CLP POWER HONG KONG LTD v. KONG CHUNG SANG

DCCJ 2775/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2775 OF 2010

--------------------

-------------------

-------------------

JUDGMENT

-------------------

Introduction

1.  This is a contractual claim of the Plaintiff (“CLP Power”) against its customer, the Defendant herein (“Mr Kong”), for alleged loss of revenue arising out of the under-recording of electricity consumption from 11 September 2003 until 4 March 2007 (“Irregularity Period”). But due to the 6-year’s limitation requirement, it has confined its claim to the period from 14 August 2004 to 4 March 2007 (“Relevant Period”).

2.  At all material times, CLP Power was/is a public utility company providing electricity to some 2.3 million households/units in Kowloon and the New Territories.

3.  Mr Kong has been, up to now and including the Relevant Period, running a wholesale frozen meat business at a unit owned by his wife at Tak Wing Industrial Building in Tuen Mun (“Unit”).

4.  CLP Power has since or about 13 October 2000 been providing electricity to Mr Kong at the Unit under the terms and conditions as set out in CLP Power’s 2001 supply rules (“Supply Rules”).

5.  On 4 March 2007, following a report made by a complainant to the police on alleged power theft at the electricity meter of the Unit (“Old Meter”), the Old Meter was replaced by a new one on the same day (“New Meter”).

6.  The Old Meter was sent to CLP Power’s testing centre for examination. Though it was found to be functioning normally within the permissible accuracy, 2 drilled holes were found at the right side of its plastic cover.

7.  A billed consumption history with ADC [average daily consumption] curve (“Billed Consumption Records”) was then retrieved by CLP Power. They show that during the Irregularity Period, the average daily electricity consumption of the Unit dropped drastically, sometime to as low as about 10% of its previous level. But once when the New Meter was installed on 4 March 2007, the average daily consumption of the Unit immediately soared up and exceeded the level prior to 11 September 2003.

8.  As such, CLP Power alleges that the Old Meter had been temporarily tampered with during the Irregularity Period, causing an under-recording of electricity consumption of the Unit. It relies on Rule 228(3) of the Supply Rules, in particular sub-rules (a), (d) and (e) therein, to claim Mr Kong for damages per the back-charge assessment set out in its back-charge assessment memo dated 19 September 2007.

9.  Mr Kong does not dispute the content of the Billed Consumption Records, but denies that there was any alleged tampering of the Old Meter or under-recording of electricity consumption. He avers that the change of electricity consumption pattern of the Unit was due to a change of mode of his frozen meat business.

Issues

10.  In view of the updated list of agreed issues duly signed by Counsel for the respective parties and the evidence in this case, I am of the view that the core issues for determination in this trial are:

(1)Was/were there any of the event(s) set out in Rule 228(3) (a), (d) and (e) of the Supply Rules, namely a malfunctioning of the [Old] Meter or its associated equipment or part thereof; and/or any unauthorised interference with the [Old]  Meter or its associated equipment o part thereof; and/or any artificial means that causes an alteration of the index or register to the [Old] Meter or prevents the [Old] Meter from duly registering the quantity of electricity supplied;

(2)If so, did CLP Power suffer any loss of revenue as a result;

(3)If so, if Mr Kong’s explanation to the irregular electricity consumption during the Relevant Period reasonable and believable;

(4)If not, what should be the quantum payable to CLP Power.

11.  On these issues, CLP Power has called 3 witnesses to give evidence, namely (1) Mr Siu, an engineer from its metering department ( a department responsible for checking and testing of new meters); (2) Mr Yip, an engineer from the revenue assurance team (a team responsible for assessing unit loss of electricity consumption and thus working out the adjusted electricity consumption as a result of meter irregularity or power theft; and (3) Mr Yau, a billing manager responsible for converting adjusted electricity consumption assessed by the revenue assurance team into monetary value.

12.  Mr Kong has given evidence but calls no defence witness.

13.  A single joint expert report prepared by Dr K W Chan (“SJE Report”) is admitted as evidence without calling the maker to give oral evidence in the trial.

The Supply Rules

14.  Before going into each issue listed above, I think it would be beneficial to say a few words on the Supply Rules.

15.  The relevant parts of Rule 228(3) of the Supply Rules states that:

“3. In the event that the Company suffers a loss of revenue due to:-

(a) a malfunction of a meter or its associated equipment or part thereof;

…

(d) disconnection, incorrect connection or non-connection of, or any unauthorized interference with, any meter or its associated equipment or part thereof; or

(e) any artificial means that causes an alteration of the index or register to any meter or prevents any meter from duly registering the quantity of electricity supplied,

the Company will, on the basis of its records, available technical evidence, the Customer’s consumption history and other relevant circumstances, make retrospective adjustments to the amounts shown in the Company’s records as due from the Customer in respect of consumption and demand to such extent and for such period as may be reasonably determined by the Company to be necessary to rectify such under charge.” (italics added)

16.  It is the common grounds of the parties that (1) the Supply Rules were/are binding on Mr Kong at all material times; and (2) the wording and meaning of the words in Rule 228(3) (a), (d) and (e) does not require CLP Power to prove personal culpability of Mr Kong in causing any malfunctioning of or unauthorized interference to the Old Meter, or in causing any artificial alteration/prevention of accurate electricity recording during the Relevant Period.

17.  Mr Chain, Counsel for CLP Power, draws my attention to the fact that there is no word in Rule 228(3) (a), (d) and (e) suggesting that the malfunctioning, unauthorized interference or artificial alteration/prevention of accurate recording has caused or arose because of any permanent or lasting damage to the Old Meter. He adds that the wording of the Rule does not preclude a momentary happening of any of the aforesaid 3 scenarios.

18.  Mr Chain further submits that for the purpose of this Rule 228(3), it is not necessary for CLP Power to pinpoint precisely whether the under-recording is a result of a malfunctioning or unauthorized interference or artificial alteration/prevention of accurate recording. Any of each of the above events by itself would allow CLP Power to recover loss of revenue.

19.  Having considered the plain and ordinary meaning of Rule 228(3), I am convinced by and thus agree with Mr Chain’s above submission.

20.  In any event, Mr Tang for Mr Kong does not seem to challenge this part of Mr Chain’s argument in his closing submission. Mr Tang does not challenge the evidence of Mr Siu (the metering engineer) that it is technically possible for a momentary malfunction, unauthorized interference or artificial alteration of the Old Meter to have occurred without any lasting or permanent damage to its accuracy, either.

Issue (1) : Was/were there any of the event(s) set out in Rule 228(3) (a), (d) and (e) of the Supply Rules

Factual Witnesses

21.  To decide on this issue, I do not find it necessary to repeat the evidence of each and every witness. Suffice for me to say is that I have considered all evidence and Counsel’s submission on the credibility of witnesses. I find the 3 witnesses of CLP Power to be truthful and reliable witnesses. Their evidence is consistent and devoid of any exaggerations. They are unshaken under cross-examination. I cannot find any reason that would cast any doubt on what they have said and thus I accept their evidence in full.

22.  At some stage of cross-examination of the CLP Power’s witnesses, the defence seems to take issue of the difference in the Meter Irregularity Report (where it states that 1 hole was found at the plastic cover of the Old Meter) and the Meter Irregularity - As Found Test Report (where it states that 2 holes were found at the plastic cover of the Old Meter).

23.  The difference between the 2 reports mentioned in the preceding paragraph can be easily explained. The Old Meter was installed at a high level close to the ceiling of the building and the hole(s) found at the Old Meter was rather small in size. It is thus not impossible that the staff of CLP who was deployed to the scene on the date of complaint of 4 March 2007 might not have noticed the number of holes at once.

24.  In any event, upon clarification, Mr Tang confirms that the defence is not alleging that the 2^nd hole was added later by the staff of CLP Power.

25.  I am thus satisfied that there was 2 holes (not 1 hole) at the right side of the Old Meter when it was replaced by the New Meter.

26.  Mr Tang also makes comment on the failure of CLP Power to call the complainant who made a report to the police on alleged power theft. I do not find this argument attractive. I also doubt how much more assistance could be rendered to this court even if this complainant was called to give evidence in this trial.

27.  After all, it is CLP Power’s case that it has no live witness who had witnessed the alleged malfunctioning, unauthorized interference or artificial alteration/prevention of accurate recording during the Relevant Period. What it relies on is circumstantial evidence.

Direct or circumstantial evidence

28.  Upon hearing all evidence and submission from both Counsel, it becomes obvious to me that the actual dispute over this issue (1) is whether CLP Power can rely on circumstantial evidence only to prove that the Old Meter suffered any of the said conditions stated in Rule 228(3) (a), (d) and (e) of the Supply Rules during the Relevant Period and if so, whether such circumstantial evidence produced by CLP Power in this action is sufficient.

29.  Mr Chain for CLP Power concedes that in this trial CLP Power does not have direct evidence that the Old Meter suffered any of the said conditions stated in Rule 228(3) (a), (d) and (e) of the Supply Rules during the Relevant Period. But he is adamant in submitting that the circumstantial evidence (ie irregular electricity consumption pattern shown in the unchallenged Billed Consumption Records and 2 drilled holes at the plastic cover of the Old Meter) is so strong that an inference can be drawn that the Old Meter must have suffered from momentary malfunctioning, unauthorized interference or artificial alteration/prevention of accurate recording during the Relevant Period.

30.  Since a clear inference of under-recording as a result of malfunctioning, unauthorized interference or artificial alteration/prevention of accurate recording can be drawn, Mr Chain says, CLP Power has effectively established a prima facie case and the evidential burden of proof has thus shifted to Mr Kong for him to provide an explanation acceptable to this court on this abnormal and irregular electricity consumption pattern during the Relevant Period (See: Abrath v North Eastern Railway Co (1883) 11 QBD 440).

31.  Mr Tang for Mr Kong, however, refutes and submits that malfunctioning is a conclusion of scientific test, the proof of which should not be on the balance of probability. He also says that direct evidence of insertion of a foreign object into the Old Meter through the 2 holes is required from CLP Power in order to establish unauthorized interference or artificial alteration/prevention of accurate reading. On this, he quotes Lord Denning in Hornal v Neuberger Products Ltd (1956) 3 All ER 973 that “the more serious the allegation the higher the degree of probability that is required; but it need not, in a civil case, reach the very high standard required by the criminal law”.

32.  Mr Tang reminds me that no police prosecution of the alleged tampering with the Old Meter was made in this case and that there was no report/complaint of the alleged tampering or power theft of the Old Meter during the monthly visit by the meter-reading staff of CLP Power during the Irregularity Period. Therefore, he argues that CLP Power has failed to discharge its burden of proof up to the required standard, which is more than on the balance of probabilities or up to the level of absolute certainty. He concludes that the circumstantial evidence in this case is insufficient to prove a prima facie case thereby shifting the evidential burden to Mr Kong.

33.  The submission of Mr Tang shows that the defence is not disputing, quite rightly so in my view, that once when CLP Power is able to establish a prima facie case, the evidential burden would shift to the defence.

34.  In my view, it is of peripheral importance that no prosecution on the alleged tampering of the Old Meter was laid, or that the meter-reading staff of CLP Power did not notice any alleged tampering or power theft during their monthly visit. I say so because (1) it is CLP Power’s primary case that there had been temporarily malfunctioning of the Old Meter during the Relevant Period; and (2) CLP Power does not have to prove the happening of all 3 events of malfunctioning, unauthorized interference or artificial alteration/prevention of accurate recording during the Relevant Period in order to establish its case. The temporarily existence of any of each of these events would suffice (see paras 17-20 of this judgment).

35.  For the same 2 reasons mentioned above, I take the view that the fact that the Old Meter (after being removed and taken back to CLP Power’s testing centre for examination) was found to be functioning normally within permissible accuracy cannot be taken as conclusive proof that there was no momentary happening of any of the events stated in Rule 228(3) (a), (d) and (e) of the Supply Rules during the Relevant Period.

36.  I am not persuaded by (and thus cannot accept) Mr Tang’s argument that CLP Power is obliged to produce direct evidence on the malfunctioning, unauthorized interference or artificial alteration/prevention of accurate recording during the Relevant Period and that the standard of proof must be up to the level of absolute certainty in this case. As Mr Chain has correctly pointed out, and this is also my understanding of the law, there are only 2 standard of proof in our law, either beyond all reasonable doubt or on the balance of probabilities. Of course, when a serious allegation is made in a civil case, such as an allegation of fraud, more cogent evidence is required but the standard of proof will always remain to be on the balance of probabilities. This is also my reading of the quoted para from Lord Denning in Hornal v Neuberger Products Ltd (supra).

37.  In any event, Mr Tang has not shown me any case law to support that anything relating to science has to be proved up to the standard of absolute certainty.

Sufficiency of circumstantial evidence

38.  Mr Chain argues in his opening as well as his closing submission that the strong circumstantial evidence of an irregular electricity consumption pattern gleaned from the Billed Consumption Records is sufficient to establish a prima facie case. Mr Tang, of course, does not agree.

39.  The irregular electricity consumption pattern is explained in details in the witness statement of Mr Yip, an engineer from the revenue assurance team responsible for assessing unit loss of electricity consumption.

40.  A close examination of the Billed Consumption Records of the Unit shows the following features:

(1)For the years of 2001 and 2002, the rate of average daily electricity consumption ranged from 74.82 kWh per day to 149.46 kWh per day. There was a regular seasonal usage pattern with electricity consumption being higher in the months of May to December, peaking in August, and lower in the months of January to April.

(2)For the period of January to September 2003, the rate of average daily electricity consumption increased, ranging from 112.8 kWh per day to 248.93 kWh per day. However, the usage pattern remained the same as that of 2001-2002, ie electricity consumption from May to September 2003 was greater than January to April 2003, and the peak consumption occurred also in August.

(3)Then, within 1 month’s time from 11 September 2003 to 14 October 2003, however, there was a sudden and acute drop in the average daily electricity consumption from 243.62 kWh per day to 70.39 kWh per day, representing almost 30% drop within a month.

(4)In the next 40 months (ie from 14 October 2003 to 4 March 2007), the average daily electricity consumption remained at a very low range of 2.61 kWh per day to 41.73 kWh per day, with no discernible pattern of electricity consumption.

(5)However, after the New Meter was installed on 4 March 2007, there was an immediate and significant increase in the average daily electricity consumption. For just 9 days after the New Meter was installed, ie from 4 March to 13 March 2007, the average daily consumption rose from 12.11 kWh per day to 281.33 kWh per day, representing a more than 23 times’ increase.

(6)Thereafter in 2007 and 2008, the usage pattern returned to exactly the same regular seasonal usage pattern prior to 11 September 2003. The average daily electricity consumption ranged from 227.26 kWh per day to 443.91 kWh per day.

41.  It needs to be reiterated that the Billed Consumption Records are not challenged by Mr Kong.

42.  It also needs to note that in the SJE Report, Dr Chan (the single joint expert) examines the consumption history of the Unit in details. And based on the assumption that electricity usage would follow a regular pattern which could be fluctuated with season, weather, social-economic and demographic variables, but without sharp changes, he concludes that the meter readings in the Irregularity Period “were questionable and should be considered as irregular”.

43.  Upon considering of all evidence, I have no hesitation to find that the Billed Consumption Records do depict an unusual and irregular electricity consumption pattern of the Unit during the Relevant Period and I am not convinced by Mr Tang’s submission on the SJE Report.

44.  I should now turn to the Old Meter.

45.  As explained by Mr Siu, the metering engineer, the plastic cover of the Old Meter is made of very hard plastic which should be hard to break. But once a hole is created and drilled, a foreign object such as a wood skewer can be inserted through the hole to reach the “disc” of the Old Meter. He said that the fast and slow running of the “disc” will affect the meter reading, ie the slower the disc runs, the lower the meter index or reading; and vice versa. If the foreign object can be placed in such a way as to stop the running of the “disc” totally, the meter index will stop running at all.

46.  I have said that I believe in the evidence of the witnesses of CLP Power.

47.  The Old Meter is produced as an exhibit in this trial and I have looked at it carefully. I can see that there are 2 holes on the right side of the plastic cover of the Old Meter, one higher than the other in terms of location. But both holes are of smoothened edge and of the size not dissimilar to that of a tooth pick.

48.  I further notice that if an imaginary horizontal line is drawn from each of these 2 holes, both lines will lead co-incidentally to the position of the “dics” of the Old Meter.

49.  The above observations by me to the Old Meter, when analysed in the light of the evidence of Mr Siu and the irregular electricity consumption gleaned from the Billed Consumption Records, take me to the conclusion that a strong inference can be drawn that a momentary malfunctioning of or a momentary interference to the Old Meter had taken place during the Relevant Period, causing an under-recording of the electricity consumption of the Unit.

Issue (2) : Did CLP Power suffer any loss of revenue as a result

50.  I note that Mr Tang has not expended much on this issue.

51.  In my finding, the answer to this issue must be in the positive, for there is clearly a direct causal link between the under-recording of electricity consumption of the Unit and the loss of revenue of CLP Power.

Issue (3) : Is Mr Kong’s explanation reasonable and believable

52.  It is Mr Chain’s closing submission that this issue is the crux of the case. He has fairly conceded that if Mr Kong’s explanation to the irregular electricity consumption pattern is accepted by the court, CLP Power’s claim in this action would fail.

53.  According to the evidence of Mr Kong, the change in electricity consumption pattern of the Unit during the Relevant Period was due to the change of the mode of his business. He explained that his frozen meat business development could be divided into following stages:

(1)Early stage of 2000 to 2003, he collected the frozen meat from warehouses; delivered some to his clients on the same day while some would be stored in the freezer room(s) of the Unit overnight for delivery the next day. The freezer room(s) was/were opened for use during this period when needed.

(2)Then in the midst of SARS in 2003, business was bad. In order to cut costs and fuel expenses, he changed his business mode to collecting from warehouses and then delivering to his clients on the same day. During this period, he closed all freezer rooms in the Unit, as he did not have to store any frozen meat overnight. Therefore, the electricity consumption of the Unit dropped significantly during this period which lasted until early 2007.

(3)His business picked up again in early 2007 when he changed his business mode to sell processed frozen meat. He would collect the frozen meat from warehouses and then store it at the freezer rooms for processing, ie cutting the frozen meat into cutes or slices or whatever form as requested by his clients, before delivery the processed meat to his clients the following day.  Therefore, he has switched on the 2 freezer rooms for use again since March 2007.

54.  Mr Chain criticizes the evidence of Mr Kong for failing to describe the freezer rooms with precision. Mr Kong has used the word “refrigerators” in his previous letter to CLP Power as well as in his witness statement.

55.  It is true that Mr Kong could have used more accurate terminology is describing the facilities that he used to store the frozen meat, but the lack of it alone, in my view, does not go as far as to destroy Mr Kong’s credibility at once. His evidence has to be assessed in totality.

56.  And upon considering the totality of Mr Kong’s evidence including his background, I have to say that he does not impress me as a credible and reliable witness. I do not find the explanation offered by him believable or reasonable mainly for the following reasons.

57.  I should start by noting that apart from producing his profit tax returns from 2002 to 2008 (to which he had, surprisingly, refused confirming under oath in court that the content therein was true and accurate), Mr Kong has failed to produce any other readily available evidence such as sales/purchase orders, invoices or ledgers to support his allegation. It thus remains his bare oral assertions that his mode of business changed as he alleged.

58.  Secondly, Mr Kong’s evidence is inconsistent with and contradictory to the documentary evidence in this case, in particular the undisputed Billed Consumption Records. It is his evidence in the cross-examination that he changed the mode of business and closed all his freezer rooms in the midst of the SARS epidemic. No one should dispute, for it is just common knowledge to the citizens of Hong Kong, that the SARS crisis started in about March 2003 and had basically abated by the end of June 2003. However, the Billed Consumption Records show that Mr Kong’s electricity consumption did not drop during the SARS crisis; quite on the contrary, it was increasing throughout May to 11 September 2003. The actual drastic drop in electricity consumption of the Unit began only after 11 September 2003, which was months after the SARS crisis had come to an end.

59.  Thirdly, Mr Kong’s evidence is also in stark contradiction with his own documentary evidence. In cross examination, he explained that the main reasons for changing his business mode during the SARS epidemic in 2003 to non-usage of the freezer rooms were to cut costs and fuel expenses. However, a comparison of the 2002-2003 (before the alleged change of business mode) and 2006-2007 (after the alleged change of business mode) profit tax returns reveals that the electricity and diesel expenditure in 2006-2007 are almost 30% and 5 times more respectively than those in 2002-2003.

60.  Fourthly, I find Mr Kong very evasive in answering questions put to him during cross-examination. On repeated occasions when he was requested to provide a more precise time table for his change in business mode, he was evasive and sometimes overly defensive to the point of counter-questioning counsel in cross examination. When pressed hard for an answer, he either conveniently resorted to the excuse of “not recalling details due to lapse of time” or “the need to refer to the documents and figures before answering”. However, when specific figures in his own profit tax returns (some with profit and loss accounts) was put to him and it became obvious that these accounts did not tally with his evidence, he surprisingly resorted to the implausible explanation that he did not know the accuracy or did not understand the details of these accounts and figures because they were prepared by the accounting company.

61.  Yet, such attempted explanation of Mr Kong does not sit well with and is in total disregard of the fact that (1) in his own admission, he was running his business without any helper at all material times; (2) any information or figures contained in his own profit tax returns must have been provided by him and him only to the accounting company; and (3) he declared that the information contained in the said profit tax returns to be true and accurate by appending his own signature therein. It is thus obvious to me that such explanation offered by him is inherently implausible and starkly against common sense, which in turn has greatly discredited him.

62.  Fifthly, Mr Kong tended to give convoluted answers to simple and direct questions posed to him about his business.  For example, he confirmed that once the SARS crisis started, business dropped at once and he was affected immediately. He was then asked to confirm whether under such circumstances, he changed his business mode at once. Instead of providing a straight forward reply, he first gave an incomprehensible answer that “it was in fact partially” (“實際上佢係局部性”). Then, without further elaboration, he changed to say that due to the time lapse of 8 to 9 years, he did not have strong recollection and was not sure which month the SARS crisis began.

63.  On the question of when he changed his business mode to one of processing frozen meat, Mr Kong gave several different and shifting versions during cross examination. He first told the court that the change took place after March 2007 (“三月打後”). When asked if he meant April 2007, he at first said in the affirmative, but quickly retracted from this answer and resorted to yet the same implausible excuse of inability to recall due to lapse of time. When being pressed for an answer, he changed again to say that it was sometime in March 2007.

64.  In conclusion, I do not believe in the evidence of Mr Kong and thus reject his purported explanation on the irregular electricity consumption of the Unit during the Relevant Period. I find that CLP Power has proved its case and Mr Kong should be held liable for the damages of CLP Power.

Issue (4) : What should be the quantum payable to CLP Power

65.  It is CLP Power’s original case that the retrospective adjustment of electricity charges during the Relevant Period (based on the back-charge assessment made on 19 September 2007 by its revenue protection department) should be $240,070.

66.  In the SJE Report, Dr Chan analyses CLP Power’s calculation method and provides 2 other alternative calculation methods. He concludes that his method 3 is relatively more technically sophisticated and would produce a more believable projection.

67.  Both Counsel indicate that in so far as quantum is concerned, they accept that calculation method 3 is the most appropriate method for calculating loss of revenue.

68.  Accordingly, I adopt method 3 stated in the SJE Report and find that the quantum of this action is $231,154.

Conclusion

69.  Due to the matters set out above, I enter judgment in favour of CLP Power against Mr Kong for the sum of $231,154 with interest at judgment rate from the date of writ until the date of this judgment, and thereafter also at judgment rate from the date of judgment until full payment.

70.  I further make a costs nisi that Mr Kong shall pay the costs of CLP Power in this action, with certificate for Counsel, to be taxed if not agreed. If no application is made to vary this costs order nisi, it shall become absolute within 14 days from the date of this judgment.