early as 16 February 2017, which formed part of the JER.

(3) Mr Seidl has responded to the Government’s expert reports and himself referred to EU standards, such as EN 1777:2004, and Machine Directive 2006/42/EC.

(4) There was no ambush and no prejudice to the Plaintiff because it has had full opportunity to answer the Government’s expert reports.

(5) The Plaintiff’s counsel (same as trial counsel) had not raised the Pleading Point at the pre-trial review. Doing so only at the trial was a tactical ambush on the Government. It was also an injustice to Mr Houghton’s own client who, apparently under legal advice, had, asked for leave to file and serve Seidl SER and the SJER at the pre-trial review.

106.I will therefore approach the expert reports as if the EU standards referred to therein have been pleaded in the RADCC and the Re-Amended Reply and Defence to Counterclaim (“Reply”). I set out that unfortunate saga on the Pleading Point so that the Courts and any counsel who may have to deal with this case in future will not be misled by the misguided approach in Mr Houghton’s opening submission.

G3. Credibility of Experts

107.When considering the credibility of an expert and the weight to be attached to his opinion, the Court pays attention to empirical data, calculations or facts that he relies on, his methodology and any change in opinion or provision of new opinion since his first report was filed.

108.In Chow Wai Shing Daniel and anor v Lu Ying, [2020] HKCFI 2148, 40-42, Au-Yeung J held that an expert witness could give evidence as to facts, interpret the data, express his/her opinion on those facts or data, and rely on his experience in his discipline. He/she may draw on literature in his discipline. The Court would decide what weight should be attached to his/her opinion. However, an expert witness could not stop at saying “I have a lot of experience. This is my opinion.” When challenged as to his opinion, there were 2 minimum sources on which he should justify himself: (i) his first hand evidence in past transactions; and (ii) information or publication in his discipline.

109.Mr Seidl, expert for the Plaintiff, was not impressive as a witness, as I shall explain under the Critical Defects Section. His evidence on buckling (Section M below) was especially evasive and unreliable.

110.With regard to the Government’s experts, Mr Houghton submits that they were given the “mission” of finding faults with the HPs at a time when some considerable public criticism was being directed at FSD with regard to the HPs.

111.I am unable to agree with Mr Houghton. Independent experts were often engaged after disputes emerged or problems were exposed to the public eye, and invariably after pleadings have closed. Mr Houghton simply does not have bases to allege that the experts were hired guns to fulfil a mission of finding faults. In this case in particular, after reading their reports and hearing the Government’s experts, there is nothing to cast doubt in my mind on their integrity as experts.

112.With regard to Professor Wu, Mr Houghton points out that he has for years been an expert engaged by the Government in various cases. I do not think that, in itself, made him partisan. Having read his reports and heard him, I find Professor Wu to be a truthful and reliable expert, as I shall explain under the Critical Defect of buckling below.

113.With regard to Mr Fuhrmann, he adopted the analyses of a Mr Kunze of his firm. There was no problem with this approach, just that he was unable at times to give details of some the analyses and that made some of his conclusions less weighty.

114.Mr Houghton submits that Mr Fuhrmann had changed his written opinion 11 years after it was first written (as attached to Termination Letters/A and B), in respect of the risk of overturning. He also remembered details not included in his report regarding the way in which he measured the angle of the boom at 55º. He also had no inhibitions about adding to the contractual requirements by reference to what Mr Houghton describes as “an increasing library of standards when it suited him to make his point in regard to any particular defect”. Mr Houghton accepts that both German experts (Mr Seidl and Mr Fuhrmann) may be criticized for this to some extent, but a fair reading of Mr Fuhrmann’s reports leads to the conclusion that he was more interested in confirming his opinions set out in his first report than he was in providing assistance to the court in understanding issues. I bear these submissions in mind when I analyze Mr Fuhrmann’s evidence, although I do not agree fully with Mr Houghton.

H. TERMS OF CONTRACTS A AND B

H1. Contractual documents

115.The HPs were to be manufactured according to specifications provided by the Government. The terms and conditions of Contracts A and B were contained in the following documents with only material differences in reference numbers and quantity of goods between the 2 Contracts:

(1) Special Conditions of Contract (“SCC”);

(2) Specifications;

(3) General Conditions of Contract (“GCC”);[3]

(4) Terms of Tender of Standard Terms and Conditions;

(5) Terms of Tender (Supplement);

(6) Tender Form (including all the Contract Schedules thereto) submitted by the Plaintiff to GLD; and

(7) Contract A Letter of Award dated 15 May 2008/ Contract B Letter of Award dated 19 December 2008.

116.Amongst these documents was the Water System Diagram which featured prominently on the 4000 lpm Requirement and the issue of Critical Defects D and E (water pressure fluctuation and shared hydraulic system).

117.GCC Clause 19 provided for conflict among contractual documents:

“19. Order of Precedence

In the event that there is any conflict, contradiction or ambiguity between any documents which form part of the Contract, the following order of precedence shall be applied in order to resolve any such conflict, contradiction or ambiguity:

(1) Special Conditions of Contract

(2) Specification

(3) General Conditions of Contract

(4) Contract Schedules”.

H2. SCC

118.SCC Clause 6 provided that FAT shall be conducted by the Plaintiff at the witness of the Government Representative before shipment. The Plaintiff shall provide all facilities and equipment for the following tests (including road tests, stability tests, platform performance tests).

119.SCC Clause 7 provided for LCT within 2 weeks after delivery in Hong Kong.

120.SCC Clauses 9(a) and (b) required the Plaintiff to provide suitable training courses for FSD’s operation and maintenance staff, training aids and course materials to trainees.

121.SCC Clause 11 provided that:

“The Contractor acknowledges and agrees that it has been supplied with sufficient information to enable it to supply to the Government the Goods which fully comply with the requirements set out in the Specification and other provisions of this Contract. The Contractor shall not be entitled to any additional payment nor be excused from any liability under this Contract as a consequence of any misinterpretation by the Contractor of any matter or fact relating to the Specification, the said requirements or any other provisions of this Contract.

122.SCC Clause 12(a) provided for payment in 3 tranches:

(i) 40% of the total Contract value payable upon notification that the chassis had been completed and inspected by the Contractor and after the receipt of an advance payment bond;

(ii) 40% of the total Contract value payable upon the final completion, inspection and acceptance of the appliances to be conducted at the Contractor’s works by a representative of FSD and presentation of a complete set of shipping documents.

(iii) Balance of 20% of the total Contract value payable upon the completion of the pre-delivery inspection and commissioning test of the completed fire appliances in Hong Kong.

123.SCC Clause 17 provided that:

“For the purpose of this Contract, … Clause 5(b) (Inspection and Acceptance), Clause 7 (Payment for Goods) … of Part 2 – General Conditions of Contract in GLD-TERMS-1 (July 2007) have been deleted.”

H3. Specifications

124.The Specifications were structured into 6 parts, ie (i) general; (ii) chassis; (iii) cab and body; (iv) fire fighting equipment; (v) aerial platform; and (vi) documentation.

125.Specifications Clause 1 stated the purpose of the Contract:

“1.1 APPLICATION

1.1.1 This specification covers self-propelled 2-axle 4 x 2 aerial platform (s) with forward control crew cab. Aerial Platform is here with a generic name of Hydraulic Platform and Aerial Ladder Platform. The aerial platform is a frontline fire appliance deployed for firefighting and high level rescue operation. It shall be designed generally for speed, good road holding, fast cornering, good manoeuvrability and at the same time having a comfortable ride to the fire crew.” (underline added)

The underlined words shall be referred to below as “the Purposes”.

126.Specifications Clause 2.3 provided for a cooling system.

127.Specifications Clause 2.5 provided for power take-offs (PTO). All PTO controls shall be located in cab close to the driver’s seat at the left hand side and shall be so designed to allow individual or simultaneous operation.

128.Specifications Clause 4 was about “firefighting equipment”. Clause 4.1.1 on fire pump provides that

“GODIVA WT 4010 or equivalent multi-pressure pump mounted on its own subframe at the rear of the chassis with rear control and hose connections. Maximum capacity at 3m suction lift shall not be less than 4000 litres/min at 10 bar and 400 litres/min at 40 bar for low and high pressure operations respectively.” (underline added)

129.Specifications Clause 5 was about aerial platforms.

(1) Clause 5.2.4 provided that the safe working load at the cage with water line dry shall not be less than 300 kg. The safe working load at the cage with maximum water discharge of 2250 lpm shall not be less than 150 kg.

(2) Clause 5.4.1 provided that a water pipe of smooth bore corrosion resistant aluminium alloy or equivalent material of not less than 80 mm dia. shall be provided for connecting the cage mounted monitor to the fire pump. The water line shall be designed to have a flow rate of not less than 2270 lpm.

H4. GCC

130.GCC Clause 3(a) stipulated 3 disjunctive grounds giving rise to 3 reliefs available to the Government numbered (i) to (iii) cited below:

“The Goods supplied under the Contract shall be of merchantable quality [ground 1], fit for the purpose for which goods of that kind are commonly bought [ground 2], and comply with the specification as described in the Schedule [ground 3]. If the Goods are not fit for the purpose or of merchantable quality or fail to comply with the specification and notwithstanding the provisions of clause 5, the Government Representative[4] may by notice in writing at any time and from time to time (i) reject all of the Goods delivered hereunder, or (ii) require the Contractor to repair or replace all or part of the Goods delivered hereunder or (iii) terminate the whole or any part of the Contract forthwith.” (emphases added)

131.GCC Clause 4 provided, amongst others, that:

“… Each delivery shall be accompanied by a copy of the order, and the Contractor shall ensure that he obtains a receipt from the Receiving Officer, but such receipts shall not constitute an acknowledgement that the Goods therein mentioned are acceptable or satisfactory.” (emphases added)

132.GCC Clause 5(a) and (b) concerned “Inspection and Acceptance”, but by virtue of SCC Clause 17, limb (b) was deleted. (See paragraph 123 above.) GCC Clause 5 should thus read like this:

“All Goods delivered shall be subject to inspection and/or testing and shall be deemed to have been accepted when:

(a) the Government Representative, or the Receiving Officer[5] furnishes the Contractor with the acceptance note; or

(b) a period of 30 clear working days has expired from the date of receipt and Goods have not been rejected;

whichever date is the earlier.”

133.With the deletion of Clause 5(b), the concluding words “whichever date is the earlier” in Clause 5 were redundant.

134.Mr Houghton submits that SCC Clause 12 was unequivocal in defining acceptance. That it was placed in SCC took precedence over the reference to “deemed acceptance” in GCC Clause 5. There was no written “acceptance note” for any HPs.

135.I am unable to agree.

(1) SCC Clause 12(a) governed the timetable for payment whereas GCC Clause 5 governed inspection, testing and acceptance. Deletion of Clause 5(b) showed a clear intention that deemed acceptance was not determined by elapse of working days. The Government could have more than 30 clear working days from the date of receipt to decide on acceptance of the HPs. However Clause 5 remained a deeming provision rebuttable by evidence.

(2) The reference in SCC Clause 12(ii) to “final completion, inspection and acceptance… to be conducted at the Contractor’s works” was a reference to FAT in SCC Clause 6. LCT would follow delivery in Hong Kong, after which the balance 20% would be paid. There was no room for construing “acceptance” in Clause 12(2) as meaning final acceptance of the delivered goods.

(3) There was no conflict, contradiction or ambiguity in SCC Clause 12 and GCC Clause 5 that would trigger GCC Clause 19 to decide the precedence of clauses.

(4) Accordingly, despite “deemed acceptance” under GCC Clause 5 or even “acceptance” under SCC Clause 12, the Government was entitled to rely on GCC Clause 3 if the HPs were not of merchantable quality, not fit for purpose or did not comply with the Specifications.

136.GCC Clause 6 governed rejections. In particular, Clause 6(a) provided that if the Government exercised its right of rejection under Clause 3(a), the Plaintiff had the duty to remove the HPs at its own expenses and if it failed to do so, the Government may dispose of them as it saw fit without liability.[6]

137.GCC Clause 8 concerned “Default” and provided as follows:

“If the Contractor fails to deliver all or any of the Goods ordered within the time specified in the order or as otherwise provided in clause 4 of this Part, or the Goods are rejected in accordance with clause 3(a), or the replacement Goods are not delivered within the period mentioned in clause 6(b), the Government may at its absolute discretion terminate the whole or any part of the Contract by notice in writing to the Contractor, but without prejudice to any claims by the Government for breach of Contract including but not limited to its right to procure any Goods then outstanding from any other source, and the Contractor shall be liable for any sums so incurred in excess of the Contract price.” (emphasis added)

H5. Schedule C to the Tender Form

138.Schedule C was a compliance statement from the Plaintiff which stated, under “General” “Personnel Protection”, “all safety devices complying with EC Machine Directive and Standard EN 17777.” (It is agreed that the standard should be 1777 instead.) There were also references to the standard of EN 1846 under various items in the Schedule.

H6. Terms of Tender (Supplement)

139.The Terms of Tender (Supplement) set out details of the information which were to be supplied by tenderers (Clause 4(b)(v)) including "technical information… including but not limited to":

(1) General arrangement drawings…

(2) Full details of the engine offered…

(3) Full details of the automatic transmission offered…

(4) Full details of power takeoff assembly offered…

(5) Weight distribution diagram…

(6) Road performance curve…

(7) Full details about the air-conditioning system…

(8) One set of operation and maintenance manual…

H7. Implied terms for Contracts A and B

140.Each party has pleaded implied terms.

141.The Plaintiff contends that the Government was under an implied duty to co-operate in the implementation and performance of Contract B, including in particular doing LCT and paying the balance of 20% of the price and to not take advantage of its own wrong in failing to do so.

142.As a general rule, where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. Notwithstanding the reference to a “general rule”, the term is not an inevitable feature of a commercial contract: the requirements for implying a term into a contract must still be satisfied before the term will be implied. The term is most likely to be implied where “positive cooperation between the parties is required to bring about a particular end contemplated by the contract. The duty to cooperate and the degree of cooperation required is to be determined, not by what is reasonable, but by the obligations imposed – whether expressly or impliedly – upon each party by the agreement itself, and the surrounding circumstances. See Chitty on Contracts, 34th edition (2021) §§16-026 to -027.

143.The 5 conditions (which may overlap) to be satisfied before a term will be implied are that: (1) it must be reasonable and equitable; (ii) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (iii) it must be so obvious that it goes without saying; (iv) it must be capable of clear expression; (v) it must not contradict any express term of the contract. See Kensland Realty Ltd. v Whale View Investment Ltd. & anor. (2001) 4 HKCFAR 381 at §23.

144.A person is not allowed to take advantage of his own wrong: Kensland Realty, §91-97. This principle is subject to a limitation, that of causation. It is necessary to show that the contractual rights which the party in question is seeking to assert arose as a direct consequence of that party’s prior breach.

145.Applying these principles, I do not see why it is necessary to imply the alleged duty.

(1) Under Contract A, the Government had done its part in terms of FAT, LCT and payments. Since Contract A operated perfectly well without the alleged implied duty, so could Contract B.

(2) If the Government had refused to participate in LCT, the Plaintiff could have asserted waiver. If the Government would not pay, the Plaintiff could simply sue for the balance of the purchase price. There was no need to rely on breach of an implied duty.

146.Further, if any implied duty to cooperate had existed, the refusal of the Government to pay was not because of its unwillingness to perform the LCT but because of the May Incident and some of the alleged Critical Defects had already surfaced in the HPs/A, and the HPs/B were of the same design. The Government was not taking advantage of its own wrong.

147.On the part of the Government, it is pleaded that there were implied terms that the HPs should be of merchantable quality, and or reasonably safe and fit for the Purposes.

148.With respect, I do not see why these implied terms were necessary, given the express terms in GCC Clause 3(a) set out above. Although being “reasonably safe” did not appear in Clause 3(a), I do not see why this phrase was a separate requirement from being merchantable or fit for purpose. See section 2(5) of SOGO on the definition of merchantable quality.

149.I therefore decline to imply terms into Contracts A and B.

I. LEGAL PRINCIPLES ON CONSTRUING CONTRACTS

150.The principle for construing written contracts has been laid down in Jumbo King Ltd v Faithful Properties (1999) 2 HKCFAR 279, at 296, Lord Hoffman NPJ:

“...construction of a document... is an attempt to discover what a reasonable person would have understood the parties to mean. As this involved having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve.”

151.The Court performs this task by identifying the meaning of the relevant words, first in the light of (i) the natural and ordinary meaning of those words, (ii) any other relevant provisions of the document, (iii) the overall purpose of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding any party's subjective intentions: Arnold v Britton [2015] AC 1619 at §15.

152.Parties are at liberty to make their own bargains and allocate risks and the court’s role is to interpret the words used by them, acting on the assumption that in the absence of clear words, the parties did not intend the contract to derogate from normal rights and obligations including those under statute.

“The modern view is accordingly to recognize that commercial parties are free to make their own bargains and allocate risks as they think fit, and that the task of the court is to interpret the words used fairly applying the ordinary methods of contractual interpretation. It also remains necessary, how, to recognize that a vital part of the setting in which parties contract is a framework of rights and obligations established by the common law (and often now codified in statute). These comprise duties imposed by the law of tort and also norms of commerce which have come to be recognized as ordinary incidents of particular types of contract or relationship and which often take the form of terms implied in the contract by law. Although its strength will vary according to the circumstances of the case, the court in construing the contract starts from the assumption that in the absence of clear words the parties did not intend the contract to derogate from these normal rights and obligations.” See Triple Point Technology Inc v PTT Public Co Ltd [2021] AC 1148 at §108, affirming the leading statement in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717G-718E.

153.In Triple Point, the Supreme Court of UK further clarified that the more valuable the right that a party is said to have abandoned, the clearer the language will need to be. This principle is essentially one of common sense (§110).

154.Mr Houghton has, on numerous issues, submitted that any ambiguity in the contract terms or specifications is to be construed contra preferentem against the Government as the standard contract terms and specifications have come from the Government. However, Triple Point regards this as an old and outmoded formula, steadily losing its last vestiges of independent authority and being subsumed within the wider Gilbert-Ash principle (§111). In any case, as the analyses will show, I do not see ambiguities in the Contract terms.

155.Unless a contract specifically provides to the contrary, I do not think the buyer or the seller should be taken to have given up any of its rights or defences under the Sale of Goods Ordinance, Cap. 26 (“SOGO”).

156.Mr Houghton submits that when interpreting the Specifications, it is important to read in context to see which of the 6 parts of the Specifications a clause appeared in (paragraph 124 above). The Specifications in one section could not be regarded as Specifications for another. I bear these in mind when analyzing the evidence.

J. GROUPING OF CRITICAL DEFECTS AND ALLEGATION OF MIS-OPERATION

157.I have grouped the 6 Critical Defects identified by the Government’s experts and will deal with them as follows:

(1) Critical Defects D and E, i.e water pressure fluctuation and shared hydraulic system respectively;

(2) Critical Defects B and C, i.e overheating[7] and no or insufficient heat insulation respectively;

(3) Critical Defect A i.e buckling;

(4) Critical Defect F i.e high risk of overturning.

158.In the following analyses, in respect of each Critical Defect, I shall refer to the pleaded case, the pleaded Specifications, factual evidence, expert evidence and latency. I will only cite Specifications from Contract A as those of Contract B were the same in substance. The burden of proof is on the Government and the standard of proof is on balance of probabilities.

159.Mr Houghton submits that the Plaintiff has contracted to provide goods as required by the Specifications, not to provide what the Government would like to have asked for but failed to. In the absence of appropriate express provisions, the Government has frequently alleged a breach of the nearest Specification Clause available. Some breaches were in lack of precision, eg simultaneous operation problem. I have borne in mind Mr Houghton’s submission when I analyze each Critical Defect, although I ultimately disagree with him.

160.Mr Houghton also submits that the Government’s case on alleged breaches of Specifications was by reference to international standards not anywhere set out in the Contracts. I do not agree with him and this is answered by Section G2 above on the Pleading Point anyway.

161.The Plaintiff has suggested that FSD officers might have mis-operated the HPs, which gave rise to some of the problems or the alleged Critical Defects. However, this was not borne out by the evidence:

(1) Mr Joe Chan stressed, in his email to Mr Courtot and Mr Moreau on the day right after the May Incident, that FSD had such grave concerns that it had suspended operation of all the new HPs for the time being. This suspension was never challenged by the Plaintiff.

(2) In particular, as regards Contract B, none of the HPs had ever been operated at all, not even for training purpose and still Critical Defects could be found.

(3) If it had only been a mis-operation problem, the Plaintiff would have solved any problem by demonstrating once again the proper operation method instead of modifying the HPs or coming up with new proposals that were purportedly validated by the FSD Team.

162.Accordingly, the Plaintiff’s suggestion of mis-operation can be dismissed as speculative.

K. CRITICAL DEFECTS D & E – WATER PRESSURE FLUCTUATION AND SHARED HYDRAULIC SYSTEM

K1. Pleaded Specifications

163.Specifications Clause 2.5.2 provided that all PTO controls shall be located in cab close to the driver’s seat at the left hand side and shall be so designed to allow individual or simultaneous operation.

164.Clauses 4.3.6 provided that an automatic pump pressure controller shall be provided to maintain a pre-set discharge pressure between 3 and 17 bar so as to eliminate the fluctuation of pressure.

165.Clause 2.10.1 provided that the drive to the rear axle and fire pump by open type shafts shall be fitted with universal joints and supported by flexibly mounted centre bearing.

166.The tender submitted by the Plaintiff specified that HPs/A would be equipped with separate hydraulic drives for the fire pump and aerial platforms.

K2. Pleaded case of the Government on Critical Defects D & E

167.Under Specifications Clause 2.5.2, the HPs shall be designed to allow simultaneous operation of the aerial platform and water pump, but the boom cage and water pump shared one hydraulic system, in breach of the tender submitted by the Plaintiff.

168.In about early April 2010, ie before the May Incident, the simultaneous operation problem surfaced. The boom-cage could not be operated when the water pump was engaged. The Plaintiff modified the hydraulic drive system for HPs/A&B in an attempt to allow simultaneous operation. However, the modification caused a drop in the water pressure of the water pump when the boom-cage was in operation; when the boom-cage was stopped, the water pressure of the water pump would surge suddenly and fluctuate before returning to normal level.

169.Water pressure fluctuation caused uncontrollable manoeuvreability of fire-fighting equipment and the sudden surge of water pressure had significant impact on fire-fighting operation. The failure to provide a workable automatic pump pressure controller to maintain a pre-set discharge pressure so as to eliminate water pressure fluctuations constituted a serious non-compliance with Specifications Clause 4.3.6. That rendered the HPs/A unsafe for use or unfit for the Purposes. The Plaintiff has failed to remedy the water pressure fluctuations.

170.In his closing submission, Mr Lui submits that the Government had at all material times required the boom system and pump system of all HPs to operate independently and simultaneously to serve the Purposes, without affecting each other’s performance. He clarified that the averments on simultaneous operation provided the context of the complaint with the water pressure fluctuation problem. Critical Defect E (shared hydraulic system) was itself not a defect but a pleaded reason for Critical Defect D (water pressure fluctuation). If Critical Defect D is not established, no finding would be necessary for Critical Defect E.

K3. Pleaded defence of the Plaintiff on Critical Defects D&E

171.Mr Houghton submits that there was no failure to comply with any of the pleaded Specifications. It was the Government who wrongly interpreted the Specifications, including that of the 4000 lpm Requirement. The Government would like to have separate hydraulic drives for the pump and boom; but the pleaded Specifications did not provide for it. There was no requirement for simultaneous operation of the aerial platforms and the pump. Simultaneous operation was a new requirement and was not defined. Where the clauses were ambiguous, they should be read contra proferentem against the Government. Mr Houghton also submits that Critical Defects D&E would not be established if the Court accepts that they were consequential on the Plaintiff’s attempt to comply with the Government’s requests in respect of the 4000 lpm Requirement at ground level, which was extraneous to the Specifications, a fortiori, they were validated by the FSD Team.

172.In gist, the defences are that:

(1) All HPs had been thoroughly tested;

(2) The Specifications provided for shared hydraulic system instead of independent ones;

(3) Simultaneous operation was an afterthought and a new requirement;

(4) The modification was at the risk of the Government;

(5) FSD failed to follow O&M Manual and had mis-operated the HPs;

(6) The defects were not critical or latent;

K4. Factual background leading to Critical Defects D and E

173.Before analyzing each of these defences, it would be useful to recap the background about (i) the failure to meet the 4000 lpm Requirement (not a pleaded Critical Defect) and (ii) emergence of the simultaneous operation problem as they provided the context for the complaint in respect of Critical Defects D and E.

174.With regard to the 4000 lpm Requirement, the issues are whether there was such a specification and whether the FSD Team had requested to test it.

175.The 4000 lpm Requirement was an express requirement in the Specifications Clause 4.1.1 (cited in paragraph 128 above) relied on by the Government and not a new requirement raised at LCT/A.

176.The Godiva pump was designed for the discharge of water at both low and high pressure simultaneously. As can be seen from the plain wording of Clause 4.1.1, some fluctuation in water pressure was anticipated, but Clause 4.3.6 required something to be done to eliminate fluctuation.

177.The pump performance test of one of the FPs (F342) at LCT/A revealed that the flow rate of its water pump in the low pressure operation could only reach 3,340 lpm at 8 bars.

178.Mr Houghton submits that there were different flow rates under the Specifications:

(1) Under Clause 4.1.1, the maximum capacity of not less than 4000 lpm at 10 bar was to be measured “at the fire pump itself and not at any subsequent point of delivery.”

(2) Clause 5.2.4 envisaged a maximum water discharge at the cage of 2,250 lpm.

(3) Clause 5.4.1 required a water pipe to be provided for connecting the “cage mounted monitor” to the fire pump. The water line shall be designed to have a flow rate of not less than 2,270 lpm.

(4) The Plaintiff had supplied a Water System Diagram (E1/14/259) to the Plaintiff on 28 January 2008 concerning the water system, which showed that the flow rate to be measured at the water pump was 4000 lpm whereas the flow rate to be measured at the monitor was 2500 lpm.

179.The Water System Diagram was specifically draw to the Government’s attention at the tender stage. Items (2) and (3) of the preceding paragraph was tested on all HPs/A during FAT/A and passed the tests.

180.Mr Houghton submits that Clause 4.3.6 referred to elimination of fluctuation of pressure “from an external source into the pump at that source, but at the outlet from the fire pump”.

181.I am unable to accept these submissions as the phrases in quote in paragraph 178(1) and paragraph 180 did not appear in the Specifications or the Water System Diagram. Even if these 2 paragraphs were the correct interpretations of the Specifications, the complaint was that it was the 4000 lpm Requirement in Clause 4.1.1 (not at the cage, water line or monitor) that was not met.

182.The next issue is whether or not the FSD Team had requested to test the 4000 lpm Requirement.

183.The FAT forms were agreed upon by both parties. There was no dispute that FSD initially required testing of the maximum pump performance at 4000 lpm at 10 bar but FSD and the Plaintiff jointly revised the FAT forms and changed the testing from 4000 lpm to 2,270 lpm. There was no contemporaneous document between the parties, whether in the FAT Report or otherwise, recording that anybody from the Government had insisted on testing 4000 lpm.

184.However, Mr Gary Yang was at pains to explain that the FSD Team had asked for testing of the 4000 lpm Requirement at FAT/A but the Plaintiff was unable to provide facilities for such a test, such that the Government had to leave it to be tested at LCT in Hong Kong.

185.Mr Gary Yang testified that the officers of both FSD and the Plaintiff had in their possession a “blank form” for recording the test results during FAT/A, which he had drafted based on a testing form for HPs previously purchased by the Government. That blank form expressly required the testing of the 4000 lpm Requirement, despite the parties having agreed to test 2,270 lpm. Mr Gary Yang claimed to have been told by Mr Courtot that the Plaintiff’s factory had only a 2-channel water collector but not a 4-channel one necessary for testing such maximum output of the water pumps. Accordingly Mr Courtot suggested that the parties should skip the testing of pump performance (save for a test under a totally different requirement under Specifications/A). The parties carried out some testing on one of the HPs/A by a lake but the results were not satisfactory. Despite that, Mr Gary Yang and Mr SC Lau were content to leave the matter for verification at LCT/A. All of these were denied by the Plaintiff.

186.Mr Houghton submits that: (1) Mr Gary Yang was simply not in a position to point to a clear 4000 lpm Requirement in the Specification at the LCT stage, and there was no failure to comply with Clause 4.3.6. (2) It became obvious to Mr Gary Yang at about the time of commencement of the LCTs that the 4000 lpm Requirement was something expected by the frontline firemen. A series of excuses then emerged involving assertions as to the absence of flowmeters, pump testing pits or having only 2-channel water collectors instead of 4-channel, to cover up what might have been an error on the part of Mr Gary Yang.

187.I do not agree with Mr Houghton. His point (1) has been dealt with by paragraphs 175-181 above.

188.As to Mr Houghton’s point (2), I have taken into account the following factors when assessing Mr Gary Yang’s evidence:

(1) Even Mr Courtot admitted that the first draft of FAT/A Report which FSD gave him asked for testing of the output rate of 4000 lpm under the pump performance test but it was corrected to 2,270 lpm.

(2) An email dated 4 November 2009 from Mr Gary Yang to KW Chan, WC Chan/FSD reporting that there was no suitable pump testing pit in the Plaintiff’s factory; it was unable to test the maximum output from the pump in FAT. What FSD could do at the time of FAT was to examine the output from the monitor in the cage to verify the output capacity via the piping to the cage. The maximum output from the pump was not fully tested. Mr Gary Yang further stated that he had requested throughout output tests on the pump in LCT.

(3) An internal reference can be found in the email from Mr WH Or to Mr Joe Chan, cc WC Cheung, dated 18 October 2010, wherein it was stated that “MI T&I clarified that Gimaex could not provide the 4-channel water collector but only a 2-channel water collector so that he could only determine 2000 lpm rather than 4000 lpm at the time of FAT in France.

(4) Mr Gordon Tsang, who attended the training in France as an interpreter, also testified, without any prompting, about a handwritten form stating that the pump had to be tested again in Hong Kong. When asked what was written on it, he said “4,000 at 10 bar, because it’s very important. It’s a tender requirement. … The pump need to reach that specification.” He confirmed that those writings were not the same as what was in the FAT/A Report. He corroborated Mr Gary Yang’s version that the Plaintiff agreed to have the proper testing of maximum output rate of HPs/A done at LCT/A. He also took a photo of the alternative testing. Mr Gordon Tsang represented China Youth as local agent for the Plaintiff. There was no reason for him to lie against the Plaintiff.

189.I accept the evidence of Mr Gary Yang’s version. His request to test the 4000 lpm Requirement was not an invention for this litigation. The test was left to LCT due to the Plaintiff’s lack of facilities.

190.LCT/A was performed in Hong Kong in November 2009, it was found that the 4000 lpm Requirement under Specifications Clause 4.1.1 could not be met. The Plaintiff replaced the hydraulic drive system with a more powerful one to satisfy the maximum flow rate requirement but it led to overheating of hydraulic oil. The Plaintiff then proposed to modify the cooler from air cooling type to water cooling type to increase the cooling capacity.

191.In the LCT/A Report, under “Remarks”, the matters to follow up included:

(1) Item 7.1 - to reduce fire pump driven system operating temperature for avoidance hydraulic oil overheat – apply to all 9 units; and

(2) Item 7.2 - To further improve fire pump output rate for meeting designed performance – apply to F345 and F351.

Items 7.1 and 7.2 were plainly referring to remedial works to meet the 4000 lpm.

192.The 4000 lpm flow rate appeared to have been met by December 2009 and the rest of the defects identified at LCT/A (including changing the cooler) by about 25 February 2010.

193.Next, the simultaneous operation problem was first discovered at the end of March 2010. Mr Gordon Tsang attended a test himself. He wrote to the Plaintiff as early as on 1 April 2010 to talk about the boom and pump problem:

“Case 1: Cage rescuing and pump engaged supplying water to the boom, and they want to cut the water and change to boom rescuing mode only. Then they have to set 0 at the pressure control and cannot shut off the pump directly. Due to there are still high pressure in the water system and cannot shut the valve immediately. There might be few second delay on the rescuing boom due to the wait on the pressure come down, but in fire fighting, second costs life!

Case 2: Water supply already have 7 bar, and there are enough water pressure for fire-fighting, but the boom is limited by the pump is (sic) this case]”

194.The oral evidence showed that before going to France for FAT/B, Mr Joe Chan already knew about the simultaneous operation problem. Despite that, there was no reference in the FAT/B testing tables (prepared by Mr IC Un) to the testing of simultaneous operation. It transpired that Mr IC Un had emailed to Mr Courtot at a wrong address, about the simultaneous operation problem but, so the FAT/B tables were not received by the Plaintiff.

195.The FAT/B Report dated 16 April 2020 stated, amongst others, that:

(1) (Similar to the FAT/A Report) The HPs/B had been thoroughly inspected and tested in FAT and were found substantially completed and ready for shipment, save for minor items (ie not affect safety operation), which would be rectified by the Plaintiff before shipment or followed up by China Youth. FSD agreed to accept the HPs for shipment but they would be “re-examined in LCT and all working parameters will also be fine-tuned to best suit local operational requirements.

(2) There were outstanding items to be done in Hong Kong.

(3) There were defects identified in FAT that were solved immediately.

(4) There were defects identified in FAT which would be solved before shipment. Amongst others, it was recorded that:

“According to the mail sent before the FAT by HKFSD, the aim is to give priority to the boom even during the priming phase. A prototype has been presented on the appliance 5230 which allows manipulating the boom even during the priming phase. There is a loss of water performance each time the operator is using the boom but this has been validated by the FAT Team. All appliances will be updated before shipment.” (underline added)

(5) FSD recognized that the 8 HPs/B had been far improved compared to the FAT done for the HPs/A.

196.Mr Joe Chan (present at FAT/B) claimed that there was no such mail sent before FAT by HKFSD. Modification of one HP was completed on the morning of the last day of FAT/B, but Mr Joe Chan claimed that the water system had not been tested, not to say the priming phase, because of lack of time. He thought it could be done at LCT in Hong Kong. He did not pay attention to the phrase “validation by the FAT Team”. Mr IC Un (also present at FAT/B) disputed the alleged validation. However, there was nothing on record to show that the FAT Team had ever refused to sign until after testing or sought amendment to the Report. The Government was thus estopped from denying the contents in the FAT/B Report, which was binding on both parties. Sub-paragraph (4) in the preceding paragraph was apparently a purported solution to the simultaneous operation problem.

197.Meanwhile, other HPs/A, ie F343 and 344 also suffered from the same problem that simultaneous operation of fire pump and platform could not occur during training sessions on 16 and 23 April 2010.

198.The FAT/B Report was followed up by an email dated 29 April 2010 from Mr Dalmaso of the Plaintiff, reminding Mr Joe Chan of the priority given to the boom and that “this has been showed and validated during the FAT.” Mr Joe Chan confirmed in the witness box that he had never written to anybody to deny that statement, until his witness statement was prepared. Again, he was estopped from denying the “validation”.

199.After his return to Hong Kong, Mr Joe Chan reported to the Director of Fire Services about a month after FAT/B that every HP had been tested and operated under various working conditions. There was no complaint in this report that the FAT Team was unable to test anything or that any test had failed.

200.I now analyze the defences of the Plaintiff to Critical Defects D and E set out in paragraph 172 one by one.

K5. All HPs had been thoroughly tested

201.Having regard to the matters set out in Section K4, after FAT/B and before LCT/B, all HPs appeared to have been thoroughly tested. The 4000 lpm Requirement had been tested and the hydraulic system was modified. The simultaneous operation problem was purportedly solved and validated by the FSD Team. Contents of the FAT/A, LCT/A and FAT/B Reports were binding on both parties.

202.The Government was apparently satisfied with the test results. On 12 May 2010, following FAT/B, Mr Joe Chan reported to the Director of Fire Services through the CFO that each and every HP was tested and operated under working conditions. The 8 HPs/B had made “remarkable improvements” from the last 9 HPs/A. The software programs and control of the HPs had also been upgraded. The manufacturer agreed to rectify all defects and discrepancies (which were minor in nature) before shipment and followed up in Hong Kong. The HPs were scheduled to be shipped to Hong Kong in mid-June 2010 and they should be put in service in August 2010.

203.On 17-18 May 2010, assuming that HPs/A were free from defects, FSD placed 3 HPs into commission at 3 fire stations.

K6 Specifications provided for shared instead of independent hydraulic system?

204.In Mr Courtot’s own words in his own 2^nd SWS (§21), the tender documents provided that:

“2.5.1 At least 2 numbers of power take-offs shall be provided for driving the fire pump and the aerial platform hydraulic system (including but not limited to the boom) respectively so as to enable individual operation as well as simultaneous operation at their respective maximum outputs … (Mr Courtot’s own underline)

2.5.2 All PTO controls shall be located in cab close to the driver’s seat at the left hand side and shall be so designed to allow individual or simultaneous operation.”

205.Mr Fuhrmann’s opinion was that 2 PTOs should be installed, with an independent hydraulic drive for water pump and an independent hydraulic drive for boom cage, as well as delivering the specified water requirement. The water pressure fluctuation problem was caused by the design problem using one single hydraulic drive system to drive the water pump and the boom-cage (§12.12 of Fuhrmann ER). Two issues arose: (i) safety: “pressure fluctuation problem caused uncontrollable maneuverability of firefighting equipment and had negative impact on the firefighting operation” and (ii) performance: in case of simultaneous operation, the water pump pressure dropped about 50% from (10 bar to 5 bar water pressure).

206.Mr Houghton disagrees. He submits that the shared hydraulic system powering both the pump and boom was the basis on which Contracts A and B were made. The Specifications required that there be and the pre-contractual documents regarding the chassis stated that there were only 2 PTOs on the HPs. The design was always a combined system with 2 PTOs and 2 PTOs were actually installed on the platforms. See Schedule C to Tender Form, §2.5.1. Not only was that the basis of the Contracts but that it was specifically drawn to the Government’s attention when the Water System Diagram (E1/14/259) was given to the Government before Contracts A and B were made and was the subject of specific discussion during the tender process (including at a meeting in July 2008 prior to the award of Contract B).

207.Mr Houghton submits that the Water System Diagram answered the Specification requirements for a stated water flow at the cage monitor and for 4 outlets at ground level of unstated flow rate. In the premises, the “automatic pump pressure controller” was to be installed in relation to the inlet to the “fire pump” itself (which was done by the Plaintiff), to eliminate the “fluctuation of pressure” of water flow from an external source into the “fire pump” (ie at source), and not at the outlet from the fire pump.

208.With respect to Mr Houghton, his submission overlooked Mr Courtot’s own evidence in his 2^nd SWS, that 2 PTOs shall be provided for driving the fire pump and the aerial platform hydraulic system respectively. Read in context, the fire pump came under section 4 of the Specifications whereas the aerial platform came under Section 5. Plainly independent hydraulic drives should be provided by the Plaintiff.

209.By a letter dated 21 January 2008, FSD sought clarification and supplementary information on the tender. In item (c) of that letter, FSD stated:

“In your submission, the offered pump is in GODIVA WT 4010 and pump control panel is in GIMAEX Hydrostatic. Please check and confirm full compatibility of these items.”

210.The Water System Diagram (E1/14/259) was provided by the Plaintiff in response to this letter. It could not undermine the Government’s case that there should be separate hydraulic drives for the fire pump and aerial platforms.

211.If Mr Houghton is right and one shared hydraulic system for 2 PTOs met the contractual requirement, then the design plainly did not support the express requirement of simultaneous operation established below.

K7. Simultaneous operation was an afterthought and a new requirement?

212.Mr Houghton submits that simultaneous operation was an afterthought and a new requirement and that there was no definition for this term. With respect, this was not supported by the Plaintiff’s own evidence.

213.As reflected in Mr Courtot’s 2^nd SWS, simultaneous operation meant what it said – operation of the fire pump and aerial platforms hydraulic system, including but not limited to the boom, at the same time at their respective maximum outputs.

214.Mr Courtot tried to pay down the effect of his evidence, by claiming that it was the PTO controls located at the driver’s seat, not the “driven systems by the PTOs”, that should be designed to allow simultaneous operation.

215.With respect, not only was his answer against the wording of his own 2^nd SWS but it was also not logical. If the controls could be operated simultaneously, why wouldn’t those systems driven by the controls (including the boom and pump) be so? If operating one control (or the system driven by it) would affect another control (or system driven by it), the contractual documents had never included any exception or caveat.

216.Further, in terms of evidence, Mr Courtot himself had no problem understanding what simultaneous operation meant. Mr Gordon Tsang’s email dated 1/4/2020 referred to the pump and boom. Mr Courtot’s own email in response referred to simultaneous operation (pump + platform).

217.At a meeting held on 27 August 2010, the Plaintiff’s officers explained that gearboxes on HPs/A had reached their power limit and it would be impossible to install a hydraulic pump with higher capacity to increase the total hydraulic power for simultaneous operation of the water system and the boom/cage system. The Plaintiff did not contend that simultaneous operation was a new requirement.

218.The oral evidence of Mr Courtot was even more telling. After some change in evidence and some convoluted speeches, he had to admit that simultaneous operation was not possible and the Government was never informed.

(1) Mr Courtot first said that simultaneous operation was forbidden under the fire-fighting method in Europe (Courtot-WS, §§86, 92). The PTO controls that the Plaintiff designed allowed for each of the boom and the pump to be controlled separately. But he clarified in his 2^nd SWS, §19 and under cross-examination that if a customer specifically requested for simultaneous operation, the Plaintiff would manufacture the HPs to that requirement.

(2) The HPs/A&B as delivered to the Government never prohibited, by design, simultaneous operation.

(3) Mr Lui referred Mr Courtot to Clause 5.7.13 of EN 1777:2004, which provided that “any simultaneous operation not allowed by the manufacturer, eg travel, movement of the extending structure, fire-pump drive, etc, shall be prevented by interlocks or equivalently effective means.” Mr Courtot confirmed that no interlocking system had been installed in the HPs/A&B. Pausing here, it meant that simultaneous operation was allowed. He then gave a long and convoluted answer about the “equivalent effective means” limb.[8]

(4) Upon the Court’s request to clarify what he meant by “equivalent effective means”, Mr Courtot testified, for the first time, that while simultaneous operation of the boom and the pump systems could be done, the design introduced by the Plaintiff was that the motion of the boom would be close to nothing when the pump was in operation. In Mr Courtot’s own words:[9]

“Mr Courtot: Yes. As I stated it could be done, it could be activated, but with close to non-speed of some motion. The motion. The movement. For example of the articulated boom of the system is not affected by the reduce of power because it is a movement where the require of power is less than on the opposite side the retraction of the boom where the demand of power is so high at that moment that the retraction is quite nil. That means after -- if we can take a parameter after 5 seconds of motion, the motion should be less than a tenth of a metre. As usual parameter we use in the design of a platform of ladder, the speed is close to a third of metre per second. So the normal operation without the pump driven should be this third of metre per second. In the case of simultaneous driving of the pump, the retraction motion is close to less than a tenth of metre and this is one of the problems or the request we had to face at the stage of upgrading and reducing the rating at the LCT step and at the final acceptance when we increase the capacity of the hydraulic driving of the water pump.”

Court: If I were to summarise this in one sentence, it would mean that when you operate one part, say the pump, the operation of the boom is close to nil.

…

You can only do one thing at a time.”[10]

…

Mr Courtot avoided answering and digressed to talk about the articulated boom. When pressed by Mr Lui as to whether the Plaintiff had installed interlocks or equivalently effective means to prevent simultaneous operation, Mr Courtot insisted that the Plaintiff had.

“Mr Courtot: the first is the interlocking way which is some signals given by some sensor to stop. Our design is a more continuous design with a continuously control supply of the power to the movement required. This is the different between interlocking or equivalent effective means.”

He confirmed twice to the Court that there was no interlocking but there was equivalently effective means. He also confirmed to Mr Lui that simultaneous operation was not allowed, was prevented by the Plaintiff.

(5) A little later, Mr Lui referred Mr Courtot to a letter from Mr Gordon Tsang dated 1 April 2010 addressed to Mr Dalmaso, copied to Mr Courtot (paragraph 193 above). Mr Courtot replied to Mr Gordon Tsang, “Gordon, As far as I know: simultaneous operation (pump and platform) has been tested on 1^st and 2^nd February 2010 by CTO and PDI Committee.” Mr Courtot had no difficulty understanding what simultaneous operation was. He confirmed, upon Mr Lui’s questioning, that he had never told Mr Gordon Tsang, still less the Government, that the Plaintiff had prevented simultaneous operation.

(6) Mr Lui pointed out that it was on 31 March 2010 that the Government for the first time discovered problems with the simultaneous operation of the boom and the pump. Mr Courtot agreed. He later said that they started analyzing and upgrading the system at the moment of the LCT and the moment of the start of this upgrading was after a meeting of the main workshop. When Mr Lui asked again whether it was true that he had never told the Government about the interlocking or other equivalently effective means to prevent simultaneous operation, Mr Courtot disagreed, thereby giving an inconsistent answer. He said it was discussed when the question of supplying the 4000/10 bar at the ground directly out of the pump and when the simultaneity was raised at the LCT step. The hydraulic system was described, using the hydraulic drawing.

“So at that time we had not known before but we explain the interlocking, or not interlocking, but hydraulic way to reduce the power to some motion and particularly the retracting on the extending of the main boom.

Mr Lui: So you mean it’s only in the LCT that you were first told about the simultaneous operation requirement, is that right?

Mr Courtot: That’s right.”

(7) In re-examination, Mr Houghton and Mr Courtot tried to establish that between the original contract and the date of Mr Gordon Tsang’s letter, there had been a modification to the system, one which increased the power supply,

Mr Courtot explained,

“My lady, we are after the upgrading of the system. We are no longer at the initial design stage. Way before this email, April 2010, we already discuss the simultaneity. We already modify the drive, the hydraulic driving. We already modify the regulation of the hydro load sensing system of the boom.

…

So we are on a stage where we accept to modify and to have simultaneous operation.” [11]

219.Mr Courtot’s oral evidence was clear in showing that simultaneous operation was a contractual requirement which he knew the Plaintiff had to fulfill. Simultaneous operation was allowed unless there was an interlocking system or equivalent effective means to prevent it. His oral evidence, with its convoluted, digressing and inconsistent speeches, was evasive. Plainly there was no interlocking system. What the equivalent effective means was was never clear and his answers as to whether he had told the Government about any interlocking or equivalent effective means (or the lack of it) were inconsistent. Plainly the Government was not told of the existence of anything that would prevent simultaneous operation. It was clear that the pump and boom affected each other whilst in operation. That was probably the reason why he avoided answering this Court’s question cited in paragraph 218(4).

220.It is not clear how his evidence under re-examination helped the Plaintiff’s case. The discussion before, at LCT/A, was about the 4000 lpm Requirement, not the simultaneous operation problem, which only first surfaced at the end of March 2010.

221.I find that there was breach of Specification of Clauses 2.5.2 and 4.3.6. Simultaneous operation was not a new requirement. The Plaintiff failed to fulfill that requirement. Although purportedly solved after LCT/A, it resurfaced soon after FAT/B, as Critical Defect D (water pressure fluctuation).

K8. Modification at the risk of the Government

222.The Plaintiff carried out works on HPs/A, which included the replacement of hydraulic motors driving water pumps. It was finished in about mid-December 2009. Testing of 3 HPs/A (F343, 351 and 353) with replaced hydraulic motors was conducted on 15 December 2009 and their flow rate performance was satisfactory.

223.However, the replacement of the original hydraulic motors with more powerful ones led to overheating of hydraulic oil used. This could affect operation of the HPs/A if not also the safety of the firemen. FSD requested for measures to lower the hydraulic oil temperature. The Plaintiff agreed to rectify later, which they did.

224.The Government regarded those as rectification work. The Plaintiff regarded those were to meet new requirements not found in the Specifications, such that all modifications were at the risk of the Government, and the Plaintiff could not be held liable. The Plaintiff took the view that neither Clause 4.3.6 nor 4.3.7 were applicable to the modified system thereafter, or could, at best, only apply with such modifications as may be commensurate or necessary or incidental as a consequence of this new requirement.

225.Mr Houghton further submits that the issue raised by Mr Fuhrmann, ie in case of simultaneous operation, the water pump pressure dropped about 50% from (10 bar to 5 bar water pressure), was precisely what FSD “validated”.

226.I do not agree with Mr Houghton. The modification came about as a result of the Plaintiff’s breach of Clauses 4.1.1, 2.5.2 and 4.3.6 in the first place. The Plaintiff had the obligation to remedy the breaches. The mode of remedy was suggested by the Plaintiff with no evidence of any warning of the potential risk. It could not be right for a manufacturer to rectify a problem, only to trigger a new one. The Plaintiff could not hide behind the “validation” by the FSD Team. Giving priority to the boom did not satisfy the contractual requirement of simultaneous operation.

227.For the reasons given, I do not accept that the modification work was at the risk of the Government.

K9 Failure of FSD to follow O&M Manual and mis-operation of HPs

228.The Plaintiff claims that during the FAT/A in July 2009, 3 representatives from FSD (Mr YM Lau, Mr FW Mok and Mr KK Kwok) had been informed and instructed not to operate the boom when the monitor valve was closed. The training of the 3 representatives included theoretical training by powerpoint presentation, in-depth practice and a warning that:

“Note …

Water being incompressible, the closure of the valve whilst the boom was in motion would trigger major damage on the equipment.

When there was a retraction, the operator is informed by a warning light.

If the warning light was on, the cannon must be opened.”

229.Further, the Government was given the O&M Manual which contained a clause stating that:

“in case of delivery of water … the rescue cage operator shall always open the valve of water protection”

230.The Plaintiff claimed that the Government had failed to follow the operation instructions and ignored the warning light, which resulted in the May Incident. In addition, “operation of the boom when the monitor valve was closed” had never been a requirement under Contract A.

231.Mr YM Lau (a training officer of FSD who administered a practical examination on the operation of an HP/A on the day of the May Incident) was adamant that he had never at any time been told not to operate the boom of an HP when its cage monitor valve was closed or else damage may result. Nor was there training material to that effect. There was no warning light installed on the cage or any part of HPs/A to alert an operator that the hydraulic boom was extending or retracting, or any indicator on the cage monitor to warn an operator of danger.

232.There is no document to evidence that the O&M Manual or the powerpoint (both in English) had been given to the Government. The undisputed evidence was that at the time of FAT/A in France, a powerpoint in French was used with oral English translation.

233.According to Mr YM Lau, in the O&M Manual supplied by the Plaintiff during the training in July 2009 in France, §4.2.7 only contained the following instructions and warnings about water discharge.

“A safety set at 12 bars is on the frame in the turret axis. If the telescopic pipe is filled with water, with the valves of the water closed gondola, then a retraction of telescope will compress the fluid in the pipe and thus to remove the fluid by the safety.

Over the winter, it is imperative to make the circuit complete purge of water after each time the water circuit. To do this you have, at the rear of the vehicle, various purges to open.”

234.With no disrespect, the English version of the O&M Manual referred to by Mr YM Lau was incomprehensible probably due to a translation problem. §4.2.7 could hardly have the effect of “warning” against simultaneous operation that the Plaintiff would want the operator to understand or the Court to accept.

235.Still further, according to Mr YM Lau, at the end of May 2010, after the May Incident, the Plaintiff emailed to FSD a revised edition of the O&M Manual in English. The following English sentences, in capital letters plainly for emphases, were added to §4.2.7

“THE WATER PIPE IS A TELESCOPIC ELEMENT. PLEASE MAKE SURE THAT THE VALVE OF THE MONITOR IS FULLY OPENED BEFORE TO RETRACT THE BOOM IN ORDER TO AVOID OVERPRESSURE IN THE PIPE.

TO BE MORE EFFICIENT THE Q3 VALVE HAS TO BE OPENED IN ORDER TO CUMULATE THE EFFECT OF THE 2 DISCHARGE VALVES.

NOTE2: THIS SAFETY DEVICES MUSTN’T BE CONSIDERED HAS A NORMAL WAY TO RETRACT THE BOOM”

Mr YM Lau confirmed that these sentences were never mentioned, let alone stressed to FSD officers attending the training course in France.

236.In my view, the contrast between the old and new editions of the O&M Manual was great and telling. If the Plaintiff had given those instructions or warnings at the training in France, it would have said so in the correspondence but it did not. The new version plainly revealed the fact that the Plaintiff had not put the instructions/warning to the forefront at the training in France but remedied the situation by providing a revised O&M Manual only after the May Incident.

237.If, as the Plaintiff claimed, there was a failure to follow the O&M Manual or misoperation, re-training of FSD would have sufficed to solve the simultaneous operation problem. The extent to which the Plaintiff modified the HPs spoke to the contrary

238.I accept the evidence of Mr YM Lau. Regardless of whether simultaneous operation was a contractual requirement, the responsibility was on the Plaintiff to provide proper instructions and warning through training of FSD officers and provision of O&M Manual: SCC Clauses 9(a) and (b). The Plaintiff failed to discharge that duty.

K10 Defect was not critical or latent

239.The Plaintiff failed to provide independent hydraulic systems. On the other hand, if Mr Houghton is right and a shared hydraulic system met the contractual requirement, Critical Defect D arose out of a design defect that prevented simultaneous operation. It was purportedly solved but the Government was not informed of the risk. The defect was latent and never remedied effectively.

240.Mr Fuhrmann was of the opinion that the water pressure fluctuation problem could result in unexpected movements of the cage creating risks to operators and researchers. The observation of Mr Gordon Tsang that “second costs” life matched the expert opinion.

241.Mr Fuhrmann proposed to use an additional auxiliary engine to drive the water pump independently. This tallied with the Plaintiff’s suggestion on 20 December 2010. However, as Mr Fuhrmann explained, the installation of an additional auxiliary engine would have impact on the overall performance of the HPs (eg scarifying the space of fire appliance, increasing gross vehicle weight and increasing fuel consumption rate etc). Besides, the works would involve substantial change of fire appliance structure and may not be technically feasible. Such expert evidence was not challenged in cross-examination. I accept Mr Fuhrmann’s evidence as regards these 2 Defects and find that they were critical and not repairable.

K11. Findings on Critical Defects D&E

242.For the reasons given in Section K, Critical Defects D and E arose out of the failure of the Plaintiff to meet Specifications 4.1.1 and 4.3.6 and 2.5.2. The failure prevented simultaneous operation of the pump and boom cage. The rectification works led to further problems which could not be remedied without substantial change to the structure of the HPs and may not be technically feasible. I find as a fact that Defects D&E are established. They were critical as affecting fire fighting operations and safety of firemen and persons to be rescued. They were latent defects as arising out of design problem and rectification works of the manufacturer.

L. CRITICAL DEFECTS B AND C - OVERHEATING AND NO OR INSUFFICIENT HEAT INSULATION

L1. Pleaded Specifications

243.The following Specifications for Contracts A and B are relevant:

(1) Guard, shields or other protection to be provided where necessary in order to prevent injury to personnel by hot, moving or rotating parts during non-maintenance operations: Specifications Clause 1.3.1.

(2) Exhaust system discharging to the offside below the chassis shall be suitable for fume extraction coupling and meeting the following requirements, amongst others, that the exhaust piping and discharge outlet shall be located or shielded in such a way so as not to expose any portion of the appliance or equipment to excessive heating: Specifications Clause 2.2.5(a).

(3) The batteries shall be protected against vibration and temperatures that exceed the battery manufacturer's recommendation: Specifications Clause 2.15.4(d).

(4) Heat insulation shall be provided to prevent heat generated from the engine or any other heat sources radiating to the cab: Specifications Clause 3.2.10.

L2. Government’s pleaded case on Critical Defects B and C

244.In breach of the pleaded Specifications, the surface temperature of a number of accessible parts of the HPs reached 140°C during normal water pumping and boom-cage operations. The electrical equipment was exposed to excessive heat generated by the vehicle and its exhaust system during normal water pumping and boom-cage operations.

245.The effect of overheating was that it posed (i) serious hazards to the safety of firefighters, in particular those operating the HPs or working nearby, and members of the public being rescued during the rescue operations; and (ii) high risk of malfunction and damage of the electrical equipment, which was essential for the proper operation of the HPs.

L3. Factual Evidence

246.There was no incident when overheating actually caused injury or damage except to a colleague of Mr Fuhrmann during the inspection by Mr Fuhrmann. These 2 Critical Defects were purely based on expert evidence.

L4. Expert Evidence

247.Both Contracts A and B made reference to EN 1777:2004, the international standard for the design and manufacturing of the HPs.

248.High heating and insufficient heat insulation were not disputed in closing submission. The disputes were centered on 6 matters, namely,

(1) the ambient temperature;

(2) the need for firefighters to wear personal protective gear (“PPG”); and

(3) the validity of Mr Fuhrmann’s measurement;

(4) the use of guards, shielding or warning signs and standards that were applicable to the present case based on express terms of Contracts A and B;

(5) latency of Critical Defects B and C; and

(6) whether the Defects could be remedied.

L4.1 Ambient temperature

249.Common sense tells that an HP was a piece of mechanical equipment designed and intended for use in hot and dangerous circumstances by highly trained personnel. The Specifications cited envisaged the possibility of hot elements being exposed but shielded. Clauses 2.2.5 and 2.2.4 of Specifications/A and B respectively also provided for non-exposure of any portion of the HP to excessive heating.

250.Mr Fuhrmann suggested an ambient temperature between 5 and 40°C. He took temperatures at 6 sample points on various HPs. Most of the recorded surface temperatures were greater than 73°C.

(1) Surface temperature of accessible parts (steps to the cab, cab door, cab frame) measured up to 140°C during normal operation in respect of HPs/A, and 121°C in respect of HPs/B. Those were beyond the limit of 86°C. See EN 1777:2004, clause 5.3.19.

(2) Mr Fuhrmann opined that the electrical equipment was exposed to extremely high temperature from the vehicle during normal operation; between 62°C and 94°C for the battery, and between 65°C and 84°C for electrical components (measured for minimum of 2 hours to maximum of 4). It posed high risk of malfunction and damage. See EN 1777:2004 Clause 5.8.1.

251.Mr Fuhrmann explained the issue of overheating with reference to the photo on D1/p.337 (“D1/337 Photo”). The tests were performed under the condition that the water pump was operating at suction lift of 3m. Mr Fuhrmann identified the parts of the HPs of which he had examined the temperatures. Those were parts accessible to firefighters even when they did not wear PPG, such as the steps to the cabin, the cabinet and gasoline tank. There could therefore be risks of injury to them, just like to the colleague of Mr Fuhrmann during investigation.

252.On the other hand, Mr Seidl suggested that there was no specified temperature limit for electrical components in the standard EN60204-1:1997. However, this was plainly not the case. As Mr Houghton points out, the applicable standard for ambient temperature was in fact provided in EN60204-1:1997 pursuant to Clause 5.8.1 of EN 1777:2004, as opposed to the standard of EN60204-1:2006+A1:2009 relied on by Mr Fuhrmann.

253.Even those were not to answers to Mr Fuhrmann’s opinion. Mr Fuhrmann has already in his SER §13.7 clarified that even if only the standard in EN60204-1:1997 was adopted, his view that the ambient temperature should be between 5°C and +40°C would remain unchanged and was in accordance with Clause 4.4.3 of EN60204-1:1997. I accept Mr Fuhrmann’s evidence as to the ambient temperature.

L4.2 The need to wear PPG

254.Mr Seidl and Mr Fuhrmann held different views in relation to whether the design of the HPs envisaged that firefighters operating them would invariably be wearing PPG at all times. Their differences primarily arose from their different understanding of Clause §4.1 of the O&M Manual which provided, amongst others, that:

“Users must wear work clothing and individual protective items, and must use proper tools according to the work being done, such as a helmet, gloves, shoes, a visor, insulated tools, etc.”.

255.Mr Seidl maintained his view during cross-examination about the need to wear PPG at all times; he offered no assistance otherwise. On the other hand, Mr Fuhrmann confirmed that there was nothing in the O&M Manual or other materials given to him which stipulated the “standard” for wearing PPG.

256.I agree with Mr Lui that there was no specific instruction or warning in the O&M Manual as to what standard or type of PPG, at or near which part(s) of the HPs, or for what task in the firefighting/rescue operation, that firefighters were expected to wear when operating the HPs. Hence, realistically the situation would simply be that there were accessible parts with excessively high temperatures and firefighters might or might not be wearing PPG due to unpredictable operational needs.

257.As could be seen from the D1/337 Photo and as explained by Mr Fuhrmann, what he had measured and observed was that the accessible parts were under “extreme exposure to temperature”. Next to the area measured was a panel at which firefighters would operate the boom, and in accessing those parts the firefighters would not wear PPG because if they did, they would not be able to handle the equipment. Indeed, what was also clear was that out of the 6 sample points tested by Mr Fuhrmann, 4 were very close to where the firefighters got into and out of the cabin. Practically, it was not reasonable to require a firefighter to wear PPG invariably throughout, because there might be a need to get into the cabin for various reasons.

258.Pausing here, Mr Houghton criticised Mr Fuhrmann’s test results for not analysing the risks to working firefighters since Mr Fuhrmann had no knowledge of working procedures in operating the platforms, or comparing his temperature results with those from other platforms adopting the same chassis and engine.

259.Without disrespect, there is no strength in these criticisms. Mr Seidl never disputed the temperatures recorded by Mr Fuhrmann, or explained what inaccurate or missing information could have impacted on the accuracy of Mr Fuhrmann’s findings. The high risk of danger posed by the recorded temperatures was self-explanatory, especially when a number of accessible parts of Contracts A and B HPs could reach 140°C.

260.It may be that Mr Fuhrmann was not in a position to give expert evidence on the nitty-gritty of operational difficulties firefighters may face in a rescue operation. However what was clear from the above was that given the positions of those 6 sample points, the unpredictable and practical operational needs of firefighters, the absence of any standard of protective clothing, the lack of any warning as to what high temperatures the HPs could potentially reach, I am of the view that Mr Seidl’s suggestion of an unparticularised requirement of PPG could not be an answer to the risk of personal injury posed by overheating.

261.In any event, there could be no dispute that the overheating problem may damage the HPs and create fire risks. Provision of PPG was not an answer to the problem (§13.5 of Fuhrmann SER).

L4.3 Validity of Mr Fuhrmann’s measurement

262.Mr Seidl criticised that the “starting” temperatures of the measured accessible parts were too high and that the HPs tested might have been over-exposed to “solar radiation”.

263.This criticism was speculative and without substance. No evidence on solar radiation was produced by Mr Seidl. The temperature of the HPs here were 140°C or 121°C.

264.As confirmed by Mr Fuhrmann, in the course of conducting the tests, the HPs were not over-exposed to “solar radiation” (FSER §13.4.3). Indeed, it was a normal condition of use of HPs when there was sunlight. Even if there was a certain degree of exposure to solar radiation, it could not possibly be so material to an extent that Mr Fuhrmann’s opinion would be different. I accept Mr Fuhrmann’s opinion.

265.Further, it is noteworthy that the tests conducted by Mr Fuhrmann were performed under the condition that the water pump was operating at suction lift of 3m, not a simulated fire scene and yet overheating was still found. One could thus expect that the heating up of such areas on the HPs when deployed at a fire scene must be more severe than what was shown in Mr Fuhrmann’s test results.

L4.4 Use of guards, shield and warning signs etc

266.Taken together, Mr Houghton suggests that the express terms were not a species of overall prohibition of hot parts on the HPs, but rather a requirement for adequate protection, guards and shielding. Therefore, Critical Defects B and C were only complaints as to the absence of these, which could be remedied at a cost of US$2,500 as suggested by Mr Fuhrmann. As a fall-back, Mr Seidl suggested that the addition of warning signs would have amounted to sufficient protection.

267.I reject these suggestions. US$2,500 was the costs of guards and shields but what could not be disputed were that:

(1) a number of accessible parts of the HPs could reach 140°C or 121°C during normal operations; and

(2) Excessive temperatures might and could cause very serious damage to critical electrical components like car main battery (leading to plastic deformation of battery), which in turn might cause operational failure of the entire hydraulic system. (Fuhrmann SER at §13.3.4) Up until the end of the trial there remained no answer to this opinion of Mr Fuhrmann.

268.No guards, shields or warning signs could have made the HPs usable under such circumstances or provide sufficient protection to firefighters and members of the public from the risks of physical injury caused by overheating and/or insufficient heat insulation.

L4.5. Latency of Critical Defects B and C

269.There was no complaint from the FSD about the high heat. Mr Houghton submits that if these 2 Critical Defects had been a problem, they would have been apparent during the multiple training sessions since May 2009. And yet the Government only raised the issues after Mr Fuhrmann’s temperature test on the HPs, clearly indicating that the HPs suffered no more from “heat” issues than did other fire fighting platforms.

270.Mr Houghton points out that this was a standard Scania platform utilising a Scania engine and exhaust system. There was no evidence to suggest that these HPs presented any greater hazard than any other fire fighting equipment based on the same engine and chassis combination. There was no evidence as to the source of the heat at all. The issue appeared to have arisen after the modification of the platform so as to cater for the additional requirement of an output of 4000 lpm in 2009. This involved modifications to the hydraulic system to drive the pump at a greater speed and clearly gave rise to overheating issues when the modifications were made.

271.However, as rightly submitted by Mr Lui, Mr Houghton’s bare assertion (if not speculation) cannot stand in the light of what Mr Fuhrmann had found - that the high temperate was exposed to high temperature from the vehicle when the water pump was operating (paragraph 250(2) and 251 above).

272.Further, a Meeting Report of a meeting held on 8 March 2010 between the officers of the Plaintiff and Scania (i) recorded that there was overheating problem found in what seemed to be one of the HPs supplied by the Plaintiff; and (ii) suggested that “rubber deflectors [apparently underneath the cab] must be removed to avoid the overheating”. As confirmed by both Mr Seidl and Mr Fuhrmann, they had never been informed of such matters. Nor did the O&M Manual warn about it. This was clear evidence of latency.

273.The Meeting Report bolstered the Government’s case as to the existence of Critical Defects B and C, given that:

(1) Scania, as the manufacturer of the chassis, also advised on measures to avoid the overheating problem;

(2) The “Position A” and “Position B” identified by Scania jointly with the Plaintiff as having overheating problem were exactly those accessible parts tested by Mr Fuhrmann; and

(3) There was no suggestion, let alone evidence, from the Plaintiff that those measures proposed by Scania to solve the overheating problem was or could be implemented.

274.I find latency established.

L4.6 Whether Defects B and C could be remedied

275.Mr Houghton points out that Mr Fuhrmann has proposed a simple remedy by the addition of guards, shields, and insulation, at an estimated cost of US$2,500.

276.With respect, this submission was an incomplete and unfair quote from Fuhrmann ER.

(1) In respect of overheating, Mr Fuhrmann stated that changing the cooling system of the chassis was usually not possible. He suggested adopting heat insulation means between the engine and accessible surface. The estimated costs were US$5,000 (not US$2,500), which would include, amongst others, finding appropriate insulation means.

(2) In respect of no or insufficient heat insulation, he suggested changing the installation position of the electrical equipment, but that would involve re-design of the layout of the fire appliance. The modification would be very complicated, if not infeasible, and would scarify the available space of the fire appliance. The estimated costs were, once again, US$5,000 (not US$2,500), which would include dismantling the electrical equipment exposed to excessive heat and finding or designing another appropriate location to install with a lot of wiring/fixing/testing jobs.

277.For the reasons given in this Section, I accept the expert opinion of Mr Fuhrmann. Defects of overheating and lack of sufficient insulation are established. Given the serious hazards to the safety of firefighters and members of the public, the Defects were critical. There were latent as Scania itself found overheating, which was not disclosed to the experts. These 2 Critical Defects could not be remedied without redesign and complicated modification. I find Critical Defects B and C established and that they were latent.

M. CRITICAL DEFECT A - BUCKLING

M1. Pleaded case of the Government on buckling

278.The third section (counting from the bottom) of the telescopic boom buckled as a result of plastic deformation and elastic instability when the boom-cage was under a working load of 300 kg with dry water line. Buckling would lead to very fast aging of the material used for the telescopic boom which, as a result, would fracture within a short period of time. It was also unsafe for use and unfit for firefighting and high level rescue operation as required under Specifications Clause 1.1.1.

M2 Pleaded Specifications

279.Clause 5.2.4 provides that the safe working load at the boom-cage with water line dry shall not be less than 300 kg; and the safe working load at the bottom-cage with maximum water discharge of 2,250 lpm shall not be less than 150 kg.

280.Mr Houghton submits that this would only be established if he Court considers that buckling had arisen in the course of normal operations by FSD rather than as a result of the Government’s mis-operation.

M3. Factual Evidence

281.An abnormal “pop” sound and metal shape deformation was discovered by both an EMSD officer and APEL.

282.On 2 June 2010, Mr WH Or was the first to report the problem of the boom of F351 giving out a “popping” sound. His inspection on 22 December 2010 found 6 out of 7 HPs/A produce a similar phenomenom.

283.In its Preliminary Report dated 26 June 2010, APEL found that on F351 and F352, a clear “pop” sound, an abnormal noise, was emitted due to metal shape deformation.

284.APEL’s Report dated 12 July 2010 reported the test on F351. At about 10m, the bottom surface of the 3^rd section (from the bottom) of the boom deformed inward at the area in contact with the tip slipper of the lower section of the boom. The 2 side walls of the section bulged outwards and touched the corresponding plastic slippers, which meant that the deflections were at least equal to the gaps measured previously. A clear “pop” sound was emitted by the deformation. The boom was retracted; within short distance the same bottom surface deflected outward and the side walls deflected inward. A clear “pop” sound was emitted by the deformation. The in-out deflection of the bottom surface was found to be 0.9mm. APEL found that there was obvious buckling of the 3 walls of the section of the boom. Whether this was marginal in terms of allowable deflection and whether this would give rise to latent fatigue failure was a topic to be further investigated by the manufacturer.

M4. Expert evidence

285.There is no dispute as to the EN standard being EN1777:2004, Clause 5.2.5.2. The experts used the safe working load specified in Clause 5.2.4 of Specifications/A.

286.Professor Wu considered the popping sound to be abnormal as it indicated sudden sideway movement of the skin of the boom. He did the stress and buckling analyses on 3 randomly chosen HPs/A.

287.As stated in §§2 and 3 of the summary of WuER:

(1) The stress safety factor should not be less than 3 for the structural safety of the boom.

(2) The finite element method (“FEM”) showed that the 2^nd, 3^rd and 4^th boom sections buckled or close to buckle when the boom was at 65° or 55°. The buckling safety factor was found to be less than 2. The buckling safety factor for the 3^rd boom section was approximately 1, ie the 3^rd boom section had buckled. The safety factors for the 2^nd and 4^th boom sections were between 1.4 and 1.8, ie close to buckling. Those results agreed with on-site observations of the 2^nd, 3^rd and 4^th boom sections of the 3 HPs/A examined, which showed signs of buckling.

(3) The telescopic boom sections in HPs/A were structurally unstable and unsafe; buckling could occur rapidly and could cause catastrophic failure. If the HPs were deployed for fire-fighting and high level rescue operation, undue risk would be imposed on firemen as well as the general public.

(4) The telescopic boom sections in HPs/A did not comply with EN 1777:2004 (Sec 5.2.5.2.2) for the requirement of “proof against failure by elastic instability (eg buckling).

(5) As HPs/A&B were of the same basic design and construction, it could be concluded that HPs/A&B did not comply with the EN 1777:2004 standard.

288.Mr Fuhrmann, performed a deformation test on a boom that carried a nominal load of 300 kg. He made a similar finding that the 3^rd boom section had buckled during his inspection at boom angle of 55° (working condition). Apart from the noise, it was also demonstrated that the sudden movement of the boom skin could be felt when the sound was heard, when the boom was extending. According to site inspection/measurement and FEA analysis, the 2^nd, 3^rd and 4^th booms were regarded as structurally unstable and could not be used for operation.

289.The buckling effect caused popping sound and deformation up to 12mm and 10mm along the boom in a wave form in HPs/A&B. This result indicated that the design was not fit for the intended condition of use. The heavy dynamic buckling effects would lead to very fast aging of the material which, in turn, would lead to fracture of the material in a short period of time.

290.Mr Fuhrmann’s static calculation result indicated the stress to be 70% above permissible level. He confirmed in the witness box that during on-site testing at 55°, there was “no bypassing of any software or hardware operation limits” and he “put the booms where the computers let [him] put the booms”. His opinion has never been challenged. (Annex D3 p.5 to FER).

291.Mr Seidl performed a strength analysis, which had taken into account the 150% of the rated load. Further loads like self-weight, wind loads and hand forces onto the man basket and the system were applied accordingly. He concluded that the HPs showed sufficient strength for the governing load case combination according to EN 1777:2004.

292.Mr Seidl made an analysis using 2 load cases: (i) 100% payload, 65° system angle and booms fully extended; and (ii) 100% payload, 65° system angle and booms fully extended and operating mistake (being operating when pumping/closing monitor and retracting the telescoping boom of the HPs simultaneously. For scenario (ii), the HPs showed insufficient load capacity where there were misoperations as defined above. The buckling load factor for the HPs acc.FEM-analysis indicated that buckling was expected. This system was expected to be not safe anymore from a stability point of view.

293.Mr Siedl’s challenges to Professor Wu’s opinion are directed at:

(1) Professor Wu’s adoption of a minimum operation angle (“MOA”) of 55° (“MOA55°”) for a fully-extended boom (“1^st Challenge”);

(2) Mis-operation by the Government which gave rise to the popping sound (“2^nd Challenge”); and

(3) The safety factor, which was not supported by recognized standards (“3^rd Challenge”); and

(4) Professor Wu's “section-by-section” analyses (“4^th Challenge”).

294.With regard to the 1^st Challenge, whether the MOA was 65° or 55° has always been a live issue between the experts ever since WuER dated 16 February 2017 was first served.

295.In WuER, the stress and buckling analyses were based on the operation profile of a fully extended boom between 55° and 75°, with 55° as the minimum[12] which he has taken from the “operation envelop diagram in the O& M Manual” (“the Diagram”) (D2/p687).

296.Mr Seidl took the view in the JER that “the Hoisting Rescue Platform … is able to operate with fully extended booms in a range between 65° and 75°. The worst case scenario with an operation angle of 55° and extended booms by Prof Wu is wrong. This scenario does not exist. The corresponding results for strength and buckling analyses are therefore wrong as well.” (bold emphases by Mr Seidl). However, he gave no primary documentation in support of his MOA65°.

297.Five years after WuER was served and with leave given at the pre-trial review, the Plaintiff served Seidl SER dated 18 August 2022. Mr Seidl explained therein, for the first time, the basis of his view that MOA 55° did not exist by reproducing a working profile of the boom in Fig.5 (D2/2/601). He claimed that it was the “original” operation envelop from the Plaintiff.

298.WuSER (§§3.1-3.7) in response pointed out that Fig.5 had been edited and was never included in the original and revised versions of the O&M Manual provided to FSD in 2009 and 2010 respectively. Professor Wu found it misleading for Mr Seidl to present the operation envelop of the platforms provided by the Plaintiff under Contracts A and B, on the basis of some re-edited diagram and falsely claiming that it was the original. Professor Wu disagreed that MOA55° was a non-existent scenario.

299.It transpired that it was Mr Courtot, not Mr Seidl, who had “edited” the Diagram on a date unknown but the Government/Professor Wu was not informed until close to the trial when the Plaintiff sought leave to file Courtot-3^rd SWS, which was refused.

300.In the interest of avoiding any insinuation that Mr Seidl as an expert had improperly “edited” original documents, I allowed Mr Seidl to affirm in the witness box that he had not done such editing and I accept that affirmation.

301.Mr Seidl claimed in the witness box that it was the Plaintiff who told him of the angle of 65°, but based on the Diagram in the O&M Manual, he worked out 60°. This was the first time Mr Seidl mentioned 60° to the Government, 3 years since he first took the view stated in paragraph 296 above.

302.Mr Seidl was invited to do a desktop calculation of the MOA using a protractor. He tried hard to avoid doing it until the Court insisted on it. He eventually did it with the Diagram and produced a figure of 55.3°. See Exhibits P1 and P2. This evasive attitude of Mr Seidl said much about his/the Plaintiff’s tacit admission that Professor Wu was right about the MOA 55° and that Fig.5 was misleading.

303.This Court is not required to determine whether the “worst case scenario” or the MOA should be 55° or 65°, but which expert’s opinion or any challenge thereto was properly arrived at on a rational basis. Given paragraphs 296-302, Mr Seidl was wholly discredited and his basis for the 1^st Challenge fell away.

304.Mr Houghton submits that the Diagram did not form part of Contracts A and B, and no rationale has so far been offered as to why it was to be adopted in gauging the contractual compliance of the platforms.

305.With respect,

(1) SCC Clause 9(a) and (b) (cited in paragraph 120 above) required the Plaintiff to provide training aids and course materials to trainees. The Terms of Tender (Supplement) specified that the tenderer had to supply one set of O&M Manual (cited in paragraph 139(8) above). Such materials were meant to be relied on by a purchaser in operating the HPs. Mr Houghton’s submission ignored the contract terms and cast doubt on the reliability of his own client’s training materials.

(2) If Mr Houghton’s submission is correct, how then could the Plaintiff accuse FSD for mis-operation in not following the O&M Manual, which led to some of the Critical Defects?

306.Mr Houghton further questioned Professor Wu to see if he had checked the Diagram to see if it was to scale. However, it was never the Plaintiff’s case that the Diagram was not to scale.

307.Mr Houghton complains that Mr Courtot “was not allowed to say when the “editing” or “updating” of the Diagram had happened and his other evidence on the topic was excluded for lateness.

308.Again, without disrespect, the Plaintiff could only blame itself for exclusion of the evidence on editing as its application to adduce such evidence was made only after a gross delay of 5 years after the MOA 55° issue first emerged. Regardless of when the editing took place, the fact remained that it was the Diagram and not Fig.5 that the Government and its expert were given to prepare their expert reports.

309.Mr Houghton also submits that it could be seen from the "Note de Calcul Structure" dated 12th May 2008 that calculations at that time were based upon a working angle for the boom of 65°, not 55°. This document (which was partly non-English) was known to Professor Wu at the time that he prepared his ER, being referred to as one of his sources of information. And the Note de Calcul was included in the Memorandum of Reply dated 1 July 2010 sent by the Plaintiff to FSD.

310.Again, without disrespect, even if the boom could perform satisfactorily under loading conditions at an angle of 65° as propounded by Mr Seidl, buckling was established on (i) the on-site inspection of Mr WH Or at an operating angle of 55° (paragraph 45 above), (ii) on site inspections by APEL and Professor Wu; and (iii) the inspection of the HPs with “whole” analyses by Mr Fuhrmann.

311.Mr Houghton points out that Professor Wu has undertaken a physical examination of the deformations observed when the boom was under load, but did not state at what angle the boom was while this was carried out. This was a useless exercise since, as he acknowledged in cross examination, there was no measurement taken in this of the permanent deformation and no allowance was made in his examination for manufacturing tolerances in the actual platforms.

312.This is a desperate submission. If a brand new HP, supposed to have a life span of 20 years, according to Professor Wu, had visible deformations exhibiting signs of buckling even when under load, how would the angle of the boom matter? The buckling would only become more serious with a full load. Which responsible government would allow its firemen to mount the HP? In a fire-fighting scene, which fireman working under pressure would care to measure the angle of a boom before operating it? What allowance should be made for manufacturing tolerance was not even supported by Mr Seidl’s evidence.

313.The 1^st Challenge fails. I accept Professor Wu’s evidence that MOA of 55° did exist and buckling occurred at that angle.

314.With regard to the 2^nd Challenge, the stress and buckling analyses done by Professor Wu and Mr Fuhrmann were based on calculations using design parameters provided by the Plaintiff that did not depend on actual operation of the HPs. Buckling occurred even without the “operating mistake” defined by Mr Seidl (ie simultaneous operation of the pumping/closing monitor and retraction of the telescoping boom). I repeat my observations in Section J above on the allegation of mis-operation being speculative. The 2^nd Challenge fails.

315.With regard to the 3^rd Challenge, §2.9 of WuSER pointed out that the concept of safety factor was distinct and different from that of structural integrity. Mr Seidl had confused the concept of permissible stress value and that of safety factor. What section 5.2.5.2 of EN 1777:2004 did was to ensure designers would incorporate the consideration of 1.25x rated load or 1.5x rated load as additional loading, as would normally be done during a proof load test for safe working load at the design calculation stage. Section 5.2.5.2 did not mention that this value of 1.25 or 1.5 was the safety factor. Instead, the last but one paragraph in Section 5.2.5.2 expressly provided that “the permissible values of stress and the required values of safety factors depended on the material, the load combination and the calculation method”. This plainly indicated that “permissible values of stresses” and “required values of safety factors” were different concepts and requirements for design, and the safety factor to be considered was on top of the 1.25x or 1.5x of load increase. (§§3.8-3.11 of WuSER).

316.Apart from repeating his consideration of EN 1777:2004 in his strength analyses, Mr Seidl had not refuted Professor Wu’s view in the preceding paragraph, whilst Professor Wu remained unshaken in cross-examination. I accept Professor Wu’s views that permissible stress value and safety factor were different concepts and his interpretation of the wording of Section 5.2.5.2 of EN1777:2004 was correct.

317.Mr Seidl pointed out that Professor Wu has not provided any materials to support his safety factor. It was not mentioned in the Machine Directive 2006/42/EC or in the EN 1777:2004 standard which was the only contractual standard. So long as the assessment was done in accordance with the relevant provisions of EN 1777:2004, that was conclusive and there was no need to introduce the safety factor as advocated by Professor Wu.

318.Professor Wu frankly confirmed in the witness box that there was no authoritative standard to govern what the safety factor should be. He did not know what it was in the design by the Plaintiff. Different companies and different engineers could have different design principles. He obtained the safety factor from an unnamed website (D2/751). He advocated a safety factor of 3 based on his “familiarity with the subject and experience, after considering all matters – the material properties, the physical dimension, the loading and then from there the sort of force in relation to the expected force that it would buckle”.

319.Applying Chow Wai Shing Daniel v Lu Ying (paragraph 108 above), it was not sufficient for an expert to just say that he had experience. However, despite the lack of industry literature on safety factor, Professor Wu had considered all the matters in the previous paragraph, an approach advocated by Section 5.2.5.2 of EN 1777:2004 (paragraph 315 above). I understood him to be giving a scale of 1-5 to enable the Court to assess the probability of buckling occurring. Where the condition of the material was closer to 1, there was a greater probability of buckling, as did happen with the HPs. This satisfied the standard of proof in civil cases.

320.Additionally, as pointed out in WuSER, given that the Plaintiff had declared to FSD that the HPs/A&B were in compliance with EN1777:2004, the failure to provide detailed stress analyses or fatigue analyses to the Government was a non-compliance. I agree, although I do not need to rely on this point to find in favour of the Government.

321.The 3^rd Challenge fails in the light of the above analyses.

322.With regard to the 4^th Challenge, Professor Wu was challenged for using a section-by-section analyses (as opposed to the boom as a whole). He was said to have assumed each section of the boom to have a fixed end, such that each of them would be “stiffer”. However, Mr Seidl has not explained how a “whole” analyses would have made a difference to Professor Wu’s conclusion, and what that difference was.

323.Professor Wu disagreed that his method of analyses was less accurate, though he did not disagree with the suggestion that a more “complete” analysis could have been done. However, he stressed that “completeness” was a different concept from “accuracy” and he considered that a section-by-section analysis was accurate in showing what happened. He had also allowed for some flexibility at the flexing position and the reaction (to loading/force exerted) was “spread over the area of the boom”.[13] Though he could not fully understand what Mr Houghton meant by “fixing” the boom at one end, he said that he had “put in a certain modelling to allow this flexibility, the fixation” and it was not the case that he had done the analysis with one end “completely fixed”.

324.I therefore agree with Mr Lui that the evidence of Professor Wu showed that (i) the “section-by-section” criticism was utterly irrelevant because Professor Wu’s stress analysis was not shown to be less accurate; and (ii) the “fixation” criticism was on a false premise because he had already factored in the requirement of flexibility at one end of the examined sections in his stress analysis. The 4^th Challenge fails.

325.Further, even if Professor Wu had erred in adopting a section-by-section analysis, the same could not be said of Mr Fuhrmann, whose stress analyses was of a whole boom with on-site testing and measurement, double checking the information he received out of the user manual and that was matching. It had brought a clear result - that existing stress (155 N/mm²) exceeded permissible stress (91 N/mm²) by 70%.

326.Mr Seidl seemed to challenge the opinion of Mr Fuhrmann on the basis that the latter adopted some inappropriate parameters in his static calculation. However, Mr Seidl has not explained how those inappropriate parameters had impacted on the reliability of Mr Fuhrmann’s conclusions. Nor had Mr Seidl put forth his own view on what he thought should be the correct results. As Mr Seidl had only been able to pick on a few of the parameters amongst many, Mr Fuhrmann had not seen fit to change his conclusion. See Fuhrmann SER §11.7.

327.The static calculation in Fuhrmann ER was given to the Plaintiff 5 years ago on 8 December 2017 when expert reports were exchanged. And yet, as Mr Fuhrmann explained in the witness box, he had only received information of Mr Seidl’s criticism of his static calculation in September 2022. The deadline for Mr Fuhrmann to hand in his SER was 10 October 2022 and it was impractical for him to re-do the static calculations. Given the unfair deadline imposed on Mr Fuhrmann, I place no weight on Mr Seidl’s criticism.

328.Mr Houghton submits that Mr Fuhrmann's exercise was inadequate as his ER was premised on the assumptions made by Professor Wu: “in assessing the calculations of Prof Wu was assumed that the loads and the geometric inputs to match the realities”.

329.Under cross-examination, Mr Fuhrmann stated that he had in fact measured the angle of the booms when he examined them for actual deflection. No relevant supporting data was found in his voluminous reports. But Mr Seidl has not shown Professor Wu’s assumptions to be wrong.

330.I find the Defect of buckling established.

M5. Critical nature of this Defect

331.Mr Houghton suggests 2 steps that could be taken if necessary:

(1) Change the operating envelope in the computer software (if necessary) so as to maintain the operations of the boom within “safe” parameters while still meeting the specified requirements of the Contract.

(2) Adopt Mr Fuhrmann’s recommendation, namely, to change the 2^nd or 3^rd boom sections at a cost of US$15,000.

332.With respect, these suggested solutions were simply not put to the Government’s experts for comment. Item (1) was never the case of the Plaintiff or Mr Seidl’s evidence either. I place no weight on this submission.

333.Even from a lay person’s point of view, it was dangerous for a fireman to mount a brand new HP with buckling or tendency to buckle. I find this defect to be critical.

M6. Latency of Critical Defect A

334.Mr Houghton accepts that it would not be “usual” to perform a structural calculation or static analysis to consider the propensity of a boom to buckle as the experts have done here. What was usual was a practical test of the strength of the structural elements by overloading them to an extent that provided a desired factor of safety without breaking them but sufficient to reveal structural deficiencies. In this case, the test was a 50% overload, i.e a test at 450kg for over one hour, using parameters that even exceeded contractual parameters in terms of snorkel working height, cage floor height and maximum horizontal outreach That test was passed at FAT/A&B, whereas there was no contractual standard for buckling.

335.With respect to Mr Houghton, despite all those tests, buckling still occurred. The Plaintiff has never given a satisfactory explanation for the popping sound and deformation and why it would still be safe for fire-fighters to use the HPs despite Professor Wu and Mr Fuhrmann’s findings. Buckling was the best example of a latent defect in this case.

(1) It was not discoverable by FAT/LCT or normal inspection;

(2) According to Professor Wu, [WuER, §3.13]; the test that needed to be done to identify buckling would be akin to a destructive test, which would destroy the boom.

(3) According to Mr Fuhrmann, it would be difficult to discover buckling in FAT because it would usually take some operation time before plastic deformation occurred. In this case plastic deformation was discovered in these new HPs.

M7. Findings on Critical Defect A

336.For the reasons given in this Section, I accept the factual evidence and the evidence of Professor Wu and Mr Fuhrmann on the existence of buckling as a defect. The defect was critical as it could pose danger to firemen using the HPs and damage the HPs. It was latent as not being discoverable without using a destructive method.

N. CRITICAL DEFECT F - HIGH RISK OF OVERTURNING

N1. Pleaded Case of the Government on Critical Defect F

337.In some operational position, ground pressure of individual stabilizer on the rear side of the vehicle was about 200 kg. If there was any external force such as wind force, there was a high risk of overturning of the HPs/A. There was no appropriate device indicating the loading weight to the operator. No risk assessment could be obtained from the manufacturer to evaluate the necessary measurements against this risk. Overturning of the HPs may result in fatal incidents.

N2. Pleaded Specifications

338.Clause 5.4.1.1 of EN1777:2004 provided that

“for hydraulic platforms with more than one combination of rated load and working envelope, avoidance of overturning and overloading the structure during operation shall be controlled by automatic control of the variable working envelopes of the extending structure (position control) and/or load moment, with appropriate information/indicators for the operator on the permitted number of persons on the platform where there is variable…”

N3. Factual evidence

339.There was no incident of actual overturning. This Critical Defect was entirely an expert point.

340.SCC Clause 6 provides that:

“Stability tests shall be carried out on the completed fire appliance either in the Contractor's factory or in Hong Kong to ensure its stability meeting the requirements. The appliance shall be tilted along its length in full laden to both sides to an angle of at least 30 degrees to the horizontal plane without overturning.”

341.There were 3 relevant reports on stability tests.

(1) The FAT for 1^st Unit ‘head of series’ dated 11 May 2009, which included a stability test;

(2) A Stability Report dated 7 July 2009 (“Stability Report”) on all 9 HPs (including the wind factor simulation;

(3) An FAT/B Report in April 2010.

Nothing on risk of overturning was discovered in any of those tests/Reports.

342.The only factual witness was Mr Courtot:

(1) Mr Courtot explained the device to minimize the risk of overturning (WS §22(a)):

“(i) With the articulated platform, there would be a limitation in the angle of the first boom to limit the risk of overturning. So there is only one single switch to manually control the angle of the boom;

(ii) On the other hand, the telescopic boom as designed and supplied by the Plaintiff, has a computer control system with "Polaris" software which will automatically compare, in real time, the angles and the extension of the booms versus the limits stored in the computer. To achieve such a sophisticated position control based on polar coordinates, the hydraulic platforms are equipped with 3 analogical sensors in order to minimize the risk of overturning.”

(2) Mr Courtot explained the difference between tilt test and stability test (WS §§45, 46, 51):

“45. Tilt test is a test where the vehicle is parked on a platform which can be tilted left and right in order to find the maximum safe tipping angle of the vehicle. On the other hand, stability test is a test where the platform is put in the worst position, to one side of the stabilized vehicle with the residual load measured on the opposite outriggers. The stability test was completely carried out during the Contract A FAT Test.

46. To simulate the worst case scenario for tilt test, you have to fully LOAD the truck, on the other hand, to simulate the worst case scenario for stability test, you have to fully UNLOAD the truck.

51. … Further, there is no "stability test" as defined in the EN standard. However we still provided the "stability test" under the EC procedure because it is mandatory.  The HKFSD in their Specifications, mixed up the difference between a tilt test and stability test.”

343.According to Mr Courtot, the Plaintiff had carried out the “true” stability test and taught Gary Yang, SC Lau and Chan Wing Sang (under the FSD Training Team) the way to carry out stability test.

N4. Expert Evidence

344.The JER only contained one paragraph of Mr Fuhrmann’s opinion on this Critical Defect for HP/A and another paragraph for one HP/B. No calculations or empirical data was given to support Mr Fuhrmann’s opinion. Mr Fuhrmann has not explained what “operational position” was taken to carry out the tests (Fuhrmann ER, page 5).

345.In his oral evidence, Mr Fuhrmann explained that what he had referred to in his Reports was the ground pressure measured at the rear stabilizers and the risk of tipping over was to the front of the vehicle, not to the side. This was a new piece of evidence, given 3 years after he first gave his Report. There was no opportunity for the Plaintiff to respond to it before the trial. In fairness to the Plaintiff, I shall not rely on this part of Mr Fuhrmann’s opinion.

346.Mr Fuhrmann was cross-examined on the Stability Report, which provided details that Mr Fuhrmann had not commented on in his expert reports. He testified that the Stability Report concerned static measurement, without a dynamic load. He himself did not carry out the test and had not seen the Stability Report. He did not even know what “CR” in that Report stood for. However, he admitted that stability tests would be required in the obtaining of an EC Type Approval Certificate, which was obtained in this case. Mr Courtot’s evidence was not challenged.

N5. Findings on Critical Defect F

347.For lack of objective calculations or empirical data from Mr Fuhrmann, I find Critical Defect F not to be established, both as a matter of expert and factual evidence.

348.I now turn to the individual issues.

O. ISSUE 1 - IMPLIED TERMS ISSUE

349.The alleged implied terms were that the HPs should be (i) of merchantable quality, (ii) be reasonably safe and (iii) fit for the purpose of fire-fighting and high level rescue operation. There was, in my view, simply no need for these implied terms (i) and (iii), because GCC Clause 3(a) contained express terms to that effect. It must be necessary to imply a term that the HPs were reasonably safe, having regard to the Purposes the grave consequence of damage to persons and property if the HP were not safe. However, I do not see how much the implied term (ii) would add to (i) and (iii). An HP that was not reasonably safe would not be merchantable or fit for the Purposes: s.2(5) SOGO.

P. ISSUE 2 – CRITICAL DEFECTS ISSUE

P1. Appropriate tests

350.The first sub-issue is: what are the appropriate tests, calculations, examinations and assumptions upon which the relevant expert opinions of the parties’ experts are based?

351.The parties have, after 7 directions on filing of expert evidence since May 2013 and by agreement, left this sub-issue to be dealt with by the experts. See the Order dated 2 May 2017 of Registrar Lung. The Plaintiff had unequivocally abandoned its Pleading Point as set out in Section G2 above. The experts have agreed that EN1777:2004 applied. They also referred to various standards in their reports which I will rely on if those standards were referred to in the Contracts or EN1777:2004 or by Mr Seidl. Under such circumstances, it is simply not necessary for the Court to set out (and neither have counsel) each and every test, calculation, examination and assumption in this judgment. I have highlighted those parts of the Reports that affect my decision under each Critical Defect above.

P2. Existence and latency

352.I have found that all but Defect F (high risk of overturning) to be established (“the Established Critical Defects”).

353.These Established Critical Defects were critical in that any of them would have subjected the fire fighters, or members of the public being rescued or to be rescued, to the risk of physical danger. The Defects would also cause damage to the HP itself. The HPs could not be deployed at all.

354.A latent defect is one that cannot be discovered by reasonable inspection or use of the goods at or immediately following delivery: Douglas v Glenvarigill Co. Ltd. [2010] S.L.T. 634 at §27.

355.The Established Critical Defects were latent. The parties could not discover them despite the FATs and LCT. Water pressure fluctuation was latent as it occurred even after modification without the Government being informed of the risks of modification. Overheating and lack of sufficient insulation were latent as the manufacturer (Scania) itself took the view that there was overheating but that was not disclosed to the Government or the experts before delivery of the HPs. Buckling was a latent defect as the test needed to identify it was a destructive test. It would have taken some time before plastic deformation occurred but the HPs, supposed to have 20 years’ life span according to Professor Wu, buckled soon after delivery. All of the Established Critical Defects surfaced within a reasonable time after delivery in Hong Kong.

P3. Legal principles on fitness for purpose and merchantability

356.Section 2 (5) of SOGO provides that goods of any kind are of merchantable quality if they are –

(1) as fit for the purpose or purposes for which goods of that kind are commonly bought;

(2) of such standard of appearance and finish;

(3) as free from defects (including minor defects);

(4) as safe; and

(5) as durable,

as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.”

357.Section 16(2) of SOGO contains an implied condition that the goods supplied under the contract are of merchantable quality, except that there is no such condition –

(1) as regards defects specifically drawn to the buyer’s attention before the contract is made; or

(2) if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal; or

(3) if the contract is a contract for sale by sample, as regards the defects which would have been apparent on a reasonable examination of the sample.

358.A seller does not promise that the goods are absolutely suitable, so liability will only attach if the goods are not reasonably fit for purpose in the circumstances: see Benjamin, Sale of Goods, 11th Edition (2021) §11-052. Rarity of the unsuitability would be weighed against the gravity of its consequences: Henry Kendall & Sons v William Lillico & Sons Ltd. Farm [1969] 2 AC 31, 115C-D, per Lord Pearce.

359.The implied warranty of fitness for a particular purpose relates to the goods at the time of delivery under the contract of sale in the state in which they were delivered. It is a continuing warranty that the goods will continue to be fit for that purpose for a reasonable time after delivery, so long as they remain in the same apparent state as that in which they were delivered, apart from normal wear and tear. What is a reasonable time will depend upon the nature of the goods. See Lexmead v Lewis [1982] AC 225 at 276E-G, per Lord Diplock.

360.Mr Houghton submits, and I agree, that the circumstances of Contract A and B showed that there was to be commissioning work done after delivery, so the question of fitness must be considered in that context.

361.A seller does not guarantee against the results of misuse, or some unstated peculiarity in the buyer’s position: see Benjamin §11-052.

362.A clause that deals with the question of merchantability cannot affect the implied condition as to fitness. Exclusions are to be construed narrowly and courts decline to accept exclusions of warranty as being sufficient to exclude condition. Henry Kendall, 114C-D.

363.The term “fitness for purpose” is qualified where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the seller’s skill or judgment: section 16(3) of SOGO.

P4. Findings on fitness for purpose and merchantability

364.Even if the HPs were fit for the Purposes or merchantable at the time of delivery and s.16(2) applied, they were not so within a reasonable time of 3 months after delivery of HPs/A when LCT/A was carried out. Established Critical Defects emerged and continued to exist after purported rectification of all HPs after FAT/B: Lexmead v Lewis.

365.Any one of the Established Critical Defects was sufficient to establish that the HPs were not reasonably safe or fit for purpose or merchantable as using them might pose risk to the lives of fire-fighters and members of the public being rescued or to be rescued. The Established Critical Defects could also cause damage to the HPs themselves. This finding covers both HPs/A&B as they shared the same design.

366.Mr Houghton contends that the alleged Defects were in reality no more than a mismatch between the expectation of FSD as end-user and what was contractually specified. He contends that the Government did not rely and it was unreasonable for the Government to rely on the Plaintiff’s skill or judgment as a seller because of:

(1) the detailed nature of the information to be submitted in the tender;

(2) the detailed Specifications; and

(3) the Government’s subsequent detailed pre-contractual scrutiny, including the pre-award meeting in July 2008 and the substantial correspondence and enquiries between the parties pre-contract.

367.Without disrespect, this contention is unmeritorious. It was the first time the Government purchased HPs manufactured by the Plaintiff, which were expected to be an upgrade from similar items then used by FSD. It was not surprising for the Government to try to learn more before deciding to buy and set out its requirements in detail. Such conduct could not bar the Government, as a purchaser, from relying on the skills and judgment of the Plaintiff to properly manufacture the HPs and ensure that they were fit for the Government’s purpose. There was mismatch between the pleaded Specifications and the end-products due to the Established Critical Defects, not the wrong expectations of the Government.

Q. ISSUE 3 - NON-CRITICAL DEFECTS

368.There are 3 sub-issues:

(1) What were the appropriate tests, calculations, examinations and assumptions upon which the relevant expert opinions of the parties’ experts were based (Expert Issue 1)?

(2) Whether HPs/A&B had the Non-Critical Defects (Expert Issues 3, 7)?

(3) Whether the existence of the Contracts A and B Non-Critical Defects (or any of them) constituted a breach of the pleaded specification or standard?

369.With regard to sub-issue 1, once again, like the Critical Defects, the appropriate tests were left to be dealt with by the experts in their opinions. It is not necessary to set them out one by one. There was no cross-examination to suggest that the wrong tests, etc, had been applied.

370.With regard to sub-issues 2 and 3, existence of the Non-Critical Defects and breach of the Specifications or standards were supported by the expert evidence of Mr Fuhrmann. He also suggested remedial steps and costs. The Plaintiff has not pleaded a positive case in response to the Non-Critical Defects and has not adduced any factual or expert evidence on this issue. Mr Houghton has not cross-examined Mr Fuhrmann either, claiming that there was insufficient time to do so, but that was not an answer.

371.Appendix B to Mr Houghton’s closing submission (“Houghton-Appx B”) purports to be the closing submission of the Plaintiff on the alleged Non-Critical Defects. Mr Houghton submits that the allegations of Non-Critical Defects were nit-picking when inspection was carried out by Mr Fuhrmann on the HPs and there was no prior complaint. Mr Houghton has summarized his general comments with regard to Non-Critical Defects under “Statement A” and “Statement B” which were applicable to Contract A and B respectively.

372.With respect, the lack of prior complaints or that the Government had accepted the HPs via FAT/LCT as being complete did not mean that the Non-Critical Defects did not exist. It was all a question of proof and that was done through Mr Fuhrmann.

373.Given the lack of challenge to Mr Fuhrmann’s evidence, I find the existence of Non-Critical Defects and remedial costs to be established on balance of probabilities.

374.In the context of this case, it is not necessary to consider the remedial costs one by one, as they will be merged into damages for the Critical Defects.

375.I am more troubled by the approach of the Plaintiff’s counsel. By a summons filed on 17 August 2022, the Plaintiff applied for leave to adduce Mr Courtot-SWS containing Tables A and B, which set out Mr Courtot’s responses to each of the alleged Non-Critical Defects. Leave was refused at the pre-trial review on 22 August 2022. Apart from the reason of delay, it was because, through Tables A and B, Mr Courtot was purporting to express views suitable for an expert. The 2 Tables also contained expert opinions mixed with factual statements. The Government and the Court should not be left with the task of sifting out expert evidence from factual evidence at that late stage before trial. See the Decision [2022] HKCFI 2675 handed down on 31 August 2022 (“2022 Decision”), §§14-16 and 25.

376.Statement A and Statement B are almost a replica (or paraphrased versions) of Tables A and B which this Court has excluded. Statement A and Statement B even contained new matters not found in Tables A and B, as can be seen from the comparison table handed up by Mr Lui in closing. Houghton-Appx B still contains matters that purport to be expert evidence, eg the items I have given as examples in §14 of the 2022 Decision remain in Houghton-Appx B.

377.This attempt of a team led by senior counsel to slip in mixed factual and expert evidence which the Court has disallowed under the disguise of closing submission is unprofessional and abusive of the process. It wastes the opponent’s time when he should be focusing on preparation of the closing submission for the Government. No weight should be placed on Houghton-Appx B. I shall come back to this on the question of costs.

R. ISSUE 4 - TERMINATION OF CONTRACT A ISSUE

R1. Parties’ cases

378.Mr Houghton submits that

(1) The Government had accepted the goods and hence it could not have rejected the HPs, let alone terminate Contract A.

(2) What constituted sufficient grounds to justify termination was unstated. Mr Houghton submits that the breach must go to the root of the contract.

(3) The consequences of such termination were not set out in GCC Clause 6.

(4) GCC Clause 8 contained a provision preserving the right to claim damages for such breach as may be established but expressed to be “any sums so incurred in excess of the Contract price”.

(5) As a matter of construction, any such termination could not be equated to rendering a contract a nullity and could not affect pre-existing rights accrued as at the date of termination.

(6) Termination was available only in respect of unperformed obligations.

(7) The fact of acceptance having occurred meant that the Government was required to treat any breach of contract as a breach of warranty and not a ground for rejecting the goods.

379.Mr Lui submits, on the other hand, that the Government was entitled at any time to terminate under GCC/A Clauses 3 to 5 if the HPs were not fit for purpose or of unmerchantable quality or fail to comply with Specifications. Any rejection/termination was without prejudice to any claims by the Government for breach of contract.

R2. Legal principles on acceptance and rejection

380.37 of SOGO provides for acceptance of goods as follows:

“(1) Subject to subsection (2), the buyer is deemed to have accepted the goods—

(a) when he intimates to the seller that he has accepted them; or

(b) when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller.

(2)Where goods are delivered to the buyer, and he has not previously examined them, he is not deemed to have accepted them under subsection (1) until he has had a reasonable opportunity of examining them for the purpose—

(a) of ascertaining whether they are in conformity with the contract; and

(b) in the case of a contract for sale by sample, of comparing the bulk with the sample.

(3) The buyer who deals as consumer cannot lose his right to rely on subsection (2) by agreement, waiver or otherwise.

(4)The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.

(5)The questions that are material in determining for the purposes of subsection (4) whether a reasonable time has elapsed include whether the buyer has had a reasonable opportunity of examining the goods for the purpose mentioned in subsection (2).”

381.Any reference to a “reasonable time” under SOGO (including reasonable time for retention of goods without rejecting them or for inspection of goods) is a matter of fact: section 58 SOGO.

382.When did time for rejection begin to run in the case of latent defects? The following principles extracted from Douglas v Glenvarigill Co. Ltd. [2010] S.L.T. 634 at §§27, 29, 33 and 34 are relevant:[14]

(1) For this purpose, a latent defect is one that cannot be discovered by reasonable inspection or use of the goods at or immediately following delivery.

(2) If the buyer allows the seller to repair the goods, time will not run during the period while repairs are being carried out (§26).

(3) In the case of a latent defect, time begins to run for the purposes of s. 37(4) of SOGO, as soon as the goods are delivered, but some level of delay in rejection may be reasonable if the defect is not immediately apparent (§§27, 29).

(4) Assessing what is reasonable time for rejection is dependent on two factors - when the defect appears and the time that elapses before rejection is intimated, but the precise relationship between those two factors depends upon the particular circumstances of the case (§27).

(5) Considerations such as whether the purchaser was aware of the defect, and the nature of the action taken by the purchaser when he was in fact aware of the defect, have been factors taken into account in determining whether the right to reject has been lost (§29).

(6) It is important for the buyer to have sufficient information to make an informed choice between acceptance and rejection. The right of rejection would be lost if, at any time, he decides to accept the goods or is deemed to have accepted them. But it is a right of election which the buyer cannot be expected to exercise until he has the information that he needs to make an informed choice. (§33)

(7) In the case of goods which are not expressly accepted and which may be subject to latent defects the Courts will be generous in fixing the ‘reasonable time’ which must elapse before acceptance is deemed or implied (§34).

(8) Rejection is a relatively drastic remedy in that it involves return of the goods and the whole of the price. At a certain stage commercial closure is required to permit the seller in particular, but also the buyer to some extent, to arrange his affairs on the basis that the goods have been effectively sold.

(9) Damages remain as an alternative remedy and so the buyer is not left without any recourse against the seller.

383.Acts or omissions may constitute “acceptance” which will bar rejection regardless of the knowledge of the buyer. Thus, where a buyer unequivocally states that goods are accepted, the law, regardless of his knowledge of defects or actual examination of the goods, “deems an election to have been made” and he can no longer reject; the same result flows from the lapse of a reasonable time. See Benjamin, §§12-039 to 12-040, citing an example in Taylor v Van Dutch Marine Holdings Ltd. (Ch. D) [2019] Bus LR 2610 at §233 per Julia Dias QC.

384.At common law, an unequivocal rejection prevents a subsequent acceptance of the goods whether that be called an affirmation of the contract or otherwise. If an affirmation of the contract has occurred, it would be too late to justify rejection if an acceptance or a deemed acceptance has intervened: Graanhandel T. Vink v European Grain Shipping [1989] 2 Lloyd's Rep 531 at 533, 535, per Evans J.

385.Under section 13(3) of SOGO,

“Where a contract of sale is not severable, and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.”

R3. Whether the Government had accepted the HPs/A

386.By the FAT/A, LCT/A, the Plaintiff had afforded the Government a reasonable opportunity of examining the HPs/A for the purpose of ascertaining whether they were in conformity with Contract A, not for the purpose of looking for defects. The FAT and LCT Reports were binding on both parties. The Government was estopped from denying that the HPs/A had been thoroughly inspected and tested or from raising any additional tests of the HPs save for those listed minor items in the FAT/A.

387.On the face of the FAT/A, LCT/A Reports, there had been “final completion, inspection and acceptance of the appliances to be conducted at the Contractor’s works” within the meaning of Clause 12(a)(ii) of Specifications/A.

388.With the full payment by the Government under Contract A, there had plainly been acceptance of the HPs/A.

R4. Rejection or termination within reasonable time

389.On a proper construction of GCC (cited in Section H4 above)

(1) Clause 3(a) expressly entitled the Government to terminate Contract A at any time, if the HPs were not of merchantable quality or fit for purpose or failed to comply with the Specifications. The wording was unambiguous.

(2) Clause 5 governed “deemed acceptance” when the Government Representative or Receiving Officer furnished the Plaintiff with an acceptance note. There was no prescribed form of acceptance note. In my view, this Clause only provided for one mode of deemed acceptance, which was rebuttable. Its wording did not exclude other modes of deemed acceptance.

390.Further, on a proper construction and applying common sense:

(1) For such a serious step as termination (and rejection of all the goods), it goes without saying that the breach must not be trivial, but must be something that goes to the root of the contract: The Hansa Nord [1976] QB 44, 61 E-F; 73D (CA). Rice v Great Yarmouth Borough Council [2000] All ER (D) 902 at §24 (CA). Each of the Established Critical Defects went to the root of Contracts A or B and was serious enough to entitle the Government to terminate. However, the Non-Critical Defects (individually or collectively) did not, as they were remediable, mostly with low cost.

(2) Exercise of the right to terminate was not restricted in time (except, perhaps, under the Limitation Ordinance). However, I find payment of the balance of 20% purchase price for Contract A to be the clearest form of deemed acceptance.

(3) I agree with Mr Houghton that it was only an executory contract that could be terminated (or rejected). Here, Contract A had been completed by full payment and even the warranty period had expired by the time of termination. There was simply no unperformed obligations on either side to terminate.

(4) I agree with Mr Houghton that any termination could not be equated to rendering a contract a nullity. Pre-existing rights accrued at the date of termination were not affected. These would include the right of the Plaintiff to retain the purchase price and all rights of the Plaintiff arising from deemed or actual acceptance of the HPs by the Government.

(5) Mr Houghton submits that, the associated rights to reject the goods or to require repair under GCC Clause 3(a) gave rise to specified consequences of removal (GCC Clause 6) and termination, and a claim for damages (GCC Clause 8). However, there was no provision in GCC setting out the consequences of termination under Clause 3(a). I agree, but that would not, in my view, prevent the Government from resorting to its pre-existing rights to damages under common law or statute.

391.Applying sub-paragraph (3), I find the purported termination by the Government of Contract A to be invalid. The Government’s rights were relegated to a claim for damages for breach of warranty.

S. ISSUE 5 - TERMINATION OF CONTRACT B ISSUE

392.In the list of issues, issue 6(a) is whether it was an implied term of Contract B that the parties were to cooperate in the implementation and performance of Contract B, including (per Clauses 7 and 12(a)(iii) of SCC) FAT, LCT and Commissioning Report.

393.It is not clear why it was necessary at all to imply this term when Contract A had operated well without it. I fail to see in what way the Government had been uncooperative. Both parties had been keen to find out the cause of any Defect and have it remedied. The Government paid Contract A in full as soon as all defects were purportedly rectified. I decline to imply the alleged term for Contract B.

394.Although HPs/B were same as HPs/A in terms of design and Critical Defects, Contract B was severable from Contract A. Unlike Contract A, it was , in principle, open to the Government to terminate Contract B at any time under GCC Clause 3(a). This was because Contract B was an executory contract, the full price has not yet been paid, LCT had not been carried out and the warranty period had not even begun.

395.The Government’s express reservations in GLD’s letter dated 15 July 2010 (paragraph 34 above) showed no intention to accept HPs/B. Despite that letter, was there “deemed acceptance” of the HPs/B? I have taken into account the circumstances in paragraphs 396-399 below.

396.Defects started to emerge in HPs/A 2 months after full payment, from the May Incident, and I find that the Government had informed the Plaintiff without any delay. Given the same design, it was reasonable for the Government to think that HPs/B would have similar defects.

397.The parties amicably tried to find out the cause and remedies. The HPs were complex machines provided by a new supplier. The Government was entitled to make an informed choice in deciding whether to reject the HPs and hence it was appropriate to do internal investigation or commission external expert reports. The time taken for all these steps should not be counted against the Government. During this period, it could not possibly be suggested that there was any waiver of the Government’s right to reject or terminate.

398.However, APEL and Professor Wu had provided their final reports by 22 November and 17 December 2010 respectively. The 7 months since the May Incident had provided more than a reasonable opportunity for the Government to examine the HPs. That examination was to ascertain conformity with Contracts A and B under s.37(2)(a) of SOGO, and not whether the Government had a “reasonable opportunity to discover any defect”. And yet it was the Government’s own case that such investigations and reports led to discovery of what were eventually pleaded as Critical Defects.

399.I accept that the Government needed to liaise with officers in different departments in this case and take professional advice. However, having the necessary information in paragraph 398 in hand, taking another 9 months to terminate Contract B in September 2011 was far more than reasonable. Commercial closure was required to permit the Plaintiff to arrange its affairs on the basis that the HPs/B had been effectively sold: Douglas v Glenvarigill.

400.Taking the totality of the circumstances in paragraphs 396-399 above, I find that a deemed acceptance of HPs/B had occurred: Graanhandel T. Vink v European Grain. The Government had lost the right of termination due to latent defects in Contract B. This should restrict the Government to a claim in damages for breach of warranty: sections 13(3) and 55(1)(b) SOGO, Benjamin §§12-039 to 12-040.

T. ISSUE 6 – GOVERNMENT’s DAMAGES ISSUE

T1. Legal principles on damages

401.The buyer may set up against the seller the breach of warranty in diminution or extinction of the price. In the case of breach of warranty of quality, such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. See s.55(1) and (3) of SOGO.

402.Where the market value of the defective goods could not be ascertained, there being no market in which they could be disposed of, damages may be awarded on the basis of the cost of bringing the goods up to the contractual standard which would make them saleable: Benjamin’s Sale of Goods, 11^th ed, §17-050 to -054. Where there is no available market in which to buy substitute goods, the buyer may buy the nearest available equivalent in quality and price to the goods. Damages would be assessed as the difference between the price paid for the substitute goods and the contract price: Benjamin, §17-023. This is similar to the right of the Government, under Clause 8 of GCC/A&B, to procure any goods then outstanding from any other source and the Plaintiff shall be liable for any sums so incurred in excess of the Contract price.

403.Mr Houghton relies on the case of Ruxley Electronics Ltd v Forsyth [1996] AC 344, 353A, 354D-F, 357E-F,367B-C, for the proposition that the cost of reinstatement is not the appropriate measure of damages if the expenditure would be out of all proportion to the benefit to be obtained. The appropriate measure of damages in such a case is the difference in value occasioned by the breach, even if that would result in a nominal award.

404.I note that Ruxley had special facts. It was found that the value of the house was not affected by the defect in the swimming pool (ie diving area was 1 ½ feet shorter than the specified depth). The estimated costs of remedying that defect was £21,560. The trial judge did not award the costs of reinstatement but only awarded the house owner £2,500 for loss of amenity, holding that the costs of reinstatement was out of all proportion to the benefit to be obtained. The House of Lords restored the trial judge’s award based on the diminution in the value of the work occasioned by the breach even if that would result in a nominal award to the house owner.

405.Ruxley is distinguishable from the present case on the facts as there cannot be any suggestion that the costs of the replacement HPs were out of all proportion to the benefit to be obtained.

406.In sum, the Government is only entitled to damages for breach of warranty in respect of Contracts A and B. As the Established Critical Defects went to the root of the contract, rendering the HPs unsuitable for use, the Government, rightly, seeks the additional costs needed to buy replacement units and other consequential loss.

407.On 27 May 2011 and 30 November 2012, respectively, the Government invited tenders for the supply of HPs to replace the HPs/A and B. SK Rosenbauer Pte Ltd (“SKR”) was awarded the contracts in July 2013.

408.The Government purchased replacement goods from SKR:

(1) 4 units of HPs, 3 of which were to replace some of the 17 HPs/A&B. The contract price in January 2012 was US$2,555,132 (ie US$638,783 each).

(2) Another 14 HPs to replace the remaining 14 HPs/A&B. The contract price in July 2013 was US$8,540,000 (i.e. US$610,000 each).

409.In terms of quantum, the total price differences for Contracts A and B is US$1,027,349, ie costs of all 17 replacement HPs (US$638,783 x 3 + US$610,000 x 14) minus costs of 17 original HPs cost of US$9,429,000 (= US$4,581,000 + US$4,848,000).

410.The Plaintiff’s objections can be classified into 3 limbs:

(1) Late disclosure of documents as to payment; and

(2) There were “upgrades” in the replacement goods, the price of which should not be borne by the Plaintiff.

(3) Damages should be calculated on the basis of bringing the defective HPs up to standard.

411.With regard to the first objection, Mr Houghton confirms that the basis was delay in discovery. He points out that Katherine Chan-WS filed on 22 May 2015 stated that the Government had paid the full price for the 1^st set of 4 replacement HPs but not the 2^nd set of 14. However, the RADCC (filed on 21 April 2020) till this date has been that the Government intended to invite for tenders. This gave the impression that the Government had potentially never fully paid for the replacement units. The Plaintiff had sought specific discovery of all documents in relation to the replacement tenders in July 2012 and August 2022. And yet, the documents were disclosed late, close to the end of the trial, on 25 November 2022. It had taken the Plaintiff by surprise as the Plaintiff had no time to study the differences between the original and replacement units and whether the “price difference” sought by the Government was reasonable.

412.The Government’s only explanation was oversight.

413.The new documents only concerned the payment position under the replacement contracts for HPs/A&B. The replacement contracts themselves have been provided by the Government to the Plaintiff well in advance to enable the Plaintiff to compare the differences between the replacement contracts and Contracts A and B. There is no dispute as to authenticity or relevance of the new documents. The award of the replacement contracts had been gazetted. Neither Ms Katherine Chan nor any one were cross-examined on those documents.

414.There was no suggestion by the Plaintiff that (i) the replacement units never arrived or were not used; or (ii) what the Government had allegedly paid SKR was in any way different from the contract price that was gazetted. Any “surprise” to the Plaintiff was only a change from no documentary evidence of full payment to having documentary evidence. The late disclosure merely made good Katherine Chan’s averments in 2015. In the premises, there was no real prejudice caused to the Plaintiff due to the late disclosure. I give leave to the Government to adduce such documents.

415.With regard to the second objection, Mr Houghton submits that the replacement machines have not been purchased under the same contractual requirements. He identifies 14 differences:

(1) the original HPs required “Six-cylinder turbocharged after-cooled 4-stroke 9-litre diesel engine of Euro-IV emission standard with a maximum power of not less than 220 kW at an engine speed of about 1800 rpm”, whereas the replacement HPs required “Front mount diesel engine of Euro V or above emission standard with a rated power of not less than 295 horsepower at an engine speed of not more than 2,500 rpm”;

(2) additional requirement to the fire pump that the discharge flow through the hose reel shall not be less than 130 lpm at 40 bar, and that the fire pump shall be capable of operating at its maximum output during the simultaneous operation of the turntable of the booms of the aerial platforms;

(3) additional requirement that the water line should be designed to have a flow rate of not less than 1,600 lpm at 8 bars;

(4) additional requirement that means of pressure releasing must be provided at the four outlets and that the four delivery valves shall be arranged in a row above the suction inlet and facing the rear;

(5) minimum warranty service period increased from 12 months or 20,000 km mileage for chassis to 24 months;

(6) additional statutory requirements were imposed, including the concerning air pollution control, telecommunications, ozone layer protection, safety glass;

(7) new requirement for compliance with BS EN 1777:2010 and BS EN 1845-2:2009;

(8) the overall height of the chassis reduced from 3.7m to 3.65m;

(9) angle of approach reduced from 18 degrees to 15 degrees;

(10) additional requirement for the cab and body that reversing video device should be in place;

(11) additional requirement that there should be a third generation mobilising system and digital trunk radio system;

(12) additional requirement that mud-flaps shall be provided for all wheels;

(13) additional requirement to Contract A that the pipe must be 5-1/2” British Standard Pipe and must not be more than 300 mm away from the edge of body;

(14) the maximum overall width of stabilizing jacks when all four jacks fully extended decreased from 3.5m to 2.5m; additional requirement that the loading pressure on any jack plate must not exceed 3.2kg/sq.cm.

416.Unfortunately these 14 items were neither pleaded by the Plaintiff, nor were the Government’s witnesses cross-examined on them. It was simply not possible for the Court to decide if the 14 items were true upgrades and the extent of upgrades. Mr Houghton’s submission on this aspect must be rejected.

417.As quantification could not be precise, Mr Houghton proposes a 10% reduction in the additional costs. No authorities have been provided in support. There was no available market in which to buy exact substitute goods because the HPs were manufactured by the Plaintiff. The evidence remains that the replacement goods were the closest substitute that the Government could find and I accept the purchase prices as the bases for computing damages.

418.With regard to the third objection, Mr Houghton submits that the Government’s damages are to be assessed by reference to Mr. Fuhrmann’s evidence, which suggested that the defects alleged were repairable at varying levels of cost. An assessment of the additional cost arising from termination must take into account the level of expenditure that would have been necessary to repair rather than replace and should not be out of all proportion to the benefit to be obtained.

419.Again, there has been no cross-examination on this. But as summed up in the Remark to Fuhrmann ER:

“The aerial platforms is a very complex equipment, including mechanical, hydraulic, electrical/electronic systems, for the critical and non-critical defects, I proposed the recommended solutions, while I must point out that the domino effects/chain reaction may occur and rectification may not make sense. For example, the critical defect – Boom buckling, I propose to change 2^nd, 3^rd, 4^th boom for all units, while new boom system may have impact on overall performance of the system (max. capacity etc.) In case the replacement of individual un-safe boom section is not possible, the whole boom system would need to be replaced. The works will involve substantial change of fire appliance structure and may not be technically feasible.”

420.Mr Fuhrmann also added the caveat that his estimated costs of rectifying each Critical Defect or Non-Critical Defect just covered the labour and material of individual component of the concerned defect. The costs of modification/upgrading works in other parts of the fire appliance which may be required in connection with the defect rectification were not included.

421.A single Established Critical Defect would have made an HP unsafe or unfit for the Purposes. Given the number of Established Critical Defects involved, I reject Mr Houghton’s submission and find that the HPs could not be repaired so as to meet the contractual requirements. This is another reason why the Established Critical Defects were critical.

422.Having considered the counterclaim and objections, I hold that the Plaintiff should pay damages for replacement goods under Contract A and B as follows:

Relief	RADCC	USD
(1)	§84	$4,489,380.00 (price under Contract A less deposit of US$91,620 forfeited by the Government)
(2)	§85	$1,822,848.00 (40% paid under Contract B less deposit of US$96,960 forfeited by the Government)
	§86.6 & 87	$1,027,349.00 (price difference for replacement goods as per §409)
	Total	$7,339,577

T2. Other damages claimed

423.The other pleaded damages that the Government claims are expenses for engagement of independent experts for the examination of HPs/A and B in the total sum of HK$1,278,250 (ie HK$182,000 in respect of APEL; HK$90,000 in respect of CityU and HK$1,006,250 in respect of Mr Fuhrmann’s company).

424.Insofar as the expenses on APEL are concerned, the Plaintiff had agreed to cover the costs of employment of independent consultant to identify the defects in the HPs. See Notes of 1^st Meeting on Problems and Defects of Gimaex Aerial Platform dated 30 June 2010, §3. The consultant then was APEL. Having now lost the case, the Plaintiff should be responsible for the same.

425.However, these were expenses on experts related to litigation rather than damages to put the Government to a position as if the Contracts were performed. These expert expenses (which I approve as a matter of principle) ought to be a matter for taxation if no agreement is reached.

U. ISSUE 7 - NEW DEVICES FOR CONTRACT A

426.“New Devices” were installed in Contract A HPs. The agreed price was €73,000. An uncontested email from Mr Gordon Tsang dated 31 March 2011 put on record matters about the Plaintiff’s failure to demonstrate successful installation and connection of a GSM telephonic communication device allowing it to work in Hong Kong. The Plaintiff does not pursue €5,500 for the non-functioning device. The balance in the sum of €67,500 is what the Government agrees to pay and the Plaintiff agrees to accept and I grant judgment accordingly.

V. ISSUE 8 – CONTRACT C ISSUES

V1. Terms of Contract C

427.The contractual documents included SCCC/C, Specifications/C and Terms of Tender (Supplement), Addendum No. 1 which amended SCC/C Clause 8(c).

428.The Plaintiff had to deliver the Contract C turntable ladders on or before 9 February 2011.

429.SCC/C Clause 5(d) provided that the Plaintiff shall submit, at least 8 weeks prior to the carrying out of the FAT/C, testing parameters, measurement procedures and report forms of such FAT/C (collectively “FAT/C Parameters”) for the approval by the Government Representative. If in the “reasonable opinion” of the Government Representative such FAT/C Parameters did not provide sufficient details to test all the functions and facilities of the turnable ladders, the Plaintiff shall make any “reasonable amendments” to the FAT/C Parameters as the Government Representative may request.

430.SCC/C Clause 24(a)(i) provided for termination:

“Without prejudice to other rights and claims of the Government under Contract C or at law, the Government shall be entitled to terminate the Contract if the Contractor failed to observe or perform any of the terms and conditions of the Contract (including the Warranties) and (in the case of a breach capable of being remedied) has failed to remedy the breach to the satisfaction of the Government within fourteen days (or such longer period as the Government may, in its sole discretion, allow) after the issuance by the Government to the Contractor of a notice in writing requiring it to do so.” (underline added)

431.Time was of the essence of Contract C: SCC/C Clause 30(a).

432.As a general rule, where a written contract provides that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. The formulation of this implied term (like any other implied term) depends on necessity. See Lewison, §§6.135-6.137, citing Mackay v Dick (1881) 29 6 App. Cas. 251, 263, Lord Blackburn.

433.The Plaintiff contends that under SCC/C Clause 5(d) there was an implied term that FSD had a duty to either:

(1) Approve the FAT/C Parameters as had been proposed to them, or at least to provide its “reasonable opinion” on those proposals for “reasonable amendments” to be made;

(2) use reasonable endeavours to enable Contract C to be fully performed; to enable the Plaintiff to perform Contract C; and not to do anything which would prevent, hinder or delay the Plaintiff from performing Contract C.

434.In my view, sub-paragraph (1) was the proper interpretation of Clause 5(d) rather than an implied term. It is unnecessary to imply sub-paragraph (2) because the undisputed fact was that upon receipt of the FAT/C Parameters (whichever party’s version as to the date is accepted), the Government made proposals to the Plaintiff immediately. Contract C could and had worked perfectly well without the need for the alleged implied term. I thus decline to imply any term on the ground of lack of necessity.

V2. Each party’s case

435.It is the Plaintiff’s case that they had provided the Government with the FAT/C Parameters by various means:

(1) at the tender stage;

(2) by way of USBs (prepared by Mr Courtot) to Mr Joe Chan and Mr Nelson Yu of APEL at a meeting on 24 September 2010;

(3) by way of a signed letter dated 29 September 2010 (“29/9/2010 Letter”) attached to an email dated 30 September 2010 (“30/9/2010 Email”); and

(4) by “re-sending the FAT/C Parameters by an email dated 21 June 2011 (“21/6/2011 Email”) enclosing, amongst others, the unsigned 29/9/2010 Letter.

The Plaintiff seeks the balance of the price for Contract C, less the proceeds of re-sale of the turntable ladders.

436.The Government’s case is that the documents submitted at the tender stage did not discharge the Plaintiff’s duty under SCC/C Clause 5(d). The Government had never received the 29/9/2010 Letter or 30/9/2010 Email. FSD only first received the FAT/C Parameters by the 21/6/2011 Email, which attached the Plaintiff’s letter dated 20 June 2011, which in turn enclosed an unsigned copy of the 29/9/2010 Letter. In any event, the FAT/C Parameters provided on 21 June 2011 were inadequate for the purpose of facilitating FAT/C and the Government had asked for further documents to assist it to determine whether the Contract C units were ready for FAT, but the Plaintiff failed to provide them. Acting in further breach of Contract C, the Plaintiff failed to deliver the Contract C units on or before 9 February 2011. As to discount, the Government’s case is that it had received a revised invoice from the Plaintiff on 9 March 2011 and made payment within 20 days on 29 March 2011, so it was entitled to a 0.5% discount under the terms of the Appendix to Contract C Letter of Award. The Government seeks damages due to the need to buy turntable ladders in replacement.

V3. Issues concerning Contract C

437.The issues concerning Contract C are:

(1) When the Plaintiff first provided the FAT/C Parameters to the Government;

(2) Whether those FAT/C Parameters provided sufficient details to facilitate FAT/C to take place;

(3) Whether the Plaintiff had breached Contract C and, if it had, whether the Government had affirmed the Contract and/or waived its rights; and

(4) Who is entitled to relief and what is the appropriate relief?

V4. When the Plaintiff first provided the FAT/C Parameters to the Government - in September 2010 or on 21 June 2011?

438.The Plaintiff’s email system had changed in April 2018, so the 30/9/2010 Email could no longer be found despite the Plaintiff’s efforts.

439.Apart from Mr Courtot’s evidence, the Plaintiff also relied on the circumstantial evidence from June 2010 to late September 2010, which Mr Houghton submits, was consistent with the Plaintiff’s case:

(1) The May Incident had led to discussion on revising the terms of and testing for Contract C at the meeting on 1 June 2010.

(2) There was further consideration between the parties and also internally at the Government’s end, of revising the delivery schedule and testing for such from at least early June 2010 through to July 2010.

(3) FSD had involved APEL in relation to the HPs/A, with APEL seeking further documentation from the supplier. See email of WH Or to Mr Courtot dated 15 July 2010 enclosing the request of APEL and Nelson Yu’s evidence.

(4) A large number of documents relating to Contract A were (on the Government’s own evidence) clearly provided by the Plaintiff to Mr Joe Chan. Mr Joe Chan admitted that it was in electronic format (though he could not remember if it was in the form of a USB or disk) at the meeting on 24 September 2010. The documents had been passed to Mr WH Or for handling. See §12 of the minutes of the meeting held on 24 September 2010; Courtot WS §§217-218.

(5) The parties continued to liaise over the question of provision of FAT/C Parameters and delivery schedule from October 2010 onwards up to June 2011, during which the Plaintiff indicated that the FAT/C Parameters had in fact been submitted and provided to D. (See correspondence in the H bundle.)

440.Mr Houghton invites the Court to find that the FAT/C Parameters had been provided to the Government in September 2010, but they were simply overlooked, given the large number of documents being exchanged at the time, and the understandable focus on the HPs/A&B.

441.In determining this issue, I have considered the credibility of Mr Courtot. I do not see why he would have withheld giving the FAT/C Parameters to FSD when, at the relevant time, the relationship between the parties had not yet broken down. I accept that he had a system of keeping hard copy documents as he explained the abbreviations of documents appearing in the email dated mardi 22 octobre 2019 of his assistant, Stephanie (“Stephanie’s email”). I am also satisfied that he had signed the 29/9/2010 Letter and kept a hard copy of it.

442.However, sometimes memories may be faulty. The evidence that the Plaintiff had sent the 29/9/2010 Letter and 30/9/2010 Email to the Government was not supported by the contemporaneous documents.

443.Firstly, §12 of the minutes of the meeting held on 24 September 2010 set out documents admittedly received by Mr Joe Chan, but none of those documents were related to Contract C. The minutes were completely silent on the Plaintiff’s important act of discharging its obligation to provide the FAT/C Parameters.

444.Further, the 30/9/2010 Email stated that Mr Courtot had passed the FAT/C Parameters to Mr Joe Chan and Mr Nelson Yu as per their request. However, it did not state the meeting date of 24 September 2010.

445.Secondly, Mr Courtot admitted having received Mr Joe Chan’s email dated 28^th September 2010 asking about progress of Contract C. There was another email from Mr Joe Chan dated 29 October 2010. And yet Mr Courtot never replied to Mr Joe Chan reminding the latter that what he wanted was already in the USB.

446.Thirdly, Mr Joe Chan was all along the person Mr Courtot that liaised with, and yet the 29/9/2010 Letter was addressed to Mr SC Wong but not Mr Joe Chan who issued the email the day before. Mr Courtot was asked at least 3 times as to why he did not copy the September 2010 Letter to Mr Joe Chan. He explained that Mr SC Wong was the Chief Fire Officer who raised the issue on delivery schedule of Contract C; Mr Courtot wanted to satisfy the FSD as much as possible. Mr SC Wong was to assist the technician as inspectors of FSD with the assistance of the expert third party from APEL. Mr Courtot’s answers did not really explain why Mr Joe Chan was not sent a copy of the 29/9/2010 Letter or 30/9/2010 Email.

447.Fourthly, none of the 3 witness statements of Mr Courtot ever mentioned giving a USB to Mr Nelson Yu. Mr Courtot explained that his witness statements talked about giving a USB to “the Hong Kong representative”, but his witness statement (§218) expressly mentioned the recipient to be only Mr Joe Chan. In fact, Mr Nelson Yu had never been instructed by the FSD in relation to Contract C. It defied common sense for Mr Courtot to include in the USB documents of another contract that did not concern Mr Nelson Yu.

448.Fifthly, the 30/9/2010 Email itself did not have enclosures but Stephanie’s email in 2019 did refer to various enclosures, amongst which was the 29/9/2010 Letter. The 29/9/2010 Letter was stated to have some enclosures as well. Mr Courtot testified that he had checked that those enclosures were exactly the same as those to the June 2011 Email, and yet he was discredited under cross-examination because the enclosures were different.

449.Sixthly, the enclosures in the June 2011 Email were different from those to the 29/9/2010 Letter in significant aspects:

(1) The 29/9/2010 Letter was signed but the version enclosed with the June 2011 Email was unsigned. Mr Courtot explained that he was then out of his office and so he sent the unsigned letter in his laptop to FSD. He had a system of having formal documents signed. However, Stephanie appeared to have the signed electronic version. I do not see why that was not forwarded to the Government.

(2) Annex B to the 29/9/2010 Letter (H69) was different from the one annexed to the 21/6/2011 Email (H43) in terms of format and contents. The former contained handwritten names of addressees (Mr Joe Chan and Mr Nelson Yu) and the date of 24 September 2010. The latter showed more information about, amongst others, the type of product, chassis, and standard reference; the table of contents was slightly different to the one in H69. Mr Courtot tried to explain away the differences by saying that they were not differences of substance and that the serial numbers meant that the products were in the process of testing, with reference to the contract units. I am unable to agree that the type of product, chassis, and standard reference were not matters of substance.

(3) Annex D to the 29/9/2010 Letter (H64-66) was different from the one annexed to the 21/6/2011 Email (H45-47). Not only were the title to the document and the format different, but the handwritten parts in the former were completely omitted in the latter. Mr Courtot claimed that the substance of the 2 Annexes D was the same, being extracts of the EN standard but one was more updated. However, he admitted that H64 referred to “verification”, whereas H45 referred to “type test/reception test” (which was stricter) in the title, which were not the same level of inspection “although the substance was the same”. I cannot accept that the substance was the same when the 2 annexures referred to different tests for FAT/C.

(4) Mr Courtot referred to Annex D with his handwriting (H64-66) as a “draft”, ie something to be agreed between the parties. On the other hand, H45 was a more elaborate document in the process to start the test of the first unit; it was a more official document with the logo of the Plaintiff and the serial numbers. Mr Courtot admitted in answer to this Court’s question, that the handwritten parts were important – for APEL to understand the basic rules for carrying out the FAT/C; and important to FSD. He must be right because, on his own evidence, the handwritten parts contained his proposals and advice, gave more choice to FSD and contained his understanding that there would be tests by a third party APAVE with APEL. The type of tests obviously would affect the time for testing. The handwritten parts even stated the estimated times for type test and FAT test. And yet these were omitted from the subsequent H45-47.

450.Mr Courtot acknowledged that there were differences in the enclosures. He explained that there was a distinction between “substance” and “purpose”. He said that the purposes of sending out the 29/9/2010 Letter and 21/6/2011 Email were different – the former to understand and organize the FAT/C; the latter to remind FSD that the Plaintiff had submitted the FAT/C and that the Plaintiff wanted to carry out the letter with no requirement for any third party test. He insisted that the substance of the enclosures to both documents were the same.

451.I reject his explanation as a recent invention in the witness box. I fail to see how there could be a difference between purpose and substance in FAT/C Parameters. Different tests could not be twisted as being in substance the same. Mr Courtot admitted, in answer to the Court’s question, that in between the time H64 and H45 were allegedly sent out, there was nothing to indicate that FSD had accepted Mr Courtot’s handwritten parts in H64-66. In my view, this reflected that he himself either did not believe that the 29/9/2010 version had been sent to the Government, or he considered that that version needed to be amended even before the Government responded.

452.Given the lapse of time and that the parties’ dealing was heavily documented, more reliance should be placed on documents than a witness’ memory. The inconsistencies between Mr Courtot’s evidence and the contemporaneous documents and the significant differences in enclosures create grave doubts as to credibility of Mr Courtot on this issue. Mr Houghton was very quiet about Bundle H in his opening and closing submission on Contract C. I am not satisfied that that Plaintiff has discharged the burden of proving its version of providing the Contract C Parameters in September 2010.

453.On the other hand, Mr Joe Chan by email dated 28 September 2010 asked Mr Courtot to advise on the latest progress of performance of Contract C. He asked Mr Courtot again about a month later, on 29 October 2010. On 27 January and 15 February, 1 June, 21 June 2011, respectively, Mr CC Ko emailed Mr Courtot, reminding the latter that the Plaintiff had to supply FAT/C Parameters for FSD’s approval. Such emails were more in line with FSD never having received the 29/9/2010 Letter.

454.Considering the evidence from both sides on this issue, I find that the Government only first received the FAT/C Parameters by the 21/6/2011 Email (an undisputed document).

V5. Whether the FAT/C Parameters provided by 21 June 2011 contained sufficient details to facilitate FAT to take place

455.The Plaintiff answers yes to this issue and claims that the Government had wrongfully failed or refused to approve the FAT/C Parameters or to provide “reasonable opinion” for “reasonable amendments”. The FAT/C Parameters were sufficient for FAT/C to proceed but the Government refused to carry out FAT/C.

456.The Government answers no. Its case is that it had (through Mr CC Ko) issued a letter dated 8 July 2011 (“CC Ko’s Letter”), requesting the Plaintiff to submit, within one week, specified documents for the Government to consider whether the Contract C units and testing equipment were ready for FAT. Except for (i) a letter dated 15 July 2011 to FSD and GLD putting on record that it had submitted the FAT/C Parameters on various occasions and urging for approval of the same; and (ii) a further letter dated 6 September 2011 complaining of the lack of approval from FSD, the Plaintiff never replied to CC Ko’s Letter.

457.The Plaintiff disagrees and submits that:

(1) CC Ko’s Letter ought to have, but did not, set out how it was that the FAT/C Parameters were insufficient and did not fall within the scope of SCC/C Clause 5(d).

(2) His letter was not premised on a “reasonable opinion” that the Plaintiff’s “testing and parameters measure procedures and report forms did not provide sufficient detail to test all the functions and facilities of the [turntable ladders]”.

(3) His letter did not contain in large part requests for the Plaintiff to make “reasonable amendments to such testing and parameters measurement procedures and/or report forms”.

(4) Mr Houghton thus submits that, with a few possible exceptions (which he did not identify in his closing submission), the requests were unconnected with the tests that constituted the FAT/C.

(5) The requests in CC Ko's Letter were unreasonable.

(6) Any ambiguity in SCC/C Clause 5(a), (d) and (e) is to be construed constra proferentem against the Government.

458.In deciding this issue, I have applied the following principles:

(1) Whether the requests contained in CC Ko’s Letter were connected to the FAT/C Parameters was to be judged solely on the face of the Letter itself.

(2) It was not necessary for Mr CC Ko to use the term “opinion” or “amendments” so long as CC Ko's Letter in substance reflected his opinion or proposed amendments.

(3) It was only the opinion of the Government’s Representative (ie Mr CC Ko) that should be assessed.

(4) Whether the opinion was reasonable involved an objective assessment. It was a matter of fact and not for expert evidence.

(5) The opposite of “reasonable” is simply “unreasonable” and not “absurd or ridiculous”. The question of the reasonableness (or otherwise) of Mr CC Ko’s opinion was to be judged in the light of the circumstances in which his opinion was formed, including the information and advice which was available to him or to which he could have reasonably gained access, and bearing in mind his status as effectively successor to the post of Mr Joe Chan. This did not require the opinion to be correct in law. See Goldlion Properties Ltd v Regent National Enterprises Ltd (2009) 12 HKCFAR 512, at §§113, 136.

(6) In giving or not giving approval or expressing an opinion, Mr CC Ko could raise questions to clarify or request for more information in order to enable him to form a reasonable opinion and/or request for reasonable amendments.

(7) If there was an implied duty to cooperate, it would also have required the Plaintiff to cooperate and respond to the Government’ opinions or proposed amendments.

459.The FAT/C Parameters provided on 21 June 2011 included, as admitted by Mr CC Ko:

(1) the suggestion that stability tests be carried out in relation to different outrigger extensions;

(2) procedures for testing operating times of the ladder in relation to cage locations; and

(3) a table suggesting what FAT tests might need to be carried out, as opposed to type tests.

460.Mr CC Ko had admitted that when he wrote CC Ko’s Letter, he was aware of and had considered what had happened in relation to Contracts A and B. As the successor of Mr Joe Chan, I also presume that he would or ought to have reasonably available to him the Specifications/A-C (which were similar in details), Schedules of Compliance/A-C, tender documents, FAT/A and B tables, and procedures. 

461.He ought to have read EN14043:2005 although he claimed in the witness box that he had not read it in detail before sending the CC Ko’s Letter.

462.I am prepared to assume, as Mr Houghton submits, that just as for FAT/A and B, it was acceptable and reasonable for FATs to focus on important tests to ensure compliance with the Specifications (or any required standards), without requiring unnecessary details in the tests, and without stating each and every underlying clause as testing parameters, and/or for every underlying document to be provided (in some cases again).

463.Judging solely on its face, the contents of CC Ko's Letter could be broadly divided into 3 parts:

(1) A request for 16 documents in English to enable the Government to decide whether the turntable ladders and testing equipment were ready for conducting FAT (“Part 1”);

(2) A note of 3 types of equipment and/or facilities being available for conducting the FAT (“Part 2”); and

(3) A request for a check list in a suggested format in accordance with each item stated in Contract Specifications and EN14043:2005 to be provided (“Part 3”).

464.Mr Houghton submits that:

465.Firstly, Part 1 was merely a request for information and documents, and not for any “amendments [let alone reasonable amendments] to such testing and parameters measurement procedures and/or report forms”. This remained the case even if some of them might eventually be expected to be provided for at FAT/C.

466.Secondly, since there was no good reason for FSD to have required such type and level of details at that stage, Part 1 was unreasonable:

(1) In particular item 2a (drawings showing body dimensions etc), item 2b (working envelop of the turntable ladder), and item 2d (technical parameter of the system) were misguided as relevant supporting documents from third-party Type Approval had already been provided at the tender stage and were available to Mr CC Ko; and

(2) It was clear from the Plaintiff’s table that it had proposed that FAT/C be carried out in relation to Items 7 and 10 of Part 1 anyway.

467.Thirdly, as to Part 2:

(1) Item 1 was unreasonable as Mr CC Ko demanded “on-site” (not merely pre-shipment as he sought to claim orally) tilt test in spite of there being information reasonably available to him that such testing had been carried out (with results exceeding EN14043 and Specifications/C), and indicating (as with the HPs/A&B) that they could and would be carried out at UTAC: See Courtot WS §§44-46,65, Sample Inspection Report; emails with Gary Yang; UTAC HPs/A Tilt Test Report; FAT/A Report at §a) 18.

(2) There was also no reasonable basis to require the provision of weight meters for measuring the loading on each wheel before a tilt test: see eg UTAC HPs/A Tilt Test. A fortiori if the Court accepts Mr Seidl’s evidence that the dynamic stability tests under Clause 5.1.2.2.2 EN14043:2005 were similar to the dynamic tests, including the static tilt test passed by the HPs/A&B per Clause 6.1.5.4 EN1777:2004. See Seidl SER §12.5.

(3) Item 3 merely repeated SCC Clause 5(a) and could not be said to constitute a request (based on any allegedly reasonable opinion) that the Plaintiff make any “reasonable amendment” of the FAT/C Parameters procedures and/or report forms”.

(4) There was no basis for suggesting that the Plaintiff’s Parameters lacked sufficient detail to enable a comprehensive FAT checklist to be prepared absent Item 2 or 3 because those 2 Items were something which would be expected to be provided for FAT.

468.Fourthly, with regard to Part 3, given what Mr CC Ko knew and had read, and must be taken to have had reasonably available to him, the request for a checklist and table be provided within 1 week in relation to all of the provisions of the Specifications and EN14043:2005 was self-evidently unreasonable.

469.Accordingly, Mr Houghton submits that the Government was not entitled to rely on SCC/C Clauses 24(a) and/or rely on Clause 30(a) (time was of the essence) to terminate Contract C.

470.I am unable to accept the Plaintiff’s submissions for the following reasons:

471.Firstly, the Plaintiff could not have prayed in aid the tender documents, Contract C or Specifications/C to say that Mr CC Ko would have or should have known the contractual requirements and that the terms therein would have fulfilled the Plaintiff’s duty to provide the FAT/C Parameters. Just as for FAT/A and B, parameters for FAT/C had to be expressly set out (post-contract) and agreed upon, despite the tender documents, the Contract and Specifications.

472.Secondly, whilst the FAT/A&B parameters could be taken to have been reasonably available to Mr CC Ko, I agree with Mr Lui that in view of what Mr Lui describes to be “the disastrous situation” in terms of the Plaintiff’s performance under Contracts A and B up to that point in time in July 2011, one could not assume that the Government was bound to accept only the parameters used for FAT/A or B. A fortiori, Contracts A and B used the standards in EN1777:2004 whilst Contract C used EN14043:2005.

473.Thirdly, on a fair reading, whilst Part 1 and/or Part 2 could not be treated as Mr CC Ko’s opinion as to the sufficiency of the details of the tests, the same could not be said of Part 3.

474.As per the enclosures to the 21/6/2011 Letter, the tables purporting to contain the parameters just set out the clause numbers of the relevant EN standard without any description. It was not clear which clause related to which or all of the Specifications under Contract C. Whilst I agree that not all details had to be tested, the parties had to have a common view as to which matter or detail needed to be tested and which did not. The tables already provided by the Plaintiff could not serve such purpose.

475.In addition, one would have learnt from FAT/A&B that the time for FAT was limited to only a few days. During FAT, who could have afforded the time to turn through the pages to the relevant clauses in the EN standard, Specifications/C or Contract C to see which clause had been tested?

476.The FAT/C Parameters to be provided by the Plaintiff were “testing and parameters measurement procedures and report forms”. Part 3 exactly asked for report forms (checklist) that would have been helpful to both parties, particularly to those who would be present on site at FAT. Of necessity, the Plaintiff would have to amend the checklist or report forms.

477.Fourthly, as to the imposition of one week in Part 3, one has to bear in mind that the FAT/C Parameters were to be provided 8 weeks before the carrying out of the FAT/C. On receipt of the FAT/C Parameters on 21 June 2011, the Government issued CC Ko's Letter within less than 3 weeks. Requiring the Plaintiff to provide Part 3 within a week could not be said to be unreasonable, especially since the Plaintiff also had the FAT/A & B forms for reference and it thought the FAT/C Parameters were sufficient. In any case, if the Plaintiff had wanted more than a week, it could have said so.

478.Moreover, if as the Plaintiff asserted, there was an implied term to cooperate, I wonder how it could apply a double standard by not cooperating to either meet the Government’s timetable or request for more time to respond to facilitate performance of Contract C.

479.On these analyses, I find that:

(1) The FAT/C Parameters supplied on 21/6/2011 were insufficient. CC Ko’s Letter had set out how it was that the FAT/C Parameters were insufficient, in particular in Part 3.

(2) His letter was premised on a “reasonable opinion” that the Plaintiff’s FAT/C Parameters for Contract C did not provide sufficient details to test all the functions and facilities of the turntable ladders and that the Plaintiff should make “reasonable amendments”, by providing a checklist.

(3) There was no ambiguity in SCC/C Clause 5 that needed to be construed against the Government.

V6. Whether the Plaintiff was in breach of Contract C and, whether the Government had affirmed Contract C

480.The Government claims that the Plaintiff was in breach (i) in not delivering the turnable ladders on or before 9 February 2011; and (ii) in failing to submit response to CC Ko’s Letter to enable the Government to assess if the FAT Parameters were acceptable. The Government therefore terminated Contract C by its letter dated 13 October 2011.

481.With regard to (i), the Plaintiff was initially in breach of the delivery date. However, the Government had elected to affirm Contract C and waived its rights relating to any breaches prior to CC Ko’s Letter.

482.With regard to (ii), the Plaintiff had twice (on 15 July and 6 September 2011) after CC KO’s Letter asked the Government to approve the FAT/C Parameters. The Plaintiff had similarly affirmed Contract C. Up until the Government’s Termination Letter, the Plaintiff had never responded to Mr CC Ko's Letter, and never supplied the Contract C units. I find that it was the Plaintiff who was in breach and the Government was entitled to terminate Contract C.

V7. Who is entitled to relief and what is the appropriate relief

483.As the Government was entitled to terminate Contract C, it has the right to reliefs.

484.The general principles on mitigation and computation of damages for Contract A and B apply equally to Contract C.

485.In March 2014, SKR was awarded (after tender) a contract for the supply of 7 turntable ladders to FSD at US$6,496,000 (US$928,000) each, of which 6 were to replace the Contract C units.

486.The Government seeks damages as pleaded in §88 of the RADCC. These comprise: US$1,790,812.80 (being the difference between the 40% deposit of US$1,885,564.80 paid to the Plaintiff under clause 17(a)(i) of SCC/C on about 29 March 2011 and the contract deposit of US$94,752.00 which the Government had forfeited).

487.The Plaintiff’s objections can be divided into 3 limbs:

(1) Late disclosure of 23 pages of documents as to payment; and

(2) There were “upgrades” in the replacement goods, the price of which should not be borne by the Plaintiff.

(3) The Government was not entitled to a discount of 5% of the purchase price.

488.With regard to the first objection, the analyses in paragraphs 411-414 above concerning Contracts A and B equally apply to Contract C. I give leave to the Government to adduce documents relating to Contract C.

489.With regard to the second objection, Mr Houghton has pointed out 11 differences between Contract C units and the replacement units:

(1) the original turntable ladders were 35 meters long, whilst the replacement units were 37 meters long;

(2) minimum warranty service period increased from 12 months or 20,000 km mileage for chassis to 24 months;

(3) the overall height of the chassis reduces from 4.2m to 3.71m;

(4) new requirement that a removable stretcher support rack with minimum loading capacity 200 kg to be mounted on the rescue cage;

(5) additional requirement that the engine must have a rated output power of not less than 300 horsepower, output torque of not less than 1,450 Nm, and that it must be front mounted;

(6) new requirement that the approach angle of the chassis shall not be less than 13 degrees and departure angle shall not be less than 12 degrees;

(7) additional requirement that the chassis must be capable of attaining a speed of 65 km/h from a standing start within 30 seconds;

(8) new requirement that the chassis frame must be equipped with vehicle towing kit, a spare tyre with a rim, vehicle jacking kit complete with handles, 2 wheel chock sets and three sets of ignition keys and door keys;

(9) additional requirement that there should be a third generation mobilising system;

(10) additional requirement that there should be a digital radio system;

(11) maximum rescue height increases from not more than 35m to 37m;

490.Similarly the analyses in paragraph 416 above concerning Contracts A and B equally apply to Contract C. I accept the Government’s evidence in the absence of challenge by the Plaintiff.

491.Upon termination, the Government can recover the amount it had already paid the Plaintiff, and claim the price difference between the Contract C price and the price for the replacement goods.

492.With regard to the third objection, in the Contract C Letter of Award, a discount was provided for:

“1% for payment made within 10 days or 0.5% for payment made between 11 and 20 days from the date of invoice or from the date such amount falls due under the terms of the Contract, whichever is the later.”

493.The Plaintiff issued its invoice dated 31^st November 2010, which was a non-existent date. It was only on 8 March 2011 that the Government (through Katherine Chan) queried if the Plaintiff meant 1 December 2010. The Plaintiff replied on 9 March 2011, enclosing an invoice dated 30 November 2010. The Government made payment on 29 March 2011.

494.The Government’s query came 3 months after receipt of the invoice. Aside from the one day difference as to the date of the invoice, the Government could not have been misled in any way as to the contract price and how to calculate the 40% deposit. Taking the most benevolent date of 1 December 2010 as the date of invoice, payment on 29 March 2011 would not entitle the Government to any discount.

495.The loss of the Government was thus:

US$928,000 X 6 – 4,737,600 + 1,790,812.80 = US$2,621,212.80

496.Just to complete the picture in case I am wrong. There is no dispute that the Plaintiff had resold (with modifications) 4 of the 6 Contract C units originally intended to be delivered to the Government. The Plaintiff’s evidence on mitigation and quantum of loss have not been challenged by the Government. The net amount that the Plaintiff received as a result of re-selling 4 units was €2,742,737.80. The Plaintiff’s loss would have been US$4,737,600 - €2,742,737.80 – US1,895,040 already received.

W. SUMMARY OF RELIEFS

497.The Government has proved on balance of probabilities 5 Established Critical Defects and that the Plaintiff was in breach of Contract C.

498.In respect of Contract A, the Plaintiff has been fully paid. For the new Devices, the Government should pay the Plaintiff € 67,500.

499.In respect of Contract B, the Plaintiff claims for the balance of 60% of the purchase price, which should be dismissed.

500.In respect of Contract C, the Plaintiff claims for the balance of the purchase price for Contract C, subject to the Plaintiff’s duty to mitigate. The mitigation and quantum have not been challenged by the Government. The claim is dismissed because it was the Plaintiff who was at fault in failing to provide the FAT/C Parameters in answer to the request of Mr CC Ko.

501.The rest of the Plaintiff’s claims for various declarations that it was the Government who was in breach, that the terminations of the Contracts were wrongful and that the Government was not entitled to claim on the performance bond, are dismissed.

502.In respect of the counterclaim, the Plaintiff should pay the Government the following as damages:

(1) For Contracts A and B: US$7,339,577 as per paragraph 422 above;

(2) For Contract C: US$2,621,212.80 as per paragraph 495.

503.The Plaintiff’s damages shall be set off against the Government’s such that the Plaintiff will pay the net sum to the Government.

X. INTERESTS

504.The Court is given a discretion to award pre-judgment interest at such rate and for all or any part of the period between the date when the cause of action arose and the date of the judgment. Mr Lui proposes 2 modes of computing interest: (i) P+5% as provided by Contract C (which would be 10.625% as of 30 December 2022); and (ii) P +1% as per counsel’s advice dated 20 March 2014.

505.Mode (i) is premised on SCC/C Clause 17(h) and (i):

“In the event that the Contractor shall fail to pay any sum of money on the date it falls due or upon demand by the Government under the Contract, it shall pay interest on such sum to accrue from the due date up to the date of actual payment in full (as well after as before judgment) at the rate of 5% above the rate per annum as announced by the Hongkong and Shanghai Banking Corporation Limited from time to time to be its prime lending rate for Hong Kong dollars. Such interest shall accrue on a daily basis in year of 365 days.

506.The Termination Letter/C dated 13 October 2011 referred to the contractual clauses breached by the Plaintiff and demanded for repayment of monies paid by the Government under each of the Contracts. The Plaintiff failed to repay the same. In principle, the contractual interest rate should apply.

507.However, the contractual interest rate appears to over-compensate the Government, which is not a profit-making entity. I have not seen counsel’s advice in 2014, but the suggested rate is in line with the usual rate for pre-judgment interest, to represent loss of use of money to the successful litigant. I therefore apply the rate of P+1% uniformly to all damages.

508.On a nisi basis, pre-judgment interests on damages awarded to the Plaintiff shall be at the rate of P+1%, from 28 October 2011, the date of the writ; and those on damages awarded to the Government at the rate of P+1% from 12 June 2012, the date of the counterclaim. Such interests shall be up to the date of judgment and thereafter at judgment rate until payment.

Y. COSTS

509.The Plaintiff has won on a distinct issue, New Devices, and in principle should get costs for it. However, not much time was spent on this issue at the trial. The Government has won on all other issues.

510.The litigation conduct of both parties attracts the Court’s criticisms.

511.The Government only disclosed documents relating to the documentary proof of the costs of purchase of substitute goods on day 10 of the trial, despite the prior chasers of the Plaintiff. But for the fact that the Government had already produced the relevant contracts that supported their claim earlier, I would not have allowed such late disclosure.

512.On the other hand, the Plaintiff’s litigation conduct requires special rebuke.

513.Despite the time taken for this case to get to pre-trial review, the Plaintiff made various belated interlocutory applications:

(1) It was close to the pre-trial review that the Plaintiff discovered that it had not provided some annexures to Seidl ER to the Government. Seidl SER had to be filed less than 3 months before the trial. (See the affidavit of the Plaintiff’s solicitor filed on 17 August 2022.) Consequently, SERs had to be filed on the Government’s side. The SJER was only filed after commencement of the trial, close to the time the experts went into the witness box.

(2) The Plaintiff only made a belated attempt to adduce Courtot-2^nd SWS with disclosure of new documents at the pre-trial review. They succeeded, in part, only because the Defendant had agreed to the late application. This Court has expressly disapproved of the Plaintiff’s behaviour, including the vexatious attempt to blame the Government for the Plaintiff’s delay in making its application on the ground that the Government was “unconstructive” in settlement negotiations: Decision in [2022] HKCFI 2675, §§23-24.

(3) The Plaintiff made a second belated attempt, on the first day of trial, to adduce Courtot-3^rd SWS in order to prove the MOA and to make substantial discovery of new documents. The application totally failed, save that the Court permitted Mr Seidl to affirm at the trial that he had not “edited” the Diagram. The Court seriously criticized the Plaintiff’s conduct for diverting the Defendant’s attention from preparation for the trial: Decision in [2022] HKCFI 3486, §25.

514.The Plaintiff was late in compliance with directions for trial (some of which were proposed by the Plaintiff itself):

(1) At the pre-trial review, the Court has directed the parties to prepare 6 sets of agreed documents (including a set of agreed facts) with its opening submission. The Plaintiff simply attached the drafts of 4 of those documents to its opening, leaving the Government with only 2 working days to reply.

(2) The draft set of agreed facts was not agreed to by the Government. It was only on 4 January 2023, after closing submission, that the Plaintiff lodged a set of agreed facts which stated “[Revised by P for consideration by D on 9.12.2022.]” It was not clear if those facts were truly all agreed.

(3) There was late service of trial and core bundles by 10 days.

(4) Documents had not entirely been agreed by the time the Government served the opening submission.

(5) On the Friday before the trial, bundles were removed for the staff of the Plaintiff’s solicitors to insert dividers.

(6) The Plaintiff was late in lodging opening submission.

(7) The Plaintiff was late in lodging closing submission.

515.Even at the trial, there was ambush on the opponents:

(1) In raising the Pleading Point in Section G2 above.

(2) In seeking to adduce what was in substance excluded evidence on Non-Critical Defects by way of closing submission without even informing the Court.

516.The litigation conduct of the Plaintiff has caused wastage of time of the Court and the Government and additional costs to the Government. The team led by Mr Lui has accommodated the Plaintiff’s lateness as much as possible save where it required additional investigation and witnesses’ evidence which would have required an adjournment of the trial. Mr Lui’s team has also ably dealt with the ambushes and late submission of the Plaintiff.

517.Taking an overall view, even though the Plaintiff had won on a short but distinct issue, I am of the view that all costs (including costs reserved) should follow the event and be to the Government. I make an order nisi on costs accordingly. For the avoidance of doubt, this case would have justified engagement of 2 counsel, even at the pleadings stage.

518.I would add that if the Plaintiff had won this case, I would have no hesitation in depriving it of 20% of the party-and-party costs to mark the Court’s disapproval of its litigation conduct.

Mr. Anthony Houghton SC and Mr. Hew Yang-Wahn, instructed by Ho & Ip, for the Plaintiff

Mr. Mike Lui, instructed by Department of Justice, for the Defendant