CHEUNG SHING SCRAP METALS RECYCLING LTD v. SECRETARY FOR JUSTICE (sued on behalf of the Government of the HKSAR)

HCA2190/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2190 OF 2011

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BETWEEN

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JUDGMENT

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1.  This is the hearing of the defendant’s applications by its summons dated 16 March 2012.

Introduction

2.  The plaintiff is a company incorporated in Hong Kong.  Its principal business is the recycling of metal waste.

3.  The Government is the owner of a site situated at Wing Kei Road in area 26D, Kwai Chung (“the site”).

4.  In March 2008 the Government’s Logistics Department (“GLD”) at the request of the Transport Department (“TD”) invited tenders for purchasing abandoned vehicles and bicycles from the Government.

5.  By a contract no C0031/2008 dated 8 May 2008 (“the 2008 contract”) the defendant accepted the plaintiff’s tender for purchasing abandoned vehicles and bicycles from the defendant for a period of 18 months commencing from 10 May 2008.

6.  There was an option on the part of the defendant to renew the contract for a period of not more than 1 year upon 1 month’s prior notice.

7.  Pursuant to the 2008 contract the defendant provided the plaintiff with the site for use during the contract period and free of rental charge for the purpose of the crushing of the goods collected under the contract.

8.  There is no dispute that the 2008 contract was extended to 9 November 2010 being 18 months’ plus 1 year’s extension pursuant to the option exercised by the defendant.

9.  There is a dispute as to whether the 2008 contract was further extended to 30 November 2011.  

10.  The plaintiff’s case is that the 2008 contract was further extended to 30 November 2011.

11.  The defendant’s case is that the 2008 contract was further extended only up to 30 September 2011 but not beyond that date.

12.  In August 2010 GLD at the request of TD invited tenders under tender reference A6000742010 (“the 2010 tender”) for the purchase of abandoned vehicles and bicycles from the Government upon the terms and conditions contained therein for a period of 36 months commencing from 10 November 2010.

13.  On 7 September 2010 the plaintiff submitted a bid pursuant to the 2010 tender.

14.  By a letter dated 10 January 2011 (“the 10 January letter”) GLD informed the plaintiff that:

“ I regret to inform you that the above tender enquiry has been cancelled. It is also noted that your offer failed to comply with the mandatory requirement in clause 4(c) of the Terms of Tender (Supplement) stating that an offer containing any price variation conditions and formula will not be considered further. The Government is now reviewing the requirements and details of your offer have been recorded for our future reference.”

15.  As the 2010 tender was cancelled, GLD at the request of TD invited tenders again in July 2011 under tender reference A6000272011 (“the 2011 tender”) for the purchase of abandoned vehicles and bicycles from the Government.

16.  The plaintiff put in a bid for the 2011 tender on 8 August 2011.

17.  By a letter dated 14 October 2011 GLD informed the plaintiff that the plaintiff was unsuccessful in the 2011 tender as the plaintiff’s estimated total amount quoted was lower than another offer from a third party which was accepted by GLD.

18.  In relation to the 2008 contract, by a letter dated 30 September 2011(“the notice to quit”) GLD wrote to the plaintiff stating:

“ I would like to inform you that the Government intends not to extend the contract period any further.

According to clause 16(d) of the Special Conditions of Contract, you are required to vacate the site at Area 26D, Wing Kei Road, Kwai Chung within three months from 1 October 2011.

            Please confirm receipt of this letter by facsimile to me at 2116 0103.”

19.  A reminder was sent to the plaintiff on 6 October 2011 to acknowledge receipt of the notice to quit.  On 7 October 2011 the plaintiff acknowledged receipt of the notice to quit.

The plaintiff’s claims

20.  In this action the plaintiff does not complain that the 2008 contract has come to an end although as I have said, its case is that it was extended up to 30 November 2011 whereas the defendant’s case is that it was extended only up to 30 September 2011.

21.  The plaintiff also does not complain that it was unsuccessful in the 2011 tender.

22.  The plaintiff’s cause of action is based on its complaints as pleaded in the statement of claim only in relation to the 2010 tender.

23.  It claims to be entitled to purchase the goods under the 2010 tender from the defendant and to stay on the site for 36 months with effect from 10 November 2010 i.e until 9 November 2013.  It claims that therefore the notice to quit is “void and null with no legal effect” (paragraphs 31 and 40 of the statement of claim).

24.  The plaintiff claims against the defendant for:

“(1) A declaration that

(a) The Plaintiff is entitled to purchase the Goods from the Defendant under the price schedules submitted in the tender (under Tender Reference: A600074210) and stay in the Site for 36 months with effect from 10 November 2010 or any period as this Honourable Court may think fit;

(b) The Notice to Quit is void and null with no legal effect.

(2) Alternatively, damages to be assessed for the breach of the Process Contract; …”

25.  The plaintiff also claims interest on damages and costs.

The defendant’s applications

26.  By its summons dated 16 March 2012 (“the summons”) the defendant applies to strike out the plaintiff’s statement of claim on the ground that it discloses no reasonable cause of action, is frivolous or vexatious or is otherwise an abuse of the process of the court.

27.  In the alternative, the defendant seeks a determination of the questions set out at paragraph 3 of the summons pursuant to O 14A r 1 RHC.

28.  The defendant asks for an order that the plaintiff’s claims be dismissed.

29.  By the summons the defendant also seeks summary judgment on its counterclaim with damages to be assessed.

30.  In the alternative to summary judgment, the defendant seeks an interlocutory injunction as set out at paragraph 6 of the summons.

The 2008 contract

31.  As to whether the 2008 contract was extended up to 30 November 2011 (as the plaintiff contends) or whether it was extended only up to 30 September 2011 (as the defendant contends), in my view it is clear on the undisputed documentary evidence that the 2008 contract was further extended only up to 30 September 2011 and not to 30 November 2011.

32.  Although the plaintiff pleads an agreement on 12 September 2012 to further extend the 2008 contract to 30 November 2011 (paragraph 37 statement of claim) this is contradicted by the undisputed documentary evidence.

33.  By a letter dated 7 September 2011 GLD wrote to the plaintiff asking whether the plaintiff was prepared to extend the 2008 contract period up to and including 31 October 2011.

34.  By a letter dated 14 September 2011 GLD wrote again to the plaintiff asking whether the plaintiff was prepared to extend the 2008 contract period up to and including 30 November 2011.

35.  It is important to bear in mind that in both letters GLD expressly stated that:

“This is an enquiry only and should not be construed as the Government’s commitment to order at this stage”.

36.  By a letter dated 7 September 2011 the plaintiff stated that it accepted an extension of the contract period to 31 October 2011.  

37.  By a letter dated 14 September 2011 the plaintiff stated that it accepted an extension of the contract period to 30 November 2011.

38.  In both letters the plaintiff also stated:

“kindly prepare and let us have your confirmation by return”

39.  GLD neither confirmed nor agreed to the extension of the contract period to either 31 October 2011 or to 30 November 2011.

40.  It is plain that GLD’s enquiries as to the extension contained in the letters dated 7 and 12 September 2011 were not binding offers but merely enquiries made by the defendant.

41.  On the undisputed documentary evidence it seems to me that there was no agreement to an extension of the contract period under the 2008 contract to beyond 30 September 2011.  To suggest that there was an agreement to an extension of the contract period to 30 November 2011 is, in my view, untenable and plainly unarguable.

42.  In my judgment it is plain and obvious that the 2008 contract came to an end on 30 September 2011.

The 2010 tender

43.  As I have said, the plaintiff’s cause of action in this action relates to its complaints only in relation to the 2010 tender.

44.  Paragraphs 18 and 19 of the statement of claim plead:

“18. On 7 September 2010, the Plaintiff submitted its tender with the prescribed pricing schedules showing an estimated total amount of HK$6,373,000.00 payable to the Defendant and the tender deposit HK$5,000.00. In addition to the prescribed pricing schedules, the Plaintiff also included another price list showing the unit rates to be applied for the Goods where the quantities would be in excess around double of the estimated quantities. The schedules are attached hereto as Annex II.

19.       The unit prices quoted for each items in the pricing schedules of the tender (under Tender Reference: A600074210) were same as those under the Contract no. C0031/2008.”

45.  There is no dispute that on 7 September 2010 the plaintiff submitted its bid pursuant to the 2010 tender.

46.  Schedules A1 and A2 of the 2010 tender set out the estimated quantities of abandoned vehicles and bicycles to be purchased from the defendant.  The plaintiff in its bid for the 2010 tender specified the prices that it was willing to pay for each item under Schedules A1 and A2.  However, what is of importance is that the plaintiff also submitted Appendix A containing different prices for each item depending on the quantities to be purchased.  In both Schedules A1 and A2 the plaintiff inserted a remark:

“Remark: The above rate subject to a limited quantity listed on Appendix A”

47.  Appendix A stated that if the quantities of abandoned vehicles and bicycles exceeded the figures specified in Table (A) in Appendix A, the lower rates as shown in Table (B) in Appendix A would be paid by the plaintiff.

48.  It is abundantly clear that the plaintiff had submitted two price lists, one in Schedules A1 and A2 and the other in Appendix A.  The prices in Table (B) of Appendix A were to apply if the quantities of abandoned vehicles and bicycles exceeded the quantities set out in Table (A).

49.  What a tenderer under the 2010 was required to quote was clearly specified at Clause 4 of the Terms of Tender (Supplement).

50.  Clause 4(a) provided that:

“A Tenderer shall quote separate price in Hong Kong dollars for each of the items in Schedules A1 and A2 to form the total prices of all items payable to the Government (‘Total Quotation’).”

51.  And by clause 4(c) it was provided that:

“A Tenderer shall quote a fixed and firm price for each item in Schedules A1 and A2 for the Contract. An offer containing any price variation condition or formula will not be considered further.”

52.  At paragraph 23 of the statement of claim it is pleaded that:

“Upon the true construction of the price schedules submitted by the Plaintiff, it is averred that they were two price schedules for different quantities of the Goods instead of an offer containing any price variation condition or formula in relation to the provision for adjusting the prices for changes in the Plaintiff’s costs or resold price of the Goods.”

53.  Mr Cheung, for the plaintiff, submitted that the words “any price variation condition or formula” in clause 4(c) were ambiguous and further, that it was inappropriate to determine the construction of clause 4(c) at this stage.

54.  I am unable to accept Mr Cheung’s submissions.

55.  It seems to me that on the undisputed facts the court can and should construe clause 4 at this stage.

56.  It seems to me that the words in clause 4(c) are clear and unambiguous.  As a matter of construction of clause 4(c) an offer containing any price variation will not be considered further.  Quite clearly, making a bid with two different price lists depending on the quantities to be purchased is, in my view, an offer containing a price variation.  This, in my view, is plain and obvious from the language used.

57.  The requirement on a tenderer under clause 4(a) was to quote a separate price for each of the items in Schedules A1 and A2 to form the total prices of all items payable to the defendant.  And by clause 4(c) a tendered was obliged to quote “a fixed and firm price” for each item.  By providing two price lists depending on the quantities to be purchased, the plaintiff clearly failed to quote a fixed and firm price for each item.

58.  It was also provided by clause 18 (b) of the Terms of Tender (Supplement) of the 2010 tender that:

“Assessment of Compliance with Mandatory Requirements

A tender will be checked for its compliance with the mandatory requirements as detailed in the Tender Document.  Any tender which fails to meet any of these mandatory requirements will not be considered further.”

59.  The plaintiff failed to comply with the mandatory requirements of clause 4(c).  That being so, quite clearly the defendant was entitled not to consider the plaintiff’s tender any further as provided in clause 18(b).

60.  One important point to bear in mind is that the defendant did not award a contract to anyone in respect of the 2010 tender. As it stated in the 10 January letter, the tender was cancelled.  Quite apart from the fact that the plaintiff failed to comply with the mandatory requirement in clause 4(c) of the Terms of Tender (Supplement), the tender was in fact cancelled.

61.  Clause 20(b) of the Terms of Tender (Supplement) clearly provided that:

“Notwithstanding anything herein to the contrary, the Tenderer acknowledges that the Government may elect at its sole option to accept all or any part of the Tenderer’s offer and is not bound to award the Contract for the purchase of all or any of the Goods specified in Schedule A (Price Schedule) to any Tenderer.”

62.  Relying on paragraphs 25 to 27 of the statement of claim, it was further submitted on behalf of the plaintiff that even if the plaintiff’s bid under the 2010 tender contained a price variation, it would have had no practical effect on the tender.  The point was made that except for one item, the actual quantities of abandoned vehicles and bicycles purchased under the 2008 contract did not in fact exceed the quantities required for the price reduction as set out in Appendix A of the 2008 contract.  Hence, the prices set out in Appendix A to the 2010 tender would have had no practical effect on the tender.  It was submitted that a materially compliant tender had been submitted by the plaintiff.

63.  Whether or not Appendix A would have had any practical effect is beside the point.  That is wholly irrelevant.  There was a mandatory requirement in clause 4(c) to quote a fixed and firm price for each item and that was not done.  The submission of two price lists depending on the quantities to be purchased was plainly an offer containing a price variation within the meaning of clause 4(c).

64.  The point was also made that in the bid for the 2008 contract where the plaintiff was the successful bidder, the plaintiff had also provided its quotation for the estimated quantities in schedules A1 and A2 as well as providing an Appendix A with its quotation for reduced prices where the quantities to be purchased would be in excess of the quantities specified in Appendix A.  

65.  In my view, that does not assist the plaintiff in its claims in respect of the 2010 tender.  The terms and conditions of the tender under the 2008 contract and the 2010 tender were different.  Of particular importance is the fact that clause 4 in the 2008 contract and clause 4 in the 2010 Terms of Tender (Supplement) are quite different.

66.  Clause 4 of the Terms of Tender (Supplement) of the 2008 contract provided:

“Quotation

Tenderer is requested to submit its offer in Hong Kong Dollars in Schedules A1 and A2 (for Paper-based Tendering and Electronic Tendering) and such prices shall be the net amount payable to the Government of the Hong Kong Special Administrative Region.  The successful Tenderer is responsible for the cost of transport and labour for the collection and removal of the Goods from the specified locations as detailed in Annex B.”

67.  It is of importance that no clause similar to clause 4(c) in the Terms of Tender (Supplement) of the 2010 tender is to be found in the 2008 contract.

68.  I am unable to see how the plaintiff’s successful bid for the 2008 contract with terms different from the terms of the 2010 tender can assist the plaintiff.

Process contract

69.  Mr Cheung also submitted that the defendant was in breach of the process contract for failing to consider the plaintiff’s tender properly and wrongfully determining that the plaintiff had failed to comply with the mandatory requirement in clause 4(c) of the Terms of Tender (Supplement) of the 2010 tender.

70.  It was further submitted that the contract under the 2010 tender should have been awarded to the plaintiff so as to allow the plaintiff to purchase the goods from the defendant and stay on the site until 9 November 2013.

71.  Both parties relied on Blackpool & Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195.  At page 1202 Bingham LJ (as he then was ) said:

“…The invitation to tender may itself, in a complex case, although again not here, involve time and expense to prepare, but the invitor does not commit himself to proceed with the project, whatever it is; he need not accept the highest tender; he need not accept any tender; he need not give reasons to justify his acceptance or rejection of any tender received. The risk to which the tenderer is exposed does not end with the risk that his tender may not be the highest or, as the case may be, lowest. But where, as here, tenders are solicited from selected parties all of them known to the invitor, and where a local authority’s invitation prescribes a clear, orderly and familiar procedure—draft contract conditions available for inspection and plainly not open to negotiation, a prescribed common form of tender, the supply of envelopes designed to preserve the absolute anonymity of tenderers and clearly to identify the tender in question, and an absolute deadline—the invitee is in my judgment protected at least to this extent; if he submits a conforming tender before the deadline he is entitled, not as a matter of mere expectation but of contractual right, to be sure that his tender will after the deadline be opened and considered in conjunction with all other conforming tenders or at least that his tender will be considered if others are...” [emphasis added]

72.  It is common ground that what was stated above by Bingham LJ is referred to as a process contract (see also Bondson Technology Limited v Secretary of Justice (HCA1458 of 2010, 19 October 2011 at paragraphs 56 and 57 of the judgment of Deputy Judge Au-yeung,  as she then was).

73.  A process contract simply means that if a confirming tender is submitted before the deadline, the tenderer is entitled as a matter of a contractual right to be sure that his tender will be considered in conjunction with all other confirming tenders or at least that his tender will be considered if others are. 

74.  I would also respectfully agree with the observation of Deputy Judge Au-yeung in Bondson at paragraph 60 where she said:

“With respect, one of the foundations of the Process Contract is that the tender had to supply a conforming tender. Since the Plaintiff did not comply with the mandatory requirements referred to above, its rights under the Process Contract simply did not come into play. It was not entitled to evaluation by the Government with other tenderers.”

75.  It is clear that the tenderer must supply a conforming tender.  If the tender is not a confirming tender then it is plain and obvious that there is no contractual right to have it considered.  Here, as I have said, the plaintiff failed to comply with the mandatory requirements in clause 4(c).  That being so, there is no contractual right to have the plaintiff’s tender considered.

76.  Furthermore, even if the plaintiff’s tender had to be considered, it seems to me to be plain that by clause 20(d) the defendant is not bound to award the contract to any tenderer including the plaintiff.

77.  There is simply no valid basis for the plaintiff to claim that it is entitled to purchase the goods under the price schedules submitted in the 2010 tender and to stay on the site for 36 months with effect from 10 November 2010 i.e until 9 November 2013.  The submission that the contract under the 2010 tender should have been awarded to the plaintiff allowing it to purchase the goods from the defendant and to stay on the site until 9 November 2013 is simply untenable and without merit.

78.  That being the only basis on which it is said that the plaintiff is entitled to the relief sought, it seems to me that the plaintiff’s claims are doomed to fail.

79.  I am satisfied that this is a plain and obvious case to strike out the statement of claim and to dismiss the plaintiff’s claims against the defendant.  I so order.

The counterclaim

80.  Mr Lam, for the defendant, submitted that the defendant was entitled to the relief sought in the terms of paragraphs 2, 3 and 6 of the prayer for relief in the counterclaim.  These are for an order for vacant possession of the site, an injunction to restrain the plaintiff from trespassing on the site and damages for trespass.

81.  As I have said, the 2008 contract was not extended beyond 30 September 2011.  It, therefore, came to an end on 30 September 2011.

82.  By the notice to quit the defendant gave notice to the plaintiff to vacate the site within 3 months from 1 October 2011 i.e on or before 31 December 2011.  The plaintiff has failed to vacate the site by that date or at all. In fact the plaintiff still occupies the site.

83.  I am unable to see any arguable defence to the defendant’s contention that the licence to the plaintiff to occupy the site has come to an end by 31 December 2011.  After that date it seems to me that it is clear that the plaintiff was a trespasser on the site.

84.  I am satisfied that it is proper to give summary judgment to the defendant on its counterclaim.  As sought by Mr Lam, I give judgment to the defendant in the terms of paragraphs 2, 3 and 6 of the prayer for relief in the counterclaim.

85.  As regards the damages for trespass, I order that these be assessed by a master.

86.  As I have granted summary judgment to the defendant on its counterclaim, it is not necessary to consider the alternative claim for an interlocutory injunction.

87.  I also make an order nisi that the costs of the claim and counterclaim including the costs of the summons be costs to the defendant to be paid by the plaintiff, such costs to be taxed if not agreed.