WIDE PROJECT ENGINEERING & CONSTRUCTION CO v. LANTAU TEA GARDENS LTD

DCCJ 3815/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3815 OF 2005

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JUDGMENT

Background

1. This is a claim made by the Plaintiff for the return of a deposit in the sum of $300,000 from the Defendant which was given under an agreement. The agreement was undated but was reached in or about September 2001 (Bundle C at p.269). The agreement related to the use of the Facilities in the tea garden belonging to the Defendant. The Facilities have 3 main components which are related to the counterclaim made by the Defendant. It comprises of:

(a)	the private access road,
(b)	the paddock, and
(c)	the trail which was formed on the woodland by the side of house belonging to Mr and Mrs Bernacchi.

In addition to that, a water tap supplying spring water from the hill was also involved. The Plaintiff needed to make use of the Facilities and access for the construction work, viz. building a water tank and laying water pipes, commissioned by the Water Supplies Department (‘WSD’).

2. The Defendant did not dispute the placing of the $300,000 deposit. However, the Defendant now puts forward the defence of a set-off and counterclaims totalled $802,308 against the Plaintiff in light of the latter’s failure to make good the damage caused to the Facilities.

The issues

3. In order to decide whether the Plaintiff can have the total refund of the $300,000 deposit or whether the Defendant’s counterclaim or set-off is successful, a number of issues have to be considered. They are:

(1)	Whether there was any damage to the Facilities?
(2)	Whether the damage was caused by the Plaintiff?
(3)	Whether the damage was also contributed by other contractors?
(4)	Whether the Plaintiff had made good the damage and reinstate the damaged Facilities?
(5)	Whether the Plaintiff was liable for the damage to the Facilities in light of the provision of the Special Conditions of Government Land Licence (‘GLL’) 5633 and the Plaintiff being the government contractor of the work project?

Order of speeches under Order 35 Rule 7

4. As there is no dispute that the Defendant did receive a sum of $300,000 as deposit money from the Plaintiff, the Defendant has the burden of proof of all the issues in the action, viz the defence of setting off and counterclaim. Accordingly, Counsel for the Defendant applied to start its case first, pursuant to Order 35 Rule 7(6). Counsel for the Plaintiff has no objection to the change of order of speeches. Leave was granted.

Agreed Facts

5. The following facts are agreed by both parties (Bundle A at pp.40-5 to 40-7):-

(1)	GLL 5633 was sent to Mrs Bernacchi vide a letter of 14 June 1999 issued by the Lands Department.
(2)	GLL 5633 (including the General and Special Conditions) was enclosed in the letter of 14 May 2002 issued by the Lands  Department.
(3)	GLL 5633 which commenced on 1 June 1998 was signed by Mrs Bernacchi and it was returned to the Lands Department on or about 16 September 2002.
(4)	By a letter of 12 August 2002, the Lands Department asked an outstanding fee of $186 which was settled by Mrs Bernacchi on 17 September 2002.
(5)	The Lands Department returned a signed copy of the GLL 5633 to Mrs Bernacchi on or about 23 September 2002.

Chronology of Events

6. The chronology of the main events leading to the present dispute is as follows:

(1)	1 January 1994
	Crown Land Licence (‘CLL’) No.5498 was granted to Mr Bernacchi.
(2)	22 September 1996
	Mr Bernacchi passed away
(3)	7 November 2000
	The Plaintiff’s construction work commissioned by WSD commenced.
(4)	July 2001
	Heavy goods vehicles started to use the private access road and the paddock for the preparation of the construction work.
(5)	18 August 2001
	The Plaintiff’s request for access through the private access road was rejected by the Defendant. In mid-2001, the Plaintiff approached Chan Woon Chi (DW3) for the purpose of using the vehicular access road inside the compound of the Defendant’s tea garden for the construction work .
(6)	18 August to 26 September 2001
	The Plaintiff’s construction work was suspended
(7)	About 26 September 2001
	An agreement was signed between the Plaintiff and the Defendant for the use of the Facilities in the tea garden (Bundle C at p.269). The Plaintiff was authorised to use the Facilities in the tea garden thereafter. Two cheques each for $150,000 (one was post-dated to 30 October 2001) were issued by the Plaintiff.
(8)	21 November 2001
	Brahms Ltd (‘Brahms’), the holding company of the Defendant, complained to the Plaintiff about the adverse conditions of the Facilities in the tea garden caused by the Plaintiff and requested remedial work. The Plaintiff did not receive the letter at the time.
(9)	January 2002
	The Plaintiff started to form the trail so that bulldozers  and excavators could use the trail for transportation purpose. A bridge with the sheet piles on a land strip was formed.
(10)	14 May 2002
	District Lands Office Islands (‘DLO’) sent a letter to Mrs Bernacchi (Bundle C at pp.365 to 374) with the caption ‘Government Land licence 5633’.
(11)	21 November 2002
	The Defendant wrote to the Plaintiff and complained that the paddock area was filled with building materials, concrete blocks, oil drums, machineries, wreckage motor vehicles and building debris. The letter was not received by the Plaintiff.
(12)	7 February 2003
	DLO sent another letter to Mrs Bernacchi (Bundle C at pp.376-377) with the caption ‘Termination of Government Land Licence 5633’ giving formal notice that the subject licence would be cancelled with effect from 10 May 2003 on which date the Licensee should cease occupying the Licenced area.
(13)	23 July 2003
	The Defendant once again wrote to the Plaintiff demanding the latter to clean up the affected areas and to make good the damages so caused.
(14)	17 September 2003
	The Defendant wrote to the Plaintiff demanding the latter to vacate the tea garden.
(15)	October 2003
	The Defendant saw that the Plaintiff’s construction work was about to complete.
(16)	Late November or early December 2003
	The Plaintiff instructed a company called Wing Kuan Engineering Co. (‘Wing Kuan’) to make quotations for restoring the Facilities to its original state and to make reinstatement accordingly.
(17)	1 December 2003
	Wing Kuan provided a quotation of $22,700 and carried out the remedial work in 2004.
(18)	Early 2004
	The Plaintiff had substantially completed the construction work for WSD.
(19)	15 January 2004
	Letter with quotation from Toyo Greenland to the Plaintiff (Bundle B at p.174) for hydro-seeding work.
(20)	11 February 2004
	Letter from Pollard Construction Co Ltd. (‘Pollard’) to Brahms (Bundle C at p.403-5) in relation to provision of water supply to Ngong Ping and the use of the access road.
(21)	18 February 2004
	The Defendant allowed Pollard to use the private access road in the Licenced area under GLL 5633 and the private land owned by Brahms. The permission lasted till 30 June 2005.
(22)	May 2004
	The Plaintiff and the Defendant had a brief meeting in and near the tea garden. Verbal requests were made to the Plaintiff for remedying the damages.
(23)	30 December 2004
	The Defendant allowed another company Chun Wo Construction and Engineering Co. Ltd (‘Chun Wo’) to use the private access road in the area under GLL 5633 and the private land owned by Brahms for storage of timber logs in the paddock till end of May 2005.
(24)	25 May 2005
	The Plaintiff obtained the maintenance certificate from WSD on completion of the construction work (Bundle C at p.443).
(25)	June 2005
	The Plaintiff demanded the return of the deposit money in the sum of $300,000.
(26)	23 June 2005
	The Plaintiff instructed its solicitors to write to the Defendant demanding the return of the deposit money (Bundle C at pp.444 to 445).
(27)	11 July 2005
	Second demand letter from the Plaintiff’s solicitors was issued (Bundle C at p.446).
(28)	8 August 2005
	Writ of Summons was taken out by the Plaintiff

The Defendant’s case

7. On or about 1 January 1962, a Crown Land Permit was issued to Mr Brook Bernacchi for use as a tea plantation on a permit land of 130.83 acres at Ngong Ping, Lantau Island. The Land Permit was renewable yearly. On 28 October 1992, Mr Bernacchi granted a sub-licence of the permit land to Brahams which in turn granted a sub-sub-licence to the Defendant. In 1994, the Government of Hong Kong issued CLL 5498 to Mr Bernacchi to replace the old Crown Land Permit for tea plantation, starting from 1 January 1994 and thereafter renewable annually.

8. On 18 May 1998, subsequent to the death of Mr Bernacchi, DLO informed Mrs Bernacchi, personal representative of her late husband, that CLL 5498 was to be cancelled with effect from 1 June 1998 and a new licence was to be commenced on the same date. On 14 May 2002, DLO offered a new land licence GLL 5633 to Mrs Bernacchi who signed and returned the licence to DLO. GLL 5633 commenced on 1 June 1998. On 7 February 2003, DLO issued a Notice of cancellation relating to GLL 5633 which would take effect on 10 May 2003, and another licence would be issued in respect of the remaining area not affected by the project for the provision of water supply to Ngong Ping.

9.  The Defendant claimed that the Licensee of CLL 5498 Mr Bernacchi had allowed Brahms to use the land since October 1992. On 14 May 2002, DLO offered a renewal of licence under GLL 5633 to Mrs Bernacchi who, together with her son Mr Robert Whitehead, had  been negotiating with the Lands Department concerning new conditions of the renewed licence, in particular, the compensation clause to be paid to the Licensee for the tea bushes, trees and plants growing on the land.

10. The Defendant claimed that all along, there was an agreement between the Plaintiff and the Defendant (Bundle C at p.269) in which the Plaintiff stated that they needed to use the private access road, the horse paddock, a woodland by the side of one Bernacchi House and a water tap in order to carry out the construction work for WSD under the project No. 9/WSD/00. The Plaintiff agreed to be responsible for the repair, reinstatement and restoration of the same to their original conditions upon completion of the construction work. The agreement did not cover felling of trees.

11. This undated agreement was signed on or about 26 September 2001. The construction work was substantially completed by the Plaintiff on 31 March 2003 and the maintenance period expired on 31 March 2004.

12. Damage was caused to the Facilities. That could be seen from the photos (Bundle B at pp.131 to 136, 193 to 222 and two photos of Exhibit P-1) and as testified by DW2 Tam who was the director of the Defendant and DW3 Chan. The situation was complicated by the fact that Defendant also allowed other companies to use the private access road and the paddock area at a later stage. 

The Plaintiff’s case

13. There is no dispute that a sum of $300,000 was given to the Defendant as a deposit under the written agreement. The Plaintiff was commissioned to construct fresh water tanks and pipes laying work at Ngong Ping for WSD. In order to carrying out the construction work, the Plaintiff had to pass a private access road which was occupied by the Defendant (in the private land area which was registered in the Lands Registry as Section C, Ngong Ping Lot No.160 and Ngong Ping Lots No.161,162, 162 extension, 167 and 219). At the same time, the Plaintiff also needed to make use of the paddock area (in the private land area), a vehicular access road which happened to be in the area licenced under CLL 5498 (the Permit land). CLL 5498 was later renewed and retitled as GLL 5633. The Plaintiff also needed to form a trail (situated inside the Permit land) in the woodland between the paddock and the work site (see the sketch at Exhibit D-1). The Plaintiff argued that they were able to avoid felling trees to form the trail which was in curved line. There was no record in correspondence with WSD that permission was sought to fell trees.

14. It was alleged by the Plaintiff that since 10 May 2003, Mrs Bernacchi was not the Licensee of the 41.9 hectares of land which was previously covered by GLL 5633, in particular, those area that was required for the WSD project. As such, the Defendant was not entitled to demand and/or was estopped from pursuing compensation from the Plaintiff for the alleged damage, if any, to the Facilities. It was also alleged that as the Plaintiff was the government contractor of the project, hence under the Licence conditions, they were not liable for the damage, if any, to the private access road in pursuance of Special Condition clause.

15. The Plaintiff has recited some of the Special conditions of the GLL 5633 in Bundle A at pp.35-5 to 35-10. The conditions in fact can be found in Bundle C at pp.368 to 373. Some of the provisions are in these terms:

“	8.	In the event of spoil and debris from the Licence Area … being eroded and washed down on to public lanes or roads …, you shall be held responsible and shall pay to the Government on demand the cost of removal of the spoil and debris. … You shall indemnify the Government against all actions, claims and demands arising out of any damage or nuisance to private property caused by such erosion and washing down.
	13.	You shall indemnify the Government against all actions, claims, costs demands whatsoever and howsoever arising out of any works carried out in connection with or upon the Licence Area (whether with or without authority).
	15.	This Licence does not confer on you any right of exclusive possession of the Licence Area. Possession is given on a temporary basis only and the Government reserves the right at all times, by its servants, agents or contractors to enter on the Licence Area for any purpose or to permit others so to do.
	30.	… Free access shall be made available at all times for staff of the Director of Water Supplies or their contractor to carry out construction, inspection, operation, maintenance and repair works.
	31.	No trees growing on the Licence Area or adjacent thereto shall be interfered with without the prior written consent of the Director who may, in granting consent, impose such conditions as to replanting as he may deem appropriate.
	32(f)	… Save in respect of making good any and all damage caused by any exercise of the aforesaid rights and powers, the Government, the Director, his officers, contractors and any other persons authorised by him, his or their workmen shall have no liability in respect of any loss, damage, nuisance or disturbance whatsoever caused to or suffered by the Licensee arising out of or incidental to the exercise of the rights conferred under this sub-clause …”

16. The Plaintiff argued that when the construction work commenced on 7 November 2000, the governing licence was GLL 5633 which was terminated on 10 May 2003 by DLO. Hence it was said that Mrs Bernacchi no longer was the Licensee since then. Such termination would release Mrs Bernacchi’s liability under the licence. The damage to the trail was part of the work authorised by WSD and hence the Plaintiff would be exempted from liability under the special conditions of the land licence. The Plaintiff had also engaged its subcontractor to perform hydro-seeding reinstatement work. In the circumstances, the Plaintiff argued that the Defendant did not suffer any loss and/or was not under any obligation to reinstate the trail.

17. The Plaintiff further submitted that the same argument applied to the private access road when GLL 5633 was terminated. The Government did not hold the Defendant liable nor did it take any action against the Defendant in respect of any damage caused to the private access road. The Plaintiff’s work remained unfinished on 10 May 2003 and had to use the private access road. It was argued that any damage to the private access road after 10 May 2003 had nothing to do with the Defendant. In this regard, it was argued by the Plaintiff that reference should be made to the extent of the damage to the private access road prior to 10 May 2003. Nevertheless, it was further suggested that as assessment of damage could only be made in 2006 when experts were called upon to make the assessment, consideration should be given to other users like Pollard, Chun Wu, Kum Shing (KF) Construction Company Ltd (‘Kum Shing’), China Light and Power Company and even the Defendant itself. Kum Shing was mentioned because PW2 Leung Kam Fai, the project manager and site agent of the Plaintiff, saw Kum Shing performing construction works in the area during a site inspection on 23 April 2007. The factor of wear and tear should also be taken into account.

18. As regards the paddock area which is situated in the private land of Brahms, there was no dispute that Yeung Kwok Yee (PW1), director and general manager of the Plaintiff, met DW2 Tam at the paddock in May 2004. The Plaintiff insisted that they had asked the company Wing Kuan, in which DW3 Chan was one of the directors, to clear the area including the paddock. That was evidenced in the invoice dated 1 December 2003 and the cost of the clearance was in the sum of $22,700 (see Bundle C at p.425). It was also suggested that in the course of performing the construction work, the Plaintiff had built a steel sheet pile section bridge (the ‘bridge’) near the paddock. Upon completion of the work in 2003, the Plaintiff claimed that it was DW3 Chan of the Defendant who requested the Plaintiff to leave the steel bridge behind so that Pollard could use the bridge for vehicular traffic. Again, the Plaintiff also argued that even if the Plaintiff is liable for the damage caused to the paddock, the fact that the area was used by other users should be taken into account. It was alleged that the paddock had ceased to be a horse riding place and the place was used as a turnaround for vehicles. There should not be any claim for laying soil for paddock purpose.

19. The Plaintiff’s expert estimated that it would cost about $4,500 to remove this steel bridge. Even if the Plaintiff was found liable for the damage done, it was argued that the cost of repair and reinstatement was substantially lower than what was proposed by the Defendant’s expert. The Plaintiff’s expert Mr TY Ho prepared an expert report (Bundle B at pp.122 to 144). He had made a number of on-site observations. It was suggested that the cost of making reinstatement would be $291,000. As there were 4 other users using the area, the Plaintiff’s expert applied a simple formula of dividing the sum into 6 and hence each user should bear a sum of $48,500 (Bundle B at p.127).

Findings

20. The status of the Defendant in relation to the piece of land covered by GLL 5633 was subject to challenge by the Plaintiff. Although it was said that GLL 5633 was cancelled as from 10 May 2003 (Bundle C at p.376) as the land was required for works relating to provision of water supply to Ngong Ping, it stated clearly that a new licence covering the remaining area not affected by the project would be issued. I am satisfied that the Licenced area would be under the occupation of the Defendant in a continuous manner. It would be absurd and unfair to the Defendant if DLO chose to cancel the licence without any negotiation with or compensation made to the Defendant. The permit land at first was under the Crown Permit, then under CLL 5498 and later under GLL 5633. Accordingly, I take the view that the special provisions under the land licence were not dispensed with outrightly. That is to say, if the Defendant was found in breach of the provision under GLL 5633, even though it was cancelled, the Defendant would still be liable to reinstate the damage. That can be seen in the provisions that are cited at paragraph 15.

21.  I also find that even though GLL 5633 was cancelled in May 2003, the status of the Licensee was far from clear. Negotiations relating to the compensation for those tea bushes planted and maintained on the licenced area was on-going between Mrs Bernacchi (later her son Robert Whitehead) and DLO in accordance with the special provision of the old CLL 5498 (Bundle C at pp.263-267). It is specifically spelled out (at p.266) in these terms:

“	Should the land be required by Government this licence shall be subject to the cancellation or refusal to renewal in respect of the whole or any part of the land on three months’ notice being given in writing by the Director provided that where such cancellation has not been made as the result of any breach of the condition of licence:-
	(a)	compensation shall be paid to the Licensee for all tea bushes growing on the land in respect of which such cancellation has been made at a valuation to be agreed between the Licensee and the Director. In the event of a failure to agree, the matter shall be referred to arbitration under the Arbitration Ordinance 1963.”

22. There was no compensation given by the government upon the issue of GLL 5633 which was intended to replace CLL 5498. As tea plantation had been grown in the area, the Licensee of the new GLL 5633 would be totally justified to negotiate with the government as to how the matter of compensation could be resolved. Or if the matter could not be resolved, the Licensee was entitled to resort to arbitration. In these circumstances, I find that even though prima facie GLL 5633 was cancelled, the interests and liabilities, if any, of the Licensee had not been resolved and determined. The repercussion was there. Mrs Bernacchi, and later her estate, could not be taken as new Licensees without any liability to damage, if any, caused to the licenced land.

23. It can be argued that the Plaintiff was working under the authority of WSD. The project itself was a government job. Under clause 30 of the special condition of the licence, it was stated that free access should be made available at all times for staff of the Director of Water Supplies or their contractor to carry out construction, inspection, operation, maintenance and repair works (Bundle C at p.371). However, I find that free access does not mean that the Plaintiff, being the government contractor, could cause damage to the Licenced area. In my judgment, the liability of the Defendant to make good any damage caused to the Licenced area still existed. Even if the land licence was cancelled, it does not prohibit the government to take action against the Defendant to make good any damage caused to the Licenced area retrospectively. From the correspondence between the Defendant and DLO, it was apparent that new licence was likely to be re-issued to the Licensee and/or to the estate of Mrs Bernacchi even though the area so covered might be reduced. There is no evidence to suggest that upon the cancellation of GLL5633, the government was to repossess the Licenced area.  It is clear that because of the death of Mrs Bernacchi in September 2005 and the project of providing water supply to Ngong Ping, a new licence was to be issued to the estate of Mrs Bernacchi. As far as the Bernacchi’s family was concerned, they were occupying the Licenced area continuously during the material period. Their positions might be different in respect of the areas required for government construction projects. Without actual repossession of the Licenced area, I accept that the Government agreed to the continued occupation of the Licenced area formerly covered by GLL5633 by the Bernacchi’s family. Such an agreement could be effected by means of acquiescence from the government at the very least. That explains why the Bernacchi’s still had part-time security officer to look after the site and there was insurance policy to cover the occupier’s liability.

24. In the circumstances, I am satisfied that the Plaintiff should be held liable for the damage caused to the Licenced area, and the Defendant was not estopped from claiming damage from the Plaintiff. The written agreement was signed in September 2001, and the project was completed in March 2003. In my judgment, the Plaintiff could not say that it is not liable for the damage caused to the area. I also do not accept the argument that as the Plaintiff was a government contractor to do the construction work thereat, the Defendant should not be held liable for any damage under the conditions of GLL 5633.

25. The next question is whether the Plaintiff had done any damage to the Facilities of the tea garden. I find the answer to be in the affirmative.

26. DW2 Tam and DW3 Chan witnessed that heavy construction vehicles propelled by metal belts, like excavators and bulldozers, used the private access road to enter the tea garden area in or about July 2001. The private access road was not strongly built. The road was also used by drivers of other construction trucks and concrete mixers with rubber tyres. The damage could be seen in those photos in the bundle.

27. The Plaintiff alleged that damage was contributed by other users which were authorised by the Defendant, in particular, Pollard and Chun Wo. I accept the evidence of DW2 Tam and DW3 Chan that the work of Pollard only started in February 2004. It was in December 2004 that the Defendant allowed Chun Wo to use the private access road. I find that the damage had already been caused to the Facilities before Pollard and Chun Wo started their own projects. The issue, as pointed out also by the Plaintiff, is how to produce an accurate and appropriate assessment of damage, given the lapse of time and the time when the expert reports were prepared. There is evidence to suggest that the Plaintiff’s construction vehicles started to use the private access road to enter the tea garden since July 2001. DW2 Tam took photos in September 2004 (Bundle C at pp.289 to 292), in April 2004 (Bundle C at pp.293 to 295) and in October 2003 (Bundle C at pp.296 to 298) depicting the situations of the road and the slope at the time. No protective layer on the access road was placed. DW2 Tam said that the large cracks along the private access road were caused by the Plaintiffs’ heavy construction vehicles which were propelled by metal belts. PW2 Leung did say that when the Plaintiff commenced the work, visible cracks were observed along the side of the private access road. These cracks were aggravated by increased vehicular traffic when the private access road was also used by other users (Bundle B at p.89). Of course, there is no clear evidence as to the extent of damage caused by other users, in particular, Pollard and Chun Wo. However, there is evidence to suggest that less heavy construction vehicles were used by Pollard and other users and, on some occasions, even helicopter was used to transport the construction materials.

28. As regards to the private area where the paddock is situated, I am also satisfied that damage was also caused by the Plaintiff. The Plaintiff’s construction work was substantially completed by 31 March 2003 and the maintenance period expired one year thereafter. The aerial photograph (Exhibit D-6) which was taken on 21 June 2001 depicted that the paddock area was largely grown with green bushes. The paddock had been laid idle after the horse riding school was closed. The paddock was used by the Plaintiff. The photos at pp.275 to 277 showed the situation of the paddock area. Stockpiling of aggregates for concrete on site and storage of pre-cast concrete sections could be seen there. A more recent photo of the paddock (Exhibit D-8) which was taken on 5 May 2007 depicted an updated situation of the paddock which was barren with loose bare soil and many vehicular tracks. Some metal waste could still be found on the bottom left corner of the said photo. Comparing with the aerial photo (Exhibit D-6), I find that extensive damage was caused to the paddock area with a substantial area of bushes removed. The Defendant goes further to argue that the construction activities undertaken by the Plaintiff between 2001 and 2003 on the paddock area had caused subsequent loss of the top soil thereon which in turn caused consequential erosions of the paddock area.

29. However, in my judgment, there is no evidence nor can inference be drawn to support the Defendant’s assertion. There is simply no evidence to prove what was the soil situation of the paddock at the material time. The paddock might well be laid idle after the horse riding school was closed and the erosion of the soil started to take effect. That said, I accept that the failure of the Plaintiff to restore the paddock area shortly after the completion of the work in March 2003 would aggravate the situation and could cause further damage to the area.

30. As far as the steel bridge is concerned (see the photo in Bundle C at p.243), DW3 Chan denied that he asked the Plaintiff not to dismantle the bridge so that Pollard could use it. It is to be noted that the Defendant only allowed Pollard to use the private access road and the private land from 18 February 2004 up till 30 June 2005.

31. In relation to the trail, DW3 Chan testified that in or about November 2001, he saw some 50 trees felled by the Plaintiff, and tree roots and trunks were transported out from the tea garden. The photos (Bundle C at pp.296 to 298) taken in October 2003, some 6 months after the completion of the Plaintiff’s work, and the photos (Bundle C at pp.293 to 295) taken in April 2004 depicted the damage caused to the trail with part of the trail having concrete remains left behind and embedded in the soil. Slope cutting and tree felling activities could be traced which were carried out in order to form a trail as a temporary access to the construction site up above the slope (see Exhibit D-1 and the sketch in Bundle C at p.468). It could be seen that damage was caused to the trail leading to the construction site, the area marked as WS in the layout plan exhibited as D-1. The photos (Bundle C at pp.236 to 243) taken in 2006 depicted the damage along the eroded trail with construction debris and concrete slabs left behind. The fact that there was no record of trees felling as stated in the letter of 16 May 2007 issued by WSD (Bundle C at p.489) does not necessarily mean that there was no felling of trees in reality. It is worthy to mention that in the same letter, WSD also said there was “no record regarding the condition of the vehicular access leading to the paddock … before the commencement of the Contract and after the completion of the Works.” From the photos and the evidence of the defence witnesses, I am satisfied that the Plaintiff had felled trees and bushes in forming the trail between November 2000 and January 2002. Concrete remains were left behind.

32. The Plaintiff also alleged that the Defendant did not inform the former the particulars and details of the damage. I accept that there is no such requirement in the written agreement between the parties. Although the Plaintiff did not take photos to record the condition prior to the works commenced, there was a brief meeting between PW1 Yeung of the Plaintiff and DW2 Tam, DW3 Chan and 2 others at the paddock or in the vicinity thereof in May 2004. The damage caused was shown to PW1 Yeung (Bundle B at p.118).

33. To conclude, I find that the Plaintiff did cause damage to the private access road, the paddock area and the trail when they performed the construction work for WSD; and subsequent to that, the Plaintiff also failed to reinstate or restore the damaged area to its original position as stipulated in the written agreement. The Plaintiff is liable for the damage done to the private access road, the paddock and the trail.

Other parties causing further damage to the Facilities

34. The Defendant accepts that there were other parties, in particular Pollard and Chung Wo, using the paddock and private access road in doing other construction works after the Plaintiff had substantially completed its work on 31 March 2003. Brahms had an agreement with Pollard on 11 February 2004 for the use of the access road inside the tea garden. Pollard started the construction work in mid-2004 which was some time after the expiry of the maintenance period of the Plaintiff’s work viz 31 March 2004. The layout plan (exhibit D-1) shows three different routes used by the Plaintiff, Pollard and Chun Wo. There was a long stretch of private access road, starting from the entrance and leading to the paddock area, that was used by all three parties. There is evidence to suggest that small vehicles and protective metal sheets were used by other users to mitigate the damage to the access road, and at times, Pollard used helicopters to transport construction materials (see photos No.18 and 19 of Exhibit D-5). DW3 Chan was the sub-contractor of Pollard and gave evidence as to how the construction work was done by Pollard. He agreed that some of his workers might use the steel bridge. It was said that the area was cleared by Pollard in or about October 2005 as shown in the photos in Bundle C at pp.459 to 462.

35. Chun Wo used part of the access road from the entrance of the tea garden to the place near the paddock in early 2005. Chun Wo stored 38 timber logs in the paddock area. Trucks with rubber tyres were used for transport. No construction work was carried out by Chun Wo. The Defendant stated that both Pollard and Chun Wo had reinstated and restored the respective sections of the access road that were used by them satisfactorily (Bundle C photos at pp.245 to 255). Pollard had replanted and hydo-seeded the hill slope affected by its work.

36. There were other users like Police, Fire Service Department, Agriculture and Fisheries and Conservation Department, China Light and Power Electric Co. Sometimes there was also private vehicular traffic by the Bernacchi’s family, the Tea Garden café  and the gas tanker. No construction works were performed by these minor users. The Defendant accepted that there would be wear and tear of the condition of the road in these circumstances.

Quantum

37. A joint statement on quantum dated 4 June 2007 was prepared by experts from both the Plaintiff and the Defendant which was produced to court (Bundle B at pp.234-1 to 234-5).

38. It was agreed that the estimated length of the private access road is 850m. The Plaintiff said the average width and thickness of the private access road are 2.7m and less than 100mm respectively in most places. The Defendant suggested that it should be 2.9m and 150mm respectively. As the road was used by the Plaintiff and the Defendant together with 4 other contractors during the period, it was suggested by the Plaintiff that it would be equitable for the Plaintiff to bear the contributory liability to the damage of the road in the region of 1/6 of 900m², namely, 150m².

39. The Defendant however put forward the idea that a complete recast of the affected section of the damaged road is necessary and cost effective. The Plaintiff should bear 40% of the cost of recasting of the entire road and the Plaintiff be responsible for a damaged area of 986m². To that effect, the Defendant argued that the total cost of reinstatement to the damaged road is $472,308 while the Plaintiff estimated the cost to be $291,000.

40. In relation to the paddock area, the experts agreed that the area of re-provision of suitable soil is 750m² and the cost of dismantling and removal of the steel bridge is $11,000. The Defendant claimed that the paddock area that needed to be reinstated is 1,400m² with a rate of $50 per m², totalled $70,000. This sum of $70,000 includes the cost of removing the steel bridge (i.e. $11,000). There is a difference of $48,000 due to the difference in assessing the area affected and the rate applied. For the re-provision of sandy soil, the Plaintiff adopted a rate of $29.5 per m² and the Defendant $40 per m².  Because of the difference in the unit rate cost, the difference in assessment is $8,317.50 ($30,000 - $21,862.5).

41. Regarding the trail, the Plaintiff assessed the cost of reinstatement to be $57,200 which included excavating excess soil and hard material and disposal thereof and to hydro-seed the affected area. The Defendant put forward the figure of $230,000 which covered the replanting of trees and providing maintenance service for newly planted trees. There is no agreed basis between the experts as to how the trail should be reinstated. The Plaintiff suggested that the area for further hydro-seeding should be 650m² and the cost is $11,000. The Defendant claimed that it is necessary to replant suitable trees and shrubs and the cost is $90,000 with a 6-month maintenance cost of $30,000.

Apportionment of the reinstatement costs

42. It was commented by the Plaintiff’s expert Mr TY Ho, in my view quite rightly (at Bundle B at p.126) that:

“	4.1	… both the Plaintiff and the Defendant failed to establish a detailed photographic record of the actual state of the ‘Road’ when the Agreement between them was signed. This makes it virtually impossible to quantify the amount of damage to the ‘Road’, if any, during the Plaintiff’s contract period of building the fresh water tank between November 2000 and May 2004. …
	4.2	The same applies to the Paddock and other area that no photographic records were agreed between the parties at the commencement and completion of the Plaintiff construction contract.”

43. That said, given the fact that damage was done to the Facilities of the tea garden, I have to decide the extent of damage that needs to be reinstated or restored, and in what proportion should the Plaintiff be liable to bear. This is a very difficult task. Even the experts from both side found it difficult, if not impossible, to quantify accurately the extent of damage and the contributory factors of the other users. The Plaintiff is liable to make good the damage but it would not be fair for the Plaintiff to be liable for making further improvement to the Facilities.

44. In this regard, the Defendant accepts that given all the circumstances of the case and the possible contributory factors, the Plaintiff should be liable for 40% of the total cost of reinstatement or restoration in relation to the private access road. The Defendant itself would bear 60%. However, the Defendant argued that no apportionment of the cost should be made for the damage to the paddock area and the trail. That said, I take into account that the Plaintiff had commissioned Wing Kuan, in which DW3 Chan was involved, to clear the construction debris and waste (Bundle C at p.425). The document was dated 1 December 2003 and the cost of the work was $22,700. It stated clearly that Wing Kuan was to clear the construction site of Ngong Ping 9/WSD/00, the very project that the Plaintiff was commissioned by WSD (Bundle B at p.72). The clearance work was not just confined to the paddock area. I also accept that in March 2004, the Plaintiff also employed Kan Hing Engineering Co. to break up the concrete paving on the paddock and the trail and to remove the debris (see Kan Hing’s quotation dated 15 March 2004 and receipt dated 30 March 2004 at Bundle B at pp.176 and 177; also photos taken on 15 October 2003 at Bundle C from pp.296 to 298).

45. Based on the joint statement on quantum prepared by both experts, the expert reports so prepared and the other evidence abovementioned, I would assess the quantum as follows:

(1) Private Access Road

46. It was estimated by the Defendant that the access road was 50% damaged. It was suggested by the Plaintiff’s expert that there were about 43 damaged areas along the road that needed to be repaired.  However, I accept that it would be more practical and sensible to repair the whole road rather than in piecemeal manner. The Defendant accepts that the Plaintiff is to bear 40% of the costs of reinstatement. I also accept the assessment made by the Defendant’s expert in calculating the width and thickness of the road. Some adjustments are made in respect of the difference in valuation as proposed by experts from both parties. I make the assessments as follows:

(a)	Length of the private access road	: 850m
(b)	Width of the road	: 2.9m
(c)	Thickness of the road	: 150mm
(d)	Breaking up, carting away, Removal of concrete	: 986m2 x $50/m2 =	$49,300
(e)	Prepare bedding, laying new concrete of thickness of 125mm	: 986m2 x $200/m2 =	$197,200
	subtotal:		$246,500
	[note: the thickness and the unit rate proposed by the Defendant is adopted: para.6(a) of the joint statement in Bundle B at p.234-2]
(f)	Preliminaries (insurance etc)
	[20% of the sub-total sum]:		$49,300
	Total:		$295,800

47. I would disallow the claim of having kerbs at both sides of the road ($54,000 as counterclaimed by the D), the inclusion of wire mesh ($29,580) and the construction plastic joints ($15,000) as I am satisfied that these items could be taken as a kind of improvement to the condition of the road. The 20% figure for preliminaries is adopted as I am satisfied that there exists a ‘Lantau factor’ when works are done in Ngong Ping.

48. Accordingly, the Plaintiff’s share is 40% x $295,800 = $118,320.

(2) Paddock area

49. Both parties agreed that the area of paddock for re-provision of suitable soil is 750m² and the cost for removing the steel bridge is $11,000. The Defendant submitted that the area affected should be 1,400m² covering those area beyond the paddock as the area was also damaged by the Plaintiff’s use. Reinstatement of the paddock area, however, should not be taken as making the paddock area suitable for horse riding activity again as the horse riding school was closed for a long time. There was no intention on the part of the Defendant to reinstate the horse riding activity. I would take 750m² as the base factor and the unit rate of reinstatement is $50/m².

50. Hence the damages to be awarded under this limb is: 750m² x $50/m² = $37,500 plus the cost of $11,000 for removing the steel bridge. The total sum under this limb is $37,500 + $11,000 = $48,500.

(3) The trail

51. Under this limb, I would allow the two items counterclaimed by the Defendant, viz the breaking up of concrete left along the trail and disposal thereof and reinstating soil profile along the trail. They amount to $60,000 and $50,000 respectively (see Bundle B at p.234-4), totalling $110,000. I would disallow the cost of replanting and the related maintenance service totalled $120,000 as put forward by the Defendant.

52. To conclude, based on the calculations above, I would award a total sum of $276,820 ($118,320 + $48,500 + $110,000) as counterclaimed by the Defendant. I would dismiss the Plaintiff’s action for the return of the deposit money in the sum of $300,000.

Interest

53. I would take the date of the cause of action be the date the maintenance period expired, viz 31 March 2004. As such, I would award interest of the total sum of $276,820 to the Defendant at half of the judgment rate from 31 March 2004 up to the date of judgment, and thereafter at judgment rate until full payment.

Costs

54. There will be a cost order nisi that the Plaintiff pays the costs of the action to the Defendant, to be taxed if not agreed, with certificate for counsel. Such Order nisi is to be made absolute 14 days after the date of handing down of this judgment.