FAIRLITE INDUSTRIES LTD v. FOSROC HONG KONG LTD

HCA3893/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3893 OF 2002

---------------------

----------------------

-------------------------

J U D G M E N T

-------------------------

1. In 2001, the plaintiff (“Fairlite”) was the buyer and the defendant (“Fosroc”) was the seller of road surfacing materials.  Fairlite was the sub-contractor engaged by “Hip Hing” who was the main contractor constructing a new Bus Depot in Chai Wan for its employer, “New World First Bus”.  Fairlite therefore entered into a contract of sale with Fosroc for the materials necessary to surface the four floors of the depot and the ramps leading from one floor to the next plus the roof.  The total area of road surfacing was approximately 26,000 square metres.  The surface was a high-grade anti-skid surface.

2. Fairlite’s contract with Hip Hing was completed in 2001 and the Depot duly went into operation soon after.  It has continuously operated since.

3. However Fairlite has not paid Fosroc for the materials supplied, a sum of $2,993,680.  Fairlite contends that the materials were defective and, having been laid, have resulted in a substandard surface.  Fairlite alleges that the materials supplied did not comply with the specifications which Fosroc was required under the contract to meet and further that the materials were not of merchantable quality or fit for the purpose for which they were intended.

4. Fairlite claims that the surface should be entirely dug up and replaced with different, superior, more expensive materials which will cost, in 2008, approximately $14 million.  Fairlite was paid approximately $5 million by Hip Hing in 2001.

5. There is no issue that Fosroc supplied the correct quantity of materials, on time and at an agreed price.  Prima facie therefore Fairlite owes Fosroc the contract sum of $2,993,680 plus interest which Fosroc claims by counterclaim.

OVERVIEW

6. The materials supplied consist of three parts which have to be applied to a clean concrete surface in order to obtain the skid resistance which was required for the buses leaving and entering the depot.  For some reason the buses were treated to a superior surface when being parked up overnight than when out on the streets of Hong Kong transporting passengers. 

7. The three parts of the finished product were firstly, Nitoprime; secondly, Cicol ET Slurry and finally, Dynagrip aggregate.  The Nitoprime and the Slurry are mixed together, the mixture is applied to the concrete, then, soon afterwards when the mixture is still sticky, the Dynagrip is applied by dropping it vertically onto the mixture.

8. On the first day of the trial (which lasted six days) the court, legal representatives and expert witnesses attended “a view” at the Chai Wan Bus Depot.  The main visible complaints are two-fold.  Firstly, there has been rusting.  The surface, especially on the roof, has rusted.  This is caused by an excess of iron in the Dynagrip.  Fairlite contends that this is a continuous process and that it weakens the surface.  As more particles rust away (particularly if exposed to the elements such as on the roof), more are exposed and the skid resistant capabilities are lessened.  Fosroc contends that the rusting was largely confined to the roof, it was merely cosmetic, it is not a continuous process and was only a problem in the early days and it is no longer a problem.

9. Secondly, bare patches have appeared.  Fairlite contends that this is due to defects in the Dynagrip.  Fosroc contends it is due to poor workmanship when the surface was applied in 2001.  The work had been sub-sub-contracted to “Union Engineering” who, but for retention money, have been paid.  The bald patches that were observed on the ‘view’ were concentrated at bends leading to the ramps going from one floor to the next.  The ramps themselves and the level surfaces at each floor appeared reasonably unaffected.  The roof area had areas of bald patches.  The patches themselves were small but obvious on the bends.  It was accepted that patches began to appear soon after the surface was laid.  The deterioration of the surface at the bends has continued over the years.  Fairlite says the deterioration is because of defective materials, Fosroc says it is because of normal wear and tear on a poorly laid surface.  It is a fact that the bends or corners are more vulnerable to deterioration (regardless of the root cause) because of greater lateral forces from the bus tyres created at those locations.

10. A reasonable life span for such a surface is 10 years.  That does not mean that it will be useless after 10 years, neither does it mean it should still be pristine after 10 years.  It means it should perform as a sufficient skid resistant surface for 10 years.  The depot has been fully operational since 2001, a period of nearly 7 years.  There have been no complaints or incidents arising from the day-to-day use of the Depot by the drivers or management.

11. I have heard evidence from two witnesses of fact; Mr Lam Moon Tai, a general manager of Fairlite and Mr Anthony Tsang, a sales manager for Fosroc.  Fairlite’s  expert witness was Dr Eric C.H. Lim, PhD MHKIE.  Fosroc’s expert witness was Mr Adrian Bell, a Chartered Chemist F.R.S.C. (UK) and MIQA (UK).  Fairlite also called a quantity surveying expert on the issue of the valuation of product and Fairlite’s loss of enjoyment claim, Mr Leo F.M. Chan.

12. Fairlite was represented by Mr Yeung Ming Tai, Fosroc by Mr Colin Wright.

13. Broadly speaking there have been two main areas of debate; the first legal, the second, scientific.  The legal debate has been what constitutes the contract by which these parties are bound.  Having established that, the scientific issue will determine whether or not Fosroc has been in breach of its contract of sale.  It is important to remember that this is a sale of goods contract between commercial parties.  What did Fosroc agree to sell and what did Fairlite agree to buy and on what terms?

THE CONTRACT

14. There are two main areas of dispute as to what documents have or have not been incorporated into the contract. 

(A)     The standard terms and conditions

15. The key contractual document is a quotation sent by Fosroc to Fairlite.  The quotation was faxed to Fairlite on 9 March 2001.  Only the front of the page was faxed.  It was accepted, signed and returned by Mr Lam on 15 March 2001.  The front page of the faxed quotation bears the words “In accordance with our standard Terms and Conditions (“STCs”) of Sale which are printed on the reverse side of this quotation”.

(i) Incoporated?

16. Fairlite’s case is that the STCs were not incorporated into the contract and it is not bound by them.  Fairlite’s argument is based on the contention that only the front page was faxed and the STCs were not brought to their attention before the fax was accepted on 15 March.

17. Fosroc agrees that only the front page was faxed but states, through the evidence of Mr Tsang, that the original containing the STCs was posted within a day or two of the fax on 9 March.  Fosroc further submits that the front page clearly refers to the STCs, the original was posted (which must be true because the original was produced by Fairlite on discovery), Fairlite knew of the STCs both by virtue of the original being sent in good time and therefore probably received before 15 March and also by virtue of the previous transactions between the parties in which the identical STCs formed part of such dealings.

18. I am strongly of the view that both the evidence and the law on this issue supports Fosroc’s position.  I am satisfied that the words on the front of the faxed copy were sufficient to bring the existence of the STCs to the attention of Fairlite.  I am satisfied that Fosroc did post them to Fairlite within a reasonable time and that Fairlite would have received them.  I am satisfied that Fairlite would have been aware of the content of the STCs both from their previous dealings and from its receipt of the original in question.

19. There was no consensus between the parties as to the extent of the previous dealings.  Fosroc referred to 12 previous dealings.  Fairlite denied knowledge of 7 of those 12.  In any event, the parties had known each other for many years and had had some previous dealings which involved identical STCs which were sufficiently numerous, in my judgment, to satisfy me that Fairlite was aware of and conversant with them and realized that they were included in this contract.  Fairlite has relied on the fact that only the front page was faxed on 9 March in an attempt to escape being bound by terms which are admittedly stringent.  However, as Mr Wright pointed out, they are terms between commercial parties who have done business before.  When considering the terms themselves it is necessary to evaluate them not as terms between a manufacturer and as consumer but between two commercial parties.  Before moving on to consider the actual terms upon which Fosroc relies it is necessary for me to find, as a matter of law, that reasonable and adequate notice of the terms was given; they were sufficiently identified, intended to apply to the contract and known to and understood by Fairlite.  I do so.

(ii) Binding?

20. In the Re-amended defence and counterclaim Fosroc cites many of the terms.  The key ones are as follows :

(a) Clause 1.1

“… Accordingly, to avoid doubt, if the Buyer does not wish to contract on these terms and conditions, it should notify the Seller (the Defendant), in a separate writing from any document containing the Buyer’s own terms and conditions or containing printed reference thereto stating that it does not wish to do so.”

(b) Clause 1.2

“ No stipulation or representation made or attempted to be made at any time by either party to the contract or by any person on behalf of either such party shall be held to vary, modify or contradict these Terms and Conditions and any express statement or stipulation appearing on the face of this document shall be valid unless agreed in writing by both parties.”

(c) Clause 7

“Save where the buyer deals as a consumer as defined by ordinance all implied terms, conditions or warranties as to :

(i) the correspondence of the Goods to any description and/or

(ii) the quality of the Goods and/or

(iii) the fitness of the Goods for any purpose whatsoever (whether made known to the Seller or not) are hereby excluded from the contract.”

(d) Clause 8

“No liability whatsoever shall be incurred by the Seller (the Defendant) to the Buyer in respect of any express terms of the contract whether a condition or a warranty including any liability otherwise arising or alleged to have arisen from a breach of such term where the said term relates or refers to any way to

(i) the correspondence of the Goods to any description and/or

(ii) the quality of the Goods and/or

(iii) the fitness of the Goods for any purpose whatsoever.”

(e) Clause 10

“It is believed that, in the event of any Goods supplied hereunder proving defective, whether by reason of negligence on the part of the Seller (the Defendant) or otherwise, the liability of the Seller (the Defendant) shall be limited to the replacement of any defective Goods and that the Seller shall in no circumstances be liable for any other loss, whether direct or consequential suffered by the Buyer.”

21. Mr Yeung on behalf of Fairlite submits that even if the above terms were incorporated into the contract, they cannot bind Fairlite because they are too onerous and unusual.  Mr Wright submits they are normal in the trade as between commercial customers because the seller has no control over how the materials will be used or applied by the buyer.

22. As a matter of general application, I consider Mr Wright to be correct.  However, whether or not a particular term is too onerous or unusual must be viewed in context.  In this case, the purpose to which the materials were to be put were plain and obvious and known to both parties.  The parties had previous dealings.  The product was known to Fairlite and Fairlite’s company and its type of works were known to Fosroc.  Moreover, the skill with which Fairlite might use the product does not alter its merchantable quality or its fitness for purpose, in this case.  In such a context, I think that it is both unusual and too onerous on Fairlite for Fosroc to exclude itself from the usual implied terms through Clause 7 of the STCs.  Interestingly also, Fosroc only pleaded and relied on Clause 7 in its 3^rd draft of its Defence, the Re-Amended Defence and Counterclaim.  This final version is dated 9 January 2008.

23. I thus proceed on the basis that in order to succeed Fairlite must establish that Fosroc is in breach of an implied term to supply materials of merchantable quality which were fit for their intended purpose.  A second reason why I proceed on this basis is because the second issue, concerning which documents were or were not incorporated into the contract, I also resolve in Fosroc’s favour.  That is the issue of the Data Sheets to which I now turn.

(B)    The Data Sheets

24. In respect of all its products, Fosroc published Data Sheets.  In this case on the Dynagrip Data Sheet is the one in issue.  It is only in relation to the Dynagrip that Fairlite contends Fosroc supplied defective material.  No issue is taken with the primer and slurry.  The Dynagrip is the “aggregate” (very small grit-like particles) which is dropped onto the slurry surface.  Fairlite makes various complaints about the Dynagrip, including the size of the particles, their hardness, their “crushability” and the iron content therein.

25. Fairlite submits that the specifications in the Data Sheet were terms of the contract of which Fosroc is in breach.  These issues have been the subject of the expert evidence which I deal with later.  At this stage, I am only concerned with the legal question namely, is the Data Sheet incorporated into the contract.

26. I am satisfied that it is not.

27. Firstly, the STCs do not permit any variations or additions to the contract as evidenced by the signed quotation.  The Data Sheet would constitute such an addition.

28. Secondly, the Data Sheet is an information sheet about the product.  It gives technical information about the product and advice on how to apply it.  It undoubtedly provides a guide as to whether the materials supplied were of merchantable quality but it falls short of being a contractual document.  In deciding whether the materials were of merchantable quality some margin of error must, as a matter of common sense, be allowed when the product supplied is being compared with the exact specifications set out in the Data Sheet.  What is an acceptable margin of error is a matter for the experts.  Thus, the expert evidence taken together with the facts and figures in the Data Sheet will be a relevant consideration when deciding if Fosroc is in breach of the implied terms.

29. Thirdly, the Data Sheet itself is headed “Dynagrip – a monolithic surface hardening compound”.  In fact, in the present case, Dynagrip was not purchased as a monolithic surface hardening compound, it was purchased for another of its uses, namely as an anti-skid paving surface.

30. Fourthly, the Data Sheet relied on by Fairlite concludes with an “important note” reiterating that Dynagrip is sold “subject to its standard terms and conditions of sale, copies of which may be obtained on request”.  In full it states :

“Important Note  Fosroc products are guaranteed against defecting materials and manufacture and are sold subject to its standard terms and conditions of sale, copies of which may be obtained on request.  Whilst Fosroc endeavours to ensure that any advice, recommendation, specification or information it may give is accurate and correct, it cannot because it has no direct or continuous control over where or how its products are applied, accept any liability either directly or indirectly arising from the use of its products, whether or not in accordance with any advice, specification, recommendation or information given by it.”

31. The tenor of this note is also supportive of the argument that the Data Sheet is a pre-contractual information sheet, not intended to bind Fosroc each and every time it enters into a contract of sale.

32. I now turn to the expert evidence which I have considered in the relatively narrow context, namely, was the Dynagrip of merchantable quality and fit for the purpose of providing an anti-skid road surface at the Chai Wan First World Bus Depot?  The alternative question posed by Fairlite, namely did the non-attainment of the specifications in Data Sheet entitle Fairlite to reject the goods does not arise.

EXPERT EVIDENCE

33. I found both Dr Lim and Mr Bell to be helpful expert witnesses of the highest calibre.  No stone was left unturned, their evidence was widely canvassed and has been carefully considered.

34. The Data Sheet stated that Dynagrip has a “Mohs Hardness” of 9 (the maximum is 10), an aggregate crushing value of 8.2 (the lower the figure the more durable the material) and a specific gravity of 3.85.  The Data Sheet made no reference to the percentage iron content.  The agreed size of the Dynagrip aggregate was agreed to be 1–3 mm (a size suitable for light traffic).

35. In short, the test results of the Dynagrip supplied indicated the Mohs Hardness was 8, the crushing value 9, the specific gravity 3.51, the percentage over-sized was 25% and the iron content was high.

36. Given these differences both experts addressed the crucial issues namely :

(i) Were the defects, as observed since 2001, due to defective materials and/or poor workmanship at the time of application?

(ii) What effect, if any, did the defects have on the skid resistance properties of the surface and its reasonable life span?

37. I have considered the competing expert opinions concerning the root cause of the defects.  I have come to the conclusion that I cannot safely exclude one cause or the other as the reason for the defects which have emerged since 2001.  It is plainly arguable that both defective materials and poor workmanship have played a part.  Whether they played an equal part or unequal parts is very difficult to say.  Counsel’s submissions as to how the court should approach such a dilemma also differ.

38. Mr Wright submits that the primary burden is on Fairlite, as the buyer, to show that the goods were not of merchantable quality at the time of purchase.  If Fosroc can discharge an evidential burden in support of poor workmanship at the time of application, Fairlite’s duty is to disprove such poor workmanship on the balance of probabilities.  If Fairlite fails to disprove poor workmanship, it must also fail to prove that they were defective.

39. Mr Yeung submits that even if there was some evidence of poor workmanship, the totality of the evidence points to the conclusion that the dominant cause of the defects was defective materials.  He relies on an extract from Keating on Construction Contracts (8^th Edition) which states :

“(b)    the dominant cause approach.  If there are two causes, one the contractual responsibility of the defendant and the other the contractual responsibility of the claimant, the claimant succeeds if he establishes that the cause for which the defendant is responsible is the effective, dominant cause.  Which cause is dominant is a question of fact, which is not solved by the mere point of order in time, but is to be decided by applying common-sense standards.”

40. Fairlite advances the following arguments in support of its “dominant cause” approach.  According to the Data Sheet, the Dynagrip aggregates should be high abrasion resistant, have high non-slip properties and should not rust when wet.  However, the skid resistance tests carried out in May 2003 and August 2006 were not satisfactory.  The expected results (of 45–50 on level surfaces and 60 on ramps) were not always achieved.

41. Also, the aggregates contained too much “free iron” which caused rusting when wet.  Significantly, the rusting in the exposed areas, particularly the roof, was worse.  Dr Lim explained that the rusting reduced both the size and the density of the aggregates and therefore its effectiveness.  The exposure of underlying aggregates (as a result of the initial rusting) made the remaining aggregates also vulnerable to further rusting.  Dr Lim described this as his “continuous rusting theory”.  Mr Bell did not agree with this theory.  He opined that the initial rusting was only an early problem which has not continued and has not affected the performance of the surface.  He pointed to the fact that little or no rusting is observable now.  He agreed that the main area of the early rusting problem was on the roof.

42. As for the hardness of the aggregates, Dr Lim said that they should have had a “Mohs” hardness of 9 but were in fact 8.  Their relative softness has led to premature smoothing of the surface and loss of non-slip properties.  Mr Bell’s position was that 8 was sufficiently hard and that the Mohs scale, although it has withstood the test of time, is only a rough and ready guide which does not provide for readings between whole digits.  Thus if a substance fails to reach a hardness of 9 it is graded as 8 even if it is, in fact 8.9.  

43. The crushing value of 9.0 (as tested) compared to 8.2 (as stated in the Data Sheet) also led to a more rapid deterioration according to Dr Lim. 

44. Mr Yeung finally submitted that even if there was poor workmanship at the time of the application it should not be regarded as a cause of the deterioration of the surface because the defects, as found, would have inevitably occurred due to the substandard materials. 

45. Fosroc does not accept that the facts and figures relating to hardness, iron content, crushing values and size have any significant effect on the performance of the surface.  Mr Wright submits that the defects, as seen, are more likely than not to have been caused by poor workmanship.  Mr Bell opined that, generally speaking, the aggregate was acceptable once reasonable margins of error had been applied to the test results.

46. Mr Wright pointed out that the application of the three products has to be done with great care.  The primer and slurry have to be well mixed.  If it is not, the mixture will harden unevenly and the aggregates will then not adhere properly.  The aggregates have to be applied within a relatively short time, whilst the mixture is of the correct texture and have to be dropped onto the slurry surface vertically from a certain height, not strewn laterally.  Fairlite had not called any evidence that its sub-sub-contractor, Union Engineering, had applied the surface competently but Mr Tsang for Fosroc had given evidence that he had seen workmen at the time throwing the aggregate rather than dropping it.  (Albeit this oral evidence was inconsistent with a letter written by him at the time that the aggregate had been applied “efficiently and satisfactorily”.)  Mr Wright also submitted that the location of the bald patches (mainly on the bends to the ramps) is equally consistent with either cause.  Whether the cause is poor materials or poor workmanship, it is the corners which are subjected to the greatest forces, namely when the buses are turning. 

47. Mr Yeung, on the other hand, submits that the location of the bald patches at the corners supports the poor materials explanation because otherwise there would be patches at other random places wherever the workmanship happened to fall short.  I do not accept this argument.  It seems to me that bald patches would be more likely to appear at the more vulnerable locations regardless of the cause.

48. The task of deciding this issue has been difficult.  I got the impression that both experts respected the other’s point of view.  Mr Bell made proper concessions where he deemed it proper to do so.  

49. I have come to the following conclusions.  On the available evidence neither explanation can be safely excluded.  The present state of the surface is probably due to a combination of poor workmanship, poor aggregates and ordinary were and tear.  Using the Data Sheet as a guide, the aggregates were not of a sufficiently high quality to provide the surface required in all locations.  It was good enough for all the covered level areas and most of the ramps but was not good enough for those locations where the lateral forces were at their greatest or where the surface was exposed to the elements.  The combined effect of the aggregate’s various shortcomings compared to the specifications in the Data Sheet, as proved by the various tests that were carried out, has led to this conclusion.

50. Mr Tsang’s oral testimony, the lack of evidence from Union Engineering and the presence of “ridges” on the surface, leads me to conclude also that the standard of workmanship, in some places, was below an acceptable standard (“ridges” being evidence of incorrect application of the Dynagrip).  However, the deficiencies in the aggregate itself were sufficiently significant to label the particular consignment as being not of merchantable quality to surface the corners.

51. On a generous estimate the affected areas constitute about 20% of the whole area.  Mr Bell’s description of the affected areas and my own assessment made during the view has enabled me to make this estimation.  It is, in my judgment, unnecessary to dig up the entire surface and replace it (as contended for by Dr Lim).  The remaining 80% has provided an adequate surface for seven years.  I think it is unnecessary to further consider the detailed analysis of the various tests done at various times and various places.  The short answer is that, but for the corners, the surface has performed adequately and has worn as expected.  I prefer Mr Bell’s opinion that “patch repairs” can be effectively carried out.

52. To this limited extent Fairlite has proved on the balance of probabilities that the aggregates were not of merchantable quality because they were not fit for the purpose of providing the required anti-skid surface at the corners and to a lesser extent on parts of the roof for a period of at least 10 years.  

LOSS AND DAMAGE

53. There are many unusual features in this aspect of the claim. 

54. Firstly, Fairlite does not own the road surface, New World First Bus owns it.  Secondly, Fairlite has been paid $4.867 million by Hip Hing, namely the contract price less retention money.  Fairlite seems to be under no obligation to effect repairs and it has taken no steps to recover its retention money.  Thirdly the Depot has been operating adequately for almost 7 years.  All parties have been working on a basis of the road surface having a life span of 10 years.  If the corners are repaired now New World First Bus will benefit by having brand new corners which will last until 2018, i.e. 7 years longer than originally expected. 

55. In my judgment Fairlite’s claim for loss of enjoyment must fail at the outset.  It has never been their property to enjoy.  Mr Leo Chan’s very lengthy valuation report merely tells us that the value of the road surface has depreciated significantly since 2001 based on its value being $0 in 2011.  If it were worth the contract price ($4.45 million) in 2001 it would be worth $594,604 after 7 years of depreciation, approximately 13% of its original value. 

56. Such calculations are of only peripheral relevance to the court’s task.  The value of the “property” being the contract price is artificial and the life span of 10 years is, in reality, low and the nominal value of $0 after 10 years is unrealistic.  This is not a criticism of Mr Chan.  He did what he was asked to do.

57. Fairlite is claming damages for breach of a contract of sale.  Fairlite has assessed its “damage” as the cost of doing the entire job again, 7 years later with a more expensive product, Hi Poly 830SR.  The quotation is just short of $14 million.  

58. In my judgment a more realistic starting point is to estimate what it would cost if Fosroc did the job again using the same product.  Allowing for some inflation since 2001 a figure of $7.5 million might be appropriate now.  The cost of replacing 20% of the entire surface would therefore be approximately $1.5 million.  

59. The present position however is that it is not known if New World First Bus would be willing to disrupt the operation of the Depot to carry out repairs.  It is not known if they would engage Hip Hing.  It is not known if Hip Hing would sub-contract the work to Fairlite.  It is not known if Fairlite would only agree to carry out the works if it was paid the retention money being withheld by Hip Hing.  Furthermore, Union Engineering is still waiting for its retention money from Fairlite. 

60. The estimated figure of $1.5 million needed to effect patch repairs should be further reduced to reflect the fact that the need for the repairs was not solely due, according to this judgment, to defective aggregate.  I have found that the defective aggregate made a significant contribution to the deterioration experienced at the corners but I have not excluded poor workmanship either.  On top of which general wear and tear has played its part.  Corners are likely to be the first areas to show signs of deterioration. 

61. The figure of $1.5 million should accordingly be reduced.  I shall reduce it to $1.2 million.  (However this should not be taken to mean that I find poor materials to be 80% of the cause and poor workmanship 20% of the cause.  It is simply not possible to make such a judgment.  It is merely a broad-brush recognition that poor workmanship played a part.)  It also recognizes that an element of “betterment” needs to be accounted for.

62. I further recognize that I have adopted a broad-brush approach to the question of loss and damage generally.  I consider it permissible to do so in this case as the parties need to know the court’s assessment of their financial exposure as a result of the findings made.  To adjourn further in order to adduce evidence of, for example, the actual rate of inflation since 2001 or the actual cost of Dynagrip in 2008 or the actual percentage of road surface in need of repairs would be an unnecessary further expense and delay.

JUDGMENT

63. It is logical to deal with the counterclaim first.  80% of the materials supplied were merchantable and fit for providing an adequate anti-skid surface on the level areas and the straight parts of the ramps.  This material must be paid for.  80% of the counterclaim is $2,394,944.  There will be judgment for this sum to Fosroc plus interest at prime plus 1% from 1 January 2002.

64. The appropriate order on the claim is more difficult.  I have decided to deal with it by way of an indemnity.  Fosroc will indemnify Fairlite to the extent of $1.2 million against any expenses incurred by Fairlite for patch repair work carried out by them at the Depot at the locations referred to herein (admittedly imprecisely) as “the corners”.  What, if any, work is carried out by Fairlite and with what materials will, no doubt, be the subject of discussion between New World First Bus and Fairlite, and, possibly, Hip Hing.  Fosroc merely needs to know the extent of its financial exposure to any such future works as may be agreed between those parties, to which, they will have no input.  No pre-trial interest should be added because the sum is gleaned from an estimation of current costs.  Should the actual cost of patch repairs be less than $1.2 million the indemnity will be in the lesser sum.

COSTS

65. I make the following nisi orders, in the exercise of my discretion, in an attempt to reflect the respective merits of the case.  On the claim Fosroc shall pay 25% of Fairlite’s costs.  On the counterclaim Fairlite shall pay 75% of Fosroc’s costs.