CHINA HARBOUR ENGINEERING CO (GROUP) v. THE SECRETARY FOR JUSTICE OF THE HKSAR

HCCT44/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO.44 OF 2004

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J U D G M E N T

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1. In late 2002 the plaintiff (“China Harbour”) was one of five tenderers who had pre-qualified for tendering for a very large construction project involving the reclamation works in the Hong Kong Harbour between Central and Wanchai.  In these proceedings they claim damages for breach of contract arising out of the fact that the contract was not awarded to them.  It was awarded to a company I shall refer to as “Leightons”.

2. It is agreed between the parties (represented by Mr John Scott SC on behalf of China Harbour and Ms Teresa Cheng SC on behalf of the defendant) that a contract in law exists in these circumstances.  The defendant is bound to consider all valid tenders properly.  Both parties agree the law is as stated by Bingham LJ in Blackpool & Fylde Aero Club v. Blackpool Borough Council [1990] 1 WLR at p.1202 :

“… 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. …”

This has been referred to as a “process contract”.

The construction contract

3. It is important in this case to summarise, at the outset, what the tenderers were bidding for.  To simplify matters I shall refer to three parts of the works.  The Government was seeking tenders to carry out, inter alia :

(a)      An 18 hectare area of reclamation of the harbour.

(b)     A 500 metre tunnel known as the Wanchai by pass (the “CWB” tunnel).

(c)     A 40 metre extension overrun tunnel for the Airport Railway Station (the “40 metre EOT”).

4. Only (a) was guaranteed to the successful bidder.  (b) and (c) could be excised from the works at a future date.  The tenders had to include prices for all three.  All tenderers knew that (b) and (c) may never go ahead, or at least, not be performed by the successful bidder.  The “excisable” status of (b) was of particular significance because it formed a substantial part of the overall works.  In very round terms the entire project was worth about $3.7 billion and (b) was worth about $1.00 billion out of the entire sum.

5. It was common knowledge at the material time that there was a real risk that item (b) would not go ahead.  The Government was therefore concerned to avoid price manipulation in the tenders.  If there was a risk that (b) would not go ahead it would be tempting to a contractor to under-price (b) and load (a) so that they would be in a win-win situation.  If (b) was excised the loaded price for (a) would remain; if it was not excised their entire sum would still be genuine.

6. The Government therefore included SCT-2 in the tender.  This set out a formula whereby the price for (b) was (in general terms) to represent at least 33.7% of the overall price.  SCT-2 stated as follows :

“SCT 2  PRICING OF CENTRAL WAN CHAI BYPASS WORKS

The tenderer shall price the Bill Nos. A2, N1 and N2 such that the following condition is complied with:-

                                                             The total of Bill Nos. A2, N1 and N2
          ______________________________________________________________________________ >33.7%

Grand total — total of Bill Nos.A3, A4, A5, P1, P2 and P3 — Contingency Sum

Failure to price the tender in accordance with the above condition may invalidate the tender.”

7. The construction of this clause is the first and key issue in this case.

8. It transpired that of the five tenders, China Harbour’s was the only one which complied with the above arithmetic.  It was the only one which had priced the CWB works above 33.7%.  The others were below 33.7%, the lowest being 28.27%.  Leightons’ was 30.32%, China Harbour’s was 34.21%.

9. Mr Scott’s primary contention was that, as China Harbour was the only compliant tender it should have been awarded the contract.  He submitted that the use of “shall” and “is” in the first part of SCT-2 made the clause mandatory and that all non-compliant tenders were invalid.  He submitted that the word “may” in the second half of SCT-2 should be read to mean “must”.

10. Ms Cheng, on the other hand, submitted that the Government, because of the word “may”, had a discretion not to invalidate non-compliant tenders.  The clause, read as a whole, she submitted, simply meant that a tenderer who chose not to comply with the stated arithmetic ran the risk of having its tender disqualified without further ado and with no chance of appeal or complaint.  Those tenderers who complied with the arithmetic ran no such risk.  For reasons which follow I have concluded that Ms Cheng is plainly right in her argument.

11. First however, I will complete the factual background as I find it to be.  The Government had engaged the firm of “Atkins” as consultants to advise on the tenders.  Prior to the production of their report, on 28 January 2003, they had been advised by the Territory Development Department (“TDD” ) the Government department responsible for this contract, that “any tender that did not comply with the pricing condition in SCT-2 should not be recommended”.  Thus, on this advice, Atkins had no choice but to recommend the only compliant tender, that of China Harbour.

12. It is necessary to set out the key parts of the report as follows :

“The rationale behind this pricing condition was to ensure that competitive prices were obtained for the committed CRIII works since, in the absence of the pricing condition, there would have been a strong commercial incentive for tenderers to price the CRIII works high (and the CWB low) in order to maximize their profits in the event that the CWB was excised from the contract.

The 33.7% minimum limit was calculated based on the pre-tender estimate of the works and is considered to be reasonable.

…

The percentage value of the CWB, calculated in accordance with the formula above, for each of the tenders is as follows :

Name of Tenderer	Percentage Value of CWB Works
Penta-Ocean – Paul Y –  BSGL Joint Venture	28.27
Leighton – China State –  Van Oord Joint Venture	30.32
Gammon Skanska Limited	29.26
China Harbour Engineering Company (Group)	34.21
Balfour Beatty – Leader –  Ham Join Venture	…

Only the tender submitted by China Harbour Engineering Company (Group) complies with the pricing condition of SCT 2.”

(The “Balfour Beatty” figures are “blacked out” throughout the report for reasons of confidentiality.  They being the only one of the four losing bids who did not make a complaint to the “Review Body on Bid Challenges” (the “Review Body”).)

13. The report continued :

“Recommended Tender

We recommend that the tender submitted by China Harbour Engineering Company (Group) in the sum of $3,785,728,856.00 be accepted.  The recommended tender obtains the second highest overall score in respect of the CRIII + CWB + 40m EOT scenario, based on the net present values of the tender sums.

The tender with the second highest overall score rather than the tender with the highest overall score (i.e. Leighton – China State  – Van Oord Joint Venture) is recommended because the highest scoring tender does not comply with the CWB pricing condition stipulated in SCT 2 (refer to para.E (xvii) above).

Moreover, if the tenders are assessed on the basis that the CWB will be excised from the contract for any unpredicted reasons (i.e. CRIII + 40m EOT scenario referred to in para.E (xiii) above), the recommended tender attains the highest overall score and is the lowest tender.

Based on the net present values of the tender sums (refer to para.E (xiv) above), the recommended tender is the second lowest for the CRIII + CWB + 40m EOT scenario and the lowest for the CRIII + 40m EOT scenario, being $16M and $112M lower than the tender submitted by Leighton  – China State – Van Oord Joint Venture for each respective scenario.

We confirm that the recommended tender complies with all the tender terms, conditions and specifications.  The recommended tender was signed by HU Jian Hua who is authorized to sign contracts on behalf of the tenderer.”

14. The following facts emerge from this recommendation :

(a)      Atkins followed its instructions from TDD and recommended the only compliant tender.

(b)     The highest score was achieved by Leightons.  (The scoring system awards points for many different factors, price being merely one of them.)

(c)     China Harbour was alone in complying with SCT-2.

(d)     China Harbour’s bid was $3.786 billion; Leightons was $3.788 billion.

(e)      If all three works ((a), (b) and (c) supra) went ahead Leightons’ was the best bid.  If only (a) and (c) went ahead (i.e. CWB being excised) China Harbour’s was the best bid.

15. Following the report two meetings of the Central Tender Board (“CTB”) were held on 30 January and 6 February 2003.  It was the CTB’s responsibility to decide which tender should be accepted.  The Deputy Secretary for Financial Services, Ms Elizabeth Tse Man Yee was a member of the CTB and gave evidence to the court.  I should say in passing that all five of the witnesses who gave evidence in this case (three for the plaintiff and two for the defendant) were witnesses who endeavoured to give honest and helpful evidence.  Ms Tse however as a witness of integrity and reliability was particularly impressive.

16. I will set out extracts from the minutes of the two meetings to demonstrate why Leightons was awarded the contract ahead of China Harbour.  Although it was always a “close run thing” China Harbour had been the front runner on 30 January but Leightons, for a specific reason, emerged the winner after the 6 February meeting.  The specific reason being the status of the CWB works at the material time. 

17. The extracts are as follows :

(i)      30 January 2003 :

“2.6      The Chairman said TDD indicated that only the tender submitted by China Harbour Engineering Company (Group) (China Harbour) complied with the pricing condition of SCT.  TDD proposed to disqualify the other four tenders received, on the grounds that they failed to comply with this pricing condition.  He asked if TDD could explain their approach.

2.7       Mr Cheung said the pricing condition was a pricing constraint.  TDD believed this should be taken into consideration in the tender evaluation, so as to be fair to all the tenderers.

2.8       The Chairman asked what TDD’s latest assessment was on whether the CWB tunnel works would proceed.

2.9         Mr Yeung said TDD had, at the time of invitation of tenders, held the view that it was likely that CWB works would proceed.  However, there had been a change of circumstances recently.  TDD was aware of an objection to the Harbour Park and in this connection, a threat of judicial review.  It would be difficult to forecast what would happen to the CWB works if the objector applied for such a judicial review.  The CWB tunnel works could not be authorized under the Roads Ordinance if the relevant Outline Zoning Plan was not authorized.  Without the works being authorized under the Roads Ordinance, TDD could not get funding for the CWB tunnel works.  TDD had to give an instruction within 17 or 18 months if the CWB tunnel works were to proceed.

2.10        The Chairman said TDD had not in the tender report set out clearly the justifications for exercising discretion under Clause SCT 2.  If these were related to any assessment by TDD on whether the CWB tunnel works would proceed, TDD should explain clearly their assessment in the tender report and why China Harbour’s offer was the most advantageous offer to the Government.

2.11     Mr Cheung agreed to supplement the tender report with further justifications and come back to the Board at its meeting scheduled for 6.2.2003.  Mrs Hung asked whether Clause SCT 2 had been covered by a tender addendum and if so, whether the tender addendum included any indication as to the chance of proceeding with the CWB tunnel works.  Mr Yeung confirmed that Clause SCT 2 had been covered by a tender addendum, which did not include any indication of the chance of proceeding with the CWB tunnel works.

2.12        Mrs Hung asked if TDD had told the prequalified tenderers how Clause SCT 2 would be applied at the pre-tender briefing session.  Mr Chan asked the same question.  Mr Yeung said as far as he could recall, Clause SCT 2 had not been raised as an issue at the pre-tender briefing session.  TDD had repeated at the briefing session what was stated in the Works Bureau Technical Circular (WBTC No.5/2000) regarding tender evaluation for tenders which contained work subject to excision.

2.13        In response to Members’ enquiry, Messrs Cheung and Yeung explained that the chance of the CWB works being ordered within the specified time period had been reduced; and these tunnel works now appeared to have a ‘slim’ rather than ‘likely’ chance of proceeding.  TDD would substantiate this latest assessment.

2.14    Members noted that in the light of TDD’s updated assessment, the more relevant basis for the tender evaluation should be the scenario covering ‘CRIII + 40mEOT’.  According to TDD’s tender report, China Harbour would be the highest combined-scoring firm.  Since China Harbour also complied with SCT 2, the question of disqualifying other firms under SCT 2 was not relevant.”

(ii)      6 February 2003 :

“2.7      Mr Lo said that according to Works Bureau Technical Circular (WBTC) No.5/2000, unless it was confirmed at the time of tender evaluation that certain works would NOT proceed, otherwise, the parts subject to excision should be included in the tender evaluation.  He believed the Government had not ruled out the CWB project.  He therefore considered that TDD should work on the basis of a contract with the CWB works included.  It followed that the CWB works should be included in the tender analysis by TDD.

2.8       The Board discussed TDD’s earlier assessment that the chance of the CWB works being able to be ordered by July 2004 was actually slim and thus the tender evaluation should only consider the CRIII + 40mEOT scenario.  Given Mr Lo’s clarification on the policy underlying the WBTC No.5/2000, and TDD’s clarification that Government should do everything possible to undertake the CWB works within the tenure of the CRIII contract (even if the option might be exercised beyond July 2004), Members agreed that pricing for CWB should not be dispensed with in the tender evaluation.  Based on TDD’s tender report, the highest-combined scorer under the CRIII + 40mEOT + CWB scenario was Leighton – China State – Van Oord Joint Venture.

2.9       Miss Tse asked if the tenderers had indicated in their proposals their programmes of proceeding with the CWB works.  She wanted to know how much float time existed for deferring the deadline for exercising the CWB option.  Mr Yeung said as far as he could recall, the tenderers had drawn up their plans for mobilization of resources on the basis of TDD’s programme, i.e. the instruction for the CWB works would be given in about 18 months’ time.  Not much float existed.

2.10    On the issue of whether TDD should exercise its discretion under SCT2, Miss Tse asked TDD how the 33.7% minimum limit for CWB works was calculated in the first place.  Mr Cheung said the 33.7% minimum limit for CWB works was calculated on the basis of the pre-tender estimates of the CWB and other works concerned.  In response to Members’ enquiry, TDD added that the average tendered price for the CWB works was some 25% lower than Government’s pre-tender estimate.  For the main CRIII works, however, the average tendered price was only about 3% lower than the Government’s pre-tender estimate.  The accuracy of the original pre-tender estimates was thus dubious; the outturn also suggested that TDD’s original ratio between the CWB and other works (i.e. the 33.7%) tended to be on the high side.

2.11     The Board noted that the percentage value of CWB works quoted by all tenders ranged between 28.27% and 34.21%.  That for Leighton – China State – Van Oord Joint Venture (30.32%) was in middle of the range.  TDD accepted that there was no evidence of price manipulation amongst the various bids.”

18. Ms Tse confirmed the accuracy of these minutes.  Put simply they amount to this : firstly, the best bid on the basis that the CWB works would go ahead was preferred because, at the material time, it had not been excised and, as Ms Tse confirmed in her evidence, it was desirable for both the Government and the successful contractor that the same contractor would, if possible, do all the works and secondly, SCT-2 was not a mandatory provision, it gave the procuring entity a discretion to award the contract to a non-compliant tender.

19. In my judgment, for the reasons which follow, I have concluded that :

(i)      all bidders were treated equally and fairly;

(ii)      Leightons’ bid, whilst not compliant with SCT-2, was not invalidated and on reasonable grounds; and

(iii)     SCT-2 read as a whole did not create a mandatory or essential requirement.

Reasons

20. (a)      I am not persuaded that in the context of this contract “may” means “must”.  Read as a whole, if “may” means “must”, the final sentence serves no purpose and should have been omitted.  It was included for a reason.  On a simple reading the message is obvious.  The message to tenderers is — do your sums according to this equation, if you do not you run the risk of being disqualified however good the rest of your bid is.

21. That this is a clear and unambiguous meaning is endorsed by the fact, inter alia, that every tenderer except China Harbour read it and interpreted it the same way.  China Harbour took a cautious approach which guaranteed getting past first base.  All the others risked early disqualification.

22. In my judgment the words of Lord Hoffmann in ICS Ltd v. West Bromwich Building Society [1998] 1 WLR at 912 and 913, when applied to SCT-2 achieve such a result :

“Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

…

The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.  On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require the judge to attribute to the parties an intention which they plainly could not have had …”

23. (b)     To use Lord Hoffmann’s expression nothing went “wrong with the language” in this case.  There was no secret or mystery about the rationale behind SCT-2, namely that it was because of the uncertainty surrounding the CWB works.

24. In November 2002 it was apparent that all tenderers were having difficulty complying with the 33.7% provision.  It was even proposed at a meeting of the Hong Kong Construction Association Ltd that a letter was sent out on behalf of all tenderers stating that 33.7% could not be complied with (i.e. because it was too high) and seeking confirmation from the TDD that bids below 33.7% would not be invalidated.  In the event the letter was not sent out.  Ms Cheng rightly pointed out that if China Harbour were genuinely unsure they could have sent such a letter on their own behalf.  They did not and neither did any other contractor.

25. Moreover, the TDD, through Atkins, issued a Tender Query which provided the answer again.  If “may” was to mean anything other than “may” they would surely have said so.  The Tender Query was as follows :

“TENDER QUERY NO. 263

Query

What will be the consequence if a tenderer prices the Bill Nos. A2, N1 and N2 not in accordance with the condition stipulated in SCT2?

—————————————————————————

Response

Failure to price the tender in accordance with the condition stipulated in SCT2 may invalidate the tender.”

26. Mr Scott described this response as “unhelpful”.  On the contrary, I regard it as helpful in the sense that it reiterates the unambiguous and clear meaning of SCT-2.  The only question that would face a contractor at the time of tendering would be — shall we risk being disqualified by reason of non-compliance or shall we not?

27. (c)      Not only should SCT-2 be read as a whole but it should be read in the context of the entire process contract, namely all the tender documents.  There are many other examples of the tenderer being directed that they “shall” do something and, in the same clause, being told that if they do not their bid “may” be disqualified.  Ms Cheng has listed them in her written submission.  They are as follows :

“(1) In GCT6 provides that ‘Any unauthorised alternation or erasure or obliteration to the text of the documents may cause the tender to be disqualified.’

(2)   GCT9 provides that ‘Any qualifications of the tender may cause the tender to be disqualified.’

(3)   SCT13(A)(B) and (D) provide that ‘(A) The tender shall submit…’ and ‘(B) Where the tenderer is a joint venture, it shall submit together with its tender :…’ and ‘(D) Failure to make the relevant submission under (A) or, as the case may be, (B) above may invalidate the tender.’

(4)   SCT5(5) provides that ‘The tenderer shall submit such further details and calculations pertaining to the design as may be requested to enable a proper assessment of the tender to be made.  Failure to do so by the tenderer may render his tender invalid.’

(5)   SCT10(b) provides that ‘The tenderer must submit with his tender a copy of a letter from the concrete supplier… Failure to submit a copy of such letter may invalidate the tender.’

(6)   SCT11(c) provides that ‘Failure to submit the duly executed Letter of Indemnity… required under SCT11(b) may invalidate the tender.’”

28. It is obviously desirable that, even though some of the above “failures” may be regarded as more serious than others, the word “may” in each case should consistently mean the same thing.  It would be confusing for “may” to mean “may” in all but one case, where it should there mean “must”.

29. By the same token, there are many examples in the tender documents of mandatory provisions where non-compliance will have an inevitable consequence.  The words used are consistently clear.  Again Ms Cheng provided examples :

“(1) SCT1(1) provides that ‘The tenderer shall complete the forms given in the Appendix C to these Conditions of Tender and provide the information as may be required… The submission of any required information or additional information relating to the technical submission after the tender closing time will not be considered in the tender evaluation.’

(2)   SCT1(3)(B)(c) provides ‘For each private sector or overseas contract, the tenderer shall provide documentary evidence… to demonstrate the existence of the contract.  Any private sector or overseas contract without the documentary evidence will not be considered in the tender evaluation.’

(3)   SCT9(b) provides ‘A tenderer in breach of this clause shall have its tenders disqualified.  The joint venture or joint ventures in which any participant or shareholder is found to be in breach of this clause shall also have its or their tender or tenders disqualified.’

(4)   SCT16 provides that ‘If, by the tender closing date, the tenderer… is under suspension from tendering for public works, his tender will not be considered unless the suspension is lifted within 40 days from and including the tender closing date.’”

30. (d)     I also take heed of the fact that all the tenderers in this case are big players in the Hong Kong construction industry.  They are highly experienced and regular bidders for Government contracts.  To argue that China Harbour was misled and was not allowed to play on a level playing field is, in my judgment, somewhat disingenuous.  The reality is that they alone chose a conservative approach to the bidding process.  I do not criticise their caution but in this instance it did not serve them well.  Consistent with this cautious approach they chose to price the CWB slightly higher than the 33.7% threshold, at 34.21%, to provide some “room for errors” as stated by Mr Kenneth Lau, China Harbour’s senior quantity surveyor.

Other issues

31. Mr Scott rightly contends that even if the primary issue concerning the construction of SCT-2 is against China Harbour the matter does not end there.

32. (1)      Firstly, allied to the primary issue but worthy of separate consideration is the question of whether the Government followed Article XIII of the World Trade Organization Agreement of Government Procurement (“GPA”).  The relevant extracts are as follows :

“4.	(a)	To be considered for award, a tender must, at the time of opening, conform to the essential requirements of the notices or tender documentation and be from a supplier which complies with the conditions for participation.  If an entity has received a tender abnormally lower than other tenders submitted, it may enquire with the tenderer to ensure that it can comply with the conditions of participation and be capable of fulfilling the terms of the contract.
	(b)	Unless in the public interest an entity decides not to issue the contract, the entity shall make the award to the tenderer who has been determined to be fully capable of undertaking the contract and whose tender, whether for domestic products or services, or products or services of other Parties, is either the lowest tender or the tender which in terms of the specific evaluation criteria set forth in the notices or tender documentation is determined to be the most advantageous.
	(c)	Awards shall be made in accordance with the criteria and essential requirements specified in the tender documentation.”

33. Whether or not Article XIII governs the process contract in issue is a separate matter.  Even on the assumption that it does, I am satisfied that my findings in relation to the primary issue are such that it can only follow that the Government were not in breach of Article XIII.  The answer to the issue turns on what is meant by an “essential requirement”.  In my judgment, it follows automatically that if the word “may” gave the procuring entity a discretion not to invalidate tenders which did not comply with SCT-2, then the pricing formula in SCT-2 did not constitute an “essential requirement”.  There has therefore been no breach.  To be “essential” a requirement must be mandatory.  Put another way, a tender which did not comply with the equation in SCT-2 could still be a valid tender, if the discretion was exercised and therefore become a conforming tender worthy of further consideration.

34. (2)     Secondly, even if SCT-2 gives the Government a discretion, Mr Scott submits, that there have been breaches of implied terms as set out in paragraph 7 of the Statement of Claim.  It is pleaded that :

“7.   The Agreement further contained the following implied terms (‘the Implied Terms’), which are implied into the Agreement so as to give business efficacy thereto, and/or implied as a result of the Tender being governed by the WTO GPA.

(a)   The Defendant shall treat all tenderers equally and fairly.

(b)   The Defendant shall properly consider the compliant tender submission from the Plaintiff along with other compliant tender submissions.

(c)   The Defendant would exclude all non-compliant tenders.”

35. Mr Cheng concedes that (a) and (b) apply to this case but submits there has been no breach.  I agree.  (a) has been complied with because all tenderers got the same documents at the same time and all were faced with the same commercial decision whether to risk invalidation due to non-compliance with SCT-2.  All had been told twice that their tender might be invalidated if it failed to do so.

36. Paragraph 5 of the Form of Tender also reminded all bidders that :

“…the Employer is not bound to accept any tender irrespective of whether the tender is the lowest bid or, where the assessment of the tender is based on a marking scheme or formula approach, the tender is with the highest overall mark.”

37. As it turned out the bidder with the highest overall score for the combined works of the guaranteed reclamation works (“CRIII”) and “CWB” and “40m EOT” was awarded the contract.

38. The contention that China Harbour was not playing on a level playfield is simply not made out.

39. Implied term (b) was also not breached.  The defendant did properly consider the only bid which was compliant with SCT-2.  That does not mean it had to be awarded the contract.  It also considered it against other tenders which were deemed to be “conforming” tenders once the discretion had been properly exercised.  The Government’s obligation is limited to giving all conforming tenders proper consideration which, by reference to the notes of the meetings on 30 January and 6 February 2003 and by reference to Ms Tse’s evidence, they plainly did.

40. The implied term at paragraph 7(c) is not admitted by the defendant.  I agree that such a term cannot be implied for three reasons.  Firstly, it would negate the discretionary nature of SCT-2.  Secondly, it would mean that if there was only one compliant tender the Government would be compelled to accept it regardless of the actual total amount of the bid and the overall score of the bidder.  Thirdly, it would mean that if there were no compliant bids the Government would be compelled to award it to no-one and re-tender rather than select the best non-compliant bid.

41. (3)     Thirdly, China Harbour make an alternative claim which is a discrete issue.  Paragraph 19 of the Statement of Claim reads as follows :

“19. Further or in the alternative, in breach of Note C(1) of the Notes of Tenderers, the TDD failed to accord impartial and timely consideration to the Plaintiff’s complaint in a manner that is not prejudicial to obtaining corrective measures through the Review Body on Bid Challenges set up under the WTO GPA (‘the Review Body’).

Particulars

(a)	The TDD knew or should have known that the Plaintiff’s tender submission was compliant, whereas the tender submissions of the other Tenderers, including that of the Leighton JV, was not complaint, with the Tender.
	(i)	Paragraph 2.6 of the Minutes of the meetings of the CTB held on 30 January 2003 stated that ‘The Chairman said TDD indicated that only the tender submitted by China Harbour Engineering (Group) (China Harbour) complied with the pricing condition of SCT.  TDD proposed to disqualify the other four tenderers received, on the grounds that they failed to comply with this pricing condition.  He asked if TDD could explain their approach.’
	(ii)	Paragraph 2.14 of the Minutes of the meetings of the CTB held on 30 January 2003 stated that ‘… China Habour also complied with SCT2…’.
	(iii)	Paragraph 2.12 of the Minutes of the meetings of the CTB held on 6 February 2003 stated that ‘… the Government should not exercise the discretion to invalidate the tender received in this exercise that did not comply with SCT2 and that the contract should be awarded to Leighton-China State-Van Oord Joint Venture…’.
(b)	On or about 8 February 2003 the Plaintiff knew that the TDD was prepared to accept the non-compliant tender submission from the Leighton JV.  On 8 February 2003 the Plaintiff requested a meeting with the TDD, otherwise the Plaintiff would lodge a bid challenge under the WTO GPA to the Review Body.  The TDD declined to attend any such meeting.  Two days later on 10 February 2003 the Defendant issued the LOA to the Leighton JV.”

The factual background is contained in the above pleading.

42. Later the Review Body heard the complaint and published its report on 14 July 2003.  In short it found that CTB has acted with undue haste in awarding the contract to Leightons and that there should be (or should have been) a re-tendering exercise.

43. Before proceeding to consider this matter as a separate issue in China Harbour’s claim in this court, I should consider the relevance of the Review Body’s report in this action.  Ms Cheng submits that it is inadmissible.  Mr Scott submits it is admissible, relevant and persuasive.  Both agree it is not binding on this court.  I do not think it is a question of admissibility.  It is a question of weight.  The report was in the trial bundle.  The written submissions made references to it.  I read it.

44. However, for a number of reasons I consider it unwise to attach too much, if any, weight to its findings.  Firstly, the two hearings are different in nature.  The Review Body is a complaints procedure.  The complaint is considered within the framework of the WTO GPA.  The writ action however is governed by pleadings (which were not before the Review Body) and is to be determined within the framework of Hong Kong domestic law.  Secondly, the material before the Review Body and the court has been different.  The Review Body did not see the correspondence concerning the proposed letter from the Hong Kong Construction Association Ltd.  It did not see over 30 pages of China Harbour’s tender and alternative tender.  The Review Body did not hear three of the witnesses who gave evidence before this court and did hear one witness who did not give evidence before this court.  Thirdly, Ms Cheng submits that the Review Body report contains factual and legal errors.  Of course, I do not know if that submission could be made good.  It is nonetheless significant that it is claimed to be in error in important ways.  Finally, as it is non-binding, no question of issue estoppel arises.

45. I now return to paragraph 19 of the Statement of Claim.  It relies primarily on Note C1 in the Notes to Tenderers.  The reliance on this specific note reinforces the differences between the Review Body and the court.  The Review Body, being unbound by contract law and pleadings, would be entitled to attach whatever weight it considered appropriate to Note C1.  Not so the court.

46. Note C1 is as follows :

“C.  BID CHALLENGES UNDER THE WTO GPA

(1)   This tender is covered by the Agreement on Government Procurement of the World Trade Organization (WTO GPA) and the provisions of the WTO GPA will apply to this tender.  Tenderers are requested to note that a Review Body on Bid Challenges (under WTO GPA) (‘the Review Body’) has been set up by the Government to deal with the challenges made against alleged breaches of the WTO GPA and the relevant procedures for handling bid challenges are set out in the Rules of Operation of the Review Body (‘the Rules’), which are available for inspection at the Secretariat of the Review Body located at the Commerce, Industry and Technology Bureau or which may be sent to interested parties upon request.  In the event that a tenderer believes that a breach of the WTO GPA has occurred, the supplier may, within 10 working days after he/she knew or reasonably should have known the basis of the challenge, lodge a challenge to the Review Body on the alleged breaches of the WTO GPA.  Nevertheless, the tenderer is encouraged to seek resolution of its complaint in consultation with the procuring department before lodging a complaint to the Review Body.  In such instances, the procuring department shall accord impartial and timely consideration to any such complaint, in a manner that is not prejudicial to obtaining corrective measures through the Review Body.”

It comes from the “Notes For Tenderers” which is headed with the following statement :

“NOTES FOR TENDERERS

The following Notes are provided for information and guidance purposes only and do not form part of the tender documents.”

47. In my judgment, this heading makes it clear that the “Notes” do not form part of the process contract which is at the heart of this action.  There is nothing contractual in the language used in the Notes.  They are what they say they are — a guide.  Thus, for the second time in this case Mr Scott has attempted to persuade the court, valiantly and tenaciously but unsuccessfully, that words should be given a meaning other than that which appears on a clear and sensible reading.

48. If Note C1 does not form part of the process contract there can be no breach arising from it.  If it does form part of the contract, all it does is provide a machinery for going to the Review Body, which is what happened in any event, leading to a non-binding opinion.  On any view, Note C1 does not assist China Harbour.

49. Finally, Mr Scott submits that if the Government had not acted with such haste and had they waited for the Review Body’s decision China Harbour would have got the contract.  I do not agree that this follows.

50. It is true that China Harbour would have re-tendered without feeling constrained by SCT-2.  It is true that their alternative tender at the time (not complying with SCT-2) was for $80 million less.  However re-tendering would have produced new bids from everyone, the process contract is still governed by the principle in the Blackpool case (supra) and clause 5 applies throughout.  An element of risk, gamble and commercial judgment cannot be eliminated.  Such factors are the same for everyone and so do not upset the level playing field.

51. After the meeting on 6 February 2003 the CTB had a stark choice.  It was important not to waste time.  If it had waited for the Review Body’s report the delay would have been for an unknown period, the outcome would have been unknown, the ramifications would have been uncertain.  For example, the contractor ultimately awarded the contract might have had a claim for being given the site late and that their bid was calculated on a commencement date in late 2002 not mid or late 2003.  The contract documents provided for a handover of the first part of the site on 1 March 2003.  Failure to comply with this date would have led to problems such as having to amend parts of the contract and/or renegociating with the successful bidder.  It is thus fair to say that overall the reasons for proceeding with the award in early February 2003 far outweighed those for not doing so.

52. In short, I do not think the CTB can be criticised for taking a decision which was both expeditions and certain.

53. China Harbour’s claim is dismissed with a costs order nisi to the defendant.