TIN SHUI WAI DEVELOPMENT LTD v. ATTORNEY GENERAL

Construction List 5/87

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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

BETWEEN

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

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

JUDGMENT (REVISED)

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

1. In this judgment I give my reasons for ruling (as I did just before the short adjournment this morning) that the defendant is to be entitled, without further amending his defence, to lead at the trial of this action evidence of the negotiations between the parties over the intended contracts (in argument called "the design and build contracts") mentioned in Clause 11(a) and (c) of the agreement between the parties constituted by the letter dated 29th July 1982 to which I shall refer in a moment.

2. The action is a substantial action concerning the development of a new town at Tin Shui Wai. The plaintiff in the action is a developer, Tin Shui Wai Development Limited, and the defendant is the Attorney General representing the Government.

3. The agreement between the plaintiff and the Government is contained in a letter of 29th July 1982 addressed to the plaintiff (and to its associated company, Mighty City Limited) and signed by the Secretary for Lands and Works for and on behalf of the Government. This letter contains a number of provisions, including the following material Clause 15, which reads :-

"15.    The government and by their acceptance of this offer, Mighty City and TSW acknowledge and declare that it is their unwavering intention that the package agreement herein described for the development of the land will be fully accomplished and the parties hereto accordingly further declare that they will at all times until the development is accomplished use their respective best endeavours in a spirit of continuing and constructive cooperation to faciliate that development in timely fashion."

4. The parties differ as to the nature and extent of the obligations entered into by the Government, and in particular, as to the obligations the Government entered into with reference to the clearance, formation and servicing of the land, the subject of the agreement of July 1982.

5. The plaintiff contends that the Government came under an obligation to clear, form and service the land within the particular times and by the particular dates specified in the statement of claim but which I need not detail here. The Plaintiff further contends that in any event the Government came under an obligation in this connection to use its best endeavours in achieving the purposes of the agreement and to do what it had to do within a reasonable time.

6. I must read Clause 11 of the letter of 29th July 1982.

"11.    The arrangements described in this paragraph form a separate part of this package. They are in addition to and in no way alter or affect the other terms herein and they will continue in force notwithstanding that the Total Consideration referred to in paragraph 12 below has become payable in accordance with sub-paragraph (b)(ii) thereof.

 

(a)    the Government and TSW will enter into a contract to form the land together with an appropriate area comprising some 83 hectares contiguous with the land ("the said contiguous areas") trunk storm water drainage in accordance with the planning and engineering requirements referred to in sub-paragraph (c) below. These works should be carried out by TSW at the cost of the Government pursuant to the said contract. It is envisaged that the contract would be on a "cost plus" basis to be agreed in all respects between TSW and the Government.

 

(b)    the Government and TSW will enter into a contract to provide or procure the provision of fill material in sufficient quantity to reclaim the land and the said contiguous areas. The fill material will be of a quality acceptable to the Government and will be supplied in accordance with the time-table, both of which are to be stiplated in the contract. The price payable by the Government pursuant to the contract and all other terms and conditions thereof will be first in all respects agreed between TSW and the Director of New Territories Development for and on behalf of the Government. It is envisaged that the contract would include a provision to allow termination by the Government on reasonable notice and compensation at any time should the Government desire itself to provide the fill material.

 

(c)    the Government and TSW will enter into a contract to provide the engineering infrastructure within the 169 hectares in accordance with planning and engineering requirements in that regard to be determined by the Government. This work will be carried out by TSW at the cost of the Government pursuant to the said contract. It is envisaged that the contract will be on a cost plus basis to be agreed in all respects between TSW and the Government."

7. Clause 11 also contains a sub-clause (d), which I need not read. Sub-clause (b), which I have read, and which relates to fill, is not the subject of any difference between the parties which I have at the moment to consider. It is sub-clause (a) and sub-clause (c), which refer to the design and build contracts, with which I am now concerned. The background is as follows.

8. The Government has never made it clear whether or not it accepts that it came under an obligation to use its best endeavours to clear, form and service the land, or to do so in timely fashion in accordance with the provisions of Clause 15 of the agreement. The plaintiff has always objected to this. The plaintiff says that, if the Government is accepting that it was under some obligation to use its best endeavours to clear, form and service the land, it is its duty to plead what it is going to say in answer to the allegations to the contrary made by the plaintiff in the statement of claim.

9. The case for the plaintiff has always been that the Government failed to use its best endeavours to clear, form and service the land, or to do what it had to do within a reasonable time. These are matters which must be pleaded and proved by the plaintiff. The defendant has traversed the plaintiff's allegations that it has failed to use its best endeavours or has failed to perform its obligations within a reasonable time. Is that enough?

10. It is a common-place of pleading that a traverse must not be evasive. If the case for a defendant is based on a negative proposition which is pregnant with an affirmative, there is an obligation on the defendant to spell out in his pleading what his case is.

11. I have considered this point in an earlier judgment which I gave on 6th February 1990. I then said of the plaintiff's case that it had to be pleaded and proved by the plaintiff, and that it could simply be denied by the defendant. I took the view that the defence contained no pregnant negative. I held that there was no obligation on the defendant to spell out in its pleading what it did unless it proposed to set up a positive case that it did use its best endeavours to clear, form and service the land in timely fashion. I held that what the defendant might have to do was to give evidence at the trial in order to meet the plaintiff's case that the Government in fact failed to use its best endeavours to clear, form and service the land in timely fashion. And I held that the plaintiff was not entitled to have the Government's evidence on this point set out in its pleadings.

12. I have read and re-read that judgment. I confess that I now take of it a view similar to that once taken by Baron Bramwell of a previous decision of his own; in Andrews v. Styrap (1872)26 L.T. 704 at p.706, Baron Bramwell said of his earlier decision :-

"The matter does not appear to me now as it appears to have appeared to me then."

13. In the present case I now harbour some doubts as to whether the Government's case does not in fact contain a pregnant negative. But I do not, fortunately, have to consider that matter, because the trial has already been under way for some time, and Mr Machin QC for the plaintiff, very sensibly and properly, does not contend that he is unaware of the nature of the Government's case except in the particular respects of which he now complains. He says that the design and build contracts, which in fact never were made, and the negotiations for which, until they were broken off, formed an important part of the background to the case, are matters which are not referred to in any way by the defendant so as to link them to his attempt to disprove the plaintiff's allegations that the government failed within a reasonable time to perform its obligations or to use its best endeavours in that connection. Mr Machin contends that some express reference ought to be made in the pleadings to the defendant's case on this aspect of the matter, and says that if no such link is made, he can justifiably claim to object if reliance is placed upon the history of the design and build contracts when the defendant comes to cross-examine the plaintiff's witnesses or to present its own case.

14. With great respect, I take a different view. It has been plain from the outset that the background of this case includes the negotiation, although eventually abortive, of the design and build contracts mentioned in Clause 11; and Mr Machin does not contend otherwise. Mr Wood QC for the defendant has made it perfectly plain that he does propose to refer to those negotiations as relevant to the allegations made against the defendant by the plaintiff in its pleadings. I see no element of surprise in any of this and, as it seems to me, there is no reason why, if these negotiations can be referred to for one purpose, they cannot be referred to for another. It will become simply a matter of argument whether or not these negotiations, and the history of them, disclose anything which will assist me in coming to the conclusion to which I will have to come, that is to say, whether or not the plaintiff has proved its case.

15. Although, as I say, I have had some hesitation about the possibility that the defence might conceal a pregnant negative, I do not think it is necessary now to explore that aspect of the matter. I think it is sufficient to hold that the defendant is to be entitled to lead evidence about those negotiations, and that means that the plaintiff must be ready to deal, when tendering its own evidence from witnesses of fact or by reference to the documents in the case (which, of course, have already been discovered), with the design and build contracts.

16. There were a number of authorities cited to me in the course of the argument. I shall, out of respect to the argument addressed to me, briefly mention them. The first authority cited to me was In re Robinson's Settlement, Gant v. Hobbs [1912] 1 Ch.D. 717. In that case, Lord Justice Buckley, referring to the rule of pleading that you must plead anything which might take the other party by surprise, said this (at p.728) :-

"The effect of the rule is, I think, for reasons of practice and justice and convenience to require the party to tell his opponent what he is coming to the Court to prove."

I accept that and I do not understand Mr Wood to be contending otherwise.

17. In Davie v. New Merton Board Mills Limited [1956]1 W.L.R. 233, Mr Justice Havers expressed the view on the facts of the case before him that the approach of the defendants, if not spelt out upon the pleadings, would be such as to take the plaintiff by surprise; and he granted an adjournment for an amendment to the pleadings of the defendants accordingly. The action was an action for personal injuries which were alleged to have been caused by the defendants' failure to provide a drift which could be hammered safely without risk of pieces flying off. The effect of the decision of the judge was that the defendants could not, without pleading it, rely on a defence that the drift was suitable because they purchased it from a reputable supplier and were not negligent in failing to subject the drift to test before it was put into use. I see no comparison between that case and the present.

18. On the matter of reasonable time, it was put to me, on the authority of a decision of the House of Lords, Pantland Hick v. Raymond & Reid [1893] A.C. 22, that what constitutes a reasonable time has to be considered in relation to the circumstances which existed at the time when the contractual services came to be performed, but excluding circumstances under the control of a party performing those services. Based upon that, Mr Justice Robert Goff held, in British Steel Corporation v. Cleveland Bridge & Engineering Co. Ltd. [1981]24 B.L.R. 94, that he had first to consider what would in ordinary circumstances be a reasonable time for the performance of the relevant services; and that he had then to consider to what extent the time of performance by BSC was in fact extended by extraordinary circumstances outside their control. Neither Mr Machin nor Mr Wood has any quarrel with that. I would add this. If it is the intention of the defendant in the present case to refer to any extraordinary circumstances which would make the reasonable time contended for by the plaintiff unreasonably short, then in my judgment, it will be the duty of the defendant expressly to plead those extraordinary circumstances. I do not include for this purpose as "extraordinary circumstances" the fact that the defendant is the Hong Kong Government. I think that any contracting party must take the other contracting party as he finds him and although a government, when it enters into a contract, has no right to behave unreasonably, it has to behave according to the proper standards of a reasonable government. It may be a matter for argument whether the proper standards of a reasonable government are the same standards as those which would apply to a commerical organisation. I say nothing about that at this stage.

19. It is for the reasons I have endeavoured to state that the defendant is in my judgment entitled, without further amending the defence, to lead at the trial evidence of the negotiations between the parties over the intended design and build contracts mentioned in Clause 11(a) and (c) of the agreement of 29th July 1982.