SECRETARY FOR JUSTICE v. KIN CHING BESSER CO LTD

HCA 561/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 561 OF 2003

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J U D G M E N T

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Introduction

1.  This is a claim for $4,248,862.55 brought by the Secretary for Justice, as Plaintiff, on behalf of the Director of Lands.  It arises out of three landslides which occurred on 9 June 1998 caused by the slippage of substantial deposits of pulverised fuel ash (“PFA”) and other materials which had been placed on the edge of the hillside slope at the boundary of an area of land which the Director of Lands had let to the Defendant by a Tenancy Agreement dated 1 May 1984.  The claim represents the cost of clearing the debris from the landslides, repairing the damage caused by them and restoring the hillside back to a safe state.

2.  The action is brought on two bases.  Primarily as an action for nuisance and negligence but also for breaches of a number of covenants contained in the Defendant’s lease.

3.  The Defendant is a manufacturer of concrete bricks which it sells to the construction industry.  The bricks are made from cement, concrete aggregate, sand and PFA.  PFA is the ash residue from coal used to fire, in this case, China Light and Power’s power station at Black’s Point which is close to the plot of land that was let to the Defendant.

4.  The land is known as Area 38 Tuen Mun New Town, New Territories.  It comprises a flat surface area of 8,700 square metres carved out of the hillside which gives it the appearance of a ledge or platform.  On to this flat area, the Defendant built its brickworks which is accessed from the road below by a track that winds its way up to the entrance of the site.  There is at Bundle 1 [page 11] a plan which is attached to the lease and which illustrates what I have just described.  On the plan, the site itself is coloured mauve and the track brown.  Bundle 3 contains a series of chronologically filed photographs which also show what is involved.  The colour plate at Bundle 3/596, dated 16 December 1997, some six months before the landslides, provides a very good view of the site with the brickworks built in the centre of the plot surrounded by pallets of cement bricks ready to be driven away down the track which is clearly seen on the left making its way down to Lung Mun Road.  The slope at the front of the site is 150 metres long down to the road and 50 metres across.  It is at an incline of 35 degrees.

5.  I should mention that to the right of the plan, and this can also be seen from the photograph at Bundle 3/596, there are a series of enclosed water reservoir buildings built and maintained by the Water Services Department (“WSD”).  These are accessed by another track, best seen on the photograph, which also continues away to the right off plan and photograph, down to the Lung Mun Road.  I mention this because the presence of this track and the works at the reservoirs have been a feature of the Defendant’s case to which I will presently need to make reference.

6.  Put shortly, the Plaintiff’s case is that the Defendant was in the habit of storing PFA on site which it had purchased cheaply from CLP’s power station.  This it stored at the front of the site at the edge of the slope and also behind the brickworks, which is very well shown in the photographs in Bundle 3.  One can usefully start at page 582 which is dated 3 october1985, after the brickworks were built and up and running and judging by the photographs the practice continued until the lease came to an end in about May 1998 when the site was finally handed back by the Defendant to the Director of Lands.

7.  During the 9 June 1998, the whole of the territory of Hong Kong was subjected to very heavy rainstorms which caused serious flooding and 42 landslides, including the three that give rise to this action.  Included in the evidence as Exhibit D2 are newspaper cuttings from the South China Morning Post of 10 June which describe the extent of the rainfall and the damage and flooding that it brought.  Overall, 410mm of rain had fallen which was the third highest daily rainfall recorded since records began.

The Cause of the Landslides and Their Effect

8.  It is helpful to start by describing the landslides and the damage that they caused and then consider why the landslides occurred, triggered, as they undoubtedly were, by the very heavy rainfall.  Debris from the landslides had poured down the slope and on to Lung Mun Road.  A report was made to the Highways Department and the Geotechnical Engineering Office (“GEO”).  The scene was viewed by Mr Cheung Chan Fai of the Highways Department and Mr Poon Kwok Fong of the GEO, both of whom have given evidence.  They inspected the site on 10 and 11 June and concluded that the landslides must have occurred on the 9^th, during the course of the rainstorms.

9.  Mr Poon, who is a Geotechnical Engineer, and who has much experience of such incidents, was of the view that the landslides involved PFA and bricks on the southern, south-western and western portion of the slope.  He estimated a volume of 700 cubic metres of material had been disturbed in the landslides.  The debris had been deposited on the hillside below the slope and some had come onto Lung Mun Road.  His opinion was that the landslides had probably been triggered by the rainfall and that the failure had been caused by:

“rainfall infiltration into the loose PFA fill, together with erosion of the loose PFA fill due to surface water below”. 

Mr Poon then gave advice to Mr Cheung as to what urgent works were required to make the slope safe and for the closure of one carriageway of Lung Mun Road, pending the clearing of debris from the road surface and the making safe of the slope.  On 19 June 1998, he prepared a memorandum [Bundle 2/332] which set out what needed to be down.  At about the same time, the GEO instructed Fugro Scott Wilson who were the retained consultant engineers to investigate the slope failure and to establish the cause of the failure.  Mr Hart, who is the co-author of a report on this, has given evidence which I will refer to shortly.

10.  Mr Cheung from the Highways Department has also given evidence which confirms Mr Poon’s findings at the scene and his opinions.  Mr Cheung then became responsible for giving instructions to the Government Term Maintenance Contractor, Sun Fook Kong (Civil) Limited (“SFK”) to carry out all the necessary clearance and repair works.  The purpose of his evidence is to produce the works order [Bundle 2/342-343].  Expenditure of $4.4 million had been authorised for this purpose.  The work order was issued on 23 July 1998 and the works completed by SFK on 5 September 1998.  The cost, as billed by SFK, amounted to $4,248,862.55 which is the amount of the claim.

11.  It is convenient to say at this stage that, in the event that I find the Defendant liable, the repair works carried out were done at an appropriate price based on the schedule of rates referable to SFK’s term maintenance contract and that all these works were properly related to the landslides and were necessary in order to clear the rubble and debris from the hillside and to restore its stability.  These works were also necessary to remove debris from Lung Mun Road and do essential repairs there and at the edge of the carriageway to make it safe for the passage of vehicles along that road.  This part of the case has not been the subject of any real challenge by the Defendant save for one important feature which I will need to consider, which is that the Defendant was never given an opportunity to inspect the landslide and its resulting damage and therefore has been deprived of any opportunity to challenge the causes of the landslide and the damage that resulted from it.  And so, whilst it is in no position to challenge the reasonableness and necessity of the works carried out, it has made no admission about these works.  Subject to that important objection by the Defendant, I am disposed to hold that the works were both necessary, reasonable and competently performed at proper rates.  I will return to the point about the Defendant not having been given an opportunity to inspect before the works were carried out when I come to the Defendant’s case.

The History of Storage of PFA at the Site

12.  This is a vital aspect of the Plaintiff’s case which has been very well documented.  Having related the extent of the landslides, their effects and the necessary repairs to restore the hillside and the road to a safe condition, as well as the cost of doing so, it is now necessary to trace the course of the Defendant’s storage of PFA. 

13.  This has been very well traced through contemporary correspondence and memoranda kept by the Director of Lands and also from photographic evidence.

14.  All of this evidence has been produced by Mr Poon and most of it is to be found in Bundle 1.  The tenancy started in May 1984.  By late November 1985, following an inspection of the site, the Director of Lands had found a very substantial stockpile of PFA at the site.  The Defendant was asked to remove it.  This correspondence starts at Bundle 1/127 and continued with mounting urgency throughout 1986.  The correspondence is there to be read.  It is not necessary to set out the terms of this correspondence here which is contained in Bundle 1.

15.  The first phase of the Director of Lands concerns ended in November 1986, after the Defendant had commissioned its own experts L G Mouchel.  Mouchel’s report starts at Bundle 1/163.  Its conclusions which are to be found at Bundle 1/170 were that “the chance of large-scale failure of the stockpiles was extremely low”.  What had been promised and expected was that during the dry season, the stockpile of PFA was to be reduced and gradually disappear.

16.  This report appears to have allayed the GEO’s fears.  At Bundle 1/195, a memorandum dated 16 December 1986 from the Chief GEO Engineer noted that “overall stability [of the stockpile] is in an acceptable state”.

17.  An aspect which I have yet to refer to is that the site had been let to the Defendant with fully functional drainage channels around the site which served to allow surface water to drain away into culverts that had been put in place for that purpose.  There was a concern that the accumulation of PFA over the drainage channels had either blocked them or damaged them.  The memorandum at Bundle 1/195 concludes with a reference to the expected complete removal of the PFA and upon that happening “[the Defendant] should be responsible for the reinstatement of any damaged drains on the slopes and within the site”.  The photographs at Bundle 1/198-202 taken in December 1986 show the extent of the stockpile.  In the course of 1987, the Director of Lands’ concern turned to the fact that the stockpile was not being reduced as expected.  See for example memorandum dated 10 September 1987 at Bundle 1/211.  A further reading of this correspondence going through the rest of Bundle 1 shows the concerns that the Director of Lands was expressing to the Defendant about the state of the site, the drainage problems and debris washing down the slope.  See for example Bundle 1/241.  For its part, the Defendant began to complain of lorries from nearby building sites travelling up the track, the one coloured brown on the plan, and dumping construction waste at the side of the track, which the Defendant was suggesting was the cause of material being washed down.  A solution was proposed in the form of a barrier being put up across the track which could be locked to prevent unauthorised lorries dumping waste at the side of the track.

18.  From about 1993, the correspondence appears to taper off but one can get a good impression of what was happening on the site from the photographs at Bundle 3.  From Bundle 3/585 in November 1988, the stockpile of PFA appears to be very considerable.  There is a reduction in 1989 [Bundle 3/586] and a real improvement in November 1994 [Bundle 3/589].  Nevertheless by 1997 it all appears to have come back, see Bundle 3/591, 592, 593, 594, 595 and finally 596.  These photographs show just how precariously perched at the edge of the slope, the stockpile is situated.  I should say that it is not accepted by the Defendant’s witnesses that, what appears to be a large stockpile of PFA precariously perched on the edge of the hillside, is in fact PFA.  They say that this is concrete and other construction waste illegally dumped by lorries, mostly using the track to the right of the site which is used to serve the reservoirs.  I must consider their evidence about this shortly.

19.  All of this evidence was taken into account by Mr Hart in co-authoring the Fugro report to which I must now turn.

The Expert Evidence

20.  The purpose of the report was to focus on the causes of the landslides.  In order to arrive at his conclusions, Mr Hart, who did not visit the site in the aftermath of these events, has studied all the reports, correspondence, plans and photographs.  Having analysed the available evidence he has provided a diagnosis of the probable causes of the landslides, at paragraph 4 and his conclusions at paragraph 5.  I propose to set these out here:

“4.5  Diagnosis of the Probable Causes of the Landslides

The close correlation between the rainstorm on 9 June 1998 and the time that the landslides were reported indicates that all the three failures were probably triggered by rainfall.

The landslides involved PFA fill materials, which were placed mainly in the period between October 1996 and November 1997.  The sliding failure and slumping of debris at Slip A are likely to have been caused by direct infiltration of rainfall into the relatively loose and permeable PFA fill materials, leading to the development of perched water pressures within the Slop and/or above the relatively less permeable natural ground.  In addition, subsurface infiltration into the PFA fill from localised ponding of water behind the crest of the Slope (i.e. on the Extension) probably occurred, which was exacerbated by lack of drainage provisions, leading to further build up of elevated water pressures within the PFA fill.

The severe washout at Slip B was most likely caused by the presence of concentrated surface water runoff, which flowed from the Premises towards this area resulting in surface erosion.

The main cause of Slip C was probably the wetting up of the loose PFA fill and building debris resulting in localised slope movement and erosion.

4.6  Key Points from the Landslide Investigation

(a)  The landslides were probably triggered by rain during or shortly after the rainstorm on 9 June 1998. The main causes of the landslides were:

-  The presence of loose, unretained and relatively permeable PFA fill, which when subjected to heavy rainfall became unstable due to elevated transient water pressures within the fill mass.

-  The absence of surface drainage created a situation whereby surface water ponded and circulated uncontrollably at the rear of, and within, the PFA fill slope.

(b)  The PFA and other fill materials were not present at the site prior to the STT Agreement between the Hong Kong Government and the KCB, which began on 1 May 1984.

(c)  PFA fill was placed on to a natural hillside between the Premises and Lung Mun Road between 1985 and 1992.  These filling activities resulted in extending the platform of the Premises leased to KCB.

Between 1992 and 1996, a relatively small portion of this PFA fill was removed from the front portion of the Slope.

Between October 1996 and December 1997, additional PFA fill materials were placed on to the area previously subjected to removal between 1992 and 1996.  Slip A affected a portion of the Slope where the PFA fill was recently placed.

Slip B occurred in an area filled with PFA materials between 1993 and 1996.  Slip C occurred in an area filled with PFA materials between 1993 and 1996, and with other construction waste between 1996 and 1997.

(d)     The PFA fill was placed without any apparent engineering input and construction control, and the stability of the portion of the slope that failed in June 1998 was not assessed previously.

(e)     Prior to the STT Agreement concrete surface drainage channels were located on the perimeter of the Premises.  Filling activities described in item (c) above covered these original drainage channels.  Furthermore, the original drainage system was not reinstated on termination of the STT Agreement in April 1998, and was not present at the time of the landslides in June 1998.

5.  CONCLUSIONS

(a)  The landslides occurred on a fill slope composed predominantly of PFA fill.  The portions involved in the main failure (i.e. Slip A) were dumped mainly between October 1996 and November 1997.  The fill material was probably in a loose state and susceptible to water ingress which became wetted up resulting in reduction in shear strength and failure.  The failure of the recently placed fill during a relatively moderate rainstorm (with a return period of about six years) demonstrated that the fill slope was substandard.  The fill slope was vulnerable to failure due to absence of any drainage and lack of engineering input in its formation.

(b)  The findings of the landslide investigation illustrate negligence of the tenant, KCB, with respect to the STT Agreement, particularly in regards to the following:

(1)  Causing, allowing or permitting the stockpiling of the surplus PFA on the Slope without any or any appropriate engineering input or construction control.

(2)  Failing to construct or install any or any sufficient drainage system in and around the Premises and the Slope, to drain away the surface water and prevent the build-up of subsurface water pressures within the ground.

(3)  Failing to take any or any adequate precautions to prevent the collapse of the PFA fill Slope.  Precautions could have included:

-  placing fill in thin horizontal layers (<0.5m thick) subjected to compaction to achieve the required degree of compaction,

-  placing fill on a suitable foundation, whereby vegetation, topsoil and other undesirable soft/loose materials removed from the natural slope and fill prior to filling, and

-  provision of surface protection and drainage on and adjacent to the fill slope.

(4)     Failing to enclose the PFA stockpiled on top of the Slope by retaining walls or other suitable means to prevent collapse.

21.  These are very well researched and reasoned findings and conclusions to which I will return after I consider the Defendant’s evidence which I now do. 

The Defendant’s Evidence

22.  It has called two witnesses, Mr Chau, the plant manager and, Mr Fong who had been the sales manager.  Both have said that the practice of stockpiling PFA stopped years before these landslides.  Both has spoken of illegal dumping by lorries from construction sites which came up both tracks, from left and right of the site and dropped construction waste including bricks and concrete and a lot of other rubbish associated with a building site.  This had been an ongoing problem which the Defendant could do little to prevent.  A lot of it went on at night and the Plaintiff had done little itself.  The barrier gate had not been an effective measure.  Both have said that what is shown in the photographs at the end of 1997 is not PFA but is construction waste.

Conclusions

23.  In approaching this evidence and because the Plaintiff had not extended to the Defendant inspection facilities at the time, which would have enabled it to take samples of what had come down in the landslides, it has not been able to contradict the Plaintiff’s expert evidence nor its other witnesses.  Had the Defendant been allowed to inspect, it could have been able to call its own expert which has not been possible.  In such circumstances, it is incumbent upon me to be particularly careful in assessing the Plaintiff’s evidence.  I have already indicated that I accept the reasonableness and quantum of its claim.  The real issue here is whether what came down in the landslides was substantially PFA.  Having looked at the history of the matter going back to 1985, I am satisfied that the Defendant continued to stockpile PFA.  I reject the evidence of Mr Chau and Mr Fong in this regard.  Whilst there may have been a certain amount of other debris washed down, the overwhelming majority of the material was PFA which the Defendant had continued to stockpile.

24.  This being so, I am completely persuaded by Mr Hart’s conclusions as to why the heavy rainfall would have triggered these events.  It triggered them, it did not cause them.  What caused them were the matters referred to by Mr Hart in paragraph 5 of his report which I have set out above.

25.  The case has been pleaded, as I have said, in negligence/nuisance and on the basis of breaches of the tenancy agreement.  It seems to me that I need go no further than negligence and nuisance.  Paragraph 5(b)(1), (2), (3) and (4) of Mr Hart’s report very clearly describe that negligence.  It seems to me that without having taken the precautions described by Mr Hart in this paragraph, it became completely foreseeable that events such of these would have occurred with precisely these consequences.  Accordingly, there must be judgment to the Plaintiff in the sum claimed save that it must give credit to the Defendant for $208,000 which is the deposit on the tenancy which the Plaintiff has retained.  The amount payable therefore will be $4,248,862.55 less $208,000 which is $4,040,862.55.  There will therefore be judgment in this amount on the claim and the counterclaim must stand dismissed.

Costs and Interest

26.  As to costs and interest, I am most concerned by the fact that the Defendant was not given inspection facilities and that having been informed on 23 July 1998 that it might be held liable, it was not formally “charged”, as it were until 2002.  The absence of inspection facilities is a serious matter because it has deprived the Defendant of being able to assess its case from the start of all of this.  Common fairness dictates that it should have been allowed that opportunity.  If it had been able to assess the strength of the Plaintiff’s case from the outset it may well have settled the action at an early stage.  I appreciate it that it has not helped itself by not asking for an inspection when it received the Plaintiff’s letter of 23 July 1999, nevertheless this does not excuse what the Plaintiff did.  Those responsible should have been alert to this so as not to cause an injustice.  In the event, I am satisfied, that none has been caused because I have been able to accept what the Plaintiff’s witnesses have said.  Nevertheless, it seems to me that I ought to hear from the parties, and certainly from the Plaintiff, as to why the Plaintiff should not be deprived of a part of its costs and as to the period and rate of interest given that the writ was issued in 2003 and the trial was not heard until 2009.  I will therefore require the parties to put in written submission on these matters.  The Plaintiff should go first and put in its written submission within 14 days and the Defendant can reply within 14 days thereafter.