China Harbour Engineering Co Ltd v. The Secretary for Justice of the Hong Kong Special Administrative Region
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cacv 138/2006 in the high court of the hong kong special administrative region court of appeal civil appeal no. 138 of 2006 (on appeal from HCCT NO. 44 of 2004) ______________________ BETWEEN
Before: Hon Le Pichon JA, Sakhrani and A Cheung JJ in Court Date of Hearing: 16 January 2007 Date of Handing Down Judgment: 23 January 2007 ______________________ J U D G M E N T ______________________ Hon Le Pichon JA: 1.This is an appeal by China Harbour Engineering Company (Group) (“the plaintiff”) whose claim against the Secretary for Justice (“the defendant”) for damages for breach by the government of a contract between the plaintiff and the Territory Development Department (“the TDD”) was dismissed by Burrell J on 6 March 2006. At the end of the appeal hearing judgment was reserved which we now give. Background 2.The plaintiff was one of five pre-qualified tenderers tendering for works in a contract known as Central Reclamation Phase III comprising:
Only items (a) and (c)(i) were guaranteed to the successful bidder. The remaining items were excisable. The entire project was worth some $3.7 billion and item (b) alone was worth some $1 billion. In order to simplify matters, in his judgment, the judge mentioned only 3 items ((a), (b) and (c)) which correspond to items (a), (b) and (c)(i) above. 3.Attached to the tender document were “Notes for Tenderers”. Section B(2) stated as follows:
Annex B, in pertinent part, read as follows:
4.As for the Tender document itself, special conditions of tender (“SCT”) were set out in Part B. SCT 2 read:
5.The reason for having such a provision is explained by Atkins, the consultants engaged by the government to advise on the tenders, in their report dated 28th of January 2003 (“the report”):
6.Of the five tenders, only the plaintiff’s complied with the pricing specification or formula set out in SCT 2. Its tender priced the CWB works at 34.21% whereas the other tenders were all below the stipulated 33.7%. 7.Prior to the production of their report, Atkins were advised by TDD that “any tender that did not comply with the pricing condition in SCT 2 should not be recommended”. Not surprisingly, Atkins recommended the plaintiff:
8.However, it will be seen from Atkins’s report that they evaluated the plaintiff’s tender along with the other tenders that did not comply with the pricing requirement. The judge summarised the salient facts emerging from Atkins’s recommendation in paragraph 14 of his judgment:
As mentioned above, the 3 items of work (a), (b) and (c) referred to in the judgment correspond to (a), (b) and (c)(i) of the items set out in paragraph 2 above. 9.The Central Tender Board (“CTB”) considered the recommendation at two meetings held on 30 January 2003 and 6 January 2003 respectively and awarded the tender to Leightons on 8 February 2003. The plaintiff commenced these proceedings on 28 June 2004. 10.The judge dismissed the plaintiff’s claim and concluded that all bidders had been treated equally and fairly; that Leightons’ bid, whilst not compliant with SCT 2, had not been invalidated and on reasonable grounds; and that SCT 2 read as a whole did not create a mandatory or essential requirement. This appeal 11.The plaintiff’s skeleton submission took issue with the judgment below in several respects. However by the hearing of the appeal, Mr Wong SC confined his submissions to a single issue – the true construction of SCT 2. 12.In essence, Mr Wong SC’s submissions on behalf of the plaintiff may be summarised as follows: it was a term of the process contract that only conforming tenders will be assessed; the only conforming tender was the plaintiff’s; the underlying rationale of the approved marking scheme was to compare like with like and as there was only one conforming tender, namely the plaintiff’s, the government acted in breach of contract by comparing the plaintiff’s conforming tender with other non-conforming tenders and awarding the contract to the bidder with the highest overall score but whose tender had not complied with the pricing formula. 13.The short question for decision is the meaning of a “conforming” tender in Annex B to the Notes. Was the defendant in breach of contract in evaluating the plaintiff’s tender together with the other tenders that did not comply with the pricing formula? The answer turns on this true construction of SCT 2. 14.It is trite law that in construing a contractual provision, the entire provision has to be considered and, where possible, every part should be given effect. The judge was not persuaded that in the context of the contract the word “may” in the final sentence of SCT 2 means “must”. I agree with the judge that the final sentence of SCT 2 would be rendered otiose if, as suggested by the plaintiff, the word “may” means “must”. If the final sentence in SCT 2 is read as addressing the consequence of failing to comply with the pricing formula, it would not be rendered otiose because its effect would be to confer on the government a discretion to invalidate any tender that did not comply with the pricing formula. Unless and until a tender that otherwise complies with all the requirements is invalidated through the exercise of the discretion, it remains a valid or conforming tender. Apart from not complying with the pricing formula in SCT 2, it is not suggested that any of the other tenders to which Atkins applied the approved marking scheme were non-compliant in any other respect. 15.Read as a whole, the judge concluded (at paragraph 20 of his judgment) that the message of SCT 2 to the tenderers was this: “do your sums according to this equation, if you do not you run the risk of being disqualified however good the rest of your bid is”. In my view, the judge’s approach to the construction of SCT 2 is irreproachable. Not only did the judge read that provision as a whole, he also read it in the context of all the tender documents. In paragraph 27 of his judgment, he listed the many examples of the tenderers being directed that they “shall” do something and, in the same clause, being told that if they do not, their bid “may” be disqualified. Those examples had been extracted from the tender documents by Ms Cheng SC who appeared for the defendant. Then at paragraph 29, the judge set out other examples (again extracted from the tender documents) of mandatory provisions where non-compliance have an automatic or inevitable consequence:
At the hearing Ms Cheng also drew attention to SCT 5(2) which read:
The very different consequence of a failure to comply with the pricing formula in SCT 2 is immediately apparent when juxtaposed with the above provisions. 16.For these reasons I am unable to accept Mr Wong’s submissions that the only conforming tender was the plaintiff’s. The other tenders considered by Atkins have not been invalidated. That being so, they were “conforming” tenders for the purposes of Annex B. I would add that it is implicit from the minutes of the meetings of the CTB set out in the judgment that the discretion not to invalidate the other tenders that did not comply with the pricing formula was exercised. 17.I would dismiss this appeal. I would also make an order nisi for costs in favour of the defendant. Hon Sakhrani J: 18.I agree. Hon A Cheung J: 19.I agree. Hon Le Pichon JA: 20.There will accordingly be an order in terms of paragraph 17.
Mr Ronny Wong SC, Mr Kenneth C.K. Chow and Ms Anny Chak, instructed by Messrs Huen & Partners, for the Plaintiff/Appellant Ms Teresa Cheng SC and Mr Douglas Lam, instructed by the Department of Justice, for the Defendant/Respondent |
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Further hearings and rulings under CACV 138/2006