SIT KAM TAI v. GAMMON IRON GATE CO LTD AND OTHERS

HCA 779/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 779 OF 2006

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J U D G M E N T

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1.  The plaintiff claims a sum of $143,512.50 from each of the seven defendants, or a total sum of $1,004,587.50. The 3rd defendant has filed a defence and a witness statement to oppose the claim, but has not appeared at the trial. The other defendants have contested the claim at the trial.

Background

2.  The claim arose out of a cartel agreement made between the plaintiff, the 1st and 3rd to 7th defendants and one Tien Shan Engineering Limited (“Tien Shan Eng.”).  Tien Shan Eng. is an associated company of the 2nd defendant.  The parties to the cartel agreement are and were stainless steel gate suppliers.  In 1997 they were the only contractors approved by the Housing Authority to supply stainless steel gates to housing projects built for the Authority.  The 2nd defendant was a supplier of parts and materials for assembly into stainless steel gates.

3.  The cartel was to regulate the price payable by its members to the 2nd defendant for the supply of parts and materials of the gates and the price for tender to be submitted to the main contractors of the Housing Authority.

4.  The cartel operated through a company called Everwin Venture Limited (“Everwin”).  This company was already incorporated on 26 March 1997.  It was acquired by members of the cartel in early May 1997.  Each of the plaintiff and the 1st to 7th defendants held 10,000 or one-eighth of the shares of Everwin through a nominee.

5.  Tien Shan Eng. did not own any such shares.  However, there is no dispute that Tien Shan Eng., as an approved stainless steel gate supplier, was also a member of the cartel and had abided by the rules of the cartel.  The 2nd defendant, in holding the beneficial interest of 10,000 Everwin shares, in fact held the same as a nominee for Tien Shan Eng.  In calculating the profit of Everwin for distribution to the beneficial shareholders, the contract price of gates in the contracts of Tien Shan Eng. to supply gates to the housing projects of the Housing Authority were taken into account.  The 2nd defendant did not enter into any contract with the main contractors of the Authority to supply and install any gate at the housing estates.  Everwin also appeared to have distributed profits to Tien Shan Eng. and not to the 2nd defendant.  Everwin also regarded Tien Shan Eng. as a member rather than the 2nd defendant (page 654 of the bundle).

6.  I therefore find that the 2nd defendant was holding the beneficial interests of 10,000 Everwin shares as a nominee of Tien Shan Eng.

7.  The plaintiff and the 1st to 7th defendants also entered into a shareholders’ agreement dated 14 October 1997 (the shareholders’ agreement) regulating their rights and obligations as members of Everwin.  I also find that the 2nd defendant entered into the shareholders’ agreement as a nominee of Tien Shan Eng.

The cartel

8.  I now deal with the operation of the cartel which has largely been documented in a document called The Brief Description of the Organisation (“組織概述”) (page 565 of the bundle), and the minutes of meetings of the members of Everwin, and is not in dispute.

9.  There were two types of stainless steel gates for supply to the Housing Authority estates.  Members of the cartel first fixed the price per gateset for each type of gates.  This price was for the purchase via Everwin from the 2nd defendant of the parts and materials for assembly into a gate.  They then fixed the total costs price per gate.  This price was not used for tendering the gate supply contracts with the main contractors.  This price included the cost for the parts and materials and all the labour costs for assembly and installation of the gate. 

10.  According to the plaintiff, after paying the price for the parts and materials supplied by the 2nd defendant and all other costs, there would not be much left from the total costs price as and for the profit of the gate supplier.

11.  The cartel also fixed the minimum tender price for tendering the gate supply contracts with the main contractors.  Housing estates of the Housing Authority are built by main contractors approved by the Authority. 

12.  When a main contractor or potential main contractor wanted supply and installation of gates to a housing estate by an approved gate supplier, it would invite tender from some or all of the cartel members.  The members would designate one of themselves as the potential supplier.  The designated supplier would then put in a tender to the main contractor at the minimum tender price.  The other members who had been invited to put in a tender might do so but at higher prices.  This arrangement was to enhance the chance of the designated supplier in obtaining the contract from the main supplier. 

13.  If the designated contractor should obtain the contract from the main contractor at the minimum tender price, it then had to pay the difference between the minimum tender price and the total costs price to Everwin.  This was Everwin’s profit, which it would later distribute to its members equally.

14.  In case the main contractor should have accepted a tender price higher than the agreed minimum, the difference between the accepted price and the total costs price would still have to be paid to Everwin as its profit.  A gate supplier which obtained the contract at the higher price could only keep the total costs price.  It could not gain more despite its accepted price was higher than the agreed minimum tender price.

15.  If any supplier should contract with a main contractor at a price lower than the minimum tender price, it still had to pay Everwin the difference between the minimum tender price and the total costs price.  In that event, the supplier would not be able to keep the whole of the total costs price to itself.

16.  PW1, Mr Wong, however recalled that there were instances where some suppliers who, as a result of negotiations with the main contractors, had agreed to contract with the main contractors at lower than the minimum tender price.  In those few instances, the members had, after discussions, agreed that Everwin would take the difference between the actual contract prices and the total costs price.

17.  I also note here that the agreed price of purchase of parts and materials, the total costs price and the minimum tender price were also subject to variation and had indeed been varied by agreement of the cartel members.

18.  In addition to profiting from the price difference aforesaid, Everwin had another source of profit.  According to DW1, Mr Wong, Everwin also profited from the purchase by the cartel members of the parts and materials of gates. 

19.  After a member had obtained a contract to supply and install gates, it would then purchase the parts and materials of the gates from the 2nd defendant.  This was done via Everwin.  A member would pay Everwin the agreed price for the parts and materials of each gateset, but the price that Everwin would pay the 2nd defendant was lower than the agreed price by $200 to $300 per gateset.  Everwin kept the difference for defraying its administration and accounting expenses.

20.  Mr Wong also remembered that Everwin had once used the surplus of this income to pay a dividend of $200,000 to $300,000 to each member, but nothing turns on this and I will say no more about it.

The shareholders’ agreement

21.  The cartel started in early April 1997 and Everwin was acquired in early May 1997 (pages 1-20 of the bundle).  The members further entered into the shareholders’ agreement on 14 October 1997 to regulate their rights and obligations as members of Everwin.  I have already mentioned above that the 2nd defendant entered into this agreement as nominee of Tien Shan Eng. as the 2nd defendant also held the beneficial interest of 10,000 Everwin shares as its nominee.

22.  The following clauses of the shareholders’ agreement are relevant to this dispute:

“The principal business of the company.

2.1 The company shall provide the beneficial owners transportation and related services for their respective tenders to supply slide/swing gates (‘the products’) to the main contractors.

…

2.3 Obligations of Tien Shan (the 2nd defendant)

(i) to keep sufficient stock of raw materials (‘the stocks’) for the making of the products; and

(ii) to co-ordinate and allocate the stocks exclusively to all beneficial owners at a reasonable price to be determined from time to time by all beneficial owners;

(iii) not to sell, supply directly or indirectly the stock to any third party.

2.4 Obligations of the beneficial owners except Tien Shan (the 2nd defendant) to purchase the stocks solely from Tien Shan (the 2nd defendant) for the relevant tenders at reasonable price to be determined from time to time by all beneficial owners.

2.5 It is agreed by all beneficial owners that the current cost for each slide gate and swing gate shall be $4,200 and $3,900 respectively and subject to adjustment and agreement by all beneficial owners from time to time.

2.6 The tender prices are to be determined by all the beneficial owners from time to time and, unless and until so determined, the minimum tender prices are fixed at $6,800 and $6,500 for every slide and swing gate respectively.

2.7

(i) Each beneficial owner shall pay the company for transportation and related services rendered at the rate of $2,600 per gate or at such any other rate per gate as all beneficial owners shall from time to time determine.

(ii) The method of payment for the said transportation and related services as referred to in clause 2.7(i) above will be as follows:

(a) 10% of the tender price shall become payable as deposit (‘the deposit’) by the beneficial owner to the company upon its signing contract with the main contractor; and

(b) the balance thereof becomes payable 45 days after each delivery of the products.

…

6. Dividend and distribution policy.

6.1  Unless otherwise agreed among the parties hereto, the company in general meetings shall from time to time declare dividends to be paid to the beneficial owner in equal shares through the nominee 1 and nominee 2 once the net accumulated profits of the company after taxes shall reach $4 million, such dividend to be paid in the manner to be agreed by all beneficial owners.”

23.  It is important to note that clause 2.7 of the shareholders’ agreement does not say that a member who has obtained a contract should pay Everwin the difference between the minimum tender price and the total costs price.  If so, one may argue that the member only needed to pay Everwin after receipt of the tender price from the main contractor and that there would be no obligation to pay if the member did not get paid by the main contractor.  There would also be complications if there should be deductions by the main contractor.  In housing projects, deductions of payments are so common that full payment is a rarity. 

24.  Instead, the shareholders’ agreement provided that Everwin would provide members with transportation and related services for their supply of gates.  In return for such services, the members had to pay Everwin a fixed sum per gate.  This fixed sum was of course equal to the difference between the minimum tender price and the total costs price, but it was not expressed as such but as a fixed price for some alleged services.

25.  There might or might not have been such services as it was not a matter canvassed at the trial, but the intention of clause 2.7 was clear, that the price for the alleged services had to be paid if a member should obtain a contract from a main contractor and Everwin had to be paid at the times provided in that clause.  The obligation to pay and the amount of payment did not depend on payment to be made by the main contractor or whether there was any deduction by the main contractor.

The plaintiff’s contract with Yiu Wing

26.  At the 28th meeting of the cartel members on 7 April 1998, the 1st defendant was designated to tender a contract with a main contractor, Yiu Wing Construction Limited (“Yiu Wing”) to supply and install 1,280 stainless steel gates to a housing estate in Tin Shui Wai, but the cartel later designated the plaintiff’s factory to tender for this contract.  The minimum tender price was fixed at $6,500 per gate or a total price of $8,320,000 for the 1,280 gates. 

27.  The plaintiff succeeded in the tender process and Yiu Wing gave his factory a letter of intent on 30 November 1998 confirming the terms of the intended subcontract.  The subcontract between the plaintiff and Yiu Wing was made on 5 June 1999, and the plaintiff then commenced delivery and installation of the gates (page 952 of the bundle).

28.  By 12 September 2000 the plaintiff had delivered all the 1,280 gates to Yiu Wing’s construction site (see interim payment certificate dated 12 September 2000 at page 966 of the bundle).

29.  Under clause 2.7, the plaintiff should have paid Everwin 10% of its tender price on 5 June 1999 and the balance of the price for the alleged services at the latest on 27 October 2000.

Payments by Yiu Wing to the plaintiff

30.  A check of the interim payment certificates submitted by the plaintiff to Yiu Wing against a table of payments of the plaintiff (page 998 of the bundle) shows that Yiu Wing paid the plaintiff within about a month for the first to seventh certificates.  For the eighth certificate dated 12 September 2000 for $950,625, Yiu Wing only paid it on 25 November 2000.  That was later than the previous payments by over a month.  For the ninth certificate dated 1 December 2000 for $312,000, Yiu Wing only paid it on 1 May 2001.  The time lapse was five months.  For the tenth certificate dated 31 March 2001 also for $312,000, Yiu Wing only paid $200,000 on 10 May 2001.  It made no further payment.  The plaintiff thus received a total of $7,171,830 from Yiu Wing, leaving a balance of $1,148,170 as per the subcontract. 

31.  The plaintiff also left 320 gatesets at the site without installation.  The reason being that there was a dispute between the Housing Authority and Yiu Wing, and the plaintiff, as a subcontractor of Yiu Wing, was barred by the Authority from entering the site.

32.  On 10 December 2001, the plaintiff issued a writ of summons against Yiu Wing at the District Court.  The claim was for the balance of the amount due under the interim certificates already issued.  The plaintiff did not claim repudiation of the subcontract by Yiu Wing or any damages flowing therefrom.  The plaintiff explained that his claim was only for the amount due but not for sums not yet due, including the retention money and further payment for work to be done.

33.  Yiu Wing was eventually wound-up by this court on 5 August 2002 upon the petition of an engineering company.

The new cartel and criminal investigation

34.  The members of the cartel obtained a total of 16 contracts to supply gates to projects of the Housing Authority.

35.  There was then another stainless steel gate supplier that had become an approved supplier of the Authority.  This new supplier was also recruited into the cartel system, but the cartel of nine suppliers did not operate their cartel through Everwin.  They incorporated/acquired another company and operated their cartel through this other company.  DW1, Mr Wong, said that members of this new cartel also obtained 10-odd projects from the main contractors of the Housing Authority before it came to an end.

36.  After the formation of the new cartel, the eight members of the old cartel did not take on any more gate supply projects pursuant to this cartel.

37.  In about March 2000, or shortly before that, the cartel members learnt that the ICAC was investigating into their cartel activities.  They became worried about the legality of the cartel.  They then decided to put an end to the cartel and also Everwin.  At this time, most of the 16 contracts had not been completed and no one had received full payment for any of the projects.

The settling of account of the old cartel

38.  The 73rd meeting of the members was held on 14 March 2000 and every member attended it.  DW1 presented a profit analysis of Everwin to the meeting.  The analysis was based on the payments by the members of the service payments per gate as defined in clause 2.7 of the shareholders’ agreement at the rate as provided therein or as subsequently agreed by the members at their meetings.  The analysis was not based on actual receipt of payments by the members from the main contractors as most projects had not been completed and no one had received full payment from any project.

39.  Based on the profit analysis, each member would be entitled to be distributed $6,888,985 by Everwin.  Since there were also service payments due from all members to Everwin, the amounts payable by Everwin were set-off against the amounts due to it. 

40.  As a result, the following three members had to make further payments to Everwin.  They were the 1st defendant ($7,632,615), the 4th defendant ($871,015), and the 6th defendant ($2,183,015).  The other five members were entitled to be paid by Everwin.  They were the plaintiff ($2,920,985), Tien Shan Eng. ($2,330,705), the 3rd defendant ($1,512,985), the 5th defendant ($1,128,985), and the 7th defendant ($2,792,985).

41.  The three members that had to make payments to Everwin were those that had contracted for more projects and had more gates to supply and install.  The 1st defendant had four projects and 4,736 gates to supply.  The 4th defendant had two projects and 2,800 gates to supply.  The 6th defendant had three projects and 3,060 gates to supply.  They therefore had to pay Everwin more service payments.  The amounts of service payments due from them to Everwin as at 14 March 2000 exceeded the sum of $6,888,985 to be paid to them, hence, they had to pay Everwin the sums above mentioned.

42.  The minutes of this meeting recorded that the profit analysis had been given to the members for record and everybody was told to complete the accounting matters and pay up as soon as possible.

43.  In the 79th meeting on 24 July 2000, the members agreed that Everwin should audit its accounts, file its tax return and to complete its winding-up at the end of August 2000.

44.  The 80th meeting was the last one and was held on 15 August 2000.  The minutes recorded that on the basis of the receipt and payment settlement table of 15 August (which was not produced but should be the same as the one dated 14 March 2000), all current accounts of the members with Everwin had been clearly settled.  All payments due from the three members to Everwin were paid in full shortly thereafter and Everwin also paid the other five members in full before the end of August 2000.

45.  The minutes further recorded that a firm of accountants would be instructed to wind-up Everwin.  There was then no further meeting of the members of Everwin.

The arrests of the cartel members and the cessation of Everwin

46.  On about the mid-Autumn Festival of 2000 (12 September 2000), the representatives of the members who took part in the cartel were arrested by the ICAC.  The charge was for conspiring between 2 April 1997 and 13 September 2000 to defraud the Housing Authority by dishonestly forming a cartel to avoid competition in a closed market of approved stainless steel gate suppliers to the Housing Authority’s housing projects.  The gravamen of charge seemed to be their having allegedly deceived the Housing Authority into accepting the pre-determined price for the gates.

47.  On 11 December 2001, the Inland Revenue Department (IRD) issued the final profits tax assessment to Everwin for the assessment year of 2000/2001 and made a refund of tax overpaid.  Everwin then paid a final dividend of $60,000 to each of its eight members who were on the register of members on 30 September 2001.  These members, including the plaintiff, then signed a statement confirming that Everwin had ceased business on 30 September 2000 and it had no outstanding indebtedness to others. 

48.  The Commissioner of IRD confirmed on 22 April 2002 that she had no objection to Everwin to be deregistered under section 88B of the Companies Ordinance.  An application for deregistration was then submitted to the Registrar of Companies on 3 June 2002 and Everwin was duly deregistered.

49.  The representatives of the members of the cartel were then tried in March 2005 in the District Court for the criminal charge.  They were acquitted on 16 March 2005 by His Honour Judge Wright (as he then was).

50.  I would note that the representative of the 1st defendant did not take part in the criminal trial and he had allegedly absconded before the commencement of the trial and did not appear until it was over.

The plaintiff’s claim

51.  The plaintiff then took out this action on 7 April 2006 against the seven defendants.

52.  The plaintiff claimed that on about 14 May 2000 (which should be 14 March 2000), the members of Everwin agreed that Everwin could expect to have an accumulated net profit at $55,111,880.  Pursuant to clause 6.1 of the shareholders’ agreement, the members then agreed to divide the expected profit so that each would be entitled to $6,888,985 as dividend.

53.  He further pleaded that he was only paid by Everwin $2,920,985 with a balance of $3,968,000 to be settled after Everwin had received the profit as expected.

54.  He also pleaded that the members had agreed that if Everwin should fail to receive the expected profit in full, the difference would be deducted from the dividends of the members.  In his witness statement he said this agreement was made at the meeting of 14 March 2000.

55.  He then pleaded that in late 2001 the actual profit received by Everwin was only $53,963,780 (which was $1,148,100 less than the expected profit of $55,111,880).  The dividend for each of the members should therefore be reduced by one-eighth of $1,148,100 or a sum of $143,512.50. 

56.  The revised figure of dividend should thus be at $6,745,472.50.  Of this sum, Everwin only paid him $5,740,885, leaving a balance of $1,004,587.50.  He therefore claimed this sum from the other seven members or a sum of $143,512.50 from each member.

57.  He further pleaded that in early 2005 the defendants agreed with him to recalculate and return the $1,004,587.50 to him.  He clarified in his witness statement that this agreement was made with the defendants in court when the criminal trial was ongoing.

58.  The plaintiff’s claim needs some explanation so that it can be fully understood.  The plaintiff took the total profits to be distributed to the members at ($6,888,985 x 8 =) $55,111,880 as Everwin’s expected profit.  Regarding his share of $6,888,985, he was paid $2,920,985 by Everwin because he owed Everwin $3,968,000 service payments under clause 2.7 of the shareholders’ agreement, but he treated this as part of the expected profit of Everwin in his statement of claim. 

59.  Since there was a shortfall of payment at $1,148,100 in his contract with Yiu Wing, he thus treated that sum as Everwin’s shortfall of profit.  He thus alleged that Everwin had a shortfall of profit at this sum and each member had to receive $143,512.50 less in dividend.  Since the other seven members had already received their full dividends at $6,888,985, each of them should therefore return to him $143,512.50 or a total sum from them at $1,004,587.50.

60.  The plaintiff’s claim is made on the assumption that the members of the cartel only had to pay Everwin the difference between the price actually received from the main contractors less the total costs price.

61.  There is also the further assumption that the profit distributed pursuant to the table dated 14 March 2000 was a provisional one subject to recalculation after payments had been received by the members from all 16 projects.

The defendants’ stance

62.  The defendants disagreed.   DW2, Mr Law, a director of the 6th defendant, said in evidence that the members of the cartel did not work on the basis of actual receipt from the main contractors as it usually took years before payment of a project would be finalised.  There was also the invariable deduction of one kind or another by the main contractors.  There would also be deductions for defects of the gate supplier.  It would be impossible for the cartel to operate on the basis of actual receipt or to take care of the question of deductions.  The cartel therefore operated simply on the basis of the amounts and number of gates in the contracts between the suppliers and the main contractors.  It was for the members to perform their contracts and to obtain payments from their main contractors.  If they should fail to receive full payment, it was a matter for them.

63.  The table of 14 March 2000 was indeed prepared on this basis.  It did not deal with the actual receipt by the members at all.  It only took into account of the amounts payable by the members to it calculated on the basis of the number of gates stipulated in the contracts.

64.  DW2 further said that if the cartel would only require members to pay Everwin the difference between actual receipt and the total costs price and there would be a recalculation of the dividend later on on this basis, then the 6th defendant would not have paid Everwin the $2,183,015 immediately after the last meeting on 15 August 2000.  It would have kept the money pending the future recalculation so as to protect its own interest. 

65.  Furthermore, the members did not contemplate that any main contractor would go bust.  The main contractors were all approved by the Housing Authority.  If any main contractor should go bust and leave a project uncompleted, that would give a lot of problems to the Housing Authority, hence the Authority would only approve main contractors that were found to be of sound financial standing.  Hence, the members of the cartel did not anticipate that any main contractor would just go bust and leave huge outstanding sums to a gate supplier.  Hence, they were comfortable in operating the cartel without taking into account the possibility of a main contractor being wound-up and leaving a supplier unpaid for a substantial sum.

66.  DW2’s evidence is in line with that of DW1.  They also denied any agreement at the meeting on 14 March 2000 or at the last meeting on 15 August 2000 or at any other time to recalculate the dividend at a future date.  DW1 also said that if there were such an important agreement, he would have recorded it in the minutes of meeting.

67.  The defence witnesses also denied any agreement in the course of the criminal trial in March 2005 to recalculate the dividend as they were then focussing on their defence of the criminal charge.  Furthermore, the 1st defendant’s representative to the cartel had absconded and did not attend the trial.  He therefore could not have made such agreement with the plaintiff.

68.  DW1 also agreed with me that but for the ICAC’s investigation and the members’ desire to put an end to Everwin, there would probably have been some more meetings of the members of Everwin before the account was finally settled.

Findings and decision

69.  I find the evidence of DW1 and DW2 reasonable and reliable.  What DW1 did in operating the cartel and calculating the sums in the table dated 14 March 2000 was in line with the terms of the shareholders’ agreement as quoted above.

70.  I also take the view that if a recalculation was to be done, the plaintiff would not have signed the statement confirming that Everwin was not indebted to anyone.  Though the statement is undated, I find that it was signed shortly before 22 April 2002 (page 950 of the bundle).  But the plaintiff was already having problems on payment by Yiu Wing at the latest in May 2001. 

71.  If there were to be a recalculation and adjustment of dividend, then there would not have been a settlement of account and full payment by and to all parties pursuant to the account.  I therefore find that all members of Everwin had settled account with Everwin in a meeting on 15 August 2000 and all payments to and by Everwin were made shortly thereafter in accordance with the account as settled.  The plaintiff cannot claim any further payment from Everwin or recalculation of profit and payment upon recalculation by other members.

72.  I also reject the plaintiff’s claim that members of Everwin had in the meeting of 14 March 2000 or the later meeting of 15 August 2000 agreed to recalculate Everwin’s profit and the dividend for the members.  If there were such an agreement, it would have been recorded in the minutes of the meeting.

73.  I also agree that the three paying members would not have paid Everwin in full after the last meeting on 15 August if there were to be a recalculation and adjustment of payment later.

74.  I also reject the plaintiff’s claim of an agreement made in the course of the criminal trial to recalculate and adjust payment.  There was one member who was not there.  The plaintiff could not explain how the absent member could have made the agreement with him. 

75.  The plaintiff’s evidence is also unreliable and contrary to the terms of the shareholders’ agreement as quoted above.  I therefore dismiss the plaintiff’s claim.

Defence of illegality

76.  The defendants had a further ground of defence, namely the plaintiff’s claim is illegal as it is contrary to public policy.  The claim is made pursuant to a cartel.  As a result of the cartel, there was no genuine competition amongst the approved suppliers of gates to the Housing Authority.  The suppliers predetermined the lowest tender price.  The closed market of the approved gate suppliers could not function at all.  They made the tendering process a farce.  But the Housing Authority and the main contractors were kept in the dark.  The Authority and the main contractors thought that the tendering process was working well and the market forces were operating.  They were also misled into believing that there was genuine competition in a closed market.

77.  The plaintiff argued that forming a cartel is not against the criminal law unless there is dishonesty or other aggravating factors.

78.  I do not overlook the fact that the cartel had obtained advice from a solicitor in August 1997, but the solicitor only dealt with the question of restraint of trade, not the question of illegality or whether the cartel was contrary to public policy.

79.  Counsel for the plaintiff relied on North Western Salt Co. Ltd v Electrolytic Alkali Co. Ltd [1914] AC 461, which involved a cartel of salt manufacturers.  However, in that case illegality was not pleaded by the defence.  There was also no full evidence on this issue being given.  There was also genuine competition from abroad.  The present case is quite different. 

80.  Counsel further submitted that although there was price-fixing and efforts to prevent cut-throat competition, the cartel was not unreasonable in that it protected the approved gate suppliers at the material time, because it prevented cut-throat competition which might eventually damage the industry and reduce the choice open to the public.  It also enabled the parties to negotiate fair terms for the supply of gates to the main contractors, and it promoted technical and economical progress within the industry.

81.  Counsel also said that there was no evidence that the minimum tender price as fixed by the cartel was unreasonable and that the lowest bid of the designated supplier might not have won the bid.  The main contractor would also negotiate further with the lowest bidder. 

Findings on illegality and decision

82.  However, I think all these arguments cannot change the fact that the Housing Authority and the main contractors were cheated into believing that the tendering system was working and the market forces were at play.  They also thought that the prefixed minimum tender price was a genuine lowest bid given by a tenderer.  The Housing Authority in the end had to pay what the cartel had decided rather than what the market dictated, and it still thought that the market was working through the tendering process.

83.  This kind of cheating is against the public interest and should be discouraged in strong terms.  I therefore reject the plaintiff’s claim on this ground of illegality as well.

Costs

84.  Finally, I make a costs order nisi that the plaintiff do pay the defendants the costs of this action, including the 3rd defendant’s costs, to be taxed.