Court of First Instance of Hong Kong

HCCT000012/1988

Construction List No. 12 of 1988

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: The Hon. Mr. Justice Kaplan in Court

Date of Hearing: 23rd-27th, 30th-31st March, 2nd-3rd April 1992

Date of Delivery of Judgment: 4th June 1992

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J U D G M E N T

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    During the night of 11/12 October 1981 the M.V. Sunshine Island collided with the eastern part of the Plaintiff's (GIC) pier at Kennedy Town and became embedded in the collapsed superstructure. Extensive damage was caused to the superstructure on the outer part of the pier. The lower part of the concrete box conveyor structure fell onto the first floor deck of the pier beneath. When the vessel was later removed, the damaged pumphouse structure toppled into the harbour.

    For reasons which have not been explained it has been agreed between the parties that the Defendants will pay GIC 70% of any damages that it is adjudged GIC have, suffered.

    This hearing has been concerned with GIC's claim for damages which neatly divides into two sections. Firstly, there are claims for physical damage to the pier and equipment and secondly, there is a claim for loss of profits.

    I take these facts from the agreed statement of facts placed before me by the parties.

    The pier was constructed in about 1968. It was located perpendicular to the seawall and in front of Green Island House (GIH). It was about 100 metres long and between 10 and 26 metres wide, with a one storey superstructure over most of its length and isolated two storey parts at, for instance, the lift room.

    GIH contained a bulk cement supply depot and a concrete batching plant. The functions of the pier were to allow barges to discharge bulk cement and crushed rock aggregates ("aggregates") which were then transported to GIH. They would be stored in GIH and subsequently used for either bulk cement deliveries or production of concrete, both of which were transported by road to their destination.

    At the outer end of the pier there was an island on which there was a seawater pumphouse and compressor room. The former provided flushing water supplied to GIH, whereas the latter delivered compressed air for the pneumatic transport of bulk cement from barges via pipelines to GIH.

    Barges berthed across the pier in the passage between the island and the pier. This passage was covered. A travelling gantry crane, located under the covered area, grabbed aggregates from the barges and placed them in whopper from where the aggregates were transported up to the 8th floor of GIH by a belt conveyor located within an inclined concrete box conveyor structure. The pipelines for the pneumatic transport of the bulk cement were located on top of the conveyor structure.

    The collision resulted in the collapse of much of the superstructure on the outer part of the pier, including the part over the barge unloading area, and the loss of the lower part of the aggregate conveyor and bulk cement delivery pipes. Consequently it was not possible to continue to accept either cement or aggregate deliveries by barges. In addition the loss of the pumphouse disrupted the water supply to GIH.

    Demolition works proceeded to remove the collapsed debris from the pier superstructure and surrounding areas and to salvage and remove the sunken pumphouse.

    Subsequent survey showed that the pier foundations and substructure were not damaged and no further demolition was required.

    Different methods were used to handle cement delivery and aggregates after the accident. So far as cement was concerned, bulk cement delivery pipes were extended down from the top of the remaining conveyor structure to the middle of the eastern side of the pier. A new electrically-driven compressor was installed. This enabled bulk cement barges to be unloaded from alongside the eastern side of the pier.

    As for aggregate barges, these were brought into a berth alongside the middle of the western side of the pier and discharged by a mobile grabbing crane into a new hopper. This fed a newly installed Chain Bucket Elevator System which delivered the aggregate to the 8th floor of GIH.

    After about two years the above-mentioned system was superceded by a different aggregate unloading arrangement similar in many respects to that in use before the accident. Aggregate barges were unloaded at the end of the pier into the hopper and belt conveyor system. The conveyor was supported on an inclined structural steel work truss which was connected with the remaining upper part of the former conveyor structure.

    Cement continued to be handled from the eastern berth but the pier mounted compressor was no longer needed because barge mounted compressors were used.

    As late as 1988 the above arrangement was still in use. The chain bucket elevator, though no longer in use, was still in position.

    Plans and photographs indicate both the pre and post accident position.

    At the time of the accident GIC's production was carried out from their plant at Hok Un, Hung Hom, Kowloon.

    At the time of the accident GIC's plant at Hok Un, Hung Hom was undergoing redevelopment. The redevelopment programmes started in 1978 and was completed at about the end of 1982. Certain sections however were already in operation before that time.

    During the redevelopment the existing old plant was demolished while a new plant was being constructed. A lot of demolition took place concurrently with the construction of the new plant without any loss of sales of cement.

    GIC's main distribution outlet to Hong Kong Island was via barges to Kennedy Town, which was only a bagging and distribution depot, and not a production facility. Apart from Kennedy Town, cement manufactured at Hok Un was also transported to two other major waterfront outlets on Hong Kong Island, namely Tai Koo Shing and Chaiwan.

    Kennedy Town was used as a distribution depot for Pioneer Concrete and other customers.

    The Tai Koo Shing depot was owned by Gammons. The Chaiwan depot was owned by Pioneer Concrete in whom GIC at the time of accident had a 25% holding.

    GIC alleges that the Tai Koo Shing depot was to be used exclusively by Gammons and the Chaiwan depot by Pioneer Concrete although this is not admitted by the Defendant.

    After the accident production continued from GIC's Hok Un Production Plant.

    The difficulty of assessment by a court of a company's loss of profits varies enormously with the circumstances of the case. In this case it is not easy because there were a number of different factors at work of which it is necessary to take account. Fortunately the authorities make it clear that the court is not dealing with an exact science and that there is scope for taking a broad brush approach where necessary having regard to the fact that the principle behind damages in tort is restitutio in integrum.

    In Ratcliffe v. Evans (1892) 2 QB 524 it was held that in a case of false and malicious publications "a loss of business is admissible as distinct from the particular known customers, evidence of such loss is admissible and sufficient to support the general loss of general action."

    In Chaplin v. Hicks (1911) 2 KB 786 the Plaintiff claimed damages for the loss of the chance of being selected for an engagement as an actress. In the Court of Appeal Vaughan Williams L.J., said at p.791:

"It is said that in a case which involves so many contingencies it is impossible to say what was the Plaintiff's pecuniary loss. I am unable to agree with that contention. I agree that the presence of all the contingencies upon which the gaining of the prize might depend makes the calculation not only difficult but incapable of being carried out with certainty or precision. The proposition is that, whenever the contingencies on which the result depends are numerous and difficult to deal with, it is impossible to recover any damages for the loss of the chance or opportunity of winning the prize. .... I do not agree with the contention that, if certainty is impossible of attainment, the damages for a breach of contract are unassessible. I agree, however, the damages might be so unassessible that the doctrine of averages would be inapplicable because the necessary figures for working upon would not be forthcoming;"

    At p.794 Fletcher Moulton L.J. put the matter thus;

"But there is no other universal principle as to the amount of damages than that it is the aim of the law to ensure that a person whose contract has been broken shall be placed as near as possible in the same position as it if it had not. The assessment is sometimes a matter of great difficulty."

On the next page he amplified this by saying:

"I think that, where it is clear that there has been actual loss resulting from the breach of contract, which it is difficult to estimate in money, it is for the jury to do their best to estimate; it is not necessary that there should be an absolute measure of damages in each case. There are no doubt well settled rules as to the measure of damages in certain cases, but such accepted rules are only applicable where a breach is one frequently occurs. In such cases the court weighs the pros and cons and gives advice, and I may almost say directions, to the jury as regards the measure of damages..... But inmost cases it may be said that there is no recognised measure of damages, and that the jury must give what they think to be an adequate solatium under all the circumstances of the case."

    In Biggin & Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422 Devlin J. (as he then was) reiterated that in difficult cases the court has to do the best it can.

    In Dominion Mosaics Co. Ltd. v. Trafalgar Trucking Co. (1990) 2 AER 246 the Plaintiff's premises were severely damaged by fire and had to be demolished. Certain items of machinery were destroyed by the fire. At p.249 Taylor L.J. (as he then was) set out the appropriate relevant principle as follows:

"The basic principle governing the measure of damages where the Defendant's tort has caused damage to the Plaintiff's land or building is restitutio in integrum. The damages should be such as will, so far as money can, put the Plaintiff in the same position as he would have held had the tort not occurred."

    The learned judge at p.253 explained that the assessment of damages is not an exact science by commenting that:

"All in all I consider that the conclusions of the judge on this part of the case cannot be faulted. He used a broad brush, but in my judgment that was the proper approach to a problem of which it would have been impossible to evaluate precisely every element."

    Several authorities make clear that the dominant rule is restitutio in integrum [see Lord Wright in The Liesbosch Dredger [1933] A.C. 449; Lord Russell in Hutchison v. Davidson [1945] S.C. 395 and Lord Sumner in The Susquehanna [1925] A.C. 655.

    Lord Sumner in The Susquehanna made it clear that there can be no rigid rules or rules that apply to all cases. Each case has to be considered on its own individual facts. It is also clear from the authorities that a judge is entitled to take a broad brush approach. Further, as Donaldson L.J. (as he then was) said in Dodd Properties v. Canterbury City Council (1980] WLR 433 at 456-7:

"(Restitutio) may be achieved by the application of two quite different measures of damage or occasionally a combination of the two. The third is the capital value of the property in an undamaged state compared with its value in a damage state. The second is to take the cost of repair or reinstatement. What is appropriate will depend on a number of factors...."

    Mr. Griffiths also asked me to bear in mind the following further principles which he submits, in my judgement correctly, can be ascertained from the various cases.

(a) Where there is a profit earning chattel or business premises, it is incumbent upon the plaintiff in order to mitigate the loss of profits to move quickly and act reasonably. (See Dominion Mosaic v. Trafalgar Ltd. [1990] 2 AER 246).

This test is what is reasonable in all the prevailing circumstances as between the parties.

(b) Where it was the plaintiff's intention prior to an accident to demolish the property for redevelopment then the value at the time of the accident is the measure but where restitutio involves reinstatement in the pre-accident condition but at a cost exceeding the pre-accident value then the plaintiff may recover this provided that it is reasonable as between the parties (see Lord Russell in Hutchinson v. Davidson (Supra) at 407-409).

(c) The defendant is not entitled to claim that repair or reinstatement-after the accident has caused betterment which must be subtracted from a claim (see Harbutt's Plasticine v. Wavne Tank [1970] 1 QB 447 at 468, 473 and 475).

(d) The plaintiffs are entitled to recover the value of damaged chattels even though they have not in fact replaced them, for "there is no obligation in principle upon a plaintiff to deploy damages awarded for loss of a chattel in replacing it. He is free to do whatever he likes with his damages?(see Taylor L.J. (as he then was) in Dominion Mosaic (Supra) at 245-255).

(e) Provided that the plaintiff acts reasonably in seeking to mitigate damages, he is entitled to be awarded the increased costs occasioned by an abortive attempt to mitigate (see paragraph 323 of McGregor on Damages).

    Mr. Wong also reminded me of the above passage at paragraph 323 of McGregor as well as one at 322.

    With those general principles in mind, I now turn to consider each of the items of physical damage which are still in contention between the parties. Fortunately, the figures are accepted subject to liability.

    When the Sunshine Island was extricated from the pier the pumphouse was pulled into the sea.

    On 19th October 1981, Mr. Brooker, the Managing Director of GIC, had a meeting with Palmer and Turner to consider the best way to get the pumphouse out of the sea. It was decided that specialist advice would be sought from Hong Kong Salvage. At this meeting it was estimated that the pumphouse weighed some 595 tonnes and the machinery contained therein weighed a further 50 tonnes.

    On 20th October 1981, the Marine Department directed GIC to remove the pumphouse from the waters of Hong Kong within 180 days because it considered it to be a hazard to navigation.

    On 29th October 1981, GIC wrote to the Marine Department expressing some surprise that this debris should constitute a hazard to navigation as alleged by the department.

    On 23rd November 1981, the Marine Department again wrote to GIC confirming that the debris was considered by them to be a hazard to navigation.

    On 17th December 1981, GIC obtained a quotation from Hong Kong Salvage which was accepted by GIC on 30th December 1981. Hong Kong Salvage were to use their crane barge Proteus to test-lift the structure. If the attempted lifting failed, GIC agreed to pay Hong Kong Salvage $250,000. If the lift was successful, then Hong Kong Salvage was to continue with the operation, transport and dispose of the structure whereupon they would have received $575,000 which was to include the $250,000 referred to above. The safe working load for the Proteus was 350 tonnes but it had a test load equivalent of 385 tonnes.

    On 11th January 1982, GIC applied to the Marine Department for licence to dump the pumphouse and indicated that they were dealing with a solid waste of 600 tonnes in air and 350 tonnes submerged.

    On 24th February 1982, Hong Kong Salvage attempted to lift the pumphouse out of the water by means of the crane barge Proteus which reached the strength of 385 tonnes and most unfortunately these attempts were unsuccessful.

    There was then some correspondence between Palmer and Turner, GIC and Hong Kong Salvage in relation to the weight estimates that had been given.

    On 25th May 1982, the Marine Department extended the deadline for removing this hazard to navigation to 360 days. In other words, GIC had 360 days from 20th October 1981. On 4th January 1983, the Marine Department substituted a period of 600 days for the period of 180 days referred to in the notice of 20th October 1981.

    The test I have to apply is one of reasonableness. I have to judge the action of GIC in deciding to go ahead with the Proteus lift with that yardstick in mind acknowledging that a plaintiff may, during his reasonable attempt to mitigate, incur further losses.

    I have heard Mr. Brooker, Mr. Kwan and Mr. Arbon on this issue on behalf of GIC. Mr. Chalmers of Scott Wilson Kirkpatrick was the defendant's expert witness but he was not involved in the decision to remove the pumphouse from the water. He had in fact been on site from the beginning as an independent witness on behalf of the defendant or their insurers. It is a pity that he was not involved in the decision to use the Proteus as this may have avoided this particular dispute. Had he been so involved, I would not have been surprised had he agreed with this course of action as the defendant must have been most anxious to get everything back to normal working as quickly as possible given their exposure to a claim for loss of profit.

    As to the evidence about the weight of the concrete structure and the machinery there has been a lot of ex post facto reasoning. Mr. Kwan recently estimated the machinery weight as 21.21 tonnes, but it is clear that 50 tonnes was the figure mentioned at the time. Mr. Arbon suggested that the concrete might have broken up during the accident but there is no suggestion in the documents of this having been considered at the time.

    Mr. Wong pointed out that in his opening Mr. Griffiths referred to the machinery as weighing 50 tonnes in air but about 45 tonnes in water. To that he added the weight of 350 tonnes for the concrete structure bringing the total to 395 tonnes which Mr. Wong points out is above the normal lifting capacity of Proteus which is 350 tonnes. The test load was in fact 385 tonnes but I do not consider it unreasonable to have regard to the higher figure.

    Mr. Brooker mentioned the machinery weight as 50 tonnes which he estimated at about 40 tonnes submerged.

    Mr. Wong's complaint is that Hong Kong Salvage were in fact given a figure of 15-20 tonnes for machinery (B78-2). By letter dated 19th April 1982, Hong Kong Salvage wrote to GIC stating that they had been given a figure of 15-20 tonnes whereas they noted that P & T Wallace Evans had been given a figure of 50 tonnes by GIC. Mr. Griffiths submits that Mr. Kwan's evidence shows that the figure of 15-20 tonnes was correct because he estimated, albeit 10 years later, that the weight was actually 21.21 tonnes.

    Although Mr. Arbon gave evidence that it was a reasonable assumption that some of the concrete would have shattered during the accident, as I have said, there was no evidence that this factor had been taken into account at the time. Mr. Arbon, with hindsight, took the view that it was reasonable to attempt to lift with the Proteus and Mr. Griffiths submits that clearly Hong Kong Salvage and GIC took the view that in all the circumstances it was reasonable to attempt the lift.

    Mr. Griffiths submits that Mr. Brooker acted reasonably in accepting Hong Kong Salvage's estimate in the light of:

(a) Having sought specialist advice;

(b) the need for expedition, especially for getting business back to normal;

(c) the correct weight was in fact given to Hong Kong Salvage;

(d) the existence of technical factors such as mud suction on the one hand and broken concrete on the other.

    No useful purpose will be served by going any further into the arguments and counter-arguments skillfully deployed by Mr. Griffiths and Mr. Wong both orally and in writing. I confess to having found this the hardest decision to make. I am concerned about the ex post facto rationalization that has taken place. I have, of course, to judge the reasonableness of the action taken as at the time it was taken.

    I cannot accept GIC were other than concerned to get the pumphouse out of the water as quickly as possible. I cannot accept that they instructed Hong Kong Salvage to go ahead in the belief that it would fail. Everybody hoped it would succeed including Hong Kong Salvage. I cannot conclude on the evidence that there was any deliberate misinformation on GIC's part. Standing back and considering the dire straits into which this accident had placed GIC and taking into account all the evidence, I cannot conclude that Mr. Brooker, on behalf of GIC, was acting unreasonably in instructing Hong Kong Salvage to attempt the lift.

    I therefore propose to allow this item as reasonably incurred in the sum of $250,000.

    GIC had in store ready for installation into the reconstructed Hok Un plant, a bucket elevator designed for use with cement or clinker but not for aggregates. It was, valued at $397,742. It had been purchased some time previously to await installation at Hok Un.

    This bucket elevator was removed from store and put into service at Kennedy Town after the accident. This was installed as an emergency measure to mitigate the loss of profit by getting the plant into operation as soon as possible. It would clearly have taken longer to wait for the repair of the conveyor system.

    A new chain bucket elevator was purchased from Germany for use at Hok Un at a cost of $787,509.

    The bucket elevator installed at Kennedy Town was no longer needed once the conveyor system was working again in its altered form. Mr. Arbon of W & T Wallace Evans, called by GIC, told me, and I accept, that this bucket elevator is now valueless and it will cost more to dismantle it than it would be worth as scrap.

    GIC contended that they are now back in the position they would have been without the accident. They have an unused chain bucket elevator in store at Hok Un. The one taken out of store is valueless now but it did help to get the plant operational quickly and as such it reduced the loss of profits claim.

    In fact the defendant has already paid $787,509 and is now claiming a credit of $389,767 on the grounds that they are only liable to pay $397,742 being the value of the bucket elevator prior to the accident. The defendant contended that they overpaid 'amidst error and confusion'.

    In my judgment GIC are correct in their contention. Had the accident not happened they would have had in store a new chain bucket elevator. They now have that and I see no reason why the defendant should not be liable for the sum of $787,509 being the cost of purchasing such a chain bucket elevator and I allow that sum accordingly.

    Prior to the accident GIC owned 3 Broomwade Compressors together with associated equipment. One was a standby in the case of breakdown or long term maintenance. A break in production would have had an adverse effect on profit and I consider it perfectly reasonable for GIC to have had one compressor on standby.

    2 Broomwade Compressors each with a capacity of 2880 cu/m/hour were needed at any one time to unload the barges.

    After the accident 3 Aerzner Compressors with their associated equipment were purchased to replace the Broomwade Compressors. 3 were purchased because 2 were required for discharging and one was on standby. Aerzners were purchased because they were more readily available than Broomwade Compressor. It is perfectly true, however, that each Aerzner had a capacity of 4650 cu/m/hour but one Aerzner cannot replace the capacity of 2 Broomwades.

    At the present time one Aerzner is used on the pier, one is used aboard a barge and the other is a spare.

    Mr. Griffiths submits that GIC are entitled to be paid for the 3 compressors because:

(a) The defendants cannot claim betterment by suggesting that one or more powerful compressors were bought;

(b) The plaintiffs were entitled to recover the price of 3 compressors irrespective of what use they in fact made of them;

(c) They are entitled to buy a compressor as a spare to replace that used as a spare before the accident;

(d) They were entitled to buy Aerzner instead of Broomwade because they were more readily available so as to mitigate their loss of profit claim;

(e) In any event, they needed to buy 2 Aerzner compressors to replace the power of 2 Broomwade even though there is a betterment in the sense of some surplus power. He relied upon the legal principles referred to above.

    Mr. Wong pointed out that Mr. Chin in cross-examination had said that there was no standby compressor on the pier. He stated that up to 25th March 1992 GIC had never had to use the one that is in store. He further added that there are only 3 barges left that require to discharge at a pier that has a compressor. Mr. Wong further relied upon Mr. Brooker's statement in cross-examination that the compressor on the barge was to service Chai Wan and Tai Koo Shing. That compressor was for use in unloading at the other site.

    Mr. Wong's submissions amount to this. He said that by virtue of the increased capacity of the Aerzner Compressors and the reduced pipe length (which shortens the discharge time) one compressor was sufficient to restore GIC to its position prior to the accident. No back up is required, he submits. Further, he says that, as was made clear by Mr. Chin, the one in store has never been used since its purchase. He goes on to submit that even if a back up was required there is no justification for a third compressor. He says that the third compressor on the evidence of Mr. Brooker was merely used to cater for GIC's needs at other sites.

    In my judgment, it was perfectly reasonable for GIC to purchase 3 replacement compressors for the 3 that were affected by the accident. The fact that they are of a larger capacity does not take the matter any further as one Aerzner cannot replace the capacity of 2 Broomwades. I have found that it was reasonable for GIC to have 3 compressors and I do not see why they should not be reimbursed the costs of replacing those 3 albeit with compressors of higher capacity. The fact that the standby generator has not been used and the further fact that the third compressor was to cater for GIC's needs at other sites is, in my judgment, wholly irrelevant. Clearly, GIC had to act quickly to replace the ruined generators. I accept the evidence that Aerzner were more readily available. GIC could not wait and it seems to me that their action in replacing the 3 Broomwades with the 3 Aerzners was perfectly reasonable in the difficult circumstances in which they found themselves. Under this claim, therefore, I allow $1,639,145.

    At the time of the accident there were in place 2 dust collectors. According to Mr. Brooker they were both in need of some repair at the time of the accident. These dust collectors were installed at a part of the pier which was destroyed by the accident. It is clear therefore that damage to them is proved. The cost of replacing the dust collectors would be the agreed figure of $589,668. Mr. Griffiths puts his case simply on the basis that GIC have had destroyed a chattel whose replacement value is the agreed sum. He submits that GIC are entitled to such replacement and they need not use the money in replacing the dust collectors. He relies upon the passage cited above from Dominion Mosaics which I accept as an accurate statement of the law.

    Mr. Griffiths accepts that in the absence of any evidence as to what it would have cost to repair these dust collectors I am entitled to use a broad brush approach and make some diminution from the agreed figure to reflect the cost of repair. He suggested a 10% discount.

    Mr. Wong reminds me that a plaintiff claiming damages must satisfy the court both that damage has been suffered and as to its amount. He submits that the fact of damage has not been established by GIC. He relies heavily on the note of a meeting held on 7th December 1981 in which it had been recorded that the original dust collection facilities did not work. He also reminded me that Mr. Chin did not know whether at the time of the accident the dust collecting facility was operating or not. Mr. Wong invited me to infer that if this facility was capable of repair then one would expect a company of GIC's standing to have kept its equipment in efficient working condition. He submits that I should disallow this item in its entirety.

    The issue here was what was the value of 2 dust collectors at the time of the accident. GIC's evidence on this point is sketchy indeed. Mr. Griffiths invites me to assume that the cost of repair would be in the region of 10% but I have no evidence whatsoever on this point and I did not see why I should take a step in the dark. A broad brush is one thing when there is paint on the palette but I am being asked to paint with a broad brush without any paint at all. The onus is on GIC and they have failed to discharge the onus in relation to the dust collector. For all I know they had been in situ but disused for years. I do not see why I should be forced to guess in GIC's favour when they could so easily have adduced the necessary evidence. I therefore disallow this item in it entirety.

    The Winches were situated in an area badly damaged in the accident. Whatever their state prior to the accident I am satisfied that they were damaged in the accident.

    The issue here is whether they were in use prior to the accident or whether as the defendant's contend, it is likely that they had not been used for many years. To support this the defendant rely on the evidence of Mr. Chin, an engineer employed by GIC, that most barges nowadays are equipped with warping winches. Further, Mr. Chalmers, the defendant's expert, told me that the winches he saw appeared to be in very poor condition.

    The burden of proof is on GIC. They have not satisfied me that the winches were used or usable prior to the accident or that they had any value and in all the circumstances I am not satisfied that GIC have in fact suffered any loss in respect of the winches. I therefore disallow this item of claim.

    Prior to the accident GIC had a purpose built factory with associated equipment which had been specially designed for this particular use. It was absolutely essential to recommence operation as quickly as possible after the accident in order to mitigate the loss of profits claim and_. thus the first stage of the bucket and chain elevator repairs were done. There can be no doubt that the cost of these repairs were recoverable and in fact they have been paid.

    Subsequently, the second stage "conveyor belt" repairs were done and these too have been paid for.

    Mr. Griffiths submits that the present position is that having recovered the cost of repairs, GIC is still left with plant and equipment and a pier which is less efficient and therefore less valuable than the one in use prior to the accident. He relies upon 9 aspects of the present system which are less favourable than the pre-accident system. I will deal with each in turn.

(a) The original conveyor system was previously in a concrete box with a life span of some 50 years. The present structure, according to Mr. Arbon who designed it, has a design life of 15 to 20 years. I accept Mr. Arbon's evidence on this point and reject the suggestion made by the defendant's expert that the present structure also has a design life of 50 years.

(b) The concrete structure which was originally in place required little or no maintenance or painting. The present system requires such maintenance and certainly requires more frequent inspection after winds and it is more difficult to maintain and therefore costs more to maintain. This was the evidence given by Mr. Kwan which I accept.

(c) The gantry crane before the accident was more controllable in ordinary use by reason of its design. The sheer-leg crane aboard the barges discharged substantial amounts into the harbour and this was clearly seen from one of the photographs. The present position is that only barges with cranes aboard can be used.

(d) The aggregate during discharge was protected by the gantry roof from rain after the tarpaulins were lifted. The present position is that the aggregates are discharged uncovered, which is a disadvantage as far as controlling the water content of the concrete before manufacture.

(e) Before the accident the pier was floored at two levels. The upper one being relatively unobstructed by the supports for the concrete box. In two areas, the floor has not been replaced, with a consequent loss of storage space at each level and of ease of use and of a dry area at the bottom level.

(f) After the accident, the cement discharge pipes were located shore-side rather than sea-side and this has led to certain berthing problems for the barges.

(g) The concrete box housing the conveyor was totally enclosed whereas the present conveyor is not. I am quite satisfied that there is some dust pollution problem in conditions of high wind.

(h) Mr. Griffiths last point was that the pier could no longer be used for what has been termed the "China Vegetable" trade due to the need to reberth the cement barges shore-side, and there has been a loss of floor area and this can no longer be used for storage purposes. I accept that there has been a loss of storage area but there has been absolutely no evidence as to the "China Vegetable Trade nor any evidence relating to loss of income therefrom, I therefore propose to ignore the "China Vegetable" point.

    It is perfectly plain that GIC were placed in a most difficult position following this accident. They had to take a number of important policy decisions. Mr. Brooker tells me, and I accept, that for practical reasons associated with restarting the business as soon as possible, he decided not to restore on an "as before" basis. He told me, and I accept, that the lease discussion played no part in this decision. There was a suggestion that there was a degree of uncertainty over the renewal of the lease of GIC's premises because of the proposed new water-front road. I do not propose to go into all the evidence about this, but I am quite satisfied that at all times Mr. Brooker was expecting a renewal of the lease subject to agreement on the appropriate terms and I think he was reasonable in expecting this because the GIC premises at Kennedy Town played an important part in the infrastructural element for Hong Kong Island and I cannot accept that the Hong Kong Government would have failed or refused to sort this matter out so as to enable GIC to continue in occupation of these premises. Further, there was evidence before me that the road problem was one which could be sorted out and I am quite satisfied that it would have been had the road gone ahead.

    In all the circumstances therefore Mr. Griffiths submits that GIC now have a less valuable and less efficient operation at Kennedy Town than before the accident. He said this would be reflected in the purchase price if, for instance, another company wished to purchase the plant as it is together with the lease. He submits that one approach I could take, using a broad brush, between the pre-accident and the present situation is to take the cost of returning the plant and pier to its pre-accident condition (which is agreed at $11,377,212) and deduct amounts paid by the defendants to get the temporary systems in place. Mr. Griffiths says he has worked out the amount paid by the defendants to achieve this, and he suggests it comes to $7,780,002. If therefore one takes that figure away from the eleven million dollar figure one comes to a figure of $3,597,210 which is effectively, as he puts it, the present value of the handicap which GIC suffer in not having the premises at their pre-accident condition. I must make it clear that Mr. Wong does not accept the figure of $7,780,002.

    One of the disadvantages with the present system is the absence of a gantry crane. The cost of putting that in would be $2,176,948. This is clearly a reasonable claim because there was a gantry crane in use before the accident and there are obvious disadvantages (which are visible from the photographs) in using the sheer leg crane. Mr. Griffiths accepts that the handicap figure which he puts at $3,597,210 includes the gantry crane cost of $2,176,948 and thus in round terms he says there is still outstanding a sum of roughly $1.5m which represents the present handicap of not having the pre-accident system presently in place.

    Mr. Wong denies that there is any residual handicap. He submits that I should infer that for operational efficiency GIC had deliberately opted for the present system as a permanent solution. On this basis he submits that GIC have been restored to the status quo ante and that no further compensation is required. He then goes on to submit that if I am of the view that minor adjustments are required in relation to the aggregate system before' it can be said that GIC have been restored to its pre-accident position, then he invited me to make an award in the sum of $2,176,948 representing the cost of installing the gantry crane. I mean no disrespect to his detailed and careful written submissions if I do not go into them in detail.

    I think at the end of the day the issue falls within a very small compass. The simple fact of the matter is that GIC had to react to the disastrous consequences of this accident. They obviously wished to get the plant operational as quickly as possible and it is to their credit, and to those who advised them, that they were able to do this so speedily. There can be no doubt that the present system is not as good as the system at the time of the accident. On the other hand, as Mr. Wong has pointed out, there are also certain advantages with the present system over the old system. I am perfectly satisfied that it is reasonable for GIC to be compensated for the cost of the gantry and I therefore award the sum of $2,176,948. It also seems perfectly reasonable to me to allow a further sum to GIC to compensate them for the disadvantages of and the extra cost involved in the present system. By this I refer to the extra cost of maintenance and the fact that the present system would almost certainly need replacing before the old system would have done. However, I think that the figure of $1.5m put forward by Mr. Griffiths is far two high. I can but use a broad brush approach in relation to this part of the claim, and what I propose to do is to allow under this whole head of claim a sum of $2,500,000 which will compensate for the gantry crane in the sum of $2,176,948 and would allow a further $223,052 to cover Mr. Griffiths's handicap point. I therefore award under claim (E) the total sum of $2,500,000.

    Not surprisingly the parties are wide apart on this issue and much of the evidence and argument centered around this claim.

    I have not the slightest doubt that GIC did suffer a loss of profit as a result of the accident and the consequent closure of the Kennedy Town plant effectively from 12th October 1981. Pumping of cement recommenced on 18th January 1992 and Pioneer Concrete recommenced their operations at Kennedy Town on 23rd March 1982. Despite argument to the contrary it seems clear to me on the evidence that GIC did suffer a loss of profit during the period of closure. The real issue is, however, when did they reach the position in which they would have been but - for the accident?

    Before considering the multiplicity of figures in this case it is necessary to have regard to some features of this industry and the construction industry in Hong Kong generally and Hong Kong Island in particular during the relevant period.

    The cement business is, of course, dependent upon the construction industry. The more buildings that are erected the more cement used. In addition to buildings such as offices or flats, one must also have regard to roads, schools, hospitals, tunnels and other Government infrastructural projects.

    So I start with the obvious point that I am dealing with a cyclical business.

    Next, the cement business is seasonal in line with the construction industry. More building is carried out from late September until January because the weather is better. Less work is carried out in the summer when heavy rains and typhoons can interrupt work. The busy season comes to an end at or about the Chinese New Year when many construction workers take an annual holiday.

    All this means that one must be careful when comparing different months in different years.

    It is also necessary to take into account that GIC with Pioneer Concrete were the major players in the cement business, especially in the sort of cement used for heavy construction work as opposed to plastering work. I have already referred to the relationship between these two major players.

    It is also necessary to take into account the question of foreign import of cements as well as the entry to the Hong Kong market of China Cement. Hong Kong cement was the only real competitor to GIC in the period 1981 - 3. China Cement came in to the market in 1984 and this together with certain agreements distorted the market.

    Regard must also be had to the opening of Gammon's large Tai Koo Shing site which opened on 17th November, 1980 and the storage of cement at this site.

    Another fact that I must consider is GIC's strategy prior to this accident and the effect that this strategy would have had but for the accident. Mr. Brooker told me, and I accept, that in 1978/9 GIC only had the Kennedy Town outlet on Hong Kong Island and he resolved upon a strategy which involved the finding of further water-front outlets on Hong Kong Island. This idea led to the Tai Koo Shing site where GIC established a bulk depot operated jointly by Gammon and GIC. The next development was that Pioneer was forced to move from their small batching plant at Shaukiwan and they found an alternative site at Chai Wan.

    GIC and Pioneer Concrete agreed that Pioneer Concrete would construct a batching plant at Chai Wan and would incorporate within this plant silos which were much larger than they required. This would then enable GIC to take cement to the plant by water and discharge using their own equipment.

    It was appreciated by GIC that the Tai Koo Shing plant had a short life because it would be lost as a batching plant as soon as the project was completed. However, the Chai Wan plant had a much longer life and proved invaluable as a backup. Mr. Brooker's aim was to deliver as much bulk as possible because it was easier to handle and more profitable to sell than bagged cement.

    The crucial part in Mr. Brooker's strategy was to get further penetration into the Hong Kong market. The object was to build up demand for cement at Kennedy Town. Hong Kong Island could not be served by Hok Un due to traffic and cost problems.

    I am quite satisfied on the evidence that I have heard that this strategy was formed by Mr. Brooker and I must take it into account when considering the loss of profit claim.

    GIC's expert witness on loss of profit was Mr. Anthony Collins, a partner in the firm of Hodgson Impey and Cheng. He qualified as a chartered accountant in England and Wales in 1974. He came to Hong Kong in 1983 since when he has been a fellow of The Hong Kong Society of Accountants. He has made some specialty of loss of profit claims and I am satisfied as to his expertise and experience. He embarked upon the difficult task of assessing GIC's loss of profit as a result of this unfortunate accident with some care. He took into account all the factors to which I have made reference.

    There are, of course, different methods of assessing claims such as this. The method used will depend upon the particular circumstances of the case. In some cases it would be possible to look at individual lost orders as a result of a shut-down but in other cases that would not be a feasible approach.

    Having considered all these matters, Mr. Collins decided to adopt the market share approach. He did so for a number of reasons which included the fact that GIC was a major supplier of cement in Hong Kong and because such an approach would enable him to ignore the problem of Kennedy Town customers transferring their business to one of the other GIC sources. I am quite satisfied that the market share approach is appropriate in this case and I accept Mr. Collins' reasons for adopting such an approach.

    The defendant's expert was Mr. Fulton of Moore Stephens. He, too, qualified in England in 1973 and has been in Hong Kong since 1978 when he, too, became a fellow of The Hong Kong Society of Accountants, He told me that he had acted in one major case as a witness for the defence in a loss of profit claim. I hope I do Mr. Fulton no injustice if I conclude, having heard them both, that Mr. Collins appeared to me to be the more experienced when it came to dealing with loss of profit claims.

    In evaluating the experts in this case, it is only fair to Mr. Fulton to point out that each was asked to undertake a completely different task. Mr. Collins was instructed to use his expertise in ascertaining what sum by way of loss of profit (if any) GIC suffered as a result of this accident. He explained in his evidence why he undertook the market share approach and indeed Mr. Fulton agreed that this can be an appropriate approach where there are only a few players in the field as is the position in this case.

    Mr. Fulton made it clear to me, and of course I accept, that his initial brief was not to ascertain GIC's loss of profit, for this would be doing their work for them. His instructions were to comment on, and effectively attack, the approach taken by Mr. Collins. This was made clear by Mr. Fulton when I asked him what figure he was putting forward as the appropriate figure for loss of profit. Perhaps as a consequence of that question from me, he went away and urgently came up with a calculation. I think it only fair to bear in mind that Mr. Fulton's role was initially, at least, that of criticising Mr. Collin's approach.

    Having heard both experts cross-examined at some length, I am quite satisfied that in the context of this case, it was appropriate for Mr. Collins to take the market share approach. In my judgement, it was not possible or appropriate to identify and contact all of GIC's Kennedy Town potential customers to see whether they would have come to Kennedy Town but for the accident.

    Mr. Collins took the end of 1983 as the cut off date for loss of profit. In his closing submission, Mr. Griffiths was, I think, prepared to trim this back by a few months. Mr. Fulton contended that loss of profit ended considerably earlier.

    Having heard both experts I am satisfied that the general approach of Mr. Collins is the correct one. The market share approach reflects the fluctuation in the construction industry in Hong Kong. I am also satisfied that it does take into account all post accident substitutions as it is based on actual sales. The use of this method also avoids the difficulty of comparing one month with another when completely different factors can be at work which can distort the picture. One of the problems, I find, with regard to a simple month by month comparison between one year and another is that it takes no account of market growth, the loss of potential customers or the effect of Mr. Brooker's strategy.

    Having preferred Mr. Collins approach and there being no challenge to the basic data upon which he bases his calculations there is little need for me to overburden this judgment with statistics and calculations. However I will refer to a few important figures and explain how I assess the figure which I propose to allow under this head.

    All the figures I now refer to can be found in Mr. Collins' reports or in other evidence placed before me.

    I set out GIC's market share from 1979.

1979 - 38.68%

1980 - 38.42%

1981 - 38.23%

1982 - 34.36%

1983 - 27.93%

1984 - 30.84%

    Between 1979 and 1981 there were only 2 major players in the local cement market. This was GIC & Pioneer. There were some imports. In 1984 China Cement entered the market and the position then became slightly less clear.

    The local consumption of cement increased for the 3 years 1980 - 1982. The figures were respectively 21.27%, 3.89% and 1.11%. In 1983 it fell by 5.09%.

    GIC's average market share for the first half of 1981 was 40.61%. For the first 9 months it was 39.71%. From October - December 1981, being post accident, it fell to an average of 35.48% and this during the busy dry season.

    It is also worth noting Kennedy Town sales as a percentage of all GIC cement sales. The average in 1980 was 13.72%. For the first 9 months of 1981 it was 13.09%. For the last 3 months it fell to 10.10%. [Some post accident sales were made by Kennedy Town out of existing stock but this was mostly in October. In November there was virtually none and in December actually none.] It was not until June 1982 that sales began to pick up a little at Kennedy Town. However, the average of total sales for 1982 was in fact 9.71%. By 1983 the percentage had risen to 19.5% but of course by then Tai Koo Shing had stopped.

    Mr. Collins calculated the loss of sale at Kennedy Town from October - October 1981 at 48,402 M.T. This figure includes a 20% growth factor which Mr. Griffiths submits is justified by a number of factors. Firstly during the first half of 1981 sales on Hong Kong Island had increased considerably compared with the same period in 1980. Secondly, he relies upon the demand for structural cement in the Kennedy Town catchment area. He reminded me of the evidence of Mr. Webber with regard to some of the major Hong Kong Island projects which were in progress during the period 1981-3. These included the Eastern Island Corridor, The Island Line, The Supreme Court, The Macau Ferry Terminal, The Academy for Performing Arts, The Wanchai Courthouse and The Queen Mary Hospital Tower. I heard evidence that the Government pushed ahead with these and other infrastructural developments to help boost confidence in 1982.

    Mr. Collins took the tonnage lost during this period, multiplied it by the average price per tonne and then applied a profit percentage to establish the net contribution Kennedy Town would have made to GIC as a whole during that period.

    He took the actual Kennedy Town sales for the same period in 1980. He added what he termed a conservative 20% to reflect the 1981 growth in sales.

    The sales during the last 3 months in 1980 were 44,699 M.T.

    The sales during the last 3 months of 1981 were 5,237 M.T.

    Assuming a 20% increase on 1980 sales for 1981 it should have been 53,639 M.T. They were in fact only 5,237 M.T. The shortfall was thus 48,402 M.T.

    To test this figure Mr. Collins added back the shortfall based on the 1981 sales and discovered that this would have given an adjusted market share of 39.71%. This tallies with the average market share for the first 9 months of 1981.

    I am satisfied that this approach is a fair and reasonable one and it is the one that I propose to allow. The average price per tonne was $359.69. 48,402 x $359.69 --$17,409,715. The Kennedy Town profit margin was 11.8% and this results in a figure of $2,054,346 for that period. I am satisfied that these figures are correct and that this is a fair and reasonable assessment of what GIC have lost during that period.

    I reject Mr. Fulton's approach as I do not think that it takes account of lost actual and potential customers during this period. It further fails to attach any or any significant importance to the commencement of the major projects above mentioned. I do not propose to go into any detail of the reasons as to why I think Mr. Fulton substantially underestimate GIC's losses. As I have said I prefer Mr. Collins' general approach to this matter and I accept all the criticisms of Mr. Fulton's evidence with Mr. Griffith's recorded in his written closing submission which I did not intend to repeat in this judgment. In particular I cannot accept Mr. Fulton's evidence that the effect of this accident had ceased by April 1982.

    The projects above mentioned were still relevant in 1982. They were all large consumers of structural cement. However, GIC's market share fell in 1982 by 4% over 1981. This was at the time when the total market increased by 1.11%.

    Appendix 5 to Mr. Collins' report is of some interest as it shows deliveries to Kennedy Town from Hok Un on a monthly basis from 1980 - 1983.

The average for the first 9 months in 1980 was 13,300 M.T.

The average for the first 9 months in 1981 was 13,170 M.T.

The average for the first 9 months in 1982 was 7,500 M.T.

The average for the first 9 months in 1983 was 13,800 M.T.

The average for the last 3 months in 1980 was 14,500 M.T.

The average for the last 3 months in 1981 was 4,200 M.T.

The average for the last 3 months in 1982 was 11,300 M.T.

The average for the last 3 months in 1983 was 14,200 M.T.

    These figures alone, submits Mr. Griffiths, show that the effect of the accident continued until well towards the end of 1983. In considering this I must also consider the strategy that Mr. Brooker had undertaken which was to increase bulk sales particularly on Hong Kong Island.

    Mr. Griffiths invited me to consider the graph at p.56A which he submitted showed that it was not until the end of 1983 that actual sales got to projected sales when one added in the 20% uplift (for 1981 over 1980.) Applying the ruler test to the graph I think one can be satisfied that the effect of the accident had for all intents and purposes worked its way out of the system by some time towards the middle of 1983.

    For 1982 Mr. Collins estimated a shortfall in sales of 150,605 M.T. This is the calculation of lost sales resulting from GIC's loss of market share caused by the accident. In the light of all the evidence I have heard I am satisfied that this is a correct and fair approach. In 1982 the average price was $358.83 (marginally down on 1981) and the profit margin was still 11.8%. The resultant figure is $6,376,908. This compares with the figure of just over $2m for 1981 which covered a period of about 21/2 months in which there was some stock to be sold. I consider that this figure is a reasonable estimate of the loss suffered by GIC in 1982.

    In 1983 GIC took a decision to assist China Cement by not reducing prices so as to increase market shares. This came out in the evidence of Mr. Brooker and was not known by Mr. Collins when he prepared his report. [Some adjustments clearly would have had to be made for this matter if loss of profits were to be claimed throughout 1983.]

    Mr. Griffiths submits that the graph at p.56A show that there remained a shortfall in 1983. Mr. Griffiths accepts that the China Cement factor must be taken into account and of course I agree. Few sales by China Cement were made in 1982. By the end of 1983 China Cement sales had reached 50% of GIC sales. This must have built up during 1983. By taking the end of May 1983 as the cut off date I believe I will have sufficiently taken into account the China Cement factor.

    Mr. Collins' figure for 1983 on the same basis as above comes to $7,510,095 (177,348 M.T. shortfall x 5,358.87 x 11.8%)

    In the light of all the evidence placed before me I am quite satisfied that the effect of this accident had ceased by the end of May 1983. Accordingly the only fair approach is to take 5/12 of $7,510,095 namely $3,129,206. Defendant's submission on loss of profits

    Mr. Wong invites me to accept Mr. Fulton's approach which I felt unable to do. Mr. Wong placed great reliance on certain statements made by the Managing Director and Chairman of GIC during the relevant years. I have considered this submission and the statements and having done so I am not satisfied, as is suggested, that they are inconsistent with what Mr. Brooker told me or with the approach taken by Mr. Collins. In my judgment Mr. Wong attempted to place too much reliance on this material. At the end of the day I have to decide upon which approach I feel able to rely and have come down firmly in favour of Mr. Collins and the market share approach.

    I do not consider that Mr. Fulton has adequately take into account the substantial projects underway during the relevant years. His evidence that the effect of the accident had ceased by April 1982 is in my judgment quite unacceptable and unrealistic when compared to the various figures contained in the numerous schedules complied by Mr. Collins. In the light of this incorrect assumption or assertion I do not find Mr. Fulton's calculations as reliable as Mr. Collins.

    Mr. Fulton's growth rate of 0.3% for Kennedy Town is not in my judgment acceptable. Mr. Collins' 20% figure can be cross checked by reference to market share figures. I reject Mr. Wong's submission that this figure is grossly exaggerated.

    Mr. Wong's primary contention was that there were no further losses of profit after the end of 1982. If I were to be against him on that submission, he invited me not to go beyond the middle of 1983 and to apply the detailed calculations set out on pp.29-32 of his very helpful submission. Nothing in them, however, or in the evidence placed before me leads me to conclude that I should depart from the approach and calculations taken by Mr. Collins. In those circumstances, it is not necessary for me to analyse Mr. Wong's detailed calculation.

    Mr. Collins' figures come to

1981              $2,054,346

1982              $6,376,908

1983              $3,129,206

    I therefore assess the loss claimable in this action in the sum of $11,323,657. I enter judgment for that amount.

    I will hear the parties, if necessary, on interest, costs and any consequential matters at a later date.

Representation:

John Griffiths Q.C. and Cliff Smith inst'd by Inns & Co. for the plaintiff

Ronny Wong Q.C. and Stephen Franklin inst'd by Johnsons_. Stokes & Master for the defendant