SECRETARY FOR JUSTICE v. CHONG KUI (GROUP) CO LTD

HCMP 1036/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1036 OF 2009

(ON AN INTENDED APPEAL FROM HCA NO. 928 OF 2007)

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J U D G M E N T

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Hon Tang VP (giving the judgment of the Court):

1.  The plaintiff’s claim against the defendant arose out of a contract dated 12 May 2004 whereby the defendant agreed to supply and install a barrier replacement for the Tolo Harbour for the Hong Kong Police Force. 

2.  Under section 3(a) of the general conditions of contract, the barrier

“3.    ……

(a)    … shall be of merchantable quality, fit for the purpose for which goods of that kind are commonly bought, and comply with the specification as described in the Schedule.  If the Goods are not fit for the purpose or of merchantable quality or fail to comply with the specification and notwithstanding the provisions of clause 5, the Government Representative may by notice in writing at any time and from time to time (i) reject all or part of the Goods delivered hereunder, or (ii) require the Contractor to repair or replace all or part of the Goods delivered hereunder or (iii) terminate the whole or any part of the Contract forthwith.”

3.  One of the specifications is the “windstanding requirement” which was described in the specifications as:

“Barrier must be capable of withstanding Beaufort Wind Scale Force 12 (a certificate with detailed calculations from a recognised institute to prove that the buoys and connection arrangement to withstand such wind force is required).”

4.  The plaintiff complained that the barrier as supplied and installed by the defendant failed the windstanding requirement. 

5.  As a result, the plaintiff claimed damages in the District Court.  The defendant, however, counterclaimed for the payment of the price, together with interests and other expenses totaling almost $6 million.  Hence, the action was transferred from the District Court to the High Court.

6.  The matter was tried before Deputy Judge Louis Chan and after a trial which lasted several days, by his judgment dated on 9 February 2009, he awarded the plaintiff damages and dismissed the counterclaim of the defendant. 

7.  This is what the learned judge said in his judgment on liability:

“Judgment on liability

99.   The defendant relied on the test and simulation it did in designing the barrier.  The design was accepted by the plaintiff’s expert as sufficient to withstand Wind Scale Force 12.  However, that does not mean that the barrier as made and installed was up to the contractual requirement.

100. The defendant also argued that only a small number of shackles had got loosened and that did not affect the barrier’s integrity or its ability to withstand strong wind.  However, as shown in the various tables produced in the exhibits, the defendant’s workers had spent many hours almost everyday from 4 October to 19 November 2004 to check and maintain the barrier.  If they should have discovered any damage, they would no doubt have repaired it there and then.  Despite their repairs, the inspections, which were conducted on many days shortly after their departure, still revealed damaged parts.  The damage so discovered certainly cast doubt on the strength and integrity of the barrier.

101. From Appendix II, it can also be seen that after 19 November when the defendant’s workers stopped the maintenance, there was more damage discovered by the police.  The damage was caused by relatively calm conditions of wind and wave. 

102. Furthermore, the daily photo reports and damage tables show that there were not just a small number of shackles coming off.  The contents of the tables have been summarised in Appendix II.  Over 200 bottom shackles had come off.  The photos in the daily reports are more telling of the problems.  A number of these had also been e-mailed by Mr Cheung to Mr Ma.  The photos taken by Mr Holmes show an even worse scenario.  The correspondence exchanged between the parties as reviewed above also shows that new damage occurred from time to time.  The evidence together shows that there were problems with the axle bars and flanges that resulted in bar bending and cutting of the buoy shell adjacent to the flange.  There were also problems with the vertical bar and end ring at the bottom of the buoy, the shackles linking up the ring with the bottom chain and the shackles linking up the bottom chain with the lower horizontal chain.

103. It is important to note that all these problems arose when the wind and wave were still calm.  It is not difficult to contemplate that if the wind and wave should get rough as in times of typhoon, the barrier will certainly suffer a lot more damage of bending of axle bars, coming off of chains and shackles and cracking of shells.

104. In fact, the integrity of the barrier was maintained up to 19 November 2004 because of the almost daily maintenance and repair.  But the barrier should function properly without such continuous maintenance and repair.  The need for continuous maintenance means the barrier could not withstand the relatively calm conditions of wind and wave.

105. The evidence of Mr Holmes also shows by 20 January 2005, there were a number of buoys that were damaged and could not remain as part of the barrier and had to be tied up to the sides of the pontoon. 

106. I find that the evidence as a whole shows that the barrier had not been manufactured to its contractual requirement.  I find that the barrier could not withstand Beaufort Wind Scale Force 12.  In fact, the summary of damage in Appendix II alone shows the poor state of the barrier.  I therefore hold that it was right for the Director of Government Logistics to reject it and to demand the defendant to remove it. 

107. I therefore hold the defendant liable to the plaintiff on the claim.  I also dismiss the counterclaim.”

8.  Cheung JA has refused leave to appeal out of time on the basis that the appeal has no reasonable prospect of success.  The defendant now appeals the determination of Cheung JA.

9.  Mr Ma, a director of the defendant, who appeared on behalf of the defendant, submitted that the learned judge’s findings in favour of the plaintiff were inconsistent with his other findings, for example,

(i)  the statement in his judgment:

“78.  However in cross-examination, Mr Holmes agreed with Mr Ma that the parameter used by the defendant for the simulation test was proper and the barrier could have withstood Scale Force 12 if built according to specifications.”;

(ii)  the learned judge did not accept Mr Holmes’ evidence on the insufficient thickness of the shell.  See para. 81;

(iii) “82.  I think in the end, there is really no criticism on the defendant’s design of the barrier. …”

10.  But, the learned judge had also said:

“82.  … However, Mr Holmes’ other findings of broken chains, broken rings and damage of buoys at the location of the axle bar and damage to the bars cannot be faulted.  The photos taken by him and produced in the report support such findings.  I accept these findings.”

11.  I do not agree the learned judge could be said to be inconsistent.

12.  Mr Ma also submitted that there was no evidence that the barrier could not withstand Beaufort Wind Scale Force 12.  But the requirement that the barrier should be able to withstand Wind Scale Force 12 must by implication require that they should be able to withstand a lower Wind Scale.  The evidence showed quite clearly that the damage were caused when the Wind Scale Force was much lower than 12.

13.  Mr Ma also submitted that the learned judge should not have accepted the damage report since they were not made on oath.  But it is clear from the evidence given on oath as well as the defendant’s repeated repair of the barrier that there were indeed such damage.

14.  Mr Ma also suggested that the learned judge was wrong to allow Mr Yuen Chi Hung to rely on his notebook.  This is what the learned judge said:

“87.  Regarding the evidence of Station Sergeant Mr Yuen, I do not see any reason why he should fabricate the damage records.  The results of his own inspections are supported by the contents of his notebooks too. …”

15.  Mr Ma submitted that the notebook should not have been accepted as evidence because it was not a previous inconsistent statement.  With respect, Mr Ma has misunderstood the rule regarding previous inconsistent statements which is a rule of evidence in criminal trial and has no application in civil proceedings.

16.  Mr Ma also relied on para. 5(b) of the contract.  The contract was in standard terms and:

Copy B

“5.    Inspection and Acceptance

    All Goods delivered shall be subject to inspection and/or testing and shall be deemed to have been accepted when:

(a)    the Government Representative, or the Receiving Officer furnishes the Contractor with the acceptance note; or

(b)    a period of 30 clear working days has expired from the date of receipt and Goods have not been rejected;

whichever date is the earlier.”

17.  But para. 5(b) had been deleted from the contract which was signed.  Mr Ma submitted that the deletion of this contract was unfair.  That had not been pleaded. 

18.  Nor was there evidence to show that it was unfair.  It is true that para. 5(b) was a term in a standard form contract, but a contract may be adapted according to the circumstances.  We have no reason to say that it is unfair in the circumstances of this case. 

19.  Mr Ma submitted that after the defendant had stopped maintaining the barrier on 19 November 2004, the learned judge found in para. 101 that:

“101.    … there was more damage discovered by the police. …”

20.  Mr Ma submitted that this is inconsistent with the documentary evidence in that Appendix II which covered the period from 20 November 2004 to 9 December 2004 inclusive, show that during those 20 days, there were 8 days in which no damage was found.  He submitted that if the barrier was unmerchantable, there should have been daily damage rather than intermittent damage.  But the defendant had not adduced any expert evidence and there is no evidential basis for this submission.

21.  In the circumstances, we agree with Cheung JA that leave to appeal should not be granted because the defendant is essentially challenging findings of facts made by the trial judge.  As Bokhary PJ has explained in Ting Kwok Keung v Tam Dick Yuen Engineering and Ors (2002) 5 HKCFAR 336, the Court of Appeal should only interfere with the trial judge’s findings of primary fact, if it is satisfied that the trial judge’s conclusion on the facts was plainly wrong, otherwise the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to his correctness.  Here, we have no doubt that the finding of the learned judge was rightly made.  We are of the view that the appeal has no reasonable prospect of success, and agree with Cheung JA that this is not a case where leave to appeal out of time should be granted.

22.  The appeal is dismissed with costs, to be taxed if not agreed.