Read the full judgment text of HCCT 72/2000 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 18 December 2001 before Hon. Kwan J.
Construction law — Performance bond — Implied terms — Contractual privity — Variation instructions — Strike out application — Kenworth Engineering Limited was a nominated subcontractor under a main contract between Nishimatsu and the Airport Authority for the Chek Lap Kok Airport project. Kenworth provided an on-demand performance bond via a Bondsman to the Authority, issued pursuant to the Sub-contract. Disputes arose after Kenworth's Sub-contract was terminated due to alleged default and cost-related claims followed. Kenworth asserted implied contractual terms in the bond and in an alleged 'special measures' agreement with the Airport Authority. The court applied the established B P Refinery test for implied terms, emphasizing contractual privity: Kenworth was not party to the bond between Authority and Bondsman, thus it had no right to enforce an implied term in the bond requiring the Authority to prove default and repay excess sums. The obligation to account for overpayments was to be implied in the underlying contract (the Sub-contract), between Kenworth and Nishimatsu, not the bond. Similarly, the alleged 'special measures agreement' was held not to create a direct contractual relationship between the Authority and Kenworth, as the 2 April 1998 letter was an instruction to Nishimatsu under the Main Contract's variation mechanism. Evidence including prior affidavits showed the letter was not intended as a direct contract with Kenworth. Kenworth's claims based on these implied terms were struck out as untenable and an abuse of process. The court also determined the related questions under Order 14A negatively in favour of the Authority. The action was dismissed with costs to the Authority.
Legal issues: Implied term in the on-demand bond in paragraph 7 · Implied term in the bond in paragraph 7A · Implied term in contract constituted by the Sub-contract Tender (paragraph 6(ii) of Amended Reply) · Implied term in the alleged 'special measures agreement' (no hindrance by Airport Authority)
Outcome: Kenworth's claims dismissed; parts of pleadings struck out; questions on implied terms determined negatively.
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