Yau Hing Machinery Ltd v. Kin Shing Construction Co Ltd
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DCCJ 4334/2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 4334 OF 2006 ____________ BETWEEN
____________ Coram : Her Honour Judge H.C. Wong in Court Dates of Hearing : 6th, 10th – 12th, 16th – 17th June 2008, 9th July 2008 Date of Handing Down Judgment : 25th August 2008 JUDGMENT 1.The Plaintiff claims against the Defendant for the sum of $316,754.40 being outstanding rental for machines hired by the Plaintiff to the Defendant for use at the Defendant’s construction sites between 11 July 2005 and 4 March 2006. The machine hired were generators and air compressors for use at construction sites. 2.The Defendant does not dispute the Plaintiff’s claim of unpaid rental charges except for the sum of $13,866.46. At the trial, the Plaintiff agreed to waive the said sum of $13,866.46 and accepted Defendant’s undisputed sum of $302,888.14 to be the outstanding rental. 3.The Defendant counterclaims against the Plaintiff for loss and damages suffered by the Defendant to the Defendant’s properties caused by a fire that took place on board of the Defendant’s flattop barge (“the barge”) at Wong Shek Pier on 21 November 2005. It is the Defendant’s claim that the fire was caused by the defect in one of the Plaintiff’s air compressors, no. 4868, hired by the Defendant (“the said air compressor”). The Defendant counterclaims against the Plaintiff for damages done to its plant, machineries and equipment, repairing costs to the damaged barge, loss and damage to the piling, loss due to delay of completion of construction work undertaken and costs of the investigation report on the cause of fire in the total sum of $1,245,448.98. Due to the limit of jurisdiction in the District Court, the Defendant waived any amount over and above $1 million in the recovery of its loss and damages against the Plaintiff. The Defendant’s Counterclaim 4.The Defendant claims that the Plaintiff was in breach of the implied terms of the contract of hire by its failure to supply the Defendant with a machine of merchantable quality and free form defects. And that in further breach of the contract of hire, the Plaintiff failed to carry out proper maintenance of the said air compressor. The Defendant further relies on the doctrine of res ipsa loquitur. The Defendant’s counsel admitted that the burden of proof is on the Defendant to show the Plaintiff’s said air compressor had caused the fire resulting in damages to its properties. 5.The Plaintiff denies liability and claims exemption under Clause 12 of the quotation and protection under Clause 3 of the rental contract requiring the Defendant to be responsible for insuring its’ own loss. 6.Further, the Plaintiff claims the Defendant was negligent and had contributed to his own loss by the delay in reporting the fire and seeking immediate help from the Fire Services Department after the fire started. The Defence Case 7.The Defendant relied on the report compiled by Mr. Tam Chi Yung Tayor, Registered Professional Engineer in Marine and Navel Architecture of Win Well Engineering & Surveyors Limited, appointed by the Defendant shortly after the fire on the Defendant’s barge at Wong Shek Pier. Mr. Tam had interviewed Mr. Lau and recorded a statement from him on 25 November 2005. It is attached as Appendix A of Win Well Engineering & Surveyors Limited report (p. 410 of the Bundle). 8.Mr. Tam conducted an inspection of the barge and the remains of the machines and plant on the barge after the fire. He also interviewed Mr. Lau Yau Tak (“Mr. Lau”) who was present at the construction site at the start of the fire. Mr. Tam further checked the maintenance records of the air compressor (Appendix B of the report at p. 412 to 414 of the Bundle) before he compiled the report. He concluded the explosion of the air compressor was caused by human error because the Plaintiff’s mechanic in the process of repair had adjusted and increased the preset value of high temperature lock to 110ºC. But he failed to make sure the automatic safety device was functioning well after the high temperature lock was adjusted up to 110ºC. He believed this had caused the air compressor to overheat thus leading to the explosion (p. 407 of the Bundle). 9.Based on Mr. Tam’s conclusions, the Defendant claims the Plaintiff was in breach of the implied terms of the hiring contract and that the air compressor was not of merchantable quality or free from defect. And/or that the repair and maintenance of the said air compressor was negligently done in breach of its duty as the owner of the air compressor and the terms of the hire contract. The Plaintiff’s Defence 10.The Plaintiff does not dispute that a fire broke out on board the Defendant’s flat top barge (“the barge”) at Wong Shek Pier on 21 November 2005 (“the fire”) and that the two air compressors hired by the Defendant used on the barge at the material time, machine nos. 4868 and 4859 (“the air compressor”), were destroyed at the fire together with a generator, a piling machine and other plant and equipments on the barge. 11.The Plaintiff put the Defendant to straight proof that the said air compressor was the cause of the fire and that the Plaintiff was liable under the contract of hire and was negligence in the maintenance of the said air compressor. 12.In August 2007, the Plaintiff instructed Great East Asia Surveyors & Consultants Co. Ltd. (“GEAS”) to carry out a desk study of the documents and to give an expert opinion of the fire incident on 21 November 2005 on the barge moored at Wong Shek Public Pier in Sai Kung. The Plaintiff’s expert report from Great East Asia Surveyors & Consultants Co. Ltd. was prepared and compiled by Mr. Chung Cham Man, mechanical engineer and fire engineer Mr. Cheung Wai Ming on 28 August 2007 (p. 308 to 400 of the Bundle). 13.The 2 GEAS experts stated they did a desk study of the documentary information, photographs and other relevant details supplied by the Plaintiff, these were annexed to the report. They further consulted the air compressor instruction manual and obtained additional information from the air compressor dealer. They gave their opinions and findings on the air compressor’s operation based on the manual, then proceeded with the fire engineer report commenting on (a) the Defendant’s investigation report of 30 November 2005 from Win Well Engineering & Surveyors Limited and; (b) the incident report from the Fire Services Department and other information relevant supplied by the Plaintiff. The GEAS report was done without any site inspection, test or examination of the two air compressors and the generator. 14.Mr. Cheung, the fire engineer, made the following observations and findings:-
15.Based on the aforesaid findings the Plaintiff’s experts held a different view on the possible origin of fire to the Defendant’s expert. Their reasons being:-
16.They concluded that:-
17.The GEAS report admitted “some of the information is personal speculations (not factual) in view that on-site investigation/interviewing of witnesses will not be carried out”. 18.Apart from denying the cause of fire was the explosion of the said air compressor and putting the Defendant to straight proof, the Plaintiff further claimed that the terms contained in the rental contract are binding on the Defendant (p. 568 of the Bundle) together with the terms on the quotation document (p. 516 of the Bundle). The Plaintiff therefore claimed there was no breach of duty on the part of the Plaintiff because the Plaintiff’s liability was exempted by virtue of the insurance clause (clause 3) in the rental contract. Clause 3 of the rental contract stated:- “3. 租出之機械所有保險由地盤負責。” 19.Furthermore, the Plaintiff claimed clause 12 of the quotation of 11 March 2005 (p. 516 of the Bundle) exempted the Plaintiff from liability. Clause 12 of the quotation stated:-
20.The Plaintiff further claimed that the fire was caused or contributed by the Defendant’s own fault or negligence and that the loss and damage claimed by the Defendant are either too remote or not foreseeable or not within reasonable contemplation of the parties. Issues to be determined 21.A. The cause of fire;
A. The Cause of Fire 22.The Defendant relied on the expert report and evidence of Mr. Tam of Win Well Engineering & Surveyors Limited who was instructed to conduct an investigation of the fire on the barge (pp. 401 to 409 of the Bundle) (“the WW report”). The 31 November 2005 WW report gave the cause of fire as the explosion of the said air compressor due to the over-heating of the said air compressor. Upon the oil hoses being destroyed in the explosion, oil from the hoses that turned into oil mist escaped into the atmosphere appearing like white smoke or cloud around the air compressor. When the oil mist came into contact with the hot surface of the diesel engine, fire broke out. Because there was a leakage of fuel, the fire spread over the vessel vigorously (p. 404 of the Bundle). 23.Mr. Tam claimed he found only a pile of irregular shaped aluminium metal on the deck of the barge after the fire, but he could not find the fuel oil tank in the said air compressor. He therefore suspected the pile of aluminium metal on the deck was the melted fuel tank. He believed the source of the fire was the radiator because this part of the machine had been burnt to the ground. 24.As to the possible cause for the said air compressor exploding, in Mr. Tam’s opinion, it was due to the following:-
25.He therefore concluded the following:-
26.Mr. Tam relied on the eye witness account of one of the Defendant’s staff, Mr. Lau, whom he personally interviewed. He interpreted what Mr. Lau told him at the interview and formed his conclusions. The statement appeared on p. 410 of the bundle. In the third line of the witness statement Mr. Lau was recorded to have said the following:-
27.Mr. Tam did not agree with the Plaintiff’s expert Mr. Chung Cham Man, the mechanical engineer. He also disagreed with the Plaintiff’s witness Mr. Mak Wing Chun, the mechanic, that it was adequate to test the machine for 90 minutes after adjusting the air compressor temperature to 110ºC without waiting for the machine to shut down. In Mr. Tam’s opinion, there may be something wrong with the diesel engine or the compressor that led to the emergency shut-down of the air compressor. He believed Mr. Mak had failed to follow the manufacturer’s instructions for the maintenance of the said air compressor. 28.In Mr. Tam’s opinion, the fire spread depended on the force and direction of the wind, the amount of oil spreading on the barge and the gradient of the deck. Even if there was a buffer zone on deck it would not have stopped the spread of the fire. And because the fuel oil tank had melted, he believed large amount of fuel oil had leaked onto the deck of the barge which ignited and fuelled the serious fire under the air compressor that had wholly destroyed the lower part of the air compressor. The fire, which started from the air compressor, then spread to the diesel generator aided by the wind blowing from stern to bow of the barge and fuelled by the oil from the oil tank that had melted down. This in turn caused the steel angle bars supporting the steel platform to collapse under high temperature. In his opinion, it is not unusual for a fire to spread a distance of over 15 metres in 22 minutes under strong wind. He disagreed that the origin of fire was at “xxx” as suggested by Mr. Cheung. 29.Mr. Tam did not agree the fire was started by electrical fault because it would have been arrested and protected by the MCCB safety device installed in the generator (the electrical cables were connected to the diesel generator through a main switch board fitted with MCCB safety device to protect short circuit). Neither did Mr. Tam agree the fire was started by a discarded cigarette butt. In his experience, the deck of the barge is usually filled with water and mud rather than oil, which made it difficult for cigarette, ends to ignite and harder still to cause an explosion. 30.The Defendant produced a report from the Fire Services Department dated 18 March 2006 in response to the Defendant’s enquiry as to the investigation done by the Fire Services Department after the fire (p. 690 to 691 of the Bundle). In the Fire Services Department report, the FSD ruled out the fire was started by a deliberate act because it did not find any peculiar smell or traces of flammable liquid or accelerant or suspicious features. As to whether the fire was caused by electrical fault, the FSD reported that workers on the barge claimed the air compressors and the piling plant were in operation during the outbreak of fire. It further reported the following:-
31.The FSD also found no evidence of disposal of lighted smoking material that had caused the fire because cigarette ends had not been detected on the barge after the fire and the workers claimed nobody was smoking at the barge at the time of the outbreak of fire. 32.The FSD found that welding works on the barge was carried out about 4 hours prior to the outbreak of fire at a location far away from the believed point of fire origin. It therefore ruled out the cause of fire by flying embers. It further concluded:-
Findings 33.Mr. Tam had attributed the cause of fire to the poor maintenance of the air compressor by the Plaintiff’s mechanic, Mr. Mak, for adjusting the safety automatic device to 110ºC from 105ºC. He blamed Mr. Mak for failing to test the air compressor’s automatic shut-down device at 110ºC. He believed there must have been another cause for the machine’s sudden cut off or shut down a few days prior to 16th and 19th November when Mr. Mak went to inspect and repair the air compressor at Wong Shek Pier. 34.According to the instruction manual of the air compressor, the machine’s compression high temperature pressure element air out-let is adjustable up to 130ºC. Consequently, Mr. Mak cannot be regarded as negligent when he adjusted the automatic shut-off device to 110ºC. It was within the manufacturer’s safety limit. Whether the machine had shut down because of other reasons is unknown because after the fire, the air compressor was badly damaged. There was no inspection and examination of the machines or the barge done by the manufacturer or by the two experts who prepared the report for the Plaintiff. 35.The Fire Services Department report did not satisfactorily explain the cause of fire because it concluded the cause of fire was “unknown”. Even though the FSD gave a number of possible causes of the fire and including the possible cause of electrical failure, this, however, cannot be positively ascertained because the electrical wiring and cables had been completely destroyed in the fire. 36.The experts could not agree where the fire started. The Plaintiff’s expert Mr. Cheung reckoned the fire had possibly started at the generator where he had marked “xxx” on the sketch. While Mr. Tam, the Defendant’s expert relied on the eye witness account that claimed white smoke was seen coming out from the air compressor before an explosion occurred. Thus, Mr. Tam believed, the fire must have started at the air compressor. Even if the fire did start at where the eye witness claimed, and white smoke had came from the air compressor, it is not possible to conclude the outbreak of fire was due to the negligence or poor maintenance of the Plaintiff. 37.Mr. Tam’s theory of oil mist can only be one of a number of possible causes of the fire. Failing further evidence in support, his theory remained only a theory based on the eye witness’s account of white smoke and the air compressor overloaded and overheated. This theory is contradicted by the Plaintiff’s experts and is contrary to the specifications in the manufacturer’s manual. B. (1)Whether the Plaintiff is liable to the Defendant’s loss due to fire damages ? 38.The Defendant produced a site diary recorded on the day of the fire by the Defendant’s site representative. The diary was countersigned by the site engineer. It recorded the fire/explosion had started at the air compressor during the piling operation and the fire had spread to the other part of the barge. That fire engines had arrived at around 16.30 hours and the fire was put out at about 17.45 hours (p. 736-1 of the Bundle No. 2). It is not known who recorded this site diary, the record keeper was not called to give evidence nor was the site representative from the Defendant, or indeed Mr. Lau, the eye witness interviewed by Mr. Tam. In the letter from the FSD of 18 March 2006, references were made to workers on the barge claiming they saw smoke emitting from one of the air compressors before the fire broke out from the said air compressor (p. 691 of the Bundle No. 2). The workers who were interviewed by the Fire Services Department were not named. The site diary report and the Fire Services Department report both referred to what they were told on the day of the incident. These and the statement from Mr. Lau are all hearsay evidence as none of the makers were called to give evidence at the trial. It must be noted that the FSD had recorded a verdict of ‘unknown’ cause of fire due to the ‘severity of the fire damage, lack of substantial evidence and eye witness’ (p. 323 of Bundle). 39.The workers on the barge, the site representative and Mr. Lau were all employees of the Defendant or the Defendant’s sub-contractor. The Defendant could easily have identified them and adduce viva voce evidence from them at the trial. At the hearing, I reminded the Defendant’s Counsel the hearsay nature of the statement of Mr. Lau, which appeared in the annex to the WW report. There was no attempt from the Defendant to adduce evidence from Mr. Lau or the site engineer. 40.On the other hand, the Plaintiff’s expert had suggested different causes of fire and a different location of the origin of the fire. Unfortunately, their report remained speculative because they did not examined the air compressors, the generator or the piling machine after the fire. They were asked only to give their opinions based on the documents shown to them. Their suggestion of an examination of the air compressor was apparently not taken up. The Fire Services Department’s investigation concluded the cause of fire to be ‘unknown’. 41.Miss Ng, counsel for the Defendant, referred to para. 5-78 of Charlesworth & Percy on Negligence (11th ed.) at p.396 :
42.While I am aware that where the evidence permits, a judge should come to a definite conclusion which party’s negligence had caused the accident (see para. 5-81 of Charlesworth and Percy on Negligence at p.397). It is obviously so in a claim under tort involving e.g. a road traffic accident or industrial accident. In the present case, the Defendant based its claim on the Plaintiff’s breach of duty of the implied terms of a hiring contract. Even though the Defendant’s counterclaim alleged the negligence of repair and maintenance of the machine hired to the Defendant by the Plaintiff, and a plea of res ipsa loquitur, it is incumbent on the Defendant to establish the Plaintiff’s liability by showing poor maintenance of the air compressor was the cause of fire. 43, The doctrine of res ipsa loquitur stems from the judgement of Erle in Scott v. London and St. Katherine Docks. Para. 8-151 of Charlesworth & Percy on Negligence, p. 497 stated that it :
44.The doctrine does not require the Plaintiff in the present case to prove on a balance of probabilities that his explanation is the correct one. If it is equally plausible as that of the Defendant’s, the Defendant will fail as it has the burden of proof. 45.Based on the evidence adduced, I am unable to reach a conclusion that the fire was caused by the lack of proper maintenance of the said air compressor or that the Plaintiff had failed to supply a machine of merchantable quality or it was in breach of the implied term of the contract of hire. The Defendant has failed to discharge the burden of proof on a balance of probabilities that the fire was caused by the Plaintiff’s negligence in the maintenance of the air compressor. Even if the fire did start at the air compressor, there are also a number of possible causes for the outbreak of fire suggested by the Plaintiff’s witnesses, such as the use of polluted diesel, the mishandling of the said air compressor causing it to over-heat and the accumulations of fuel and combustible materials close to the machines that caused the fire to spread quickly. The Defendant has failed to show that the intensity of the fire was due solely to the melt down of the oil tank of the air compressor rather than the presence of fuel close to the air compressors and generator and other combustible materials on the deck of the barge. Furthermore, the Defendant had been operating the said air compressor for 8 months prior to the fire. (2) Whether the Plaintiff is exempted by clause 3 of the rental contract and clause 12 of the quotation? 46.It is not disputed that prior to the hiring of the air compressor on 11 March 2005, the Plaintiff sent to the Defendant a fax copy of the quotation (p. 516 of the Bundle). The quotation specified the model of the two air compressor machines requested by the Defendant, the terms of the hiring, the model numbers, monthly and daily rental and delivery charges. Further, there were 12 terms and conditions set out in the same document. This document was signed by both parties with Mr. Ho representing the Plaintiff and a signature from someone on behalf of the Defendant together with the Defendant’s chop. The date of signature was 14 March 2005. Clause 12 of this document stated:-
47.It is not disputed that the Plaintiff would deliver the machine together with a rental contract. This was done in the case of the two air compressors and the receipt of the two air compressors were signed by the Defendant’s site representative. The Plaintiff relied on the rental document dated 1 April 2005; it was signed by a Mr. Hung (盧世洪) who represented the Defendant at the site (p. 568 of the Bundle). This document bore the Plaintiff’s chop. Clause 3 of the said rental contract stated that “the insurance of the rented machine is the responsibility for the site contractor”. Clause 11 further stated that “upon the signing of receipt of the rented machine at the construction site, this contract becomes immediately effective”. 48.It is Mr. Ho’s evidence that he had negotiated the terms of hire of the air compressors with a Mr. Michael Cheung of the Defendant. After forwarding the quotation to the Defendant, Mr. Ho telephoned Mr. Cheung to discuss the terms of the quotation and he had further informed Mr. Cheung that he would require the Defendant to sign a rental contract with the Plaintiff. The Plaintiff also relied on previous hiring arrangements with the Defendant prior to the accident. Mr. Ho accepted that there had been previous occasions that rental contracts and the corresponding purchase orders issued by the Defendant were relied on without any quotation issued. 49.Clearly the terms of the Plaintiff’s agreement with the Defendant of the said air compressor were based on both the quotation and the rental contract. They are binding on the parties upon being signed by the Defendant or its representative. It follows that the terms set out in both documents must be binding on both parties as the terms of hire. On the aforesaid basis, I hold clause 3 of the rental contract is binding on the Defendant. 50.Base on my findings above that the Defendant had failed to establish the Plaintiff’s liability by a breach of duty under an implied terms of the contract of hire and had supplied a defective air compressor to the Defendant and/or was negligent in the maintenance of the said machine which caused the fire, I do not think it is necessary for me to go further into whether clause 3 of the rental contract and clause 12 of the quotation exempted the Plaintiff from liability or whether two clauses are unenforceable and void due to ambiguity or vagueness or unfairness. Suffice it for me to say, no one can disclaim liability by inserting an exemption clause in the contract if he failed to supply a safe machine or goods of merchantable quality (see Control of Exemption Clauses Ordinance). 51.For the same reason, it is not necessary for me to go into whether the Defendant contributed to the negligence by the 20 minutes delay in seeking assistance from the Fire Services Department or whether there were combustible materials on board the barge in breach of Fire Services Regulations thus contributing to the negligence to the cause or the size of the fire. Or who should be responsible to take out an insurance of the chattels on the barge or used in the construction. Conclusion 52.For the aforesaid reasons, I give judgment to the Plaintiff in the sum of $302,888.14. I further dismiss the Defendant’s counterclaim against the Plaintiff. Interests 53.Interests at half judgment rate on the judgment sum form date of writ to the date of judgment thereafter at judgment rate until full payment. Costs 54.Cost nisi- costs to follow the event. The Defendant do pay the Plaintiff’s costs to be taxed if not agreed with certificate for counsel. The order will be made absolute if no application on costs is made within 14 days hereof.
Parties Mr. Simon Ho instructed by Messrs. Eric Chan & Co. for the Plaintiff. Miss Queenie W.S. Ng instructed by Messrs. K.H. Lam & Co. for the Defendant. |