SINOEARN INTERNATIONAL LTD v. HYUNDAI CCECC JOINT VENTURE (a firm)

HCA 3987/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3987 OF 2003

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J U D G M E N T

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A. Introduction

1.  The Defendant was the principal contractor for the construction works of the project for building container terminal 9 (“the CT9 project”) in Kwai Chung, Hong Kong.

2.  This is the trial of the Plaintiff’s claim against the Defendant for breach of a contract entered into in July 2000. There is no dispute that the parties entered into a contract (“the dumping contract”) for the Defendant to engage the Plaintiff to act as its agent to obtain dumping permits from the relevant Mainland authority for dumping contaminated mud produced under the CT9 project in South Er Zhou in the Mainland waters.    The centre dispute in the trial is as to whether the contract contained a particular term.

3.  It is the Plaintiff’s pleaded case that under the dumping contract, the Defendant was committed to dump exactly 6,410,770 m³ of CT 9 contaminated mud at the unit price of HK$17.00 per m³ at South Er Zhou.  In other words, it is the Plaintiff’s case that it should be entitled to be paid HK$108,983,090.00 under the dumping contract.  In other words, the contract was a fixed sum contract.

4.  It is common ground that (a) the agreed unit price under the dumping contract was HK$17 per m³, (b) the Defendant eventually had only dumped approximately 338,128 m³ of contaminated mud at South Er Zhou and (c) it had effectively paid the Plaintiff approximately HK$10,000,000.00 under the contract for various purposes[1].   The Defendant was therefore, says the Plaintiff, in breach of the dumping contract in failing to pay it the outstanding sum in the amount of HK$100,083,090.00.

5.  The Plaintiff’s principal claim is thus for damages for breach of contract in the sum of $100,083,090.00.  Alternatively, the Plaintiff seeks damages in (or in the form of indemnity from the Defendant for) the sums of HK$22,331,579.80 and RMB44,875,390.00 as various expenses or liabilities incurred by the Plaintiff under various back-to-back agreements and undertakings it had entered into in the Mainland for the purpose of its performance under the dumping contract.

6.  The Defendant denies both liability and quantum.  It further counterclaims for altogether some HK$5.2 million as money overpaid to the Plaintiff under the dumping contract.   

7.  Briefly, the Defendant’s pleaded case can be summarized as follows:  

(1) Although agreeing that there was a contract engaging the Plaintiff as its agent to obtain dumping permits for dumping contaminated mud at the South Er Zhou site at a unit price of HK$17/m³, the Defendant says it was a measurement contract instead of a fixed sum contract. In other words, under the dumping contract, there was never a term that the Defendant was contracted to dump 6,410,770 m³ of contaminated mud at that site. Instead it was a term of the contract that the final quantity of the mud dumped was to be measured on site by an agreed measurement method. The sum payable under the dumping contract was thus the final total amount of mud dumped at the site multiplied by the agreed unit price.

(2) Given that the Defendant had eventually only dumped 338,128 m³ contaminated mud at the South Er Zhou site, it was only required to pay the Plaintiff HK$5,748,176.00 under the Dumping Contract. As it had by way of advancement paid the Plaintiff (a) HK$8,900,000.00 for obtaining the first part of the necessary dumping permit for dumping 1,000,000 m³ mud, and (b) HK$900,000.00 for obtaining an extension of the validity of that first dumping permit, which it says the Plaintiff had failed to obtain, the Defendant should be entitled to, and thus counterclaims for, the refund of the sum of HK$3.15 million odd (HK$10,000,000.00 – HK$5,748,176.00) and the HK$900,000.00.

(3) Alternatively, if the dumping contract was a fixed sum contract as claimed by the Plaintiff, it was frustrated by 31 May 2001 by the event that the Environmental Protection Department (“EDP”) had refused to further grant a loading permit to the Defendant for loading the contaminated mud on barges for the purpose of transporting the same out of Hong Kong waters. In the circumstances, the Defendant is entitled under section 16 of the Law Amendment and Reform (Consolidation) Ordinance (Cap 23) (“LARCO”) to recover from the Plaintiff all sums paid to the Plaintiff less the expenses incurred by the Plaintiff and/or any valuable benefit conferred to the Defendant prior to the frustration. In this respect, the Defendant further says that, under the relevant PRC law, once the dumping contract was frustrated, the Plaintiff was no longer liable under the back-to-back agreements the Plaintiff had entered into as claimed. There were therefore no further expenses incurred by the Plaintiff under these back-to-back contracts after the frustration event.

8.  The Plaintiff in reply and in defence to the counterclaim effectively denies the Defendant’s case.

9.  In the premises, the principal issues arising from the pleadings are thus:

(1) Whether it was an express or implied term of the dumping contract that the Defendant agreed and was contracted to dump 6,410,770 m³ contaminated mud at the South Er Zhou site.

(2) If yes:

(a) Whether the dumping contract was frustrated by the EPD’s refusal to issue further loading permits to enable the Defendant to transport the contaminated mud out of Hong Kong; and

(b) If so, whether under PRC law, the Plaintiff is still liable to pay under the various back-to-back agreements and undertakings it had entered into and is entitled to recover from the Defendant such sums as expenses incurred.

(3) If no, whether the Defendant is entitled to succeed in the counterclaim, given that there is no dispute that the Defendant had only dumped 338,128 m³ contaminated mud at the South Er Zhou site.

10.  There are subsidiary questions which arise from these principal issues, of which I would elaborate when I deal with them below.

11.  But in order to understand the disputes in proper context, I need to first set out the relevant background.

B. Background

12.  Unless otherwise stated, the following are the relevant background facts arising from unchallenged or uncontroversial evidence, and common ground.

13.  The Defendant was a joint venture between Hyundai Engineering and Construction Co Ltd (“Hyundai”) and China Civil Engineering Construction Corporation (“CCECC”) formed in around 1998 to tender for the construction works for the CT9 project.  

14.  In May 2000, the Defendant was awarded the contract for the construction works for CT9 and became the principal contractor.

15.  The construction works of CT9 in part involved the deepening of a depth of some 50 feet of the Rambler Channel, dredging of the Kwai Chung Container Port to accommodate large container vessels and various substantial dredging and reclamation works.  The said dredging works were amongst the first foundation works that the Defendant had to carry out to prepare the site for the construction of the container berths at CT9.

16.  From the dredging works, massive amount of contaminated mud would be excavated and needed to be disposed of.  The disposal of contaminated mud needed to satisfy environmental requirements imposed under the relevant governing authorities.  It was therefore necessary for the Defendant to secure an approved dumping ground (for environmental protection reasons) for the said disposal of the contaminated mud. 

17.  At the same time, since a relatively tight work schedule provided in the contract, it was also imperative for the Defendant to so secure such a dumping ground as soon as possible after the award of the CT9 contract so as to enable it to commence full-scale work promptly.   It was intended that the first berth of the CT 9 development to be commissioned in May 2002, with the last (sixth) berth be operational by November 2004.

18.  The Defendant, as the main contractor, was to bear all the charges and levies imposed for the carriage and disposal of the contaminated mud.

19.  The cost for disposing the contaminated mud at a site in Hong Kong waters as approved by the EPD would be significant.  It was on the other hand generally cheaper to so dispose at an approved site in Mainland waters. 

20.  It is also common ground for the present purpose that there were two potential areas that might be considered for dumping the CT 9 contaminated mud:

(1) The East Sha Chau Marine Disposal Area (“ESC”) located in Hong Kong waters. This site was available for, and permitted by EPD, to dump contaminated materials for disposal purposes. As indicated in the tender documents for the CT9 development, the Hong Kong Government would charge a fee of HK$55.4 per m³ of marine spoil for the use of ESC for dumping purposes.

(2) A designated approved site in the Mainland waters if a corresponding dumping permit issued by the State Oceanic Administration (“SOA”) was obtained. It was understood that the Mainland authority would charge a much lower unit fee for dumping at such a designated marine ground in the Mainland waters.

21.  In the beginning of May 2000, the Defendant applied for permits from EPD to enable it to dump the contaminated mud at ESC. The permit had to be renewed monthly.  Although the application fee was HK$20,000.00 for each month, as mentioned above, the actual dumping fee would be charged at the rate of HK$55.40 per m³ measured by reference to the actual amount of mud dumped at the site.

22.  The Defendant had in fact made use of the ESC in the beginning of the CT9 works and carried out some small-scale dumping operations there.

23.  Then, sometime in June 2000, a Mr Lam Yiu Kong (“Mr Lam”) of Wing Yiu Co (“Wing Yiu”) called a Mr Shek Hung Yee (“Mr Shek”) of the Defendant, saying that he (Mr Lam) could procure dumping permits from SOA for dumping contaminated mud from the CT9 works at South Er Zhou in the Mainland waters. 

24.  Mr Shek was until April 2002 was the Defendant’s manager for land, electrical and mechanical works and coordination in relation to the CT9 contract.    Mr Shek understood that Wing Yiu was a marine work contractor.

25.  After consulting Mr Yong Bae Kwon (“Mr Kwon”) (the project director) and Mr Dunh Pil Choi (“Mr Choi”) (the project manager) of the Defendant, Mr Shek and Mr Choi met Mr Lam to hear from Mr Lam about engaging Wing Yiu to apply to SOA for dumping permits for dumping at South Er Zhou.  Eventually, they decided to ask Mr Lam to arrange meetings with officials from the South China Sea Branch of SOA (“SCSB”) on behalf of the Defendant to explore the possibility of applying for such dumping permits.   This was attractive to the Defendant as, if it could obtain the necessary dumping permits, it would be able to dispose the CT9 contaminated mud at a much lower cost.

26.  Thereafter, Mr Choi, Mr Shek and Mr Lam went to Guangzhou to have meetings with the officials from SCSB to discuss the Defendant’s potential application for dumping permits.  One of these officials was a Mr Chen Xin Xing (“Mr Chen”).

27.  After a few rounds of meetings, SCSB was in principle agreeable to issue dumping permits to the Plaintiff but advised that the Defendant still had to locate and choose a suitable site for that purpose. Mr Chen then suggested to them three such potential sites:

(1) A Mainland Government approved site at the South China Sea.

(2) An entirely new dumping ground to be established by the Defendant with the Mainland Government’s approval.

(3) An already approved marine site at South Er Zhou that had already been set up by a private enterprise.

28.  Further, SCSB also suggested that, given that the Defendant had no previous experience in applying for such dumping permits and was not familiar with the procedures, it might better consider engaging an agent which had such previous experience to do so.  For that purpose, Mr Chen provided to Mr Choi and Mr Shek the names of two such agents, being the Plaintiff and one Zhu Jiang Company.   They were further informed that the Plaintiff had itself already established an approved temporary dumping site at South Er Zhou which had a dumping capacity in excess of 8 million m³.

29.  Mr Choi and Mr Shek then discussed these options with Mr Kwon over the phone. Mr Kwon instructed that they should give priority to engage the assistance of whichever agent which could help the Defendant quickest to obtain such dumping permits.  This would enable the Defendant to start dumping the contaminated mud at a site in the Mainland waters as soon as possible to save cost. 

30.  On 13 July 2000, Mr Choi, Mr Shek, Mr Lam and Mr Lam’s assistance (one Mr J Chan) gathered at the Guangdong Foreign Businessmen Club (“GFB Club”)^[2]to discuss whether to engage Zhu Jiang or the Plaintiff as the Defendant’s agent to apply for the necessary dumping permits.  After they had made a few enquiries, Mr Choi and Mr Shek decided that the Plaintiff was the preferred choice given:

(1) The Plaintiff had in 1999 already obtained SCSB’s approval to establish a temporary 8 million m³ capacity dumping site at South Er Zhou (“the SEZ Site”) to cater for the dumping for a period of 3 years, and this dumping right could be quickly activated with a an appropriate application to SCSB for permits.

(2) The Plaintiff was prepared to charge a lower fee (although still subject to negotiation) than Zhu Jiang, which sought to ask for a fee between HK$25.00 and HK$28.00.

31.  Once so decided, through the contact of Mr Lam, the Plaintiff’s managing director, Mr Rudy Tsang (“Mr Tsang”), immediately came from Hong Kong on that day (i.e., 13 July 2000) to meet with Mr Choi and Mr Shek at the GFB Club to discuss and negotiate for the terms of the Defendant’s engagement of the Plaintiff as its agent.

32.  The discussions at the GFB Club were conducted between Mr Choi (a Korean speaking in English) and Mr Tsang (speaking in Cantonese) through the interpretation of Mr Shek.  The negotiations took many sessions and went well into that night.  The negotiations focussed on the discussion of fees (based on a unit price) payable to the Plaintiff.

33.  On 14 July 2000, the negotiations continued in the morning.  Mr Choi and Mr Tsang eventually reached consensus on the unit price that the Plaintiff would charge the Defendant for acting as its application agent for dumping permits at the SEZ Site.   During these negotiations, Mr Tsang had been occasionally on phone discussions with Mr Lam regarding the unit price payable.  Apparently this is so as it was agreed amongst all of them (including Mr Choi) that, if the Plaintiff was so engaged by the Defendant, it (the Plaintiff) had to pay HK$1.2 per m³ as commission to Wing Yiu as the middleman.

34.  Both Mr Choi and Mr Tsang then signed two Chinese documents (collectively “the 14/7 Documents”) prepared by Mr Shek to record what were agreed at the end of the discussions on that day.  These documents were made on papers bearing the Defendant’s letterhead.

35.  One of the 14/7 Documents provided as follows (in translation):

“Agreement on the Dumping of Dredged Mud

[The Defendant] is the General Contractor of Container Terminal 9 Development of Hong Kong, and [the Plaintiff] is the subcontractor of [the Defendant]. After friendly discussions, both parties have reached an agreement on cooperating in dumping the dredged mud from Container Terminal 9 Development to seawater at South Er Zhou, Dangan, Wanshan, Zhuhai, China. Both parties have agreed on the following:

I. The price is HK$17.00/ m³, and the total quantity is subject to the final quantity confirmed by the Owner of Container Terminal 9 Development to [the Defendant].

II. Terms of the payment and other provisions will be decided through further discussions.”

36.  The other of the 14/7 Documents stated as follows (in translation):

“Agreement on the Dumping of Dredged Mud

[The Defendant] is the General Contractor of Container Terminal 9 Development of Hong Kong, and [the Plaintiff] is the Subcontractor of [the Defendant]. After friendly discussions, both parties have reached an agreement on cooperating in dumping the dredged mud from Container Terminal 9 Development to seawater at South Er Zhou, Dangan, Wanshan, Zhuhai, China. Furthermore, both parties have decided to jointly apply to [the SCSB] for the permit for dumping dredged mud. Relevant details of construction[3] will be decided through further discussions.”

37.  After that, on 17 July 2000, Mr Tsang and Mr Shek met again, as Mr Tsang said the Plaintiff was going to put in an application for a dumping permit with SCSB.  He handed to Mr Shek a letter dated 17 July 2000 prepared by the Plaintiff and addressed to the Defendant. The letter stated as follows:

“Dumping to China

This is to confirm that we are the agent authorized by [the SCSB] to manage the dumping of contaminated Mud to China water. We confirm our agreement to arrange the necessary dumping permit from the SOA to [the Defendant] during the week beginning July 24, 2000.”

38.  Enclosed in this letter was a copy of a letter of authorization from the SCSB dated 20 October 1999, which stated that it had in principle agreed that the Plaintiff had until 31 December 2003 a right to dump dredged mud at the identified SEZ Site up to the volume of 8 million m³.

39.  Subsequent to 14 July 2000, Mr Choi, in accordance with the work routine of Hyundai for drafting agreements, had asked one Mr Walsh (the manager of the Department of Quantity Surveying at Hyundai) to draw up the formal and detailed agreement. He had passed the details and information on what were discussed and concluded on 14 July 2000 to Mr Walsh for that purpose.

40.  Mr Walsh then drafted a formal document which was dated 21 July 2000.   The draft was passed amongst Mr Kwon, Mr Choi and Mr Shek for comments and approved by the senior management of Hyundai.  This document (“the 21/7 Agreement”) forms one of the central documents debated at trial, and it is perhaps useful now to set it out in full:

“HYUNDAI ENGINEERING & CONSTRUCTION CO LTD

KWAI CHUNG CONTAINER PORT - TERMINAL 9 DEVELOPMENT

AN AGREEMENT made the 21st day of July 2000 BETWEEN Hyundai Engineering & Construction Co. Ltd. whose registered office is at Room 3206, 32/F, The Center, 99 Queens Road Central, Hong Kong (hereinafter called "the Contractor") of the one part and Sinoearn International Ltd whose registered office is at 19/F., Xiu Hua Commercial Building, 211-213 Jaffe Road, Wanchai, Hong Kong. (hereinafter called "the Agent") of the other part.

After consultation, the two parties set forth the following Articles of Agreement, to which both party's shall adhere.

NOW IT IS HEREBY AGREED as follows:

	1.0	GENERAL
		The duties and performances of the Agent shall include but not necessarily be limited to the following.
	1.1	To act on behalf of the Contractor, as Agent, in respect to all matters relating to the obtaining of Dumping Permits to dispose of contaminated mud and necessary permits for the Contractor's vessels to enter/operate, in China waters.
	1.2	To liaise and coordinate with all concerned Parties in China for smooth progress of the Contractor's operations.
	2.0	PARTICULAR
	2.1	Dumping Fee: HK$ 17.00/ m3 (Seventeen dollars) based on in-situ volume and inclusive of all expenses whatsoever incurred relating to the dumping permit in mainland China.
	2.2	Dumping Area: The contaminated mud materials shall be deposited in and around the dumping area South of Er Zhou, as stipulated in the Dumping Permit.
	2.3	The Dumping Fee is inclusive of all costs and expenses whatsoever incurred in respect to obtaining the necessary approvals/ permits and permissions in mainland China.
	2.4	The first Dumping Permit under clause 2.6 hereof from the relevant Authority in China (State Oceanic Administration), for the dumping of contaminated mud shall be obtained within the week commencing 24 July 2000.
	2.5	Quantity - The total dumping quantities is estimated to be in the region of 3,000,000 m3, under this agreement actual quantities will be those finally disposed of at the China dumping area through this Contract.
	2.6	Payment Schedule
		The first Dumping Permit shall be for a quantity of 1,000,000 m3 of contaminated mud equivalent to a Dumping Fee of HK$17,000,000 which shall be paid as follows:-
		a. First Payment, Within four (4) working days of the Contractor receiving the first official Dumping Permit, the Contractor will deposit HK$5,000,000 (five million dollars) directly to the Agents bank account for the procurement of the Performance Guarantee Bond. b. Second Payment, of HK$5,000,000 (five million dollars) will be paid to the Agent, in the presence of representatives from State Oceanic Administration, within three (3) working days of the Contractor receiving the Performance Guarantee Bond. c. Third Payment, balance of HK$7,000,000 (seven million dollars) will be paid upon the quantity of dumping having reached 60% (600,000 m3) of the Permit total.
		Subsequent Permits
		d. Three (3) Instalments shall be paid in advance for each Dumping Quantities of 1,000,000 m3 under the subsequent Dumping Permit as follows;
		1stInstalment 0-350,000 m3 - HK$5,950,000.00 2ndInstalment 350,000-700,000 m3 - HK$5,950,000.00 3rdInstalment 700,000-1,000,000 m3- HK$5,100,000.00
	2.7	The measurement for interim volume shall be on the basis of the current factor applied by the relevant China Authority but if no case shall this exceed 70% of volume of mud-water mixture calculated by actual loaded 'Barge Volume'.
	2.8	The measurement of final volume shall be, based on the Bathymetric Survey data submitted by the Contractor to the Employer of the Project, calculated using the principle of Initial Survey less Final Survey less any other Survey quantities of contaminated mud dumped in other disposal areas.
	2.9	The Agent shall be responsible for arranging the taking of samples for analysis by the State Oceanic Administration, the payment of all fees and expenses whatsoever incurred in respect to the obtaining of all necessary permits for the Contractor's dumping operations and for liaising with all concerned parties including local people groups for the smooth progress of the Contractor's operations.
	2.10	The Contractor shall allow two representatives of the Agent to be stationed in a container office, with electricity supply and telephone line, at the CT9 project site free of charge for the duration of the dumping operation for performance of the contract.
	2.11	The Contractor undertakes to provide the Agent with details of vessels, information of dumping quantities and time schedules insofar as the same is required for the carrying out of the Contractor's operations and shall assist the Agent and do such things or act as may be required by the China authority for the performance of this Agreement.
	3.0	Performance Guarantee Bond - Pursuant to the period stated in Article 2.6a) above, the Agent shall provide to the Contractor, in wording to be agreed by the Contractor an irrevocable and unconditional Letter of Guarantee issued through a reputable bank in Hong Kong, for the sum of HK$5,000,000.00 (five million dollars).
	4.0	Confidentiality - The matters in and surrounding this agreement shall be treated and remain as strictly private and confidential between the party's.
	5.0	The Agent shall not be regarded as committing a breach of this Agreement by reason of any change of law or policy of the Chinese Government.
For and on behalf of Hyundai Engineering & Construction Co Ltd Mr S P Choi Project Manager For and on behalf of Sinoearn International Ltd Rudy C.K. Tsang Managing Director”

41.  Mr Choi signed the 21/7 Agreement for the Defendant and Mr Tsang for the Plaintiff in Hong Kong.   When Mr Tsang signed it at the Defendant’s office, Mr Choi was not there and it was Mr Shek who explained its contents to Mr Tsang.

42.  The 21/7 Agreement was subsequently amended by two addenda in relation to clauses 2.4 to 2.9.  These amendments dealt with changes in some of the payments schedule.  These amendments are not important for the present purposes.  Unless stated otherwise, I would refer below to the 21/7 Agreement as the one as amended by the two addenda.  

43.  It is the Plaintiff’s pleaded case that:

(1) The 14/7 Documents recorded and evidenced a binding agreement formed between the parties on 14 July 2000 for the Defendant to engage the Plaintiff to apply for dumping permits to dump an exact quantity (“the Alleged Agreed Quantity”) of 6,410,770 m³ contaminated mud at the SEZ Site at the unit price of HK$17.00 per m³. In other words, there was a term (“the Alleged Agreed Quantity Term”) of the agreement formed on 14 July 2000 that the Defendant agreed to and was committed to dump the Alleged Agreed Quantity of CT9 contaminated mud.

(2) The 21/7 Agreement was entered into to supplement the detailed terms of the agreement reached on 14 July 2000 as evidenced by the 14/7 Documents. Together, these three documents constituted and evidenced the complete dumping contract between the parties. However, the 21/7 Agreement did not, and was not intended to, supersede the agreement already reached on 14 July and evidenced by the 14/7 Documents. More importantly, the 21/7 Agreement did not and could not replace or supersede the Alleged Agreed Quantity Term.

44.  It is however the Defendant’s case that:

(1) There was no binding agreement formed on 14 July 2000, although the parties had reached certain in principle understanding which formed the basis of an agreement entered into later. The 14/7 Documents were only to record the understanding.

(2) The binding agreement was only formed on 21 July 2000 when the 21/7 Agreement (when it was without the addenda) was signed. Together with the addenda, the 21/7 Agreement represented and was the only dumping contract entered into by the parties for the purpose of the Defendant engaging the Plaintiff as its agent to apply for dumping permits from SCSB.

45.  It is also the Plaintiff’s case that, in order to carry out its obligations under the dumping contract, it had further entered into the following back-to-back agreements with other parties:

(1) On 14 July 2000, the Plaintiff entered into a written agreement with Wing Yiu whereby the Plaintiff agreed to pay Wing Yiu middleman commission at the unit rate of HK$1.2/ m³ of contaminated mud. I will call this “the Wing Yiu Agreement”.

(2) On 19 July 2000, the Plaintiff entered into a written agreement with Zhuhai Dongqu Hanshing Building Materials Co Ltd (“Hanshing”) whereby the Plaintiff agreed to pay Hanshing HK$3.6/ m³ of contaminated mud for its services in dealing with (a) the relevant port supervisory authority of Zhuhai, (b) the compensation for marine resources to be paid to the Wanshan District Government, and (c) the various compensation and charges that needed to be paid to the fishermen and domestic co-operators. These services were needed to appease the communities which would be affected by the dumping of contaminated mud in the waters of the ESZ Site. I will call this “the Hanshing Agreement”.

(3) On 20 July 2000, the Plaintiff entered into a written agreement with the National Environmental Monitoring Centre of China (“the Monitoring Centre”) entrusting the Monitoring Centre to conduct monitoring works for the dumping (“the 1^st Monitoring Agreement”)

46.  On 26 July 2000, Mr Tsang handed to Mr Shek a dumping permit No. NH/00/14 (“the 1^st Dumping Permit”) issued by SCSB.  The 1^st Dumping Permit named Hyundai on behalf of the Plaintiff as the dumping unit. It permitted a dumping volume of 1 million m³ and had a validity period of 3 months lasting from 27 July to 26 October 2000.  The 1^st Dumping Permit also stated that it was for the exclusive use of Hyundai on behalf of the Plaintiff, and any assignment of it was prohibited.

47.  By that time, as the Defendant had not paid the Plaintiff the sum for obtaining the 1^st Dumping Permit as provided in the 21/7 Agreement, Mr Tsang told Mr Shek that in obtaining the 1^st Dumping Permit, he had given the SCSB financial security (including a guarantee from a third party) for RMB7,000,000.00.  He emphasized that he needed to make payment to the SCSB for the 1^st Dumping Permit within a few days.

48.  On 31 July 2000:

(1) Pursuant to its application, the Defendant was granted a loading permit by the EPD to load up to 500,000 m³ of contaminated mud from the CT9 site on barges and to carry it through and out of the Hong Kong waters. The loading permit was only valid for the month of August 2000.

(2) The Defendant paid the Plaintiff HK$8,000,000.00, out of which HK$7,000,000.00 was to be in turn paid to SCSB by the Plaintiff for the 1^st Dumping Permit, and the remaining HK$1,000,000.00 to the Zhuhai port authority to obtain the necessary port clearance certificate to enable named vessels to carry the contaminated mud through the port into the Mainland waters to the ESZ Site.

49.  On 1 August 2000, Mr Tsang further gave Mr Shek a port clearance certificate issued by the Zhuhai port authority dated the same day.  The certificate sanctioned the sailing of the Defendant’s named vessels or barges to the SEZ Site to carry out dumping of contaminated mud there.

50.  The Defendant started carrying out dumping exercise at the SEZ Site on 2 August 2000.  

51.  On 21 August 2000, pursuant to the 21/7 Agreement, the Defendant remitted to the Plaintiff’s bank account HK$2,000,000.00 for the purpose of enabling the Plaintiff to secure a performance bond.

52.  It further obtained a second similar loading permit from the EPD on 24 August 2000 for the month of September.

53.  In about August 2000, Mr Choi’s secondment to the Hong Kong office of Hyundai ended and he returned to its head office in Seoul of South Korea.  Mr Kwon became more involved in the CT9 works.

54.  Then, in between late August and mid-September 2000:

(1) The environmental concern activist group “Greenpeace” had been making various public protests in Hong Kong against the dumping activities of the CT9 contaminated mud at the SEZ Site. These protests included the Greenpeace activists repeatedly boarding the Defendant’s dredging barges to stop them from dredging and loading the contaminated mud.

(2) Greenpeace had also criticized EPD in issuing the loading permits to the Defendant to facilitate the said dumping activities.

(3) As a result of these, EPD and Greenpeace had engaged in various meetings and the EPD had issued a few press releases stating that it would only permit dumping of contaminated materials outside Hong Kong which were dredged from Hong Kong if the activity met the requirements of the Dumping at Sea Ordinance (Cap 466) applicable in Hong Kong and of the London Convention which was extended to Hong Kong. One of these requirements was that the degree and level of contamination of the materials, even though dumped outside Hong Kong, should not cause any unacceptable environmental impact on the marine environment. One of the press releases also said that according to the test results and information then made available to EPD, the level of contamination of the dredged mud from CT9 works was acceptable to the SCSB for dumping at the SEZ Site.

55.  On 19 September 2000, the Defendant submitted to EPD its application for a fresh loading permit for the month of October 2000.

56.  In reply, by a letter dated 19 September 2000, the EPD stated that:

(1) The dumping permit granted by the SCSB did not qualify as sufficient evidence as required by the Dumping at Sea Ordinance to prove that dumping at the SEZ Site would not cause unacceptable impact on the marine environment.

(2) After obtaining legal advice, in considering whether or not to grant a loading permit, the EPD would require the Defendant to produce direct and sufficient proof, such as an environmental impact assessment report for the dumping ground, to show that the dumping of the CT9 contaminated mud at the SEZ Site was environmentally acceptable.

57.  In light of EPD’s reply, Mr Shek then asked Mr Tsang to approach the SCSB on an urgent basis to try to obtain from them the environmental impact assessment reports which he had given to SCSB when the Defendant put in its application via the Plaintiff for the dumping permits.  

58.  On 21 September 2000, Mr Tsang handed to Mr Shek copies of the following:

(1) An environmental impact assessment report dated 30 November 1995 for a dumping volume of 1.6 million m³ at the SEZ Site.

(2) An environmental impact assessment report dated 25 December 1998 for a dumping volume of 8 million m³ at the SEZ Site.

(3) The Environmental Monitoring and Audit Manual (“the Manual”) prepared by SCSB in August 2000.

(4) A monitoring report dated 14 September 2000 covering the period from 4 to 11 September 2000, which was the SCSB’s report on monitoring the Defendant’s dumping activity at the SEZ Site.

59.  The Defendant by its letter dated 21 September 2000 sent these documents to EPD in further support of its application for a loading permit.

60.  At the same time, on 27 September 2000, the Defendant paid the Plaintiff a total sum of HK$900,000.00, out of which HK$500,000.00 was intended for payment for application for renewal of the port permits, and HK$400,000.00 was to be further paid over to Wing Yiu by the Plaintiff[4].

61.  However, on 4 October 2000, EPD formally replied to the Defendant rejecting its application for the October loading permit.  It gave its reasons for the refusal as follows:

(1) Those documents provided by the Defendant did not contain sufficient details to prove that dumping the contaminated mud at the SEZ Site would not cause unacceptable impact on the marine environment.

(2) SCSB and EPD operated upon different and independent assessment systems. Thus, for the purpose of assessing whether dumping of contaminated materials would cause unacceptable environmental impact, data that was found to be adequate to satisfy SCSB might not do so in relation to the standards adopted in Hong Kong. The information disclosed by those documents did not satisfy the Hong Kong criteria.

62.  After obtaining legal advice, the Defendant lodged an appeal to the Dumping At Sea Appeal Board (“the Appeal Board”) against the EPD’s said decision. 

63.  The said appeal was eventually heard on 6 February 2001. It lasted for 5 days.

64.  By a written decision dated 31 May 2001, the Appeal Board dismissed the Defendant’s appeal.

65.  Subsequent to that, a meeting was held on 18 July 2001 between EPD and the Defendant with the presence of various other parties to further discuss what would be required to satisfy the EPD to consider issuing a loading permit to the Defendant. The EPD indicated that the Defendant would have to produce an environmental assessment report containing all the information required by the EPD, and if that report satisfied EPD’s requirements, it would issue a loading permit to the Defendant.

66.  Soon after this meeting, the Defendant appointed Maunsell Environmental Management Consultants Ltd (“MEMCL”) to prepare an environmental impact assessment report as required by the EPD.   For this purpose, MEMCL asked the Defendant to arrange facilities for it to conduct monitoring and testing works at the SEZ Site for both the wet season and dry season. 

67.  In light of MEMCL’s request, Mr Shek and a Dr Choy of MEMCL met with the chief engineer of the Monitoring Centre at its office in Guangzhou to discuss the possibility of engaging the Monitoring Centre to provide such facilities and assistance to MEMCL to carry out the said dry and wet seasons monitoring works.

68.  Eventually on 29 August 2001, Hyundai^[5] signed a contract (“the 2^nd Monitoring Agreement”) with the Monitoring Centre, engaging its services to prepare a monitoring report of the waters at South Er Zhou during the wet season and the dry season.  This report was intended to be included in the final environmental impact assessment report to be produced by MEMCL to be submitted to the EPD.  

69.  Before the 2^nd Monitoring Agreement was made, the Plaintiff had given an undertaking (in Chinese) dated 22 August 2001 (“the Plaintiff’s Undertaking”) in favour of the Monitoring Centre relating to the intended 2^nd Monitoring Agreement.  It was stated in the Plaintiff’s Undertaking that it would first pay RMB700,000.00 to the Monitoring Centre as initial funding in relation to the total fees payable under the 2^nd Monitoring Agreement to the extent of RMB1.9 million.  The Plaintiff says it amounted to a undertaking to shoulder the payment of up to RMB1.9 million to the Monitoring Centre under the 2^nd Monitoring Agreement

70.  Within about a week after MEMCL and the Monitoring Centre had started work on the respective reports, in early September 2001, the Defendant suddenly:

(1) instructed MEMCL and the Monitoring Centre to stop the works; and

(2) instead ordered a full-scale dumping at full speed of the CT9 contaminated mud at ESC in Hong Kong.

71.  On 30 October 2001, the Monitoring Centre sent a fax to the Defendant maintaining that there was a subsisting contract and complained about the Defendant’s failure to offer any explanation for instructing them to stop work after they had already completed the preliminary stages of the monitoring work.

72.  The Defendant responded by a letter dated 2 November 2001.  It was stated that the Defendant was encountering difficulties with dumping in the Mainland waters and offered to pay compensation to the Monitoring Centre for the work it had already undertaken under the 2^nd Monitoring Agreement.

73.  Apparently, the Monitoring Centre insisted being paid HK$1,267,760.00 and it had also asked the Plaintiff to pay it under the Plaintiff’s Undertaking. 

74.  The Defendant has not paid the Monitoring Centre any sums under the 2^nd Monitoring Agreement.

75.  Further, the Plaintiff sent a letter dated 13 March 2002 to the Defendant also demanding payment under the dumping contract.

76.  By a letter dated 14 March 2002, the Defendant replied and denied any liability.

77.  On 8 December 2008, the Plaintiff brought the present claim against the Defendant.

C. The issues

C1. Whether there was the Alleged Agree Quantity Term

C1.1 The pleaded case

78.  Specific to this issue, it is the Plaintiff’s pleaded case^[6] that:

(1) There was a binding agreement between the Plaintiff and the Defendant formed on 14 July 2000 for the Defendant to engage the Plaintiff to apply for dumping permits from SCSB for the dumping of the Alleged Agreed Quantity at the SEZ Site, at the unit price of HK$17.00 per m³. This binding agreement was contained in and evidenced by the 14/7 Documents. The Alleged Agreed Quantity Term was either an express or implied term of this agreement.

(2) The 21/7 Agreement constituted and evidenced the further and detailed terms agreed for the implementation of the agreement formed on 14 July 2000. The 21/7 Agreement was not intended to, and did not so, supersede the agreement entered on 14 July 2000, including the Alleged Agreed Quantity Term.

(3) The 14/7 Documents and 21/7 Agreement constituted all the documents evidencing the dumping contract between the parties, although on 14 July 2000, the parties had already entered into a binding head agreement.

79.  On the other hand, it is the Defendant’s case that:

(1) The 14/7 Documents only reflected a “preliminary intention of the parties” and it was the 21/7 Agreement which constituted the entire binding agreement between the Plaintiff and Defendant. Thus, the agreement was only formed on 21 July 2000 and as set out in the 21/7 Agreement, but not on 14 July 2000.

(2) In any event, there was never the Alleged Agreed Quantity Term, express or implied, of the contract between the parties (whether evidenced under the 14/7 Documents or not).

80.  There are therefore two questions arising from the contentions:

(1) When did the parties enter into a binding agreement.

(2) Whether there was an express or implied term of the agreement that the Defendant agreed to dump the Alleged Agreed Quantity of the contaminated mud at SEZ Site.

81.  Under this issue, the Plaintiff has called the following witnesses to give evidence in support of its case:

(1) Mr Shek.

(2) Mr Tsang.

(3) Mr Chen.

(4) Mr Lam.

(5) Mr Chen Xian of Hanshing.

82.  The Defendant has two witnesses, namely Mr Choi and one Mr Ng, to give evidence on its behalf.    Mr Ng was the General Manager of the Contracts Division of Hyundai at the material times.  Mr Ng has filed two witness statements but the Plaintiff did not seek to cross-examine him, and thus he has not given live evidence at trial.

C1.2 When was the agreement entered into

83.  I agree with the Plaintiff that the parties entered into a binding agreement with the Defendant on 14 July 2000, which was evidenced by the 14/7 Documents.  My reasons are as follows.

84.  First, reading and construing these documents objectively and as a whole, they clearly show to me that the parties had the intention to enter into an agreement to engage the Plaintiff to act as its agent to apply for dumping permits with SCSB at a unit cost of HK$17.00. 

85.  In particular, the following translated words^[7] used in the 14/7 Documents in my view objectively show that the parties intended to record an agreement reached on 14 July 2000 after engaging lengthy negotiations on 13 and 14 July 2000:

(1) “After friendly discussions, both parties have reached an agreement on cooperating in dumping the dredged mud from [CT9 development]…”

(2) “Both parties have agreed on the following…”

(3) “…Both parties have reached an agreement on cooperating…” (emphasis added)

86.  Secondly, I also agree with the submissions of Ms Cheng SC (for the Plaintiff) that, given the following background^[8] leading to and at the time of the 14/7 Documents, it is objectively clear that the parties intended to enter into the agreement with binding effect:

(1) At that time, the Defendant was facing a tight timetable to secure dumping permits from SCSB.

(2) Mr Shek and Mr Choi were instructed by Mr Kwon that they must try to secure getting the dumping permits on their trip to Guangzhou, and they should not return to Hong Kong without achieving that.

(3) Mr Choi admitted that at that time, sorting out the dumping permits was “very important and urgent” and that the Defendant had to continue with the dredging works by the end of July in order to avoid any serious delay.

(4) Mr Choi and Mr Tsang had spent many negotiation sessions on the two days before signing the 14/7 Documents to reach an agreed unit price. This was a very important term for both parties.

(5) In light of these, it made no commercial sense for them not to intend to enter into a binding agreement once they managed to agree on the price after serious negotiations, while having it recorded on the 14/7 Documents.

(6) This is also consistent with the Plaintiff entering into a back-to-back agreement with Wing Yiu on the same date[9].

87.  Further, I also accept that the 14/7 Documents contained all the necessary essential terms to form a binding agreement on the Defendant engaging the Plaintiff to apply for dumping permits with SCSB for the contaminated mud coming from CT9 at an unit price of HK$17.00, leaving the parties to agree further on the other terms required to carry out and implement this principal agreement.  See: Chitty on Contracts (30^th ed), paras 2-113 to 114; Hillas & Co Ltd v Arcos Ltd [1932] 147 LT 503 at 514 per Lord Wright; RTS Flexible Systems Ltd v Molkerei Alois Mller Gmbh & Co KG (UK Production) [2010] UKSC 14 at paras 45-50.

88.  In the premises, I hold that the parties entered into a binding agreement (“the 14/7 Agreement”) on 14 July 2000 whereby the Defendant agreed to engage the Plaintiff to act as its agent at a service fee of HK$17.00 per m³ to apply for dumping permits with SCSB for the purpose of dumping contaminated mud from CT9 development at the SEZ Site.  This agreement was evidenced by and contained in the 14/7 Documents.

C1.3 Was there the Alleged Agreed Quantity Term, whether express or implied

89.  On construing the terms of a contract, the following uncontroversial legal principles apply:

(1) The construction of the terms of a contract is an objective task to ascertain the common intention of the parties, by looking at the plain and ordinary meaning of the words used: Chitty on Contracts, supra, paras 12-042 – 12-051.

(2) Where there is a written contract, in the absence of a case of collateral agreement (oral or otherwise), mistake, misrepresentation, non est factum or rectification, the rule on parol evidence generally prevents the Court from admitting and hearing extrinsic evidence to construe the terms of a contract. In any event, no extrinsic evidence should be admitted to contradict the express provision of a contract: Shogun Finance Ltd v Hudson^[10], at 944A-F per Lord Hobhouse; Chitty on Contract, supra, paras 12-097 - 12-100

(3) On the other hand, the Court is prepared to and should look at and have regard to the factual matrix against which the contract is entered into in construing the terms of a contract: Jumbo King Ltd v Faithful Properties Ltd^[11]; Okachi (Hong Kong) Co Ltd v Nominee (Holdings) Ltd^[12].

(4) Insofar as implied terms are concerned, it is trite that the Court will only imply a term to a contract where (a) it must be reasonable and equitable to do so, (b) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it, (c) it must be so obvious that it goes without saying, (d) it must be capable of clear expression, (e) it must not contradict any express term of the contract: BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings^[13]; Chitty on Contracts, supra, paras 13-001 – 13-012.

(5) It is however pertinent to note that (a) the business efficacy test and officious bystander test are two separate criteria and not cumulative, and whichever the test the court is considering, implication is a matter of necessity^[14], (b) to satisfy the business efficacy test, the term must be “absolutely essential” to the contract under consideration, and the term itself must also be reasonable, other than being necessary^[15].

90.  Bearing these principles in mind, I now turn to the present case.

91.  It is important to note that it is not part of the Plaintiff’s case that there was an oral agreement or term that the Defendant agreed to commit itself to the Plaintiff that it would dump the Alleged Agreed Quantity under the 14/7 Agreement. The Plaintiff’s case is restricted to there being either an express term or implied term of the agreement.

92.  Insofar as the case on express term is concerned, I can quickly deal with it as follows. 

93.  It is not entirely clear as to what the Plaintiff’s case on express term is.  However, it is clear and undisputed that no such term was written in the 14/7 Documents and the 21/7 Agreement.   In light of this, and given that this is not a case on an oral collateral agreement or oral term[16], nor is it the Plaintiff’s case that such a term arises from a proper construction of any of the written clauses of these documents, I cannot see how it can be seriously contended that there was an express term of the 14/7 Agreement of such an effect.  

94.  Further, and insofar as necessary, I also find that the Plaintiff’s case on an express term is untenable objectively in light of the following:

(1) No such term was expressly written into the 14/7 Agreement when, in accordance to the Plaintiff’s own case, this was one of most fundamental and important terms. It does not make any common or commercial sense that such an important term, if in fact agreed, would have been left out in the written document, the purpose of which was to evidence and record the agreement reached.

(2) It also lacks any common and commercial sense that if there were in fact an agreement on the quantity of the contaminated mud to be dumped with an agreed unit price, the 14/7 Agreement did not proceed to set out simply or at least also the total contract sum payable (which was about HK$100m odd) by the Defendant, but only the unit price.

(3) The setting out only of the agreed unit price was clearly objectively more consistent with there being no agreement at the time of contract on what the final quantity of the contaminated mud to be dumped was, which needed to be measured when the works were completed.

(4) The Alleged Agreed Quantity Term was inconsistent with the express term stated in one of the 14/7 Documents (which collectively evidenced the 14/7 Agreement) that “the total quantity is subject to the final quantity confirmed by the owner of [the CT9 Development] to [the Defendant]”.

(5) The Alleged Agreed Quantity Term was also clearly inconsistent with the express clauses in the 21/7 Documents (which the Plaintiff accepted together with the 14/7 Agreement constituted the entire dumping contract) which provided that:

(a) The total dumping quantity is estimated to be in the region of 3,000,000 m³ but the actual quantity would be those finally disposed at the SEZ Site under the contract^[17];

(b) The measurement of the final quantity shall be based on an agreed method of Bathymetric Survey^[18].

95.  I therefore conclude that there was no such express term of the Alleged Agreed Quantity Term in the 14/7 Agreement (or the entire dumping contract).

96.  I now turn to the Plaintiff’s case on implied term.  

97.  Again, it is not entirely clear from the pleadings as to what the Plaintiff’s case on an implied term is.  No specific grounds in support of such an implied term are pleaded.  It is also not pleaded as to whether such an implied term arose by reason of obvious implication, business efficacy and/or as a matter of law.  However, at the same time, the Defendant has not sought further and better particulars on the Plaintiff’s pleadings relating to the claim of implied term.  I would therefore have to consider the Plaintiff’s case on these various trite grounds.

98.  Ms Cheng runs the case on there being such a term of the contract^[19] in her Opening Submissions at paragraph 9 as follows:

“9. The 14.7.2000 Agreements did not explicitly state the exact quantity of contaminated mud to be dumped at [the Alleged Agreed Quantity]. However, such term can be ascertained by reference to the following facts:

(1) It had been the Defendant’s intention to dump basically all the contaminated mud in the PRC waters;

(2) The only party that the Defendant had engaged in getting the dumping permit in the PRC waters was the Plaintiff;

(3) The parties knew that the quantity of the contaminated mud undertaken to be dredged and dumped by the Plaintiff in the PRC waters was about [the Agreed Quantity], and proceeded the negotiation on that basis;

(4) The application for dumping permits involved substantial costs and/or liabilities to be incurred upfront. It would be out of business senses for the Plaintiff not to agree the quantity in the first place;

(5) Equally, given the substantial savings that the Defendant would benefit from dumping at [South Er Zhou], it would be out of sense for the Defendant not to agree the quantity; and

(6) In any event, the 14/7/2000 Agreements were drafted by the Defendant and any ambiguous terms are to be construed against it: contra proferentem.” (emphasis added)

99.  In support of her case on finding such a term, Ms Cheng also relies on the undisputed fact that the Alleged Agreed Quantity was expressly stated in a quotation requisition sheet as the quantity of contaminated mud to be dredged from the CT9 development.  The Defendant sent the quotation requisition sheet to various subcontractors (including the Plaintiff) back in January 2000[20] to invite them to give a quotation for the provision of dumping ground for contaminated mud from CT9 development. It was further provided in the quotation requisition sheet that the subcontractor were “now informed of the total volume of contaminated mud to be dumped.  Will [it] be able to quot [sic] for the price per unit volume now”.

100.  Insofar as Ms Cheng is inviting me to look at the background facts to consider the implication into the agreement the Alleged Agreed Quantity Term, applying the principles I have set out above, I am prepared to consider the various witnesses’ evidence adduced by the parties but only to the extent to enable me to find the relevant background matrix relating to the entering into the 14/7 Agreement.

101.  After considering the evidence, in addition to the uncontroversial background I have set out in Section B and paragraph 86 above, I am prepared to further accept that the evidence[21] establishes the following background factual matrix relevant to the 14/7 Agreement:

(1) It was the Defendant’s hope to dump basically all the contaminated mud in the Mainland waters in order to save costs.

(2) The Defendant had entered into serious negotiations with only the Plaintiff for the purpose of engaging it to get the necessary dumping permits in the Mainland waters.

(3) At the time when the negotiations were taking place, both Mr Choi and Mr Tsang proceeded the discussions with an estimate that the entire volume of the contaminated mud to be dredged under the CT9 development would be in the region of 6.8 m³. But the parties did not conduct the negotiations with an or any exact quantity of the contaminated mud in mind or as a basis^[22].

102.  However, even after taking into account of all these background matrix and facts, including the quotation requisition sheet, I do not see how these would support the fining of an implied term that the Defendant had agreed and committed to dump the Alleged Agreed Quantity of contaminated mud.

103.  The clear and unchallenged evidence shows that at the time of the agreement, the parties only had a rough estimation of what the amount of the contaminated mud that mightcome out from the CT9 development would be.

104.  In light of this, there is simply no room to imply a term to the agreement for the Alleged Agreed Quantity, which represented an exact amount of 6,410,770 m³ of contaminated mud because: 

(1) The term clearly could not be implied as a matter of law. I do not think Ms Cheng is submitting that there is any law which would have required or mandated the implication of the Alleged Agreed Quantity Term.

(2) This could also not have arisen by way of an obvious implication, as this was inconsistent with the undisputed background matrix and the common basis that there was only an estimation of what the contaminated mud’s quantity was likely to be. The fact that the Defendant had hoped, no matter how earnest that hope was, to dump basically all the CT9 contaminated mud in the Mainland waters is a very different thing from saying that it was prepared to enter into a binding agreement to dump an exact and large amount (the Alleged Agreed Quantity) of the mud.

(3) This also could not have arisen by reason of business efficacy. I fail to see, given the background matrix and the existence of only a rough estimation on the quantity, how such a term on the Alleged Agreed Quantity was necessary to imply the term to enable the 14/7 Agreement to operate. Quite to the contrary, the 14/7 Agreement expressly provided that the final quantity of the contaminated mud would have to be ascertained, whereas the method of such measurement to ascertain the final quantity of contaminated actually dumped was then provided in detail in the 21/7 Agreement. These clauses in the 21/7 Agreement (as accepted and in fact advanced by Ms Cheng for the Plaintiff) provided for the implementation and operation of the 14/7 Agreement. It was therefore unnecessary, and in fact contradictory, to imply the Alleged Agreed Quantity Term.

105.  Much evidence has been given by Mr Shek and Mr Tsang for the Plaintiff at trial to explain why, if there was already the Alleged Agreed Quantity Term under the 14/7 Agreement, Mr Tsang still agreed to sign the 21/7 Agreement, which contained express clauses (as mentioned above) contradicting the said alleged term.   They have been subject to extensive cross-examinations by Mr Scott SC for the Defendant.  Effectively:

(1) Mr Shek’s evidence is that he was shocked and surprised to see the terms in the 21/7 Agreement (without the addenda) when he was first given a copy of it, which were not what were agreed under the 14/7 Agreement, in particular in relation to the Alleged Agreed Quantity Term. When he asked, it was explained that these were terms required to solely relieve the Defendant’s financial difficulty in meeting the immediate financial commitments under the 14/7 Agreement if it had to pay at once for all the fees (a) in getting the permits for the Alleged Agreed Quantity, and (b) also to provide financial subsidy to the Plaintiff for purchasing the performance bond, the value of which was to be calculated by reference to the totally contract sum for the entire Alleged Agreed Quantity. It was further explained that further agreements would be provided at different stages to reflect the dumping of the Alleged Agreed Quantity of contaminated mud beyond what was already provided in the 21/7 Agreement. Mr Shek says in evidence that he reluctantly accepted these explanations. Then, when Mr Tsang later came to the Defendant’s office to sign the 21/7 Agreement, he interpreted every single clause in it to Mr Tsang. Mr Tsang was initially very unhappy about the terms which contradicted the Alleged Agreed Quantity Term. Mr Shek then tried very hard to convince Mr Tsang the Defendant’s explanations based on the Defendant’s own financial concerns as he (Mr Shek) was told. Mr Tsang eventually reluctantly accepted the explanations and signed the document.

(2) Mr Tsang’s evidence however is quite different. When he is cross-examined on the relevant clauses in the 21/7Agreement and asked why he still signed it, he says that at the time of signing, he did not fully understand these clauses. He further says Mr Shek did not interpret them in detail to him. Mr Shek’s interpretation was in fact very brief and general and did not explain clause by clause to him. He therefore signed the 21/7 Agreement without really knowing that there were these terms which contradicted the Alleged Agreed Quantity Term.

106.  I have no hesitation in rejecting both of their evidence as unreliable:

(1) The respective evidence, as summarized above, clearly and unexplainably contradicts against each other.

(2) Further, the version provided by Mr Shek does not make any commercial sense and is inherently incredible. Even in light of the financial difficulties experienced by the Defendant as explained, it did not make any commercial sense as to why the 21/7 Agreement could not have contained or reflected the Alleged Agreed Quantity Term (if there was one), but instead set out various payment and measurement terms directly contradicting the said alleged term. It is important to note that the so-called requirement to purchase a performance bond calculated by reference to the entire contract sum was a matter of Hyundai’s own practice but not required by any law or regulations. It is therefore beyond me to understand why, it there were the agreed term on the Alleged Agreed Quantity, it was necessary to set out all these contradictory terms to satisfy effectively the Defendant itself that it did not have to immediately pay the required sum to finance the Plaintiff to purchase the performance bond. There appears to be no commercial reasons why it was not possible to set out the Alleged Agreed Quantity as the final quantity of contaminated mud to be dumped and as agreed (if that were the case), but provide in the document for a staged payments and staged purchase of the necessary performance bonds regime. The same applies to the payment of the contract. It is similarly difficult to see why, if the Defendant did have the financial concerns at that time, it could not have stated in the 21/7 Agreement a staged payment method for the entire contract sum (calculated on the Alleged Agreed Quantity), but instead had to (as said by Mr Shek) resort to entering into further new agreements in the future to cater for the rest of the payments.

(3) Moreover, the suggestion by Mr Shek that there was in fact the Alleged Agreed Quantity Term under the 14/7 Agreement is inconsistent with his own evidence in the witness statement^[23] that, even at the time when he was translating the 21/7 Agreement to Mr Tsang, he had tried very had to convince Mr Tsang to accept them although these terms appeared to be contradictory to the estimated quantity of 6.8 m³ (as opposed to the Alleged Agreed Quantity) of contaminated mud expected to come out from the CT9 works.

(4) In any event, this detailed account of what happened in relation to the signing of the 21/7 Agreement is not contained in Mr Shek’s Amended Witness Statement. This also renders the account unreliable.

(5) Mr Tsang’s version of events as to why he signed the 21/7 Agreement is also inherently incredible:

(a) It lacks any commercial sense for an experienced businessman like him to sign a 3-pages long entirely English agreement without in fact knowing what was really said in relation to the many clauses set out in it, and also without asking for a full interpretation thereof.

(b) In any event, in the whole document, insofar as the description of volume was concerned, there was only a reference to 3,000,000 m³ at clause 2.5, but never any references to the Alleged Agreed Quantity or other quantities. Mr Tsang must be able to read this figure. It appears to me to be without any common or business sense that he had not enquired with Mr Shek about that.

(c) Similarly, the whole document did not refer to the payment (whether by stages or otherwise) of the whole contract sum of HK$100m odd for the Alleged Agreed Quantity, but only has references to (a) the sum of HK$17,000,000.00, and (b) three respective sums of HK$5,950,000.00, HK$5,950,000.00 and HK$5,100,000.00. Again, Mr Tsang must be able to read these figures of payments, and must be surprised if not shocked (if there were the agreed term on the Alleged Agreed Quantity) to find that these were the only sums referred to for payment in the document. I would have expected that, if there was only one thing that Mr Tsang would look for in the document (which was for the implementation of the details terms of the 14/7 Agreement), it would be the setting out of the payments for the agreed HK$100m odd. I further repeat my observation concerning the express term at paragraphs 94(2) and (3) above.

107.  In the circumstances, I see no reason to explain away the contradiction between the existence of the Alleged Agreed Quantity Term and these clauses in the 21/7 Agreement for the implementation of the 14/7 Agreement.

108.  For the above reasons, I also reject the Plaintiff’s case on implied term.

C1.4 Conclusion under the 1^st issue

109.  I therefore hold that:

(1) The parties entered into a binding agreement on 14 July 2000 for the Defendant to engage the Plaintiff to act as its agent to apply for dumping permits with SCSB for dumping the contaminated mud dredged from the CT9 project. The service fee to be paid to the Plaintiff was calculated by reference to a unit price of HK$17.00 per m³ of the contaminated mud dumped. Further detail terms to implement this agreement were to be provided for. This agreement (the 14/7 Agreement) was contained in and evidenced by the 14/7 Documents.

(2) The parties then further entered into the 21/7 Agreement on the detailed terms for carrying out the 14/7 Agreement.

(3) The 14/7 Agreement (whether construed alone or together with the 21/7 Agreement) did not contain the Alleged Agreed Quantity Term whether expressly or impliedly. It was a measurement contract.

C1.5 The Plaintiff’s alternative cases

110.  Although not pleaded, in its Closing Submissions, the Plaintiff seeks to run two further alternative cases on the term of the dumping contract (i.e., the 14/7 Agreement read together with the 21/7 Agreement).  They are in summary as follows.

111.  As the first alternative, it is contended that by concluding the 14/7 Agreement and/or the 21/7 Agreement, the Defendant agreed to engage the Plaintiff to secure the right to dump the entire quantity of mud dredged from CT9 project at the SEZ Site.  Although no quantity of contaminated mud had been fixed, the quantity relating to the right to dump was ascertainable and referable to the entire amount of contaminated mud that was dredged from the CT9 project (subject to the “bad weather” exception as explained below). 

112.  However, as there is no evidence at trial as to what was the entire quantity of mud dredged from the CT9 project (understandably so, since this issue does not arise from the pleadings and at trial), Ms Cheng says if the Plaintiff could succeed on this, there should be a further direction for assessment of damages.

113.  As the second alternative, it is submitted that the Plaintiff’s contractual duty under the dumping contract was to secure the right to dump (i.e., the dumping permits) for the Defendant, and it was entitled to receive HK$17.00 per m³ on the volume of the right to dump that it had secured for the Defendant (as opposed to the actual dumped volume) under the said permits.  Given that the Plaintiff had successfully obtained the 1^st Dumping Permit for the right to dump 1 million m³ contaminated mud, the Plaintiff was thus entitled to receive HK$17 million of which the Defendant had only paid HK$8.9 million.  The Plaintiff should therefore be entitled to claim for the difference of HK$8.1 million.

114.  Ms Cheng cited the CFA’s decision in Mak Kang Hoi v Ho Yuk Wah^[24] to say that, although these alternative cases are not specifically pleaded, the Plaintiff should still be permitted to run them as it is only seeking the Court to determine the terms of an agreement with the same set of evidence adduced at trial.  These alternative cases are also not radical departure from the primary pleaded case.  No prejudice could be thus said to be caused to the Defendant.

115.  Although objecting these alternative cases to be advanced, Mr Scott SC for the Defendant has not clearly identified any specific prejudice that would have caused to the Defendant if they are so allowed to be run. In particular, counsel has not specifically shown what evidence the Defendant would have adduced had these alternative cases had been specifically pleaded and is thus prejudiced by having been deprived of the chance to do so.

116.  I am therefore prepared do allow these alternative cases of the Plaintiff to be run by way of submissions.

117.  After consideration, I would however also reject these two alternative cases for the following reasons.

118.  Insofar as to the first alternative case is concerned, the contended term that the Defendant had agreed to dump the entire contaminated mud dredged from the CT9 project under the dumping contract is simply and clearly inconsistent with clause 2.8 of the 21/7 Agreement.  Clause 2.8 provided as follows:

“The measurement of the final volume shall be, based on the Bathymetric Survey data submitted by the [Defendant] to the Employer of the [CT9 Project], calculated using the principal of Initial Survey less Final Survey less any other Survey quantities of contaminated mud dumped in other disposal area.” (emphasis added)

119.  Clause 2.8 thus set out objectively clear that for the purpose of calculating the final quantity of the contaminated mud dumped at the SEZ Site (for the purpose of calculating the sums payable by the Defendant to the Plaintiff under the dumping contract), the measurement should take into account of mud dumped in other disposal sites.

120.  This therefore does not permit a construction of the dumping contract for a term that the Defendant must dump all the contaminated mud dredged from the CT9 project at the SEZ Site. 

121.  Ms Cheng tries to argue^[25] that the dumping at other disposal areas provided in clause 2.8 is, by proper construction with reference to the background matrix, only a reference to the situation of bad weather. 

122.  With respect, I disagree.  I can see nothing from the factual matrix or in the 14/7 Agreement and the 21/7 Agreement that would objectively limit or confine the reference to “any other Survey quantities of contaminated mud dumped in other disposal areas” in clause 2.8 to only “bad weather” exception.  It is pertinent to note that nowhere in all 14/7 Agreement and the 21/7 Agreement had an express reference to a “bad weather” exception. 

123.  I may also add that the provision in one of the 14/7 Documents that “the total quantity is subject to the final quantity confirmed by the Owner of [the CT9 Development] to [the Defendant]” is equally consistent with an objective meaning that the total quantity to be measured under the agreement was those confirmed quantity dredged from the CT9 project and actually dumped at SEZ Site.  This therefore does not point objectively to a construction (as also contended by Ms Cheng) that the Defendant must have to dump all the mud dredged out from the CT9 project at that site.

124.  I therefore reject the Plaintiff’s first alternative case whether on a case of express or implied term.

125.  In relation to the second alternative case, similarly, in light of clauses 2.7 and 2.8 of the 21/7 Agreement, which dealt with the final measurements of the contaminated dumped at the SEZ Site, it is also inconsistent with there being a term of the dumping contract that the Plaintiff was entitled to the payment of the full amount (i.e, HK$17,000,000.00) of the 1^st  Dumping Permit (permitting the dumping of 1,000,000 m³ of contaminated mud) as obtained irrespective of whether or not the Defendant in fact dumped the full 1,000,000 m³ of mud.  It is important note that:

(1) If (as contended) the Plaintiff was entitled to receive HK$17.00/ m³ on the volume on the right to dump it had secured for the Defendant under each dumping permit so obtained, as opposed to the dumped volume, there was no need for the dumping contract to provide for the method of measurement of the dumped mud.

(2) There was no qualification in clauses 2.7 and 2.8 (the measurement clauses) that they do not apply to the 1^st Dumping Permit but only to subsequent dumping permits obtained. To be fair to Ms Cheng, she has also not so contended.

126.  I therefore further reject the Plaintiff’s 2^nd alternative case.

C2. Was the dumping contract frustrated

127.  Given my conclusion above, the issue of whether the dumping contract was frustrated does not arise. 

128.  However, as this has been argued fully before me, I would deal with the question of frustration briefly as follows.

C2.1 The law

129.  Frustration is a common law doctrine which discharges the parties from performing their obligations under a contract.  It occurs whenever the law recognises that without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.  However, there is generally no frustration if it has only become more onerous or expensive for the party to perform its outstanding obligations under the contract.  See: Davis Contractor v Fareham^[26]and National Carriers Ltd v Panalpina (Northern) Ltd^[27].

130.  In J Lauritzen AS v Wijsmuller BV (the Super Servant Two)^[28], Bingham LJ set out the following five propositions which form the essence of the doctrine.  These have been summarized in Chitty on Contracts[29] as follows:

(1) The doctrine of frustration has evolved “to mitigate the rigour of the common law’s insistence on literal performance of absolute promises”.

(2) Frustration operates to “kill the contract and discharge the parties from further liability under it” and that therefore it cannot be “lightly evoked” but must be kept within “very narrow limits and ought not to be extended”.

(3) It brings a contract to an end “forthwith, without more and automatically”.

(4) The “essence of frustration is that it should not be due to the act or election of the party seeking to rely on it” and it must be some “outside event or extraneous change of situation”.

(5) A frustration event must take place “without blame or fault on the side of the party seeking to rely on it”.

131.  Further, the mere fact that it has become no longer commercially viable to perform the contract is not sufficient to invoke the doctrine of frustration:  Tenants (Lancashire) Ltd v CS Wilson & Co Ltd^[30] and Thames Valley Power Ltd v Total Gas & Power Ltd^[31].

C2.2 The present case

132.  As an alternative defence, the Defendant pleaded that the dumping contract was frustrated by the dismissal of its appeal against the EPD’s refusal to grant the loading permits.

133.  I do not think the evidence establishes that this amounted to a frustration event:

(1) It is clear from the accepted evidence and the decision of the Appeal Board that the EPD would and could continue to issue the necessary loading permits to the Defendant if the Defendant could provide the necessary environmental impact assessment report that would satisfy EPD’s requirements.

(2) After the dismissal of the appeal, the Defendant had in fact proceeded to enter into the 2^nd Monitoring Agreement and engage with other professionals for the purpose of producing such a report.

(3) There is no evidence whatsoever to show that it was impossible to produce a report that could have satisfied the EPD’s requirements.

(4) However, it is the evidence that the Defendant out of its own volition suddenly terminated the continuation of the 2^nd Monitoring Agreement and the commission of the professionals to produce the necessary impact assessment report. The Defendant’s own evidence[32] shows that the Defendant terminated the preparation of the environmental impact assessment report as it was informed by the Lands Department that the Defendant would be in breach of a special condition of the relevant land grant (for the CT9 development) to dump the contaminated mud at sites other than those designated in the grant. The SEZ Site was not such a designated site.

(5) In the circumstances, I am not satisfied that the dumping contract was no longer possible to be performed by the Defendant by reason of an extraneous event which the Defendant was not to be blamed[33]. Looking at the evidence, the performance of the dumping contract might have become more onerous and expensive by having to obtain the necessary environmental impact assessment report. But as mentioned above, this does not amount to frustration of the underlying contract.

134.  For these reasons, I would have dismissed the Defendant’s defence of frustration if this had become a relevant issue.

C3. The Plaintiff’s liability under the Mainland back-to-back agreements and undertakings

135.  Whether the Plaintiff is liable under PRC law under the Mainland back-to-back agreements and undertakings it had given relating to the dumping contract is relevant to the question on whether the Plaintiff is entitled to be indemnified by the Defendant for these liabilities.  This question however would only need to be determined if the Defendant was in breach of the dumping contract and that there was a frustration of the dumping contract.

136.  Again, in light of my conclusion above that (a) the Defendant was not in breach of the dumping contract, and (b) even if the Defendant were in breach of it, there was no frustration thereof, this issue simply does not arise.

137.  But for completeness, I would also deal with this issue quickly as follows.

C3.1 The contentions

138.  Under clauses 2.3 and 2.9 of the 21/7 Agreement, the Plaintiff was responsible for paying all fees and expenses incurred in respect of obtaining the dumping permits and for liasing with all concerned parties for the smooth progress of the Defendant’s operations to dump contaminated mud at the SEZ Site.  The agreed fees to be paid by the Defendant to the Plaintiff under the contract (i.e., at the rate of HK$17.00/ m³ of contaminated mud) was inclusive of all such costs and expenses whatsoever incurred.

139.  I accept that for the purpose of the dumping contract:

(1) The Plaintiff had entered into the following back-to-back agreements (collectively “the Back-to-Back Agreements”) in the Mainland:

(a) The 1^st Monitoring Agreement.

(b) The Wing Yiu Agreement.

(c) The Hanshing Agreement.

(2) The Plaintiff had given the Plaintiff’s Undertaking in favour of the Monitoring Centre in respect of the 2^nd Monitoring Agreement up to the extent of RMB1.9 million.

140.  On the other hand, for the same reasons I set out above in rejecting the Plaintiff’s case on the Alleged Agreed Quantity Term, I would have also rejected Mr Tsang’s evidence that (a) the Plaintiff had given an undertaking on 15 July 2000 to SCSB to the effect that the Defendant would dump the Alleged Agreed Quantity of contaminated mud, and (b) based on that undertaking, SCSB agreed to set the dumping levy at the rate of RMB7.00 per m³ based on this amount.  However, if I am wrong in rejecting the Plaintiff’s case on the Alleged Agreed Quantity Term on those bases, then I would have inclined to accept Mr Tsang’s evidence that he had given this undertaking (“the Alleged Agreed Quantity Undertaking”).

141.  It is the Plaintiff’s case that even if the dumping contract was frustrated^[34], it is entitled to be reimbursed for its liability under the Back-to-Back Agreements, the Plaintiff’s Undertaking and the Alleged Agreed Quantity Undertaking under section 16 of LARCO.  Such reimbursement may be made in the form of an order for indemnity.

142.  The Defendant’s defence is essentially that under the relevant PRC law (which governs these Back-to-Back Agreements and undertakings), the Plaintiff was not liable by way of time limitation or various other defences, including the defence of change of circumstances, once the head contract (i.e., the dumping contract, governed by Hong Kong law) was frustrated.   In this respect, the Defendant relies on the expert evidence of Prof Zhang on PRC law to support its case.

143.  On the other hand, the Plaintiff relies on Prof Ge’s expert opinion to effectively say that, under PRC law, there were no valid defences available to the Plaintiff to deny liabilities under these agreements and undertakings.

144.  Prof Ge is a professor of law at the Peking University and had been a practising PRC lawyer.  The Defendant has not challenged his expertise.

145.  Prof Zhang is professor on PRC law at the Hong Kong University.  Ms Cheng for the Plaintiff challenges Prof Zhang’s expertise on PRC contract law (which is the relevant discipline of PRC law for the present purpose) mainly on the following two grounds:

(1) Prof Zhang has settled in Hong Kong since 1983. He is also not a qualified practising PRC lawyer and has never so practised PRC law as a qualified lawyer. His exposure is limited only to academic research. These cast doubts on his expertise on PRC laws, which have since then undergone substantial reform and expansion.

(2) Prof Zhang’s research area is on PRC economic law, and according to his own evidence, economic law is concerned with the laws relating to the government’s involvement, which casts an impact on the market such as tax law or budget law. Ms Cheng submits that this should not include PRC contract law and thus his knowledge on PRC contract law can only be a general one and does not acquire any expertise status.

146.  Although Ms Cheng’s submissions have some force, I am not prepared to reject Prof Zhang’s opinion for lack of expertise as contended. In particular, Prof Zhang’s experience as out in his expert report^[35] that (a) he is an arbitrator of CIETAC, and (b) he has done extensive research also in PRC contract law, foreign investment law and cross-border legal relationship has not been subject to any real challenge.   In my view, unless the contrary has been shown (which has not), these experiences should provide to support Prof Zhang’s expertise in giving opinion on PRC contract law for the present purpose.

147.  Notwithstanding this, I would however in general prefer Prof Ge’s opinion to that of Prof Zhang’s in case of any conflicts as to whether the Plaintiff is in a position under the relevant PRC law to deny liability under the respective Back-to-Back Agreements and undertakings. My reasons can be summarised as follows.

148.  First, Prof Ge as an expert witness is generally consistent and unshaken under cross-examination in relation to the opinions he has expressed, and it has not been demonstrated that the opinions so expressed are flawed in any material aspects.  He has expressed his views in a clear, logical and cogent manner.  Moreover, Prof Ge has been fair and honest in giving evidence in Court.  He demonstrates independence in readily admitting matters that he may not have sufficient knowledge or in a position to give, when asked, a view on.

149.  In contrast, Prof Zhang appears from time to time to be evasive in his answers to questions under cross-examination.  I also agree and accept Ms Cheng’s submissions that some parts of Prof Zhang’s opinions appear to be inconsistent and not supported by analysis:

(1) Prior to 1999, the doctrine of change of circumstances was recognised as a principle under Article 27(1)(4) of the Economic Contract Law (經濟合同法). It is common ground that the Economic Contract Law was repealed in 1999. Despite this, Prof Zhang sought to rely on what is known as the Summary of the Major Points of the National Conference on Economic Trial (全國經濟審判工作會議紀要) (“the Summary”) as a judicial interpretation to support the juridical basis of the doctrine of change of circumstances. Prof Zhang was cross-examined extensively that the Summary could only at most be treated as an extra curial statement but not a judicial interpretation. However, in my view, Prof Zhang has failed to give any clear explanations (backed by any authorities) to support his opinion that the Summary is somehow a judicial interpretation.

(2) Prof Zhang advanced the proposition that judicial interpretation (as opposed to judicial decision) of the People’s Supreme Court is binding even though he accepted that the Legislative Law (立法法) does not grant any legal status to judicial interpretation. When cross-examined on the difference between judicial decisions and judicial interpretation, Prof Zhang without offering any convincing basis, sought to draw a distinction between judicial decisions given by the Supreme People’s Court (which he says are non-binding) and judicial interpretation (which he says is binding). Again, suffice for me to say that I am not persuaded by these explanations.

(3) When Prof Zhang was challenged drawing a conclusion in his report^[36] that the EPD’s refusal to grant loading permit amounted to a frustration event of the dumping contract (which was governed by Hong Kong law), he suggested that his conclusion was the result of applying PRC legal doctrine of change of circumstances. This is without proper basis as it must be wrong to apply PRC law to analyse a contract accepted to be governed by Hong Kong law.

150.  Secondly, I also agree with Ms Cheng that Prof Zhang appears to have crossed the line of an independent expert to act as an advocate for the Defendant.  Below are two of the most notable examples:

(1) Prof Zhang opined that the legal relationship between the Plaintiff and the Defendant was one of measurement contract^[37]. When he was asked why he referred to the nature of the contractual relationship between the parties (which was governed by Hong Kong law), as he as an expert was only asked to give opinions on PRC law which governed the Back-to-Back Agreements, he explained that “because at that time when I was asked to provide opinion, the focus was on the dispute between the plaintiff and the defendant”.

(2) Further, as pointed out above, apparently upon nobody’s invitation, Prof Zhang also opined (not merely acknowledging that this was his instruction) in his report that EPD’s refusal to grant loading permit constituted a frustration event under the dumping contract. Given the scope and purpose of his opinion as sought, it was unnecessary for him to give a view as to whether EPD’s refusal was a frustration event, other than for the purpose of supporting the Defendant’s case. This is further underlined by the fact that it was inappropriate for him to give such an opinion, since whether the EPD’s refusal amounted to a frustration of the dumping contract was a matter of Hong Kong law.

151.  For these reasons, I would reject Prof Zhang’s opinions insofar as they conflict with Prof Ge’s opinions.

152.  Therefore, had the issue become relevant:

(1) I would have accepted all of Prof Ge’s opinions concerning the Plaintiff’s liabilities under the Back-to-Back Agreements, the relevant undertakings.

(2) I would have made the findings concerning the Plaintiff’s liability under these agreements and undertaking as follows (as submitted by Ms Cheng[38]):

(a) The Plaintiff was liable to compensate SCSB under the Alleged Agreed Quantity Undertaking[39] in the sum of RMB37,875,390.00.

(b) If there was not the Alleged Agreed Quantity Undertaking[40], the Plaintiff is entitled to be indemnified by the Defendant any liability the Plaintiff owed to SOA under the 1^st Monitoring Agreement.

(c) Under the Hanshing Agreement, the Plaintiff is liable to pay, if so demand, Hanshing the sum of HK$20,736,000.00 (6.4m x HK$3.60 x 90%). I further accept that the Plaintiff and Hanshing had entered into a Debt-Repayment Agreement on 28 July 2003 whereby the Plaintiff agreed to transfer its 80% interest in a Chinese company to Hanshing as partial settlement of the liability. Any failure to perform this Debt-Repaying Agreement would give rise to a new cause of action.

(d) The Plaintiff was still liable to pay Wing Yiu under the Wing Yiu Agreement an outstanding sum of HK$7,292,924.00. The Plaintiff is entitled to be indemnified by the Defendant on this liability.

(e) The Plaintiff is also entitled to be indemnified by the Defendant for its liability under the Plaintiff’s Undertaking.

C4. The Counterclaim

153.  As I have rejected the Plaintiff’s primary claim and come to the conclusion that the dumping contract was a measurement contract, I would allow the Defendant’s Counterclaim. However, I am not satisfied that the Defendant is entitled to be repaid the HK$900,000.00 it had paid to the Plaintiff for the extension of the validity of the relevant permits, since it was the Defendant’s own request for making the application for extension.  I am also not satisfied that there is evidence to show that the extension application was unsuccessful as alleged by the Defendant.

154.  In the premises, the Plaintiff should pay the Defendant the sum of HK$3,151,824.00 (HK$8,900,000.00 – HK$5,748,176.00^[41]).

D. Conclusion

155.  I would dismiss the Plaintiff’s claim and allow the Defendant’s counterclaim for the sum of HK$3,151.824.00.  The Defendant is further entitled to interest on this sum at the rate of 1% above the prime rate as from time to time quoted by HSBC, from the date of writ until today, and thereafter at judgment rate until full payment.

156.  Insofar as costs is concerned, there appears to be no reason why it should not follow the event.  I further make an order nisi that costs of the action (including the counterclaim) be to the Defendant to be taxed if not agreed.  The order nisi shall be made absolute 14 days from today unless any of the parties applies to vary it by Summons.

157.  Lastly, I thank counsel for their helpful assistance in this matter.