Sze Fung Engineering Ltd v. Trevi Construction Company Ltd

CACV 82/2023, [2025] HKCA 278

On Appeal From [2023] HKCFI 419

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 82 OF 2023

(ON APPEAL FROM HCCT NO 51 OF 2019)

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JUDGMENT

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Hon Anthony Chan J (giving the Judgment of the Court) :

1.This is an appeal from the Judgment of M Chan J dated 17 February 2023. The action arose from a construction dispute. After trial, it was adjudged that the Plaintiff (“SF”) had to pay to the Defendant (“Trevi”) the amount of HK$865,985.28 which was overpaid to it with interest (both pre-judgment and post-judgment) and the costs of the action.

Notice of Appeal and Issues

2.The Notice of Appeal contains 8 paragraphs, some with sub- paragraphs.

3.In summary, there are 4 issues in this appeal. First, the construction of Item 18 of the Quotation (“Item 18” and “Quotation”) presented by SF to Trevi dated 9 September 2017. It is common ground that the Quotation formed part of the sub-sub-contract between Trevi and SF (“SF Contract”). This issue turns on whether the payment term “back to back” should be construed to mean “pay when paid”[1] as held by the learned Judge.

4.Second, the implied terms to the SF Contract contended by SF.

5.Third, on the basis that the construction of Item 18 by the Judge is erroneous, the quantification of the claims made by SF against Trevi, namely, (i) variations claims (both agreed variations and disputed variations); (ii) idling claims; (iii) acceleration claim; and (iv) loss of profits claim.

6.Fourth, on the basis that Item 18 was correctly construed by the Judge, whether some of SF’s claims should nevertheless be paid by Trevi.

Background

7.The relevant background facts (extracted from the Judgment) can be succinctly stated as follows. The action concerned a construction project to build a new combined gas turbine unit at Black Point Power Station at Tuen Mun, New Territories (“Project”). CLP Power Hong Kong Ltd (“CLP”) was the employer of the Project and Leighton Contractors (Asia) Ltd (“Leighton”) was the main contractor for the civil, building, mechanical, electrical and plumbing works of the Project (“Main Contract Works”). Leighton was formally appointed as main contractor on 29 May 2017.

8.There were two invitations to Trevi and SF by Leighton to tender for part of the Main Contract Works, which included the construction of pipe pile walls, sheet pile walls and grouting works (“Subcontract Works”). The first tenders were submitted respectively in January and February 2017 by Trevi and SF. The second tenders were submitted in July 2017.

9.In early September 2017, the contract to execute the Subcontract Works (“Subcontract”) was awarded to Trevi by Leighton. The Subcontract was dated 15 September with a total price of about HK$77.24 million.

10.After two meetings held on 7 August and 8 September 2017 between Trevi and SF (the second meeting was attended also by Leighton), the Quotation was submitted to Trevi by SF on 9 September 2017. The Quotation covered part of the Subcontract Works. Essentially, these were the piling and pumping tests of the Subcontract Works (“SF Works”). The total price for the SF Works was about HK$20.37 million.

11.The Quotation stated that various items were to be provided to SF free of charge. Of relevance for the present appeal were Items 5, 6, 7, 9, 17 and 19 :

“5. Monitoring works of underground utilities and / or adjacent structures.

6. Monitoring of noise, vibration, ground movement and ground water level.

7. All utilities protection and diversion works before commencement of works. Also, the removal of existing old foundations, if any, especially RC structures.

…

9. Temporary working platform, wherever required.

…

17.Working hours on weekdays only from 8a.m. to 6p.m. Overtime works, if required, up to 8p.m. on weekdays only. No OT Rate applied between 6pm to 8pm (Alan Liu/Chui HW telecom on 9- 9-17”

…

19.All necessary Licenses (if required), permits, Consents, TCPs are not included.”

12.Item 18 of the Quotation provided as follows :

“Payment is based on ‘back to back’ principle and to be released to Sze Fung within 3 days upon receipt of the same from Client.”

13.The Judge found that based on contemporaneous documents and notes, there was a telephone discussion between SF and Trevi on 9 September 2017. Consequently, Items 16 and 17 of the Quotation were varied. For the present purpose, Item 16 is not relevant.

14.For Item 17, no overtime was to apply between 6 pm to 8 pm[2]. It is apparent that the sentence in red (in manuscript) was added to Item 17. The red amendment is largely consistent with the finding at para 13 of the Judgment.

15.SF commenced the SF Works on around 22 September 2017. On 19 January 2018, Trevi sent to SF a draft contract for the SF Works the terms of which were identical to those of the Subcontract[3]. Clause 18.9 of the Subcontract (also found in the draft contract sent to SF) contained a pay when paid term as follows :

“It is expressly agreed that in consequence of the Contractor being dependent for payment in respect of the Subcontract Works on successful recovery of such payment under the Main Contract, in no circumstances will the Contractor be liable to pay any amounts due to the Subcontractor under this Subcontract or for breach of this Subcontract without the Contractor having first received actual payment from the Employer under the Main Contract of such amounts.”

16.SF declined to agree to the draft contract. The reasons given were that the SF Works had already commenced and there was already a binding contract between Trevi and SF with all terms (including those set out in the Quotation) having been agreed.

The Judgment

17.The Judge rejected Trevi’s case that, properly construed, Item 18 incorporated the entirely of clause 18 of the Subcontract into the SF Contract. However, it was held that, on a proper construction, Item 18 was a pay when paid clause, ie, SF would only be paid if Trevi was paid for the work in question by Leighton. The Judge’s reasons for the construction will be considered below.

18.In respect of the implied term contended by SF that Trevi would assess and pay SF for all works duly carried out in a timely manner and pay a reasonable price therefor, the Judge held that it was inconsistent with the pay when paid effect of Item 18 and rejected it. It was observed that the real dispute in the action was whether SF was entitled under the SF Contract to payment for the SF Works it carried out when some of the works were not certified and paid by CLP/Leighton to Trevi.

19.Based on the pay when paid construction, the Judge assessed the agreed variations, which were disputed on quantum, such that if Trevi was only paid a certain sum by Leighton, it would be the payment entitled by SF. The disputed variations and loss of profits claims by SF were rejected because they were not certified and paid by Leighton. For the idling and acceleration claims, they were rejected because of lack of substantiation by producing the necessary particulars and evidence. Again, the details of the holdings will be discussed below.

Proper construction of Item 18

20.The principles on construction of contracts are trite. They were set out in para 27 of the Judgment as follows :

“… Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties (per Lord Bingham in BCCI v Ali [2001] UKHL 8; [2001] 1 AC 251).”

21.In respect of the wording of Item 18, although it referred to “back to back principle”, it is common ground that back to back is not a term of art. Clearly, it is an ambiguous term. It can mean that the timing of payment to SF should follow the payment received by Trevi (subject to the 3-day gap). Conceivably, back to back can also mean that apart from timing of payment, SF’s entitlement to payment also depended upon Trevi getting paid. In other words, there was a condition to SF’s payment entitlement. These meanings represent the opposing construction advanced by the parties. In light of its ambiguity, the meaning of Item 18 will have to be ascertained from the context and factual matrix.

22.As regards the authorities, it appears from those cited below and to this Court that there is only one appellate decision on the construction of a back to back clause, namely, Massford (HK) Ltd v Wah Seng General Contractors Ltd, unrep, CACV 78/2005, 8 November 2005. The terms of payment in that case was as follows :

“Terms of Payment are on a back to back basis … your payment is subject to Architect’s Payment Certificate and the honouring of Payment Certificate by the Employer.”

23.In that case, the plaintiff (subcontractor) argued that the payment terms did not impose a condition precedent to its entitlement to be paid by the defendant (main contractor) to the effect that payment had to be received by the defendant from the employer. It was further contended that the plaintiff was entitled to be paid within a reasonable time even if the defendant had not received payment from the employer, and that the payment terms only governed the time for payment rather than imposing a condition which had to be fulfilled before payment became due.

24.Perhaps unsurprisingly, it was held that the matter was abundantly clear. Not only were the Terms of Payment made on a back to back basis but the payment to the plaintiff was expressly “subject” to both the Architect’s Payment Certificate and the honouring of the Payment Certificate by the Employer. However, the Court made clear that each contract has to be individually construed and it is unlikely that the construction of the contract in that case would be of assistance in construing any other (para 13 of the CA Judgment).

25.There are 3 first instance cases where, in the context of construing a back to back payment clause, the court took the view that sufficiently clear words have to be used to justify the construction that the payee’s obligation was subject to condition: Wo Hing Engineering Ltd v Pekko Engineers Ltd, unrep, HCA5561/1996, 7 September 1998, [47]-[48]; Brington Engineering Ltd v Cheerise Asia Ltd, unrep, HCCT2/2010, 18 August 2011, [53]; and Wing Kei Structural Metalworks Co Ltd v Wah Fai Construction and Engineering Co Ltd [2024] HKCFI 255, [36]-[37].

26.We agree that as a general proposition the court should look for clear words to support the construction that payment entitlement is subject to condition. On the other hand, the circumstances of the case or the context and factual matrix may justify such a construction.

27.In Tim Lee Construction Engineering Co Ltd v Kwong Wah trading as Super King Engineering Co, unrep, HCCT 18/2010, 20 April 2012, [38] and [44], in construing the back to back payment clause, it was held that the subcontractor’s obligation to pay its sub-sub-contractor would arise only after it had received payment for the relevant works from the principal contractor (ie, it was a pay when paid clause). The circumstances of that case were that the subcontract was entirely sub-let to the sub- sub- contractor and the subcontractor would retain 26% of the payment under the subcontract as his profit. Further, the court found that there was no indication that the subcontractor had assumed an independent obligation to pay the sub-sub-contractor. Instead, in the course of discussions over the payment terms the sub-sub-contractor was given an assurance by the subcontractor to allay its concern over the risk it had to bear under the back to back arrangement ([37]).

28.Tim Lee may be seen as a case where the circumstances justified the construction that the payment entitlement of the contractor was subject to condition of payment higher up the contractual chain.

29.In the present case, the Judge referred to Wo Hing, Brington and Tim Lee in the analysis on the proper construction of Item 18[4]. The Judge observed, rightly, that: “[t]he meaning found by the court in any case is dependent on the facts of the case, and cannot be rigidly followed in another case where the relationship of the parties is different, the facts and circumstances are distinguishable and the entire factual matrix may be different”[5].

30.The Judge noted with agreement that in Tim Lee the learned Recorder considered that there was only one obligation concerning payment, and that was the obligation to pay when payment was received, and it would be artificial to make the distinction between entitlement to and the timing of payment[6].

31.In considering the words used in Item 18, the Judge took the view that the meaning of Item 18 was plain and unequivocal (Judgment, [45] and [47]) :

“ 45. Put simply, Item 18 provides for “what”, “how”, and “when” in its reference to “back to back”. What is back-to-back? Payment. What is made back-to-back? SF’s payment and Trevi’s payment. How is payment made? Back-to-back. When is payment made? Upon receipt from the client. That is clear on a plain reading of the ordinary meaning of the words used.

…

47. In my judgment, it is clear that Item 18 was plain and unequivocal in providing for payment to SF to be made by Trevi, back‑to‑back to Trevi being paid by Leighton, and that payment to SF would be released within 3 days upon Trevi’s receipt of payment from Leighton. This extends to payment for the SF Works undertaken under the Agreement, and for all agreed or permitted variations of such work. I agree with the learned Recorder’s observations in Tim Lee, that it is artificial to draw a distinction between the time for payment, and liability for payment – as the latter involves the same question as to when such liability arises.”

32.Thus, the Judge was in agreement with Trevi that, properly read and construed, Item 18 was on its own a pay-when-paid clause[7]. This remains the main contention advanced on behalf of Trevi in this appeal by Mr Rompotis, who appeared with Mr Kirpalani for Trevi.

33.The Judge also found support for the construction of Item 18 from the factual matrix, as well as the post-contract conduct of the parties. Before addressing those matters, on the wordings of Item 18, we are unable to agree with the Judge that there should be no distinction between the time for payment and entitlement (or liability) to payment.

34.What was held in Tim Lee in respect of the lack of distinction between time and liability for payment was as follows ([38]) :

“Absent special trade usage, it seems to me that the natural meaning conveyed by the expression “for the supply/installation of ... work in a back to back payment basis ....” is simply that Tim Lee would be paid when Super King had received payment from its superior contractor for the relevant works. This, to me, is just one single obligation concerning payment, namely, the obligation to pay when payment is received. There is no indication, whether from the language or the factual background, that the single obligation should be dissected into parts – one part as to entitlement and the other part timing. With respect to Counsel (for Tim Lee), I find such distinction rather artificial.”

35.We do not believe that the lack of distinction point was intended to be a matter of general principle. On the contrary, it was pointed out by the learned Recorder that the factual background was considered in coming to that view. Tim Lee was a case where the subcontract was entirely sub-let to the sub-sub-contractor and there was no indication that the subcontractor had assumed any independent responsibility to pay the sub-sub-contractor in the event that he was not paid by the main contractor (see para 27 above). In our view, that holding in Tim Lee should be understood to be applicable to the facts of that case.

36.The time of payment is generally understood to be the lifeline for contractors in the construction industry. It is unsurprising that there would be provision(s) in their contracts which governs the matter. On the other hand, the contractual payment they are entitled to is something different. It is sound common sense that this entitlement would not be lightly disturbed by the imposition of condition in the absence of clear words. For a payment term which is ambiguous (as in this case), the court must look for adequate support to come to the construction that both timing and entitlement are governed by the same term.

37.Before we turn to the factual matrix relied upon by the Judge, the main argument of Mr Nip SC, who appeared with Mr Yan for SF, should be addressed, namely, that the construction that Item 18 was a pay when paid clause is against commercial sense.

38.Although part of the Subcontract Works was carved out and sub-sub-contracted to SF, the scope of works between the Subcontract and the SF Contract was not identical. Under the Quotation, various works, which were included in the Subcontract, were excluded, eg, temporary platform[8]. It is therefore difficult to see why Item 18 was a pay when paid clause. If it was so, SF would never be paid for what was excluded in the Quotation but included in the Subcontract, which is contrary to commercial sense. There is considerable force in the submission, and it was not a point dealt with in the Judgment.

Factual matrix

39.In respect of the factual matrix relied upon by the court below, firstly, SF had tendered for the Subcontract Works, and had knowledge of the nature of the Project and the work contemplated as well as the contents and terms of the Subcontract, including the general framework of payment under it. In addition, meetings were held between Trevi and SF where the timing of payment in light of Trevi’s interim payment applications was discussed[9].

40.Secondly, SF was experienced in the construction industry, and payment on back to back basis or pay when paid provisions should not have been novel to it[10].

41.Thirdly, SF was given an assurance by Leighton in a telephone conversation which took place on around 8 September 2017 that the latter would “step in” if Trevi should fail to fairly administer the SF Contract, including the administration of the payment conditions. SF’s reliance on the assurance suggested that it knew that there was a risk to be assumed, but had accepted such risk with Leighton’s assurance[11].

42.In respect of SF’s knowledge of the terms of the Subcontract, Mr Nip submitted that the Subcontract was negotiated between Trevi and Leighton, and the final version was different to the tender documents provided by Leighton. However, it is clear from para 46 of the Judgment that the court was referring to the knowledge of the parties over the “general framework of payment under the Subcontract” which was derived from their knowledge of the “contents and terms of the Subcontract as provided by Leighton”. It thus appears that the court was referring to the draft subcontract normally found in the tender documents. No criticism is called for.

43.It is correct that SF was alive to the nature of the Project, the work contemplated and the general framework of payment under the Subcontract. On the other hand, it is difficult to see such matters as pointing to SF’s payment entitlement being subject to any condition. SF’s contract was made with Trevi, and it was not privy to the terms agreed between Trevi and Leighton. SF and Trevi were free to agree the terms of their contract.

44.As for the discussions between SF and Trevi on the timing of payment in light of the interim payment applications by the latter, they are at best neutral to the question whether Item 18 was a pay when paid clause. Indeed, it may be said that the discussions, being confined to timing of payment, are not supportive of the pay when paid construction.

45.The same may be said for SF’s familiarity with the back to back and pay when paid provisions used in the construction industry. The use by SF of the back to back term in the Quotation, instead of the pay when paid term, does not support the pay when paid construction. At best, it is neutral to the construction task.

46.As regards the assurance by Leighton, the telephone conversation in question was recorded in a letter by SF to Leighton dated 27 November 2019[12]. Mr Nip made two points. First, the conservation did not involve Trevi. It was not a matter known to both parties at the time of the SF Contract, and therefore not a relevant factual matrix for consideration. Second, the conversation concerned the non-payment of Trevi and not the non-payment of Leighton or CLP. It had nothing to do with pay when paid. We agree with both points.

47.Mr Rompotis submitted that the Judge referred to the conversation in the context of case law concerning the assumption of commercial risks of default by those higher up in the contractual chain (Judgment, [52]-[53]) to address the reasonableness and hence likelihood of SF agreeing to bear the commercial risks of non-payment on the basis of an assurance from Leighton. Such comment was open to the Judge on the evidence and consistent with Trevi not assuming an independent obligation to pay SF.

48.Paragraph 53 of the Judgment referred to Tim Lee for the proposition that it is a matter of the parties’ bargain and agreement on the allocation of risk, and there is no reason in principle why a properly drafted pay when paid clause should not be given effect by the court.

49.We have no disagreement with the proposition. Given our view that Item 18 is ambiguous, the issue is whether there was evidence that SF had assumed the risk of not getting paid by Trevi if the latter was not paid by the contractor higher up the chain. Apart from our agreement with Mr Nip’s submissions that the conversation between SF and Leighton did not have such effect, the proposition that SF had assumed the risk of non-payment by the contractor higher up the chain is not consistent with the difference in scope between the SF Works and the Subcontract Works (see para 38 above).

Subsequent conduct

50.The Judge took into consideration for the construction of Item 18 certain subsequent conduct of the parties, namely, the correspondence between SF and Trevi in respect of the former’s payment claims and SF’s participation in the negotiations with Leighton in connection with the SF Works[13].

51.On legal principles, the Judge referred to Chitty on Contracts. The relevant commentary can be found in the latest 35^th edition, vol 1, [16-061] :

“…Subsequent actions are therefore inadmissible to interpret a written agreement, although there are certain exceptions to this rule: (i) where the contract is oral or partly oral; (ii) where a conveyance is unclear or ambiguous with respect to the land conveyed by it; (iii) in the case of ancient documents, contemporaneous or subsequent action may be adduced in order to explain words whose contemporary meaning may have become obscure; (iv) to show that an agreement, or a term of an agreement, is a sham; (v) to show whether there was a contract and what the terms of the contract were; (vi) to show that the terms of a contract have been varied or enlarged; (vii) to found an estoppel; and (viii) to infer the governing law.”

52.It appears that the Judge had relied upon exception (v). Paragraph 55 of the Judgment stated that :

“In relation to the dispute as to whether there was in fact a term of “pay-when-paid” on back-to-back basis, and not on the question of the interpretation of Item 18, the conduct of the parties after the date of the Agreement can be considered…”

53.With respect, we believe that there was a conflation. There was no issue between the parties that Item 18 was part of the SF Contract and that it was the clause which governed the payment obligations. The dispute before the court was whether Item 18 was, on proper construction, a pay when paid clause. It was not a dispute on the existence or otherwise of such a clause.

54.We agree with the submission of Mr Nip that subsequent conduct of the parties should be ignored in the construction exercise.

55.In the premises, we are unable to agree that the construction that Item 18 is a pay when paid clause is supported by the factual matrix. It follows that the construction by the court below is flawed. In our view, the proper construction of Item 18 is that the “back to back principle” governs the timing of payment.

Implied term

56.Mr Nip accepted that the only implied term which is relevant in this appeal is that Trevi would assess and pay SF for all works duly done in a timely manner and pay a reasonable price therefor[14]. This implied term was rejected below on the basis that it was contrary to Item 18, which was a pay when paid clause. However, it was noted that the real dispute was whether SF was entitled to payment for the SF Works it carried out when some of the works were not certified and paid by Leighton or CLP to Trevi.

57.Given our view that Item 18 only governs the timing of payment, it does not deal with the situation where Trevi did not receive payment from Leighton. We agree with Mr Nip that there is sound basis for the implication of a term in the SF Contract for Trevi to assess and pay SF for all works duly done pursuant to the SF Contract in a timely manner and pay a reasonable price for the same (“Term”).

58.Mr Rompotis submitted that payment of “reasonable price” would be contrary to the express stipulation under the SF Contract that payment is to be based on the rates contained in the Bills of Quantities attached to the Quotation. To imply the Term would, in effect, be allowing SF to seek payment on quantum meruit, which is neither pleaded nor consistent with the Quotation.

59.We are unable to agree. Firstly, the Term was pleaded in SF’s Amended Statement of Claim (“ASOC”)[15] as implied term. Secondly, it was stated in the Quotation that :

“The quantities in this quotation are subject to remeasurement and shall exclude the works which are not covered in the Bills of Quantities and shall also refer to [SF’s] remarks in the BQ …”.

60.Apparently, it was not intended that SF’s payment entitlement is confined to what was provided under the Bills of Quantities. Indeed, as stated in para 11 above, various Items referred to in the Quotation were to be provided to SF free of charge. If SF ended up doing what should have been provided to it free of charge, it is difficult to see why it should not be paid under the SF Contract. Implying the Term is not inconsistent with the terms of the SF Contract.

61.It follows from the erroneous construction of Item 18 that the court below also fell into error in the rejection of the Term as an implied term of the SF Contract.

Quantum

62.To begin with, we note that Trevi no longer disputes the quantification on remeasured works at HK$28,382,206.80.

63.SF’s claims for variations (both agreed variations and disputed variations) and loss of profits can be dealt with together because they were rejected by the court below on the basis that Item 18 was a pay when paid clause and those claims were not paid (in the case of the agreed variations, only partially paid) by Leighton or CLP.

64.Due to the lack of findings by the court below, these are not issues which this Court can resolve. Mr Nip and Mr Rompotis are in agreement on the need to refer the matters back to the court below.

65.We note that in respect of the disputed variations, Trevi had an alternative position at trial that: (a) the works in question do not constitute a variation as they were covered by the rates and work included in the SF Contract; and (b) apart from the fact that they were not paid by Leighton, they were not supported by necessary information and evidence[16]. As a consequence of the pay when paid construction, the court below did not make any finding on these issues[17]. These matters will need to be determined unless they are not pursued by Trevi.

66.Both the idling and acceleration claims were rejected by the Judge due to deficiencies in necessary particulars and evidence. It was held in para 78 of the Judgment :

“Any claim made on the basis of the implied term relied on by SF, that Trevi was under a duty not to hinder SF’s works to completion, is not accepted as SF had no right of exclusive access to the site but must co-ordinate with the sequence and programme of works imposed and planned by Leighton for all the contractors working at the site for the Project. I also accept Trevi’s submission, that if SF claims that there was disruption of its work or that it had been prevented to execute its work in a timely manner by reason of having to co-ordinate with the work of other contractors, and that hence, there was breach by Trevi of the implied term, then SF must substantiate such claim for its idling costs and other alleged loss, by producing the necessary particulars and evidence of (inter alia) the disruptive event complained of, its own planned work allegedly disrupted, whether it could have worked elsewhere and whether its claimed idling and loss was due to its own poor management and inefficient working practices etc, all of which were lacking and none of which had been produced, either to Leighton or the SJE in this action, for assessment. Questions of delay would require consideration of issues such as whether any instruction to suspend works caused any critical delay in the programme of works, and whether delay was caused or contributed to by SF. Even if there was any instruction from Leighton to stop work, or to “accelerate work”, that does not by itself give rise to any consequential liability on the part of Leighton or Trevi to pay for SF’s claim – which claim must (like all disputed claims) be substantiated by proper particulars and evidence of the damages allegedly caused as a result of the instruction.”

67.The idling claims were based on an implied term that Trevi would not prevent or hinder SF from carrying out the SF Works and bringing them to completion, and that the implied term was breached by Trevi[18]. The particulars were contained in Appendix 2 (Schedule of Claims) to the ASOC. In the Schedule, the idling claims followed a format which identified the cause of idling time and cost, SF’s letter (referred to as a Notice of Claim) which recorded the incident in question and stated SF’s intention to claim additional time and cost[19], Leighton’s Subcontractor Site Instruction (“SCI”) no. 45[20] issued on 20 November 2018 and site records, the majority of which were said to be signed by Leighton or Trevi.

68.According to Mr Nip, SF’s idling claims were based on instructions given to it and records of actual resources lying idle. They were supported by contemporaneous documents which were not disputed. SF’s witness also confirmed that the facts contained in the records were correct.

69.We do not believe that SF had sufficiently made out its idling claims by merely relying upon the fact that resources were lying idle because the work at a particular location was delayed or obstructed. As held by the court below, SF had a duty to co-ordinate with the sequence and programme of works planned by Leighton for all the contractors working for the Project. The discharge of such duty could avoid idling resources. If there was unavoidable obstruction, there would be question of deploying the idle resources at other location(s). In short, we are not satisfied that the Judge had erred in rejecting the idling claims for the reasons given in para 78 of the Judgment.

70.There is only one acceleration claim. SF’s pleaded case was that it was instructed to carry out acceleration work and did so[21]. The particulars provided under Appendix 2 were limited to the locations of the acceleration work, amount of claim, SF’s Notice of Claim which referred to it having been instructed by Leighton to work overtime and SCI no. 45.

71.In para 4.2 of the Notice of Appeal, it is contended that the acceleration claim is in fact a claim “due to Leighton / Trevi’s instruction for SF to work overtime”. Mr Nip informed the Court that this claim is entirely based on Item 17 of the Quotation and that SF was instructed to work between 6pm to 8pm.

72.SF’s challenge to the rejection of its acceleration claim has no leg to stand on unless the finding on the amendment to Item 17 (see paras 13 and 14 above) is appealed. There is no such appeal, and it would be unfair to allow SF to challenge the factual finding without identifying it in the Notice of Appeal. The unfairness is amplified by the fact that SF’s skeleton arguments did not address the issue or state why the finding is erroneous.

73.We see no reason to disturb the rejection of the acceleration claim by the court below.

74.In light of this Court’s conclusion that Item 18 is not a pay when paid clause, there is no need to deal with the fourth issue identified in para 6 above, namely, on the basis that Item 18 was correctly construed by the Judge, whether some of SF’s claims should nevertheless be paid by Trevi.

Disposition

75.For the reasons aforesaid, this appeal is allowed and the Judgment entered below is set aside. SF’s variation claims (both agreed variations and disputed variations) and loss of profits claim are remitted back to the court below for determination.

76.We make an order nisi that the costs of this appeal be paid by Trevi to SF with a certificate for 2 counsel, to be taxed if not agreed. As for the costs below, although SF should have won the argument on construction of Item 18, whether it should have been the eventual winner depends on the determination of the remitted issues. Conceivably, the determination may not result in an outcome materially more favourable to SF than the outcome of the trial below. On balance, we believe that the better course is to reserve the costs below to the Judge. We make an order nisi accordingly. All orders nisi shall become absolute in the absence of any variation application within 14 days from the date of this Judgment.

77.We are grateful to counsel for their assistance.

Mr Norman Nip SC and Mr Yan Kwok Wing, instructed by Wong & Lawyers, for the Plaintiff (Appellant)

Mr Phillip Rompotis and Mr Lavesh Kirpalani, instructed by Georgiou Payne Stewien LLP, for the Defendant (Respondent)