Secretary for Justice v. Chong Kui (Group) Co Ltd
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HCA 928/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 928 OF 2007 ----------------------
---------------------- Before: Deputy High Court Judge L. Chan in Court Dates of Hearing: 19-20 May, 3-5 and 9 December 2008 Date of Judgment: 9 February 2009 ---------------------- J U D G M E N T ---------------------- 1.This is a claim for damages for breach of contract. The Department of Government Logistics entered into a contract with the defendant on 12 May 2004 for the supply and installation of a floating barrier. The barrier was purchased at HK$5,214,998.89 for use by the Marine Police to stop the high-speed craft engaged in trafficking of goods. The barrier was for installation at the entrance of Tolo Harbour stretching from Fung Wong Wat (鳳凰笏) on the northern shore to Heung Lo Kok (響螺角) on the southern shore. 2.The defendant supplied and installed the barrier in August and September 2004. The police alleged that the barrier was not up to the contractual requirement and refused to accept delivery. The Department of Government Logistics then terminated the contract and asked the defendant to remove the barrier. The defendant refused to do so. The police then removed it and the Secretary of Justice on behalf of the Government claimed the defendant for loss. The defendant counterclaimed for the price of the barrier and other loss and damage. 3.The barrier had three sections. The two sections on the sides were fixed and the middle one could be moved. The fixed sections were made of barrier buoys of 1.8 metres in diameter and 2 metres in length. They were interconnected by stainless steel chains. They were also tied to a lower horizontal stainless steel chain at the bottom. Their interconnecting chains were also connected by vertical stainless steel chains to the lower horizontal stainless steel chain. The lower chain was thicker and anchored to shore points and sinkers on the seabed. A copy of the design of the barrier buoys and the way they were interconnected is produced in Appendix 1. 4.The first fixed section stretched from Fung Wong Wat to the middle of the harbour and was about 450 metres in length. It had 153 buoys. The other fixed section stretched from Heung Lo Kok to the middle of the harbour and was about 470 metres in length. It had 158 buoys. The middle mobile section was about 260 metres in length. It was made of smaller buoys and served as a mobile gate for control of traffic. 5.The contract is made up of some general and special conditions. The relevant general conditions are:
The relevant special condition imposes a requirement on the strength of the barrier:
The Pleadings 6.The plaintiff pleaded in the Statement of Claim that the barrier, when tested on 1 and 2 October 2004, did not comply with the requirement of Beaufort Wind Scale Force 12. Despite repeated requests by the police for repair and replacement, the defendant did not provide a barrier that could comply with the contractual requirement. On 11 November 2004, the police sent the defendant a letter requiring the defendant to take remedial actions to enhance the barrier’s integrity and capability within two weeks. However, the defendant failed to comply with the requirement after the two weeks. An independent survey conducted on 20 January 2005 also found that the barrier was not built according to the drawings proposed by the defendant and it was damaged when the maximum wind speed was only at Beaufort Scale Force 5. As a result of the defendant’s failure to comply with the contract, the Director of Government Logistics notified the defendant by letter on 15 March 2005 of the rejection of the barrier and termination of the contract. The Director in the same letter also required the defendant to dismantle and remove the barrier. The defendant did not accede to the request. The Government then engaged another contractor to remove the barrier. The Government then claimed the defendant for damages under various heads of loss. 7.The defendant filed a defence. It pleaded that the police had on 27 September 2004 accepted delivery of the barrier. It denied that there was any test of the barrier on 1 and 2 October. It also pointed out that the plaintiff had not provided any data of the alleged test or how the result of the alleged test was obtained showing that the barrier could not withstand Beaufort Scale Force 12. It also challenged the lack of expertise of those who carried out the alleged test and the lack of test report from the plaintiff. It further pleaded that the barrier could withstand Beaufort Scale Force 12 as verified by professional simulation tests conducted by reputable institutes in the Mainland. It also referred to certificates issued by these institutes prior to delivery of the barrier. 8.The defendant further pleaded that after the receipt of the letter dated 11 November 2004 from the police, it carried out repairs to the barrier by mainly reinstalling the loosened shackles. It further argued that there were 312 buoys and each buoy had eight shackles making a total of 2,496 shackles. A small number of shackles got loosened therefore did not affect the barrier’s integrity or its ability to withstand wind. It also queried the lack of experimental data or information on how the test result was obtained in the two weeks after completion of repairs to prove that the barrier did not comply with the requirement to withstand wind. 9.Regarding the survey conducted on 20 January 2005, the defendant pleaded that it was not invited to take part in the survey. Furthermore, the police had already accepted the barrier on 27 September 2004 and it was too late to conduct the test on 20 January 2005. The defendant also queries the factual findings of the plaintiff’s expert as to the insufficient thickness of the buoy shell and insufficient foam materials inside the buoys. 10.The defendant further pleaded that according to the records of the Hong Kong Observatory, even if the average wind speed should be at 18.5 km per hour (Beaufort Scale Force 3), the biggest wind speed could be at 209 km per hour. That is much higher than the Beaufort Scale Force 12 which is equivalent to 118 km to 135 km per hour. 11.It also counterclaimed for the contract price, return of deposit, compensation for loss of tax refund and maintenance fees. 12.The plaintiff in the reply denied that the plaintiff had ever accepted delivery of the barrier. Furthermore, even if the plaintiff should have accepted delivery of the barrier, it was still entitled to reject the same pursuant to general conditions no. 3(a) of the contract. The plaintiff also referred to the certificates provided by the defendant and pleaded that they only related to the stainless steel chains and not the whole barrier. The certificates were thus irrelevant. The plaintiff also denied the counterclaim. The Test of the Mobile Gate 13.The plaintiff also pleaded that the defendant had tested the mobile gate on 22 September 2004 which did not pass the 5-minute closing time requirement. This requirement was only met on 27 September 2004 after repair works had been done by the defendant. The defendant however denied any repair work. It pleaded that the failure on 22 September to pass the test was because of insufficient power of the vessel used to close the gate. It was for that reason that the police did not accept delivery of the barrier on 22 September and the defendant’s invoice of the same day was also not paid. 14.Whatever might have been the situation, I do not think this is really an issue in the action as that test was indeed passed on 27 September 2004. Correspondence Between the Parties and Minutes Kept by the Police 15.After the test on 22 September, a Chief Inspector, Mr Cheung Wing Kee made a minute of the event. He recorded the failure of the closing of the gate within five minutes. Apart from that, everything else was in order. But he noted at the end that the defendant’s expertise and the performance of the barrier had to be tested by time. 16.After the passing of the gate-closing test on 27 September, Mr Cheung sent an e-mail to his seniors. He recorded the passing of the test and a few improvements that the defendant had promised to make. He also mentioned the receipt of an invoice from the defendant demanding full payment upon meeting the tender specifications. He sought the consideration and approval for payment from his seniors. 17.However, on 4 October 2004, Mr Cheung sent the director of the defendant, a Mr Ma an e-mail advising him of damage to the barrier and asked for immediate remedial action. The e-mail had four photographs attached to it showing broken connecting chains for the buoys and dislocated axle bars of the buoys. The e-mail said the damage was caused by strong easterly or northerly wind. The records of the Hong Kong Observatory shows that the wind speed on 1 and 2 October was particularly strong. The wind was blowing from the north at a speed of more than 36 km per hour or at Beaufort Scale Force 5. 18.Mr Cheung sent Mr Ma a further email on 5 October and attached six more photographs of damage for immediate remedial action. The e-mail also contained observations from other officers that the buoys were getting worse with damage found on the surface. The photos also showed damage, defects and broken chains in many places. Mr Cheung said in the e-mail that it appeared that the buoys were not structurally strong enough to withstand the wind and had cracks. He suggested that more strongly built buoys were required for the repair and replacement works. 19.The defendant sent the police a reply on 6 October but wrongly dated it 27 September. It said the damage was due to excessive horizontal force exerted on the axle bar. It had started to remedy the situation on 5 October by adjusting the vertical chains and expected to finish the adjustment work on 6 October. For the parts that had to be replaced, the replacement was expected to be done on 12 October. 20.However, on 8 October, Mr Cheung again sent an e-mail to Mr Ma attaching five photos showing cracks on the plastic surfaces at the axle bar positions. Mr Cheung also said in the e-mail that the buoys had cracks within such short time and that reflected on the quality. He asked Mr Ma to look into the matter seriously and to provide a detail report. 21.Mr Ma replied by letter on 9 October. He said remedial action was still in progress. He also referred to some adjustment work on the vertical chains that had been completed and some adjustment to the horizontal chains to be completed on 11 October. He also said that 12 buoys had to be replaced and 15 to be repaired. He also referred to other adjustment works which were expected to finish on 12 October. 22.Mr Ma wrote again on 11 October and reiterated that the barrier could withstand Beaufort Scale Force 12. He also said remedial action to the damage caused by the monsoon had been taken. 23.However, Mr Cheung sent a further e-mail to Mr Ma on 13 October advising on new damage found on 12 October and also some buoys listed to one side without known cause. 24.Mr Ma replied on 14 October and said that the listing of buoys was because of marine growth which had been dealt with. He also suggested joint inspection on 18 to 20 October. 25.The inspection was conducted on 19 October and Mr Ma wrote to Mr Cheung on the same day saying that the dislocation of shackles was due to the use of a “fast-connect” shackle in the bottom chain. This joint was designed for simple release of the buoy to facilitate rotation during maintenance and cleaning. However, the joint could be shaken loose in heavy wind and wave condition. He therefore started to replace the joint with a more permanent joint. He also requested for payment though he only put the blame for the delay in payment on the defendant and not on the police. 26.On 25 October, Mr Ma wrote again to advise that the joints between the buoys and the main chain had been replaced by shackles with retainers and there was no more loose connection. He further said that upon the police’s receipt of delivery of the barrier, the defendant would take full responsibility for third party loss during the 12-month warranty period. 27.However, Mr Cheung on 26 October sent him an e-mail again advising on damage that needed repair. The damage was repaired on the same day. From other records of the police, it can be seen that the defendant’s workers had reported to the police at the barrier that all damage had been repaired on that day and the police did not discover any new damage. Nevertheless, there were e-mails on 28 and 29 October from Mr Cheung to Mr Ma advising on the discovery of new damage and asking for action by the defendant. 28.On 5 November 2004, Mr Ma wrote directly to the Department of Government Logistics asking for payment. 29.The Director replied on 8 November 2004 and referred to general conditions nos. 5(a) and 7 of the contract. The conditions provided that the barrier was subject to inspection and testing and would be deemed to have been accepted by the Government when an acceptance note had been furnished to the defendant. Payment would only be made upon such acceptance. 30.On 11 November 2004, the police issued another letter to the defendant saying that the barrier would be rejected because of ongoing damage and defects found on the buoys and the chains. Such damage and defects occurred when the condition was below Beaufort Scale Force 6. The repair and maintenance by the defendant were seemingly unable to prevent the recurrence of the problems. The police thus regarded the barrier had failed to meet the contractual requirement of Beaufort Scale Force 12. However, the police gave the defendant two more weeks to remedy and enhance the integrity and capability of the barrier. After that, the police would assess the barrier for another two weeks before making the final decision. 31.On 17 November 2004, a meeting was held between Mr Cheung and several of his senior officers on the one hand and Mr Ma and his assistant on the other. It is useful to set out the notes of the meeting as prepared by Mr Cheung:
32.These notes were prepared by the police and are a one sided record. However, they have been disclosed in discovery and the defendant has not challenged the accuracy. I therefore think that they should be a fair record of the exchanges between the parties at the meeting. 33.After the meeting, the defendant’s workers continued working at the barrier on 18 and 19 November, but they did not return there anymore after 19 November 2004. 34.On 23 November, Mr Ma wrote to the Director of Government Logistics requesting for payment again. He said:
35.The Director replied on 24 November. He reiterated his letter of 8 November and referred to the police’s letter of 11 November. 36.On 26 November, the police wrote to the defendant and referred to the two weeks for remedy and enhancement to the barrier, which expired on 25 November, and the commencement of the two-week period for inspection. 37.On 1 December 2004, the defendant’s solicitors wrote to the Director and demanded payment. The solicitors asserted that the barrier had been delivered to and accepted by the police on 27 September 2004 and it could not then be rejected. Furthermore, the damage and defects were matters of warranty and could not be reasons for non-payment. 38.The Director replied on 7 December and reiterated his position that the barrier had not been accepted and no payment would be made. 39.On 24 January 2005, the police wrote to the defendant advising that the unattended barrier was likely to become a risk to people travelling at the sea of Tolo Harbour and told the defendant to remove the risk. 40.The defendant replied on 24 January saying that it would resume the maintenance and repair work upon receipt of payment. 41.On 15 March 2005, the Director wrote the defendant again. He referred to the letters by the police dated 11 and 26 November 2004 and the inspection during 26 November to 9 December 2004. He said that the barrier had not been repaired or replaced to meet the contractual specifications. The Government’s findings were also supported by the findings of an independent surveyor who had inspected the barrier. He therefore rejected the barrier in accordance with clause 3(a) of the general conditions of the contract. He then demanded the defendant to dismantle and remove the barrier at its own costs. 42.The defendant did not accede to the demand. The Government later engaged another contractor to remove the barrier at further costs. The Plaintiff’s Witnesses 43.The plaintiff 1st witness is a Madam Cheung, a Chief Supplies Officer of the Department of Government Logistics. She testified that the Director had on behalf the Government entered into a contract with the defendant for the supply of the barrier. Subsequently, the police notified the Director that the barrier had many damage and the police did not want to accept it. Later the police notified the Director that there were instances of the chain coming off the buoys and cracking of buoys. The police took the view that the barrier could not be accepted as the buoys may come off the barrier in strong wind and would pose a danger to the public and the vessels navigating there. On 15 March 2005, the Director advised the defendant of the termination of the contract and asked the defendant to remove the barrier. The defendant did not do so. The police then engaged another contractor to remove the barrier at a cost of $150,000. 44.After the barrier was removed, the police made a temporary barrier in its place at a cost of $270,085.20. The temporary barrier was still there at the conclusion of this trial and the police did not have any plan to replace it with a permanent one. The defendant’s barrier is now stored by the police at its base in Siu Lam in the New Territories. The police estimate that the cost for the final disposal of the barrier is about $500,000. 45.The police’s 2nd witness is Chief Inspector, Mr Cheung Wing Kee. He in his witness statement referred to the contractual requirement that the barrier should withstand Beaufort Scale Force 12. However, shortly after the installation and when the wind speed was below Force 12, there were already many damage in the barrier. The police also engaged an expert to inspect the barrier. The expert took the view that the barrier was not made per its design. The Director of Government Logistics therefore refused to accept the barrier. 46.Regarding one of the defendant’s allegations that Mr Cheung had on 27 September 2004 on behalf of the police accepted delivery of the barrier, Mr Cheung denied it. He agreed that he had received the defendant’s invoice, but had not accepted delivery of the barrier. He said that was a matter for his seniors in the Marine Police Headquarters and was beyond him. He also confirmed that the police had not accepted delivery of the barrier on that day. 47.Mr Cheung also said that on 1 and 2 October 2004, the wind speed reached Beaufort Scale Force 5 to 6. The Northern District of the Marine Police then issued a report showing cracking of buoys and loosening of chains. He then notified Mr Ma for repair. His e-mails to Mr Ma have already been referred to above. He also referred to the correspondence exchanged between the police and the defendant and the eventual termination of the contract. He also confirmed the sums of money incurred for the removal of the barrier and the making of the temporary barrier and the expected sum for final disposal of the defendant’s barrier. He amplified in his oral evidence that the temporary barrier was constructed by the Marine Police Officers themselves with materials purchased from outside. 48.He was cross-examined on some daily damage tables and daily photo reports which were prepared and compiled by the plaintiff’s 3rd factual witness station sergeant, Mr Yuen Chi Hung. Mr Yuen is already in retirement and was called when the trial resumed in December last year. He said in his witness statement that there was a strong northeast monsoon in early October. On 1 October 2004, the patrolling officers advised him that there were damaged parts in the barrier. He then inspected the barrier and instructed his subordinates to keep watch pending his follow up on 4 October as he was on leave on 2 and 3 October. On 4 October when he inspected the barrier, he found some 50 damaged parts. He took some 16 photos of the damage. 49.On 7 October, he was instructed to arrange for regular checking of the barrier. He then arranged regular inspections and recording of the damage discovered. He also prepared daily photo reports and daily damage tables to record the new damage discovered in the inspections. He classified the damage into four types. The first type D1 referred to damage to the buoy adjacent to the steel axle bar, the displacement of the axle bar or the listing of buoy. The second type D2 referred to the loosening or coming apart of the small interconnecting chain between two buoys. The third type D3 referred to the loosening or coming apart of the vertical small chain that linked up the above-mentioned small interconnecting chain to the lower horizontal chain. The fourth type D4 referred to the breakage, displacement or bending of the shackle that linked up the bottom of the buoy to the short chain below, the same problems of the shackle that linked up the short chain below to the lower horizontal chain or the coming off of this short chain. 50.There were inspections that took place almost daily during the period between 7 October 2004 and 10 December 2004 and twice a weak thereafter until 13 July 2005. Some inspections were conducted by Mr Yuen himself and some by his colleagues. The damage discovered by him or reported to him were then classified and entered into the photo reports and damage tables. The tables were all compiled by him. The damage recorded in the daily photo reports for 4 to 7 October 2004 and in the damage tables from 8 October 2004 to 9 December 2004 are summarised in the table in Appendix II. The reason for using the daily photo reports for the first three days is because the 1st damage table was prepared on 7 October and it included damage discovered previously which had not been repaired. It thus did not just tell the damage that was discovered only on 7 October. That was not the case for the tables for 8 October onwards, which only recorded fresh damage found on the day in question. 51.Mr Yuen was cross-examined on number of matters. He was asked why the numbers of damaged parts discovered on 4 and 16-19 October 2004 were much more than those discovered on other days. He was also the officer who conducted the inspection on 18 October 2004. 52.From Appendix II, it can be seen that when the police started to count the damage on 4 October after the monsoon on 1 and 2 October, the number of damaged parts was large. However, the numbers discovered in the following days were smaller. 53.Mr Yuen explained that the 1st count on 4 October covered all the damage occasioned since the installation and particularly the damage occasioned by the monsoon on 1 and 2 October. However, the defendant’s workers had been repairing the damage and maintaining the barrier since 5 October. That explained why there was less damage discovered after 4 October. 54.Regarding the damage between 16 to 19 October, Mr Yuen explained that the defendant’s workers were on holiday between 15 to 17 December after they had finished their repairs on 14 October. The daily damage tables prepared by Mr Yuen for 13 to 15 October showed that no new damage was discovered on those days. However, between 15 and 17 October, there was no one to maintain the barrier and to repair the damage occasioned from time to time. When the police officers inspected the barrier on 16 October at 16:30 to 18:00 hours, they discovered 32 new D4 damage. The inspection on 17 October at 16:15 to 17:15 discovered another 25 new D4 damage. The defendant’s workers returned on 18 October. But despite their repairing work, the inspection led by Mr Yuen at 16:05 to 18:15 hours on that day revealed another 38 new D4 damage. On 19 October, the number of new damage declined to 10 of D4 type. It further declined to one of D4 type on 20 October. From the above, the sudden surge of D4 damage on 16 to 19 October can be explained by the lack of daytime maintenance and repair by the defendant’s workers from 15 to 17 October. D4 damage refers to the coming off of shackles at the bottom of the buoy. The correspondence referred to above also shows that up to 19 October, the shackles used were of the “fast-connect” type that could be shaken loose in heavy wind and wave. 55.The next matter that Mr Yuen was cross-examined was the daily photo reports. There are two sets of such reports produced by the plaintiff. One set is annexed to the expert report of the plaintiff. The police had provided this set to the expert for preparation of the expert report. The other set was produced by the police in discovery of documents. These two sets of reports should be the same. However, there are four reports annexed to the expert report that differed from the corresponding ones produced in discovery. They are reports for 6, 12 and 18 October and 6 December 2004. Mr Yuen was also questioned on the discrepancy between the daily photo report and the damage table for 4 November 2004. 56.Mr Yuen’s evidence was that he was instructed at about the end of January 2005 to make a copy of all the daily photo reports for the expert’s reference. He then reviewed the photo reports and found that all of them were there, but he did not check their contents. He then made a copy of them in a CD and sent the CD to his headquarters for delivery to the expert. 57.On about 9 July 2005, he reviewed the photo reports again because the barrier was to be removed soon. He also checked their contents against the data in the daily damage tables. He discovered some discrepancies between the photo reports and the tables. He then corrected the photo reports so that they would tally with the tables. 58.Regarding the photo report dated 6 October as produced by the expert, there are four photos showing different buoys with captions referring to buoy numbers. But the captions for three of the photos refer to the same buoy number. Whereas the captions for the photos in the report of the same date and produced in discovery refer to different buoy numbers. 59.Mr Yuen explained that when he prepared the photo report for the first time, there were four photos in the report. He had to prepare a caption for each of the photos. He prepared the first caption and copied it for use in the 2nd and 3rd photos. But he forgot to change the photo numbers in the captions for the 2nd and 3rd photos which resulted in the same buoy number being used in the captions for the first, second and third photos. This report was copied for the expert without correction. When he reviewed the photo reports on about 9 July 2005, he spotted the error and corrected it. The correction of the error resulted in a different version of the report for 6 October that was produced in discovery. I also say that this error is obvious because the correct buoy numbers are in fact shown in the photos themselves. 60.For the photo report of 12 October and sent to the expert, there were two photos missing. Mr Yuen said that when he saw the error in the 9 July review, he put back newly taken photos of the same buoys. The corrected report was disclosed in discovery. 61.The photo report dated 6 December and sent to the expert showed one damage of D3 type and 21 damage of D4 type. Mr Yuen said that when he reviewed the reports on about 9 July, he found that of the 21 D4 type damage, five of them were damage for the second time. He thus divided the 21 damage into two groups of 16 and 5 and added the explanation that five of them were damaged for the second time. That explained the difference between the two reports of the same date. 62.For the report dated 18 October, it is more problematic. The report sent to the expert recorded an inspection between 9:50 and 12:05 hours that discovered seven damaged buoys of D4 type. They included buoy numbers 209 and 210. The report also depicted the photos of these two buoys. The report produced in discovery recorded an inspection between 16:05 and 18:15 hours which revealed 38 damaged buoys. This report also included buoy numbers 209 and 210, but not the other 5 referred to in the report that was sent to the expert. This report also depicted the same two photos. 63.Mr Yuen tried to explain the discrepancy in his witness statement. He referred to his notebook, which recorded his inspection between 16:05 and 18:15 hours, and the numbers of the 38 damaged buoys. The same damaged buoy numbers are found in the daily damage table. The occurrence book also recorded his inspection between those hours. However, he said when he did the inspection, he overlooked that his colleagues had already done an earlier inspection on the same day and had prepared a photo report of the result. He had also not updated his colleagues’ photo report with the findings of his own inspection. There were thus discrepancies between the damage table and the photo report for 18 October. He did not discover this discrepancy when he copied the photo reports for the expert. He only discovered the problem in the 9 July review. He then replaced the data in the photo report prepared by his colleagues with the data of his own inspection as recorded in the daily damage table. The corrected photo report thus differed from the one that was sent to the expert. But he admitted in oral evidence that the occurrence book of the police did not have any record of the earlier inspection by his colleagues on 18 October. He had also checked with all his colleagues who were on duty on that day, but could not find out anyone who had done the earlier inspection. 64.However, when he was asked in cross-examination by Mr Ma to compare the photo report for 18 November with the one produced by the expert for 18 October, he realised the true cause of the discrepancy. These two reports have the same data for inspection time, wind speed, sea state, the number of damaged buoys and the buoy numbers. Both included buoy numbers 209 and 210. The data in the report of 18 November tallied with those in the damage table for the same day. The notebook of Mr Yuen also recorded his inspection on 18 November and the numbers of the damaged buoys found. They correspond with those in the photo report and the damage table for the same day. The occurrence book also recorded his inspection on 18 November at the same hours. He then explained that when he prepared the photo reports for the expert, he had erroneously used the report of 18 November as a template for correcting the report of 18 October. However, after changing the date from November to October, he forgot to change the data in the report but just changed the photos. There was thus an erroneous photo report for 18 October. He discovered the discrepancy between this photo report and the damage table in the 9 July review. He then corrected this report with the data in the damage table. That explained why there was no record of the so-called earlier inspection on 18 October in the occurrence book or in any of the notebook of his colleagues. There was in fact no inspection at the earlier hours on 18 October. He admitted that the earlier explanation in his witness statement was just his erroneous assumption to explain the existence of two versions of the photo report for 18 October. 65.Finally, Mr Yuen was asked about the discrepancy between the damage table for 4 November, which reported three new D4 type damage, and the photo report for same day, which showed no new damage. Mr Yuen explained that the damage recorded in the table for 4 November were in fact old ones which had already been recorded in the damage tables for 31 October and 1 November. This is confirmed by checking the tables for those two days. Hence, the table for 4 November should be corrected to no new damage. After the correction, the data in the table are the same as that in the report. 66.Apart from the above matters, Mr Yuen was also cross-examined on how fast he was able to conduct an examination of the barrier and any particular buoy. His answer was that it depended on the sea condition and whether there was any damage to the buoys. He also stressed in his witness statement that he thought the daily damage tables he compiled were just for internal use of the police. He therefore had no reason to exaggerate the damage to the barrier. The Defendant’s Witnesses 67.The defendant called Mr Ma, its general manager and a manager Mr Fan. Mr Ma referred to the certificates from the various institutes he had obtained and reiterated that the design of the barrier as tested in experiments and simulations did meet the contractual requirement and could withstand Beaufort Scale Force 12. 68.He also alleged that Mr Cheung of the police had accepted delivery of the barrier on 27 September 2004 and verbally confirmed that the barrier conformed to all requirements. He further alleged that Mr Cheung had promised to arrange payment within seven days. 69.He challenged the police to produce data showing that his barrier could not meet Beaufort Scale Force 12 or the report for the tests on 1 and 2 October 2004. He also challenged the engagement of expert by the police four months after the delivery of the barrier. He also disagreed with the factual findings of the expert on the lack of flanges for the buoys or the insufficient thickness of the buoys as referred to below. He said he himself had cut open a buoy and measured the thickness at different parts. He found that the thickness requirement had been complied with. 70.He also purported to rely on the deleted general condition no. 5(b) and argued that the police had taken delivery of the goods for 30 working days and had not rejected the same. He said in cross-examination that it was unfair to delete this clause and it should be given effect to. 71.The next defence witness Mr Fan said in his statement that he together with the defendant’s workers had been working at the barrier for 45 days between 4 October and 19 November. They were maintaining the barrier, repairing the loosened shackles and the damaged buoys. He said the barrier had been properly maintained during this period. He attributed the cause for some shackles coming off to the poor workmanship of some workers. 72.He referred to the number of damage recorded in the daily damage tables of the police and highlighted the substantial number recorded but the number of photos taken was much less. The number of photos sent by Mr Cheung to Mr Ma by e-mail was even smaller. He queried whether there were the allegedly damaged buoys when they were not shown in the photos. He said he and his workers repaired and maintained the barrier between the hours of about 9:30 to about 17:00. The police would conduct the inspection at about 16:00 hours to about 18:00 hours after they had left the scene. 73.He further said in oral evidence that he went to the barrier almost everyday as the Government had not paid the defendant and Mr Ma told him to go to check the barrier. He also said that the number of damaged buoys was much less than as recorded in the damage tables of the police, but he had not kept any data or figure to prove his assertion. 74.He also confirmed that at about the end of October to early November, he and his workers had added a nylon rope to link up the rings at the bottom of the buoys. He said that was to facilitate the rolling of the buoy for cleaning. But cleaning was only due six months from installation or at about the end of February 2005. He had also added pins at the end of the shackles to prevent them from coming off. 75.He also said on 26 October, he had completed the work for replacing the damaged buoys, adjusting the length of chains and replacing the “quick release” shackles with shackles that cannot be easily released. He also reported the completion of work to the police. He continued to go to the barrier to check the buoys until 19 November. When asked why did he spend so many hours at the barrier every day when there was no problem. He said Mr Ma told him to go and Ma was very concerned at that time because he had not received payment from the Government. The Plaintiff’s Expert Evidence 76.The plaintiff called Mr Holmes of Carmichael and Clarke Company Ltd. to give expert evidence. Mr Holmes had been a chief engineer for 30 years. He has been working as a surveyor since 1985. I accept him as an expert witness. He had inspected the barrier on 20 January 2005. He studied the design of the barrier and the Hong Kong Observatory hourly weather report for Tap Mun from 1 October 2004 to 20 January 2005. He also took a number of photos showing damaged buoys, damaged axle bars and broken vertical and lower main chains. From the inspection, he made six factual findings. They are:
77.He also criticised the parameter used by the defendant in the simulation experiment. He said the harbour buoy stress calculation and research test report of the defendant did not represent the conditions of the sea at Tolo Harbour. Regarding the weather condition, the hourly report of the Hong Kong Observatory showed a maximum wind of 16.7 knots (Beaufort Scale Force 5) for about three hours over the period of 1 October 2004 to 20 January 2005 and the remaining period had wind speeds far less than this. However, the Beaufort Scale Force 12 was over 64 knots (64 knots to 73 knots). He concluded that the barrier was not built to the design as there was no flange, insufficient buoy shell thickness and buoy not fully fill with foam. Despite the test result and calculations which confirmed the suitability of the design, there were already over 400 damaged parts from 4 October 2004 to 20 January 2005 when the wind speed was far below Beaufort Scale Force 12. 78.However in cross-examination, Mr Holmes agreed with Mr Ma that the parameter used by the defendant for the simulation test was proper and the barrier could have withstood Scale Force 12 if built according to specifications. 79.Regarding the flanges that protected the buoy shell from being cut into by the axle bars, they were in fact present and their diameters were as per the design drawing. However, Mr Holmes still regarded them as too small to absorb the loading to stop the cutting of the shell by the axle bar. 80.Regarding insufficient foam filling, he came to this view after inspecting about half dozen open damaged buoys that had been taken off the barrier. He did not check those that were still part of the barrier. 81.Regarding the insufficient thickness of the shell, he just picked up some bits and pieces of broken plastic at the inspection. There was no breakdown of how many pieces were of what thickness. He did not cut open any shell to measure the thickness at different points or to check the amount of foam filling. Analysis and Findings on Expert Evidence 82.I think in the end, there is really no criticism on the defendant’s design of the barrier. Regarding the sufficiency of foam filling and thickness of shell, I think the objects examined by Mr Holmes were not representative enough and I do not prefer to rely on his findings on these two matters. I also think that there were flanges in the buoys as required by the design and the contract. However, Mr Holmes’ other findings of broken chains, broken rings and damage of buoys at the location of the axle bar and damage to the bars cannot be faulted. The photos taken by him and produced in the report support such findings. I accept these findings. 83.Regarding wind speed, Mr Ma has suggested that there could be moments of very strong wind even when the average wind speed is low. However, this is just a guess. Furthermore, the damage as recorded by the police was discovered on many different days and such could not be explained by a few moments of strong wind. I therefore accept Mr Holmes’ finding by reference to the Hong Kong Observatory records that the damaged parts were occasioned by wind speed well below the required Scale Force 12. Analysis and Findings on Factual Evidence 84.There is no significant dispute on the evidence of Madam Cheung of the Department of Government Logistics. 85.Regarding the evidence of Chief Inspector Mr Cheung and in particular the defendant’s allegation that he had accepted the delivery of the barrier on 27 September 2004, I do not think the defendant has proved this allegation. None of the contemporaneous documents showed that Mr Cheung had accepted delivery of the barrier. It was something that had to be decided by his superior officers or Superintendent Colson. The documents showed that Mr Cheung was merely seeking his approval. I do not think Mr Cheung would have accepted the delivery when he knew through well that he had no power to do so. Furthermore, the notes of the meeting 17 November 2004 showed that Mr Ma was seeking the early acceptance of the barrier by the police to relieve his financial constraint. The correspondence also shows that there was no acceptance on 27th September 2004. I therefore hold that Mr Cheung had not accepted delivery of the barrier as alleged by the defendant or at all. 86.Regarding the e-mails Mr Cheung sent Mr Ma, he only sent those photos that were sent to him by his colleagues and subordinates. Those photos did not have to be all that had been taken by the police. It was also not necessary to send Mr Ma all the photos as the damage could be seen at the site and had to be repaired there. 87.Regarding the evidence of Station Sergeant Mr Yuen, I do not see any reason why he should fabricate the damage records. The results of his own inspections are supported by the contents of his notebooks too. The dates and hours of his inspection are also recorded in the occurrence books of the police. Furthermore, there were many inspections that were conducted by other police officers and not by Mr Yuen. The inspections were also not done by individual officers, but by three officers in a team as recorded in the occurrence books. Regarding the few discrepancies that existed in different versions of the photo reports, I accept Mr Yuen’s explanations. I in particular find his explanation for the report dated 18 October acceptable as his inspection results on both 18 October and 18 November were corroborated by his notebooks and the occurrence books. 88.Regarding the surge in the number of damage on 16 to 19 October, Mr Ma suggested that the four police officers including Mr Yuen who did the inspections on those days had exaggerated the damage as the damage found on other days were much less. However, these four officers had also conducted inspections on other days and they only found little damage. 89.In fact, the surge in damage between 16 to 19 October coincided with the time when the defendant’s workers went on holiday and the defendant’s need to replace the “fast-connect” shackles with more permanent shackles. I find the attack on the 4 police officers without merit. 90.The defendant also attempted to attack Mr Yuen’s evidence by analysing the time he spent in conducting inspections and the number of new damage he found. But I find the attack unscientific. In making the analysis, the defendant assumed that Mr Yuen was working under constant conditions as if he were sitting in front of a production line in a factory. The reality was that he worked under different conditions of wind and wave everyday and his efficiency bound to differ. For these reasons, I accept the evidence of Mr Yuen. I also find that the damage tables prepared by him and summarised in Appendix II were accurate records of the various damage discovered on different dates. 91.I do not accept Mr Fan’s evidence in so far as it differed from that of Mr Cheung and Mr Yuen. His evidence was basically assertions not supported by any document or other evidence. I also do not accept that the number of damaged parts he found at the barrier was fewer than those recorded in the damage tables of the police as he provided no data to support his assertion. 92.I now deal with the arguments raised in the defence and in Mr Ma’s evidence. I have already rejected Mr Ma’s allegation that Mr Cheung had accepted delivery of the barrier on 27 September 2004. However, the defendant’s solicitors in one of their letters raised the argument that clause 5(a) of the general conditions, which provided for acceptance by way of an acceptance note, was just a deeming provision and could not preclude actual acceptance of delivery. I do not accept this argument as clause 7 on payment made acceptance under clause 5 the condition precedent. 93.Even if this argument were right and that the police should have accepted the barrier by conduct or otherwise, it did not preclude the police from rejecting it afterwards under general conditions clause 3(a). Whether it was a case of delivery not having been accepted under clause 5(a) or the barrier was rejected and the contract terminated under clause 3(a), the result is the same. The plaintiff has also relied on both in the reply and defence to counterclaim. 94.Regarding the deletion of clause 5(b) of the general conditions, I do not see any reason why the deletion was unfair. It was a matter of contract between the parties. I therefore hold that clause 5(b) of the general conditions was deleted and did not form part of this contract. However, I would repeat that even if clause 5(b) were not deleted and were still part of the contract, the acceptance of the barrier under clause 5(b) could not have precluded the police from rejecting it under clause 3(a). 95.Regarding the argument of lack of data of the so-called test on 1 and 2 October, I do not think there was any formal test on those days. The fact was that there was a strong monsoon on those two days and the barrier was put to test by the monsoon. There was no formal data or parameter of the test that could be provided to the defendant. However, the actual damage was there at the barrier and the defendant had repaired them. 96.Regarding the query of lack of experimental data or how the test result was obtained on the performance of the barrier in the two weeks after 25 November, I do not think the police had conducted any particular experiment or applied any particular methodology to test the barrier during those two weeks. The police just left the barrier as it was and inspected it regularly to see if there was any new damage occurred from time to time. The results of the inspections are contained in the daily damage tables and photo reports. 97.The defendant also argued that it had not been invited to attend the survey by Mr Holmes on 20 January 2005. I have already dealt with the evidence of Mr Holmes above. I have only accepted part of his evidence. That part of the evidence is also shown in the photos annexed to his report. This evidence has also been available for the defendant’s inspection as the barrier has been stored by the police at Siu Lam. Furthermore, the defendant was also given the opportunity to call expert evidence though the defendant did not utilize this opportunity. 98.I therefore do not think that the defendant has been prejudiced by not having been invited to take part in the inspection on 20 January 2005. Regarding the further argument that inspection on 20 January was too late as the barrier was installed almost four months ago on 27 September 2004, I do not think this is a valid argument. Under general conditions clause no. 13(a) quoted above, the defendant had to give a guarantee for 12 months from the day of acceptance. This clause indicates a requirement that the barrier should last for at least 12 months from acceptance and it should be strong enough to withstand strong wind and wave at Force Scale 12 during these 12 months. Hence, regardless of whether the barrier had been accepted on 27 September 2004, it should still be in a condition as required by the contract on 20 January. The inspection on 20 January was not too late. Judgment on liability 99.The defendant relied on the test and simulation it did in designing the barrier. The design was accepted by the plaintiff’s expert as sufficient to withstand Wind Scale Force 12. However, that does not mean that the barrier as made and installed was up to the contractual requirement. 100.The defendant also argued that only a small number of shackles had got loosened and that did not affect the barrier’s integrity or its ability to withstand strong wind. However, as shown in the various tables produced in the exhibits, the defendant’s workers had spent many hours almost everyday from 4 October to 19 November 2004 to check and maintain the barrier. If they should have discovered any damage, they would no doubt have repaired it there and then. Despite their repairs, the inspections, which were conducted on many days shortly after their departure, still revealed damaged parts. The damage so discovered certainly cast doubt on the strength and integrity of the barrier. 101.From Appendix II, it can also be seen that after 19 November when the defendant’s workers stopped the maintenance, there was more damage discovered by the police. The damage was caused by relatively calm conditions of wind and wave. 102.Furthermore, the daily photo reports and damage tables show that there were not just a small number of shackles coming off. The contents of the tables have been summarised in Appendix II. Over 200 bottom shackles had come off. The photos in the daily reports are more telling of the problems. A number of these had also been e-mailed by Mr Cheung to Mr Ma. The photos taken by Mr Holmes show an even worse scenario. The correspondence exchanged between the parties as reviewed above also shows that new damage occurred from time to time. The evidence together shows that there were problems with the axle bars and flanges that resulted in bar bending and cutting of the buoy shell adjacent to the flange. There were also problems with the vertical bar and end ring at the bottom of the buoy, the shackles linking up the ring with the bottom chain and the shackles linking up the bottom chain with the lower horizontal chain. 103.It is important to note that all these problems arose when the wind and wave were still calm. It is not difficult to contemplate that if the wind and wave should get rough as in times of typhoon, the barrier will certainly suffer a lot more damage of bending of axle bars, coming off of chains and shackles and cracking of shells. 104.In fact, the integrity of the barrier was maintained up to 19 November 2004 because of the almost daily maintenance and repair. But the barrier should function properly without such continuous maintenance and repair. The need for continuous maintenance means the barrier could not withstand the relatively calm conditions of wind and wave. 105.The evidence of Mr Holmes also shows by 20 January 2005, there were a number of buoys that were damaged and could not remain as part of the barrier and had to be tied up to the sides of the pontoon. 106.I find that the evidence as a whole shows that the barrier had not been manufactured to its contractual requirement. I find that the barrier could not withstand Beaufort Wind Scale Force 12. In fact, the summary of damage in Appendix II alone shows the poor state of the barrier. I therefore hold that it was right for the Director of Government Logistics to reject it and to demand the defendant to remove it. 107.I therefore hold the defendant liable to the plaintiff on the claim. I also dismiss the counterclaim. Quantum 108.I now deal with the quantum of the damages. The plaintiff claims the following:
109.I do not accept item 1 as such survey costs were not in the contemplation of the parties when they entered into the contract. Even if I am wrong on this, I find that the defendant was not even told about the engagement of the expert and had no opportunity to take part in the exercise. In the end, the parts of the expert evidence that were accepted were just matters of fact that a joint inspection by the parties could have confirmed. These costs are also not part of the legal costs as they were not incurred for the purpose of this litigation. There is also no evidence to suggest that the parties were contemplating this litigation in January 2005. 110.I allow item 2. This item in fact was not seriously challenged. 111.Regarding items 3, 4 and 6, if they were for replacing the defendant’s barrier, then the total costs were very much below the defendant’s contract price and the Government has suffered no loss. If the temporary barrier was just an interim measure and a permanent barrier would be made to replace the defendant’s barrier, then there is no evidence of the price of the new barrier to be made and hence no evidence of the loss, if any, that the Government may suffer. In fact, the police have no plan to acquire any barrier to replace the interim barrier. Furthermore, the defendant only guaranteed its barrier for 12 months from acceptance. When the trial concluded in December 2008, there was still no replacement arranged. But the defendant’s guarantee period had long expired. I therefore do not allow these three items. 112.Regarding item 5 for the disposal of the barrier, I withhold the assessment of any damages for this item. I would give the defendant two months from today to arrange for the removal of the barrier from police storage and properly dispose of the same. If the defendant should fail to accomplish this task within this period, the plaintiff can apply to me for assessment of this item of damages. I grant the plaintiff liberty to apply for this purpose. 113.Regarding item 7, the police have not adduced any evidence and I make no award under it. 114.The plaintiff should give credit to the defendant for the deposit of $104,300. The defendant should also pay the plaintiff interest at the judgment rate from the issuance of the writ for the net amount payable. 115.Finally, I order the defendant to pay the plaintiff the costs of this action including the costs for the counterclaim. Despite the quantum being below $1,000,000, I would not order taxation at the District Court Scale as the case was brought to this court by reason of the counterclaim.
Mr Jennifer Tsui, instructed by Department of Justice, for the Plaintiff The Defendant, represented by Mr Ma Fei Hong, in person, present
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Further hearings and rulings under HCA 928/2007