LegCo Panel on Transport

Minutes of meeting held on Tuesday, 17 December 1996,at 8:15 am in the Chamber of the Legislative Council Building in the Chamber of the Legislative Council Building

IV.Tuen Mun Road widening works mediation case

(Paper No. CB(1) 512/96-97(03) extract from minutes of meeting held on 23 October 1996)

(Paper No. CB(1) 512/96-97(04) provided by the Administration in October 1996)

(Paper No. CB(1) 512/96-97(05) extract from minutes of meeting held on 29 November 1996)

(Paper No. CB(1) 512/96-97(06) provided by the Administration in November 1996)

(Paper No. CB(1) 512/96-97(07) provided by the Administration in December 1996)

4.In response to a member, the Director of Highways (D of HyD) and the Assistant Director of Highways (Major Works) (AD of HyD(MW)) advised that the Contractor had put in claims in relation to the mediation case. One of the claims was to cover the costs of the additional works, traffic diversions and programme acceleration for completion of the works at Sam Shing Hui and So Kwun Wat sections after the rockfall incident. Those claims which were related to works at the disputed section at Tai Lam and subsequently found to be impossible amounted to about $100 million. There were also other claims not related to the impossibility issue. All of these claims were being assessed by the Supervising Officer of the contract.

5. Members were dissatisfied with the non-disclosure of the Mediator’s Decision. A member noted that the Administration had repeatedly emphasized the Contractor’s right in declining disclosure of the Decision until the Coroner’s Inquest in March 1997. He was concerned with the possibility of significant sums of public money being incurred if the Government were to lose in these claims. In response, the Principal Assistant Secretary for Works (Contracts & Cost Control) (PAS for W(CCC)) advised that it might not be practical to settle all claims before March 1997. It was also inadvisable to release the content of the claims before settlement and the special conditions of contract which would impact on the rights of both parties before the court, and he had been advised by the Attorney General’s Chambers that these conditions could not be divulged. Furthermore, the liability of the claim was governed by the contract and its quantum would be subject to negotiation between the Administration and the Contractor. The payment of compensation was a matter of professional judgement and it was his fundamental concern that LegCo Members, being the third party, should not interfere with this commercial activity.

6. Members disagreed strongly with PAS for W(CCC) for labelling LegCo Members as the third party in this case. They pointed out that LegCo had approved a significant amount for the project and this might have obviated the need for the Administration to seek approval from the Finance Committee for funds required for the compensation. Without knowing the basis of the Mediator’s Decision, members were unable to judge whether negligence or errors were involved or that the Mediator had come to the right conclusion. They also considered that some officials, when lobbying support for the project, had only stated such advantages as the cost-effectiveness of the Design and Build Contract and had failed to draw attention to other important aspects. In response, D of HyD advised that the construction contract was overseen by a supervising officer who was an experienced chartered engineer of the Government. The supervising officer would not be influenced by either the Government or the Contractor, and his neutrality was important in ensuring the smooth implementation of provisions in the contract. Any interference might intrude this neutrality and lead to arguments on infringement of contractual rights, resulting thereby in other claims for compensation. The Chairman stressed that members’ primary concern was on the claims and on monitoring the proper spending of public money.

7.Hon Albert CHAN Wai-yip considered that the Contractor’s claims of $100 million had resulted from the acceptance of the Mediator’s Decision, and this was a separate issue from the impartiality of the supervising officer. He was dissatisfied with LegCo being deprived of the opportunity of being fully briefed on the incident. He also questioned the basis for the Administration to accept the Decision and if this was the best way to tackle the case. He remarked that to guard against future recurrences, the Democratic Party might raise at the meeting of the Public Works Subcommittee on 18 December 1996 a requirement for disclosure of mediator’s decisions and related negotiation documents as a prerequisite for approving funding requests from the Administration in the future. D of HyD explained that acceptance of the Mediator’s Decision was based on legal advice from private counsel and the Attorney General’s Chambers. The decision of not pursuing the impossibility claim in arbitration was made after considering the pros and cons of different courses of action and the conclusion reached was that further pursuing the case would not be in the overall interest of the public. He added that the Administration was still assessing the claims and had yet to make a decision. The Secretary for Transport (S for T) said that he would raise with the Secretary for Works observations made by members. He considered however that members should have regard to the principles for the overall system of contracts and approval of funds and these should not be affected by a single incident. He re-iterated that all information relating to the incident in question would probably be released at the time of the Coroner’s Inquest and the Administration as well as the Director of Audit would take follow-up action where necessary on such matters as safety and risk assessment, dereliction of duty and negligence after the Inquest proceedings. While it was not possible at the moment for the Administration to compromise its stance on the non-disclosure of the Mediator’s Decision, S for T undertook to explore other means of addressing members’ concerns.

Admin Admin

8. Hon Albert HO Chun-yan did not agree that disclosure of the said document would pre-empt the findings of the Coroner’s Inquest, having regard to the facts that Coroners had in some cases agreed to release documents for public information prior to proceedings, that persons could take civil proceedings and request disclosure of relevant documents, that LegCo could conduct public hearings or the Governor could appoint commissions of enquiry, and that issues such as the Kwun Lung Lau incident and the fire accident in the Garley Building were discussed in public by Members and related documents were made available prior to proceedings. He held the view that on the basis of the above, it was unreasonable for the Administration to withhold the information. He also cast doubt on the Administration’s claim that the issue involved matter of sub judice. The Chairman pointed out that contractual obligations were involved and sought clarification from the Administration. D of HyD advised in response that the Hong Kong Government Mediation Rules stipulated that the Mediator’s Decision could only be disclosed with the mutual consent of both parties concerned. Similar conditions regarding divulgence of information were also stipulated in Clause 8 of the General Conditions of Contract.

9.Members were concerned about the party which should be held responsible in this case, and the policy implications and impact of this incident on existing and future works contracts. In particular, they asked if there were any disclaimer clause in the contract concerning unforeseeable situations and accidents beyond control, and if a copy of the supplementary agreement for works at Sam Shing Hui and So Kwun Wat sections could be provided to the Panel. PAS for W(CCC) undertook to provide relevant extracts of the general conditions of contract on the two clauses on impossibility and the confidentiality of commercial documents for members’ reference. D of HyD added that the supplementary agreement stipulated special conditions of contracts which could not be divulged at this juncture. He also advised that following acceptance of the Mediator’s Decision, the Contractor had been relieved of his obligation to complete the disputed works at the Tai Lam section. The Administration was conducting a feasibility study for the remainder of the works and this was expected for completion by April 1997. (Post-meeting note: Response from PAS for W(CCC) was circulated to members vide LegCo Paper No. CB(1) 647/96-97.)

Admin

10. A member noted from the information paper that significant resources would have to be incurred for the construction of a new lane for Tuen Mun Road. In view of the impending opening of the Ting Kau Bridge and the Route 3 (Country Park Section) in late 1997 and mid-1998 respectively, and the fact that about $500 million spent on the works had only succeeded in increasing traffic flow by 400 vehicles during the morning peak hour, he sought clarification on whether it was the Administration’s intention to proceed with the construction of the new lane. S for T said in reply that the Administration had yet to decide but he would take the member’s views into consideration. Another member expressed disappointment with the manner with which Design and Build contracts were handled. When introducing Design and Build projects previously, the Administration had advised that contractors would normally be responsible for technical issues related to the projects. This did not appear to be applicable in the present case. He stressed that Government should not be held liable for follow-up action and it was inconceivable for Government to have to pay significant compensation in this and some other cases. He suggested that all future contracts should be available for public inspection.

11. The Panel requested the Administration to report to members progress of this case and provide all relevant documents in due course. The Chairman advised that this item would be discussed again after the Coroner’s Inquest.

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