BONDSON TECHNOLOGY LTD v. SECRETARY FOR JUSTICE

HCA 1458/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1458 OF 2010

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BETWEEN

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JUDGMENT

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1.  This is an application by the Defendant under Order 14A for determination of several questions in relation to the construction and legal effect of tender documents made by the Plaintiff to the Government.

BACKGROUND

2.  In June 2004, the Government issued the Tender Documents in respect of Tender Ref. CR 273/6/37-T1 (“Tender 37”) with closing date of 16 July 2004.  The tender was for the provision of digital audio recording and transcription services (“DARTS”) to some specified courts in Hong Kong under Contract A and to other specified courts under Contract B for 4 years commencing 7 December 2004.

3.  The Tender Documents consisted of 8 parts of which the following are relevant to this application:

Part I:	Notes to Tenderers
Part II:	Terms of Tender
Part III:	Conditions of Contract
Part IV:	Contract Schedules
Part V:	Specifications
Part VI:	Offer to be Bound
Part VII:	Form of the Supplier’s Undertaking
Part VIII:	Articles of Agreement

4.  The relevant provisions of the Tender Documents included the following:

“Part I. Notes to Tenderers

4.1 All tenderers are advised to read the instructions contained herein carefully prior to preparing their tender. These instructions are conditions of tendering and any tender which does not follow these instructions will be considered incomplete and may be disqualified.

…

5.1 Complete information on the Services and Proposed Equipment and Software offered to be provided, including technical and descriptive literature, shall be submitted with the tender as an attachment to the Contract Schedules. Information submitted shall be sufficiently detailed to show that the Services and the Proposed Equipment and Software offered meet the requirements under the Conditions of Contract and the Specifications.

…

Part II. Terms of Tender

8.1 Subject to paragraph 2.4 hereof, the Government may elect at its sole option to accept all or any part of the tenderer’s offer and the Government has sole discretion whether or not to accept any of the tenders irrespective of its price.

…

11.1 All terms and conditions in the Contract are the requirements of the Government and should not be altered by the tenderer. Any counter-proposal will only be considered in exceptional circumstances and on issues of a fundamental nature.

…

11.3 The Specifications are not subject to any counter-proposal whatsoever from the tenderer.

…

12.1 The following are the mandatory requirements for this invitation to tender which a tenderer must fulfil before its tender is eligible for assessment under the marking scheme contained in Annex A hereof:

(a) It is mandatory that tenderers comply with each and every clause in the Specifications by not providing any statement of non-compliance in Contract Schedule 9…

Without prejudice to other grounds specified in these Terms of Tender or in the Notes to Tenderers which entitle the Government to reject or disqualify a tender, a tenderer’s failure to comply with the above mandatory requirements will render its tender invalid and its tender will not be considered for evaluation.

(b) It is mandatory that each tenderer must submit:

(i) all Contract Schedules, except Contract Schedules 1, 2, 6, 8D, 11A and 12;

12.2 Notwithstanding anything in the Tender Documents to the contrary, save and except for those Tender Documents the submission of which by a tenderer in its tender are specified to be a mandatory requirement under paragraph 12.1 above, where certain documents or information required under any of the Tender Documents (including any document or information required under any of the Contract Schedules except for Contract Schedule 5) are found missing, or there is ambiguity or inconsistency, in a tender submitted by a tenderer, which the Government Representative, in its opinion, considers the tenderer concerned has merely made an unintentional error of form and that giving the tenderer an opportunity to correct that error will not give rise to any discriminatory practice, the Government Representative may, in its absolute discretion, request that tenderer concerned to supply such missing document, additional information or documentary proof, or clarification, on or before such date as the Government Representative may elect to assess that tender on an as is basis. A tenderer who fails to comply with the Government’s request for missing or supplemental information or document, or clarification , pursuant to this paragraph will entitle the Government to disqualify its tender without further notice.

…

26.1 In evaluating the tenders submitted and awarding the Contracts, the Government is not bound to accept the lowest or any tender. The award of Contracts will be made to the tenderers who are assessed by the Government to be fully capable of undertaking the Contracts. Even if a tenderer attains the highest Final Assessment Scores (as defined in Annex A hereof) for both Contracts, no one (1) single tenderer will be awarded with both of them, and the Contracts will be awarded on the basis of a tender combination that is determined by the Government to be most advantageous to the Government.

Part III. Conditions of Contract

16.3.10 Throughout the Term, the Contractor shall, at its own expense and at no cost to the Government, stock adequate spare parts and spare Equipment to ensure the smooth running of the System to meet the Service Levels specified in Clause 35, Contract Schedule 6 and the Specifications, according to the quantities of spare parts and spare Equipment prescribed in Contract Schedule 4 (collectively “spare parts”). The spare parts shall at all times throughout the Term be kept and maintained in good working order and condition, and be from time to time replenished to the quantities specified in Contract Schedule 4 in case of use. The minimum level of spare parts proposed by the Contractor may be amended should the Government Representative deem necessary.

16.3.11 In the event that it shall become necessary for the Contractor to replace a piece of Applicable Item or any part thereof within the System in performing the Remedial Maintenance Services, the Contractor may consider, before using its own spare parts kept by it in accordance with Clause 16.3.10 and Contract Schedule 4, making use of the Government’s spare parts…

Part IV. Contract Schedules

Schedule 4 – Spare Level

1. The Contractor shall stock the following spare parts and spare equipment at its own costs.

[One of the spare parts was fixed microphone and the Contractor has to specify the minimum quantity in the table.]

Part V. Specifications

2.1.3 Microphones (forming part of the Existing Equipment) are provided for the following persons:

[The judge and 6 categories of persons]

Two (2) full sets of the above microphones in good function and condition shall be made available by the Contractor as spare items.”

5.  The Plaintiff submitted tenders for both Contract A and Contract B (“the Plaintiff’s Tender”) before the closing date.

6.  By letter dated 4 August 2004, the Judiciary Administrator (“JA”) sought clarification of the Plaintiff’s tender but received no reply by the stipulated deadline.   

7.  On 28 September 2004, the JA informed the Plaintiff by letter that its tender in respect of Contract A and Contract B had not been accepted due to its failure to comply with all the mandatory requirements specified in paragraph 12.1 of the Terms of Tender (“Clause 12.1”).

8.  By a further letter dated 8 October 2004, the JA set out the reasons why the Plaintiff failed in its tender:

(i)  Failure to comply with the mandatory requirements in Clause 12.1;

(ii)  That notwithstanding that the Plaintiff had not provided any statement of non-compliance in Contract Schedule 9, failure to propose to provide spare microphones as required under Clause 2.1.3 of the Specifications (“Clause 2.1.3”);

(iii)  Failure to meet the requirements of Paragraph 12.2 of the Terms of Tender in failing to comply with the JA’s letter dated 4 August 2004 by the stipulated deadline[1]; and

(iv)  That in any event, the Plaintiff had failed to score a passing mark for assessment criterion 4.4 of the marking scheme in respect of both Contract A and Contract B, and hence was rejected in accordance with paragraph 2.1 of Annex A to the Terms of Tender.

9.  The Government eventually awarded Contract B to one MIL.

10.  The Plaintiff sought a review by the Review Body on Bid Challenges of the Government’s decision to reject the Plaintiff’s Tender but it was dismissed.

11.  In about 2006, the JA discovered that MIL had provided false information in support of its tender for Contract B.  On 13 July 2007, officers of MIL were convicted of conspiracy to defraud the Government and sentenced to 3 years’ imprisonment. 

12.  The contract between the Government and MIL was terminated.  A fresh tender process took place under Tender Ref. CR273/6/39-T1) (“Tender 39”) and the Plaintiff was eventually awarded a service contract from 5 October 2007 up to 30 June 2012.

13.  In the Statement of Claim, the Plaintiff avers that the Government had acted in breach of contract and/or negligently in:

(i)  Failing to award Contract B to the Plaintiff;

(ii)  Awarding Contract B to MIL when its tender was about $3,000,000 more expensive and less advantageous compared to that of the Plaintiff’s and did not comply with Clauses 1.6 and 3.1.10 of the Specifications; and

(iii)  Rejecting the Plaintiff’s Tender under Clause 2.1.3 by failing to consider the adequacy of the existing microphone stock.

(iv)  Erroneously insisting that Clause 2.1.3 be strictly complied with in spite of its relatively minor importance to performance of the services;

(v)  Failing to recognize that there were false representations in MIL’s tender documents during the evaluation process.

(vi)  Failing to recognize that MIL’s tender did not satisfy the mandatory requirements for human resources set out in the Specifications.

14.  The Government’s defence was, amongst others, that on a proper construction of Clauses 12.1, Clause 2.1.3 and Clause 16.3.10 of the Conditions of Contract (“Clause 16.3.10”), the Plaintiff’s Tender was clearly not compliant with the mandatory requirements and the government was entitled to reject it.

THE QUESTIONS FOR DETERMINATION

15.  By this application, the Defendant seeks determination of 3 Questions on the true construction of those provisions in the preceding paragraph and whether the Plaintiff’s Tender was non-compliant with them so as to entitle the Government to reject it.  The Defendant asks that the Plaintiff’s claim be dismissed upon determination of the questions.

THE PLAINTIFF’S GROUNDS OF OBJECTION

16.  On the Questions themselves, the Plaintiff submits that it had not breached any mandatory requirements under Clause 12.1.

17.  The Plaintiff further submits that the Government had breached its duty under what was known as a “Process Contract” whereby a tenderer in the Plaintiff’s position had a contractual entitlement (and not merely an expectation) to have its tender duly evaluated fairly and with reasonable care, skill and diligence.

18.  The Plaintiff submits that the Order 14A procedure is not suitable if the issues of fact are interwoven with the legal issues to be determined.  The Court should decline to use this procedure if it is necessary to hear evidence and resolve factual disputes: Shell Hong Kong Ltd v. Yeung Wai Man Kiu Yip Co. Ltd. & anor (2003) 6 HKCFAR 222, at 230 H-I, per Hon. Chan PJ.  The Court has a residual discretion on whether or not to embark on a determination of a question under Order 14A even where the question of law or construction was one that was suitable for determination without a trial and its determination would finally determine the entire cause or matter: Rockwin Enterprises Ltd v. Shui Yee Ltd & others [2003] HKC 174, per Mr Recorder Ma SC (as he then was).

19.  In the present case, the questions should not be determined summarily under Order 14A.  It will only be at the trial that the entire background will be fully apparent and then the meaning of the Tender Documents could be ascertained.  The present application will not finally determine the present action, so Mr Wright submits.

PRINCIPLES FOR CONSTRUCTION

20.  Lord Hoffmann NPJ in Jumbo King v. Faithful Properties Ltd (1999) 2 HKCFAR 279, at 296D stated the principles for construction of a document:

“The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which if taken literally, mean something different from what they obviously intended. … But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

21.  Words in a contract are to be given their plain and ordinary meaning.  In construing a contract, all parts of it must be given effect where possible.  See Lewison: The Interpretation of Contracts, 4^th edition, paras 1.03, 5.01, 5.02, 7.02 and 7.03.

22.  With these principles in mind, I come to construe the relevant provisions.

TRUE CONSTRUCTION OF CLAUSE 12.1

23.  The 1^st Question posed in the Summons is:

“Whether, on the true and proper construction of Paragraph 12.1 of the Terms of Tender (Part II of the Tender Documents):

(1) The Plaintiff was required to comply with each and every requirement of the Specifications (Part V of the Tender Documents) failing which its tender would be disqualified/rejected and would not be considered for evaluation; and

(2) Non-delivery of any statement of non-compliance did not exonerate the Plaintiff from complying with each and every requirement of the Specifications.”

24.  Clause 12.1(a) was in itself clear and unambiguous.  The compliance with each and every clause in the Specifications was mandatory.  Failure by a tenderer to comply with such mandatory requirements would result in his tender being treated as invalid and it would not be considered for evaluation.

25.  This Clause should be read in context with other provisions in the Tender Documents:

(i)  Paragraph 11.3 of the Terms of Tender which provided that the Specifications were not subject to any counter-proposals whatsoever from the tenderer. 

(ii)  Under paragraph 1 of Contract Schedule 9, tenderers were required to provide a “compliance statement” in the following terms:

“We [name of tenderer], hereby confirm that if we were awarded with Contract (A) or (B), we will comply with all requirements set out in that Contract including the Specifications save and except the following …”

(iii)  Footnote (a) and (b) of Contract Schedule 9 further provides:

“(a) In the event any reason for non-compliance amounts to a counter-proposal to a term of the Contract, paragraph 11 of the Terms of Tender shall apply to such statement of compliance, mutatis mutandis, and the tenderer shall also submit such reason for non-compliance in accordance with that paragraph.

(b) Tenderers’ attention is drawn to the mandatory requirements specified in paragraph 12 of the Terms of Tender.”

26.  Viewed in the context of those provisions, on a proper construction of Clause 12.1(a), the conclusion is the same.  All the Specifications must be complied with without exception. Should a tenderer fail to comply with any of the Specifications, he should provide a statement of non-compliance, stating the reasons for non-compliance. As admitted in the statement of claim, if any statement of non-compliance was provided, the tender would be rejected and disqualified without evaluation.  A tenderer could not make any counter-proposals.

27.  Mr Wright submits that Clause 12.1 only referred to the requirement that a tenderer should not provide any statement of non-compliance in Contract Schedule 9.  It all related to documents to be submitted under Clause 12.1(b) by the tenderer. 

28.  That submission, with respect, ignores the clear opening words of Clause 12.1 which required compliance with each and every clause in the Specifications.  That Clause did not just govern the submission of documents.

29.  Furthermore, in my view, providing a statement of compliance or not providing a statement of non-compliance was merely a representation that, in the subjective view of the tenderer, all the mandatory requirements had been complied with.  It could not bar the Government from checking if the tender had actually met all the mandatory requirements.  To suggest otherwise would enable a tenderer to get round those requirements by deliberately omitting to provide a statement of non-compliance under Contract Schedule 9.

30.  Question 1(1) should be answered in the positive.  In respect of Question 1(2), non-delivery of any statement of non-compliance did not exonerate the Plaintiff from complying with each and every requirement of the Specifications.

TRUE CONSTRUCTION OF CLAUSE 16.3.10 AND CLAUSE 2.1.3

31.  The 2^nd Question in the Summons is:

“Whether, on the true and proper construction of Clause 16.3.10 of the Conditions of Contract and Clause 2.1.3 of the Specifications, the Plaintiff was required to make available two full sets of microphones (i.e. a total of 14 microphones) as spare items regardless of the availability of the Government’s spare parts referred to in Clause 16.3.11 of the Conditions of Contract.”

32.  Clause 2.1.3 clearly and unambiguously provided as a mandatory requirement that 2 full sets of microphones (to be provided to each class of persons specified in that Clause) was to be “made available” as spare items.  That meant a total of 14 microphones.  And they had to be made available “by the Contractor” and not by the Government.

33.  The fact that the Government had spare microphones available did not remove or reduce the mandatory requirements under Clause 2.1.3 because Clause 16.3.10 emphasized that the Contractor shall, “at its own expense and at no cost to the Government”, stock adequate spare parts to meet the prescribed service levels set out in the Specifications and in accordance with the prescribed quantities in Contract Schedule 4.  The contents of Contract Schedule 4 required the tenderer to list all the spare parts and spare equipment which it would provide “at its own cost”.

34.  Mr Wright submits that to make “available” means to be “able to be used or obtained” and “at one’s disposal: Concise Oxford English Dictionary.  In Thompson v. Smith (1976) 135 CLR 102, Gibbs J held that:

“Property is ‘made available’ within the ordinary meaning of those words, when one person places it at the disposal of another, or in other words does something whereby the other person is enabled to use the property, either at will or in a particular way.”

35.  Mr Wright submits that Clause 16.3.11 expressly provided that the contractor could consider making use of the Government’s stock of spare parts before using the contractor’s spare parts.  In the Tender Documents, the Government expressly stated that it had, as spares available for Contract B, a total of 96 fixed and 16 radio microphones which the contractor could consider using if any replacement was necessary before the contractor used any of the spares held by the contractor.  The references to such microphones as spare parts could only be explained in the event that the contractor was entitled to use them as the spare items to be made available, otherwise such references would have been otiose. 

36.  In my view, this submission runs contrary to the clear wording of Clauses 2.1.3, 16.3.10 and 16.3.11, which made it mandatory for the tenderer to make proposals in Contract Schedule 4 to make available the 2 full sets of microphones as spare items at his own costs regardless of the availability of the Government’s stock of spare microphones.  Which set should be used first was a question that would only arise after the tender was accepted.  By not making a compliant tender, the Plaintiff could not get to the stage of using under Clause 16.3.10. Question 2 should be answered in the affirmative.

NON-COMPLIANCE WITH MANDATORY REQUIREMENTS

37.  The 3^rd Question in the Summons is:

“Whether the Plaintiff’s Tender was non-compliant with Paragraph 12.1 of the Terms of Tender and/or Clause 2.1.3 of the Specifications such that the Government was entitled to reject the Plaintiff’s Tender by reason of such non-compliance.”

38.  In the Plaintiff’s Contract Schedule 4 for Contract A and Contract B, where the number of spare “Fixed Microphones” had to be specified, it was stated, “Judiciary’s used microphones taken as serviceable”.  This effectively indicated that the Plaintiff would not be providing any spare microphones as required under Clause 2.1.3 of the Specifications.  The Plaintiff clearly failed to meet the mandatory requirements under Clause 2.1.3 and Clause 16.3.10.

39.  The Plaintiff denies non-compliance on the following grounds:

(i)  That it had already complied with Clause 12.1 by not providing a statement of non-compliance in the form of Schedule 9 of the Contract.

(ii)  The interpretation adopted in the JA’s letter dated 8 October 2004 would have required the Plaintiff to provide (as opposed to make available) spare microphones notwithstanding the large no. of spare microphones already in the Government’s possession.

(iii)  That Clause 16.3.11 permitted a tenderer to use the Government’s spare parts.

(iv)  The construction placed by the Government, viewed against the objectives of the tender would show that the Government did not express its intention very well in the tender documents, although there was no reasonable doubt as to what was meant.

(i)  Not Providing a Statement of Non-Compliance

40.  As analyzed under Question 1, non-provision of a statement of non-compliance did not exonerate a tenderer from compliance with the mandatory requirements.   This ground of objection does not stand.

(ii)  JA’s Letter of Rejection Would Have Required the Plaintiff to Provide (As Opposed to Make Available) Spare Microphones

41.  Mr Wright submits that if it was a “mandatory requirement” to provide spare sets of microphones, it would appear that the Plaintiff was actually required to provide the spare microphones at the time of submission of the Tender. 

42.  The JA’s letter dated 8 October 2004 stated that the Plaintiff “had not proposed in the earlier Contract Schedule 4 of your tenders to provide spare microphones.” Clearly the JA was interested in a proposal to provide as opposed to the actual provision of the microphones in kind.  This ground of objection is untenable. 

(iii)  That Clause 16.3.11 Permitted a Tenderer to Use the Government’s Spare Parts

43.  The Plaintiff’s case is that in view of the large quantity of spare microphones available from the Government which would provide more than enough to cover for Contract B and the low incidence of failure, it reasonably believed that the spare microphones held by the Government could be used and so it did not tender new microphones in Contract Schedule 4 as spare items. 

44.  It was clear from Clause 16.3.10 of the Conditions of Contract that the purpose of the requirement of having spare parts available was to ensure the smooth running of the DARTS system to meet the service levels specified in Clause 35, Contract Schedule 6 of the Specifications.  Mr Wright points out that there was no suggestion by the Government that the smooth running of the system would not have been achieved by the use of the Government’s spare microphones. 

45.  Moreover, the Plaintiff’s evidence was that it was able to use or obtain in excess 2 full sets of spare microphones and had such spare microphones at its disposal.  Failures of microphones were nil or insignificant.  The fastest way to replace a faulty microphone was to replace it with another in the same court room or an idle court room than obtaining a spare from storage.

46.  Mr Wright submits that even though the Plaintiff in its tender indicated that it would rely in the first instance on the Government’s own microphones, the compliance statement in Contract Schedule 9 would have compelled the Plaintiff to make the provision.  The Defendant had not suggested that the Plaintiff would have been unable to comply with a contractual requirement to make available the 2 sets of spare microphones.  The alleged failure to comply with Clause 2.1.3 should accordingly have not made any difference to the performance of the service.

47.  The Plaintiff alleged that the Government ought to have considered these matters in deciding whether the mandatory requirements under Clause 12.1 and Clause 2.1.3 had been breached.

48.  The Plaintiff’s belief could not justify the non-compliance.   The fact that the spare microphones could be obtained by the Plaintiff with relative ease was irrelevant.  The important thing was that the Plaintiff had to show the Government in its tender that it would make available those microphones and at what cost. Such cost was bound to have some impact on the tender price, and might even affect the outcome of the tender. 

49.  The fact that not making available the spare microphones would have made no difference to the level of performance was irrelevant.  A tender could be made up of various items which, when viewed individually, would have no impact on the overall quality of performance of the contract.  The Government was still entitled to insist on full compliance.

50.  This ground of objection cannot stand.

 (iv) Government Did Not Express Its Intention Very Well in the Tender Documents Although the Meaning Was Clear

51.  Mr Wright submits that in the exercise of construction, it was to be assumed that the Government had the following objectives:

a)To select the contractor capable of undertaking the DARTS services for the courts at the lowest cost;

b)To increase the cost-effectiveness of such service before the courts; and

c)To prevent unnecessary wastage of resources.

52.  He submits that each of those objectives would be achieved if the Plaintiff’s construction of Clauses 2.1.3 and 16.3.10 was adopted and vice versa if the Government’s construction was adopted.  The Government’s failure to consider the Plaintiff’s Tender led to the award of Contract B to MIL at an additional cost to the taxpayer of over HK$3 million.  It would also have required the Plaintiff to maintain a stock of microphones for no conceivable benefit when the Government had more than sufficient in stock.  The unnecessary acquisition of additional microphones would be a wastage of resources the cost of which would have been passed onto the taxpayer.  In the light of the above objectives, the Government’s construction was therefore untenable, so Mr Wright submits.  The inference to be drawn was that the Government did not express its intention very well in the Tender Documents although there was no reasonable doubt as to what was meant.  Even if the words were capable of bearing the meaning contended for by the Government, the words would be ambiguous.  The ambiguity should be resolved against the Government under the contra proferentum principle.

53.  There was in my view no ambiguity in the meaning over the requirement for spare microphones. One cannot second guess why the Government wanted 2 spare sets of microphones to be made available by the contractor.  Nor could the Plaintiff’s Tender in respect of the microphones bear any other meaning but its obvious one – that the Plaintiff had not made any proposal as regards provision of microphones.  Where the meaning of a contractual provision was clear, the Court should not re-write it for the parties under the pretext of meeting certain objectives that had not been stated in the contract.  The Tender Documents had made it very clear that the Government would not consider counter proposals.

54.  In summary, I find that the Plaintiff had not complied with the mandatory requirements under Clauses 12.1, 2.1.3 and 16.3.10.  I answer the 3^rd Question in the affirmative. 

APPROPRIATENESS OF THE ORDER 14A PROCEDURE

55.  Despite answering all 3 Questions in favour of the Defendant, there are other issues in relation to the Process Contract and the pleaded case which might affect whether judgment should be given under Order 14A.

Breach of the Process Contract

56.  The Plaintiff’s case is that by virtue of the Process Contract and its common law duty, the Government was subject to an obligation to evaluate the Plaintiff’s Tender and other compliant tenders with reasonable care, skill and diligence. 

“… 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. …” Blackpool & Fylde Aero Club v. Blackpool Borough Council [1990] 1 WLR 1195 at p.1202 A-D, per Bingham LJ; followed in Hong Kong in City University of Hong Kong v. Blue Cross (Asia Pacific) Insurance Ltd [2001] 1 HKC 463 at 473 B-H

57.  This has been referred to as a “process contract”: China Harbour Engineering Company (Group) v. Secretary for Justice, unrep., HCCT 44/2004, 6.3.2006.

58.  Mr Tong SC does not object to proceeding on the assumption that such obligations existed and I proceed accordingly. 

59.  Mr Wright submits that the Government had breached its obligation under the Process Contract by rejecting the Plaintiff’s tender and awarding Contract B to MIL when the latter did not comply with the Specifications.  A proper determination of the question of whether the Government breached its duty would require a full investigation into the manner in which the Government evaluated MIL’s tender.

60.  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. 

The Pleaded Claims

61.  The pleaded case has been summarized in paragraph 13 above.  Apart from the answers to the 3 Questions above, the following are additional reasons why I think the Plaintiff’s claims are not sustainable.

62.  Firstly, the fact that MIL’s tender price was more expensive and less advantageous compared to that of the Plaintiff’s was irrelevant.  The Government was not obliged to accept the lowest tender: Clause 8.1 of the Terms of Tender. 

63.  Secondly, the new Contract to the Plaintiff cannot be evidence that the Government should have awarded Contract B to the Plaintiff in the first place.  The new Contract was pursuant to a different tender on different terms.  It was for a different period and not for the remainder of the term of Contract B as alleged by the Plaintiff.

64.  Thirdly, the fact that the mandatory requirements concerning spare microphones were relatively of minor importance to performance of the services compared to other terms or could have been easily remedied by the Plaintiff was irrelevant.  A single item in a tender, taken individually, may have minor impact on the overall performance of the contract.  The tenderer could have complied with a requirement at a very low or nil cost.  However, fairness in the tender process requires strict compliance with the terms without counter proposals.  The Plaintiff could not be expected to be given another chance to make a supplemental tender with regard to microphones without the same chance being given to other tenderers. 

65.  Fourthly, the Plaintiff cannot use the fraud on the Government in support of its case that the Government should not have awarded Contract B to MIL.  The Plaintiff avers that the central question of whether the Government evaluated the Plaintiff’s Tender and other tenders for Contract B fairly and with reasonable care, skill and diligence cannot be determined without considering the manner in which the Government evaluated the other tenderers for Contract B.  It was clear that something went badly wrong with the Government’s evaluation of MIL’s tender as was demonstrated by the premature termination of the contract awarded to MIL and the conviction of its officers.  A full investigation at trial was necessary.  The investigation could also ascertain the reasons why the Government failed to rejeect MIL’s tender on the ground, e.g. that MIL’s tender did not satisfy the mandatory requirements for human resources set out in Clauses 1.6 and 3.1.10 of the Specifications.  The Government’s failure to take reasonable steps to ascertain that MIL’s tender contained false information and documentation amounted to a breach of the Government’s obligation to exercise reasonable care, skill and diligence in evaluating MIL’s tender.  There was also an issue of fact as to whether the Government breached its obligation to award the contract to the tenderer with the lowest and most advantageous tender.

66.  The Government’s answer is that during the evaluation stage, there was no verification of the documentation supplied by the tenderers as there was no such requirement under the Government’s Stores and Procurement Regulations.  All tender proposals received the same treatment by the evaluation team.

67.  In fact, the Review Body in its Decision was unable to say that MIL had not complied with the requirements on submission of documentation under the Contract Schedules. 

68.  What is more fundamental is that the Government had been defrauded by MIL who misled the Government into thinking that it had complied with all aspects of the mandatory requirements.  One cannot act with hindsight and use a conviction 2 ½ years after Contract B was awarded to say that there had been non-compliance by MIL and hence the Government should not have awarded the Contract to it.  

69.  Fifthly, even if MIL had been non-compliant in the aspects alleged by the Plaintiff, that did not mean the Government must have awarded Contract B to the Plaintiff by default, regardless of whether the Plaintiff had complied with all the mandatory requirements.  It is noteworthy that the Plaintiff is not claiming for the loss of an opportunity to make a tender or to win the Contract but loss of profit.

RULING

70.  The pleaded case of the Plaintiff cannot stand.  I am of the view that the 3 Questions posed by the Government are all suitable for determination without the need for resolution of factual disputes.  The determination will finally determine the entire cause of matter in this action.  The application clearly falls within the ambit of Order 14A.  Accordingly, I answer the questions in favour of the Government, following the sequence as they appear in the Summons, as follows:

1(1).  Yes;

1(2).  No, the Plaintiff was not exonerated;

2.      Yes.

3.      No, the Plaintiff’s Tender was non-compliant and the Government was entitled to reject it by reason thereof.

71.  The action ought to be dismissed.

COSTS

72.  Costs should follow the event and be to the Government.

73.  Whilst I greatly appreciate the assistance which Mr Tong SC and Ms Tong have rendered to the Court, I am of the view that this matter was not of such complexity as to warrant the engagement of 2 counsel.    I therefore only allow the fees of a senior counsel.

74.  Similarly, this matter is not so complicated or urgent as to warrant more than one fee earners.  Hence only the fees of one government counsel will be allowed.  The Government has conceded that attendance by law clerk on filing and service should be reduced.

75.  It is acceptable for costs of mediation to be included.

76.  Costs of summary assessment are disallowed as a matter of principle: paragraph 13 of PD 14.3.

77.  I summarily assess the costs at $750,000.

ORDER

78.  I order that:

(1)  The questions be answered as per paragraph 70 above and that the action be dismissed;

(2)  On a nisi basis, costs shall be to the Defendant, summarily assessed and allowed at $750,000.

79.  I thank counsel for their assistance.