Might Foundate Development Ltd. v. Ccecc (H.K.) Ltd.

HCCT000024/2001

HCCT23, 24, 25 & 26/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO.23 OF 2001

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Coram: Hon Burrell J in Chambers

Dates of Hearing: 23 to 25 July 2001

Date of Decision: 6 August 2001

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D E C I S I O N

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1.In this hearing the applicant, Might Foundate Development Limited ("the Respondent in arbitration") seeks orders under sections 23, 24 and 25 of the Arbitration Ordinance. They seek leave to appeal an arbitrator's award pursuant to section 23, an order to remit various issues to the arbitrator for reconsideration under section 24 and the removal of the arbitrator under section 25. The arbitration took place in July 2000 before Mr Colin Wall. It lasted 12 days. The award save as to costs was published on 23 February 2001. It contains 287 paragraphs over 93 pages.

2.Miss Teresa Cheng SC appeared for the respondent in the arbitration and the applicant in these applications. Mr James Lee appeared for the Claimant in the arbitration, CCECC (H.K.) Limited, and was led by Mr Nigel Aiken SC in these applications. The Notices of Originating Motion and grounds of appeal cover 23 pages. In effect, there is very little that the applicant does not complain about or seek leave to appeal against in the award. Mr Aiken described it as "a shotgun gun" approach.

3.Before turning to each of the issues in these applications, I will briefly set out the important legal principles and tests to be applied in applications such as this.

4.It must not be forgotten that parties choose to arbitrate and parties choose their arbitrators. It is their chosen method of resolving their disputes. The threshold that an applicant must reach in order to get leave to appeal an award or an order to remit for reconsideration is set high because of the important presumption of finality of an arbitrator's award. The court's role is supervisory and the circumstances in which it will rebut the presumption of finality are carefully defined and are narrow.

5.The leading Hong Kong authority is the PT Dover Chemical Company Case [1990] 1 HKC 132. It sets out the court's first task, namely to determine where a particular ground of appeal lies on the "sliding scale" :

" At the top of the scale or spectrum the presumption of finality is strongest in the 'one-off' case or 'one-off' event. Typically this will concern a specially drawn contract giving rise to no point of construction: peculiar or special facts: a question of law 'in which the general market and the commercial fraternity has no interest (it merely affects the rights of the particular parties) per Lord Donaldson, M.R. in The Kelaniya [1989]1 Lloyd's Rep 30, 32: and a question of law decided by an arbitrator chosen for his legal qualifications and arising in an international context. Then leave should be granted only if the arbitrator is, in Lord Diplock's reformulation in The Antaios p. 206:

'So obviously wrong as to preclude the possibility that he might be right.'

In the simpler and more homely language of Lord Donaldson in The Kelaniya 32 :

'... there is a strong presumption that they have also accepted him for better or for worse in relation to questions of law. This is not however to say that, even in a one-off case, an arbitrator is to be allowed to cavort about the market carrying a small palm tree and doing what he thinks appropriate by way of settling the dispute. What it does amount to is that the Courts will normally leave him to his own devices and leave the parties to the consequences of their choice. They will only intervene if it can be demonstrated quickly and easily that the arbitrator was plainly wrong.'

At the bottom end of the scale the presumption is weakest where the dispute arises between Hong Kong parties out of a standard form of contract in regular use in Hong Kong; turns upon the construction of that contract in the context of events which are commonplace or likely to recur; and has given rise to a question of law decided by a non-legal arbitrator, e.g. an architect or engineer. This is the classic standard case envisaged by Lord Diplock in The Nema where he said at p. 743D :

'Rather less strict criteria are in my view appropriate where questions of construction of contracts in standard terms are concerned. That there should be as high a degree of legal certainty as it is practical to obtain as to how such terms apply upon the occurrence of events of a kind that it is not unlikely may reproduce themselves in similar transactions between other parties engaged in the same trade, is a public interest that is recognised by the Act particularly in s. 4. So if the decision of the question of construction in the circumstances of the particular case would add significantly to the clarity and certainty of English commercial law it would be proper to give leave.' ....

.... Even in such circumstances as these leave should only be granted if a strong prima facie case of error is made out."

6.This assessment must be made in relation to each issue before the court. In the applications before me, I have come to the conclusion that all the issues are "one-off" issues about which the court should only intervene where it can be demonstrated quickly and easily that the arbitrator was plainly wrong. There is, however, one factor which prevents these issues from being placed at the "top of the scale" and that is that the arbitrator was not a lawyer. For this reason, the issues slide slightly down the scale. I take this into account. However, I also take into account that Mr Colin Wall is a chartered arbitrator who has considerable experience of Hong Kong, of building arbitrations and of the construction industry. He is a former chairman of the Chartered Institute of Arbitrators (H.K. branch) and an ex-officio of the H.K. International Arbitration Centre.

7.The presumption of finality, albeit rebuttable, was emphasized by Leonard J in Garden Co. Ltd v. On Lee General Contractors Ltd [1995] 2 HKC 89. In that case, Leonard J complained about the length of the hearing (which was approximately half the length of this hearing), the number of arch-lever files and the length of the Notice of Motion (again, they were about double in this case). He concluded with these words :

" By now it should have dawned upon the profession that leave to appeal will be granted only in exceptional cases and clients involved in arbitration should be so advised. If it cannot be demonstrated quickly and easily that the arbitrator is wrong, elaborate arguments are unlikely to succeed."

8.Another general principle to be kept in mind when determining whether to grant leave or to remit a point or points back to the arbitrator concerns what standards an arbitrator should meet when giving a reasoned award. In Robert Merkin on Arbitration Law, the following passage appears :

" The often repeated guidelines for the making of a reasoned award were laid down by Donaldson LJ in Bremer Handelsgesellschaft mbH v. Westzucker GmbH (No 2), the following quotation having been modified to remove superfluous references to the Arbitration Act 1979:

It is of the greatest importance that trade arbitrators ... should realise that their whole approach should now be different. At the end of the hearing they will be in a position to give a decision and the reasons for that decision. They should do so at the earliest possible moment ... No particular form of award is required... All that is necessary is that the arbitrators should set out what on their view of the evidence, did or did not happen, and should explain succinctly why in the light of what happened, they have reached their decision and what their decision is ... Where a [reasoned] award differs from a judgment is in the fact that the arbitrators will not be expected to analyse the law and the authorities. It will be quite sufficient that they should explain how they reached their conclusion ... The point which I am seeking to make is that a reasoned award ... is not technical, it is not difficult to draw and above all it is something which can and should be produced promptly and quickly at the conclusion of the hearing.

The courts have, consistently with this passage, stressed that awards are not legal judgments, and thus must not be expected to reach that standard or be construed in a pedantic or overcritical fashion. An award which is short is not necessarily inadequately reasoned. In particular it is not necessary for arbitrators to set out lists of rival submissions and factual propositions and to set out reasons for choosing between them. It is enough that the award demonstrates why the arbitrators have found for one party rather than the other, as the losing party must be able to ascertain whether there is a right to seek the court's permission to appeal against the award (assuming that the right to seek permission to appeal has not been ousted by agreement)."

9.Clearly, a learned legal treatise is neither required nor expected. When two parties cannot agree someone else has to make a decision for them. One party will probably not like the decision but entrusting that decision to a chosen third party is the only way to bring the dispute to a conclusion. Of course, a simple 'Yes' or 'No' is not enough, professional standards must be met. However, in our case, I am far from persuaded that this arbitrator has failed to achieve those standards.

10.On issues concerning the application of general principles, there is a final matter upon which counsel do not agree, to which I now turn. It concerns whether different tests should be applied when deciding whether to 'remit' under section 23(2)(b) and under section 24.

11.Section 23(2)(b) provides that :

"... On determination of such an appeal the Court may by order -

(a) ...

(b) remit the award to the reconsideration of the arbitrator ...."

12.Section 24 provides that :

"In all cases of reference to arbitration the Court .... may from time to time remit the matters referred ... to the reconsideration of the arbitrator ..."

13.Miss Cheng submits that the tests under sections 23(2)(b) and 24 are different. Mr Aiken submits they are the same.

14.Miss Cheng submits that The Nema guidelined (as adopted in Hong Kong in the PT Dover case) do not apply to section 24. She refers the court to a passage in Indian Oil Corporation v. Coastal Bermuda Ltd [1990] Lloyds Law Reports at page 414 where Evans J said :

" The statutory power of remission is discretionary and it is not subject to any statutory limits ... There have been many decisions revealing two lines of authority, and the question remains controversial ... Some authorities support the view that the power may be exercised whenever justice so demands, others the narrower view that the circumstances must fall within one of a number of categories which have been recognized in past judgments of the Courts (ibid).

According to Russell on Arbitration (19th & 20th eds.):

... there is a never-ending war between two irreconcilable principles, the high principle which demands justice though the heavens fall, and the low principle which demands that there should be an end to litigation.

I must admit that I do not read the authorities in this way. True, the power should not be exercised unless the failure to do so would or might cause injustice to the applicant: .... But at the same time it is of 'over-riding importance' that the finality of awards shall be preserved which, on any view of the matter, imposes severe restraints on the exercise of the statutory power: per Sir Roger Ormrod in The Montan, [1985] 1 Lloyd's Rep. 189 at p. 198.

These two factors, in my view, are not inconsistent with each other. If either of them is to prevail, then it should be the requirement of justice. But justice, even fairness, is not an abstract concept. It has to be applied in this context between two parties who were in dispute with each other and who agreed that the dispute should be resolved by an arbitral tribunal. They agreed that the tribunal's award should be final. But they agreed this on the basis that the arbitration procedures would be regulated by law. The Court has statutory power to set aside an award when the arbitrators misconduct themselves or the reference - s. 23 of the 1950 Act - but it also has the unqualified discretion to remit the award to the chosen tribunal under s. 22. If the power is exercised, but only in circumstances when it would be unjust not to do so, then there is not, in my judgment, an uncovenanted nor an unacceptable restriction on the agreed finality of the tribunal's award. As Lord Atkin said in a different context, recently cited with approval by the Court of Appeal (Criminal Division) 'Finality is a good thing, but justice is better.' (Ras Behari Lal v. The King-Emperor, (1933) 50 T.L.R. 1)."

15.Thus, section 24 confers on the court a discretion. Mr Aiken does not suggest that the above passage is wrong but simply invites the court to put it into the Hong Kong context when deciding whether or not to exercise the discretion. He reminds the court of the following case.

16.In A.G. v. Shimizu Corp. [1996] 2 HKC 412, Leonard J held :

" (i) The applicant had failed to demonstrate that there had been technical misconduct or procedural mishap. Remission of the award did not lie unless the circumstances in which an error was made were so exceptional as to override the principle of finality."

17.Later in the judgment he cites, Sir John Donaldson's remarks :

" In deciding upon the correct approach to the government's submissions and support of the application for remission, I must have regard to what was said by Sir John Donaldson MR in Moran v Lloyd's [1983] 2 All ER 200. The learned Master of the Rolls said at 204, in giving the judgment of the court:

S. 22 of the 1950 Act differs from s 23 in that it gives a power of remission, as contrasted with a power to set aside, and in that its exercise does not depend on a finding of misconduct on the part of the arbitrator or umpire. It is in terms wholly discretionary, but that discretion has to be exercised in accordance with established principles.

For present purposes, it is only necessary to say, as counsel for the applicant fully accepted, that the authorities established that an arbitrator or umpire does not misconduct himself or the proceedings merely because he makes an error of fact or of law. Similarly the power of remission under s 22 has never been exercisable merely on the basis that the arbitrator or umpire has made such an error. ...

We stress this aspect in order to make it clear to all who are concerned in and with arbitration that neither s 22 nor s 23 of the 1950 Act is available as a backdoor method of circumventing the restrictions on the court's power to intervene in arbitral proceedings which have been created by the 1979 Act."

(Section 22 is the same as Hong Kong's section 24).

18.Of course, this does not permit the courts to turn a blind eye to justice. However, whether or not there is a real risk that an injustice has occurred has to be viewed in the light of, and balanced against, the established principles governing applications for leave to appeal. The presumption of finality and the parties' acceptance of the arbitral process weigh heavily in that balancing act. When deciding whether to grant an application under section 24 the court will only do so if there has been an obvious error and that error was so exceptional that a failure to remit would constitute a serious injustice.

19.With all these principles in mind, I now turn to the several grounds of appeal. Broadly speaking, there are two groups of grounds. Counsel have referred to the first group as 'Time' points. The second group is largely concerned with issues of quantum. Given the length of the submissions and the somewhat elaborate nature of the arguments (Miss Cheng's helpful written skeleton is 48 pages) and given the length of the award itself and the notice of motion, it would be unduly onerous to set out in full, all the extracts from the award which are the subject of complaint, extracts from the notices of motion listing the complaints and the grounds of appeal themselves. Mr Aiken's approach has been to summarize and crystallize the issues. I shall attempt the same, although it will be necessary to recite some parts, albeit selectively, of the award which are under scrutiny.

THE 'TIME' POINTS

A. Practical Completion

20.The arbitrators award states as follows :

"74. The law is clear that Practical Completion does not mean 100% completion and that minor defects which do not affect the beneficial occupation should not prevent the certificate from being issued. The Claimant maintains that in February 1999 the building had reached such a state and that the certificate could have been issued then. However, the evidence shows that the building was only occupied on 30th June 1999.

75. The Respondent in its written closing submission says that because it has challenged the certificate issued by the Architect I, as arbitrator, must put myself in the same position as the Architect and review all the circumstances and conditions relating to the issue of the Practical Completion certificate and that I cannot waive any requirements of the Contract. For this it relies on Issue 15 of Merton v Stanley Hugh Leach Ltd [1995].

76. In the Claimant's written closing submission it has expressed concern that the Respondent had never before challenged the validity of the Practical Completion certificate and only raised this as an argument in its written closing submission. The Claimant has invited me to disregard this submission and treat the Practical Completion certificate as valid.

77. The Respondent has countered this by saying that this ground of defence does not need to be pleaded, as it is a matter of law. However, this is arbitration not litigation and my Order for Directions No.1 made it clear that the Statement of Defence and Counterclaim should specify for a proper understanding of the Defence 'a summary of the contentions of law relied upon'. This was not done. Neither did the Respondent adduce any evidence on this point in the hearing. I therefore agree that this submission should be disregarded.

78. I FIND as a FACT that this contention of law is not contained in the Respondent's pleadings and I therefore HOLD as a matter of LAW that it should be disregarded.

79. If I am wrong and I should consider this ground of defence then I have read the case of Merton v Leach and I HOLD as a matter of LAW that I have the right and a duty to review the Architect's decisions (including the issue of a certificate) and, if appropriate, open it up and to substitute my own opinion.

80. Having reviewed the Architect's decision and on the evidence available to me I am content that the Architect was correct in issuing his certificate of Practical Completion on the 24th June 1999. I do not therefore need to open up the certificate and substitute my own opinion.

81. As the Respondent has correctly pointed out there is no such thing as a qualified Practical Completion certificate. Neither did Mr Peter Yau, on behalf of the Claimant, admit that the Completion Certificate was qualified.

82. Accordingly, I FIND as a FACT that the Practical Completion certificate signed on 24th June 1999 was an unqualified document and I HOLD as a matter of LAW that the two conditions imposed four days later, following the site handover meeting, do not affect the validity of, or in any way modify, the certificate.

83. If I am wrong in this finding then I also FIND as a FACT that the cleaning work had been sufficiently completed by 24th June 1999 so as not to affect the issue of the certificate.

84. Furthermore, I FIND as a FACT that the defects in the curtain walling were of a minor nature and not of such magnitude as to prevent the issuance of the certificate of Practical Completion. The evidence shows that the defects in the panes of glass, which form the curtain walling, are blemishes, scratches, different coloured glass and stains with paint and cement. Defects of this nature are minor and could have been corrected during the maintenance period. In fact, when I viewed the real evidence at the end of July 2000, these minor defects had still not been corrected even though areas of the building were occupied.

85. I HOLD as a matter of LAW that once the certificate of Practical Completion has been issued, defects discovered after that date do not affect its validity. Therefore, the arguments put forward by the Respondent relating to the need to relocate the water supply pipe and the temporary defect in the remote signalling system to the fire alarm system are not factors that should be taken into account in considering when the Works were Practically Complete.

86. I also, FIND as a FACT that the building was habitable on 24th June 1999."

21.The applicant's submissions in relation to this part of the award are firstly, that the arbitrator was wrong to say that Practical Completion does not mean 100% completion (with regard to this contract) and secondly that he failed to consider all relevant circumstances when assessing practical completion.

(a) What does practical completion mean in this contract? The complaint is that the arbitrator ignored SP 17.28 and SP 17.22. It is submitted that these are conditions precedent to the issuance of practical completion. For example SP 17.28 provides that "prior to the issue of a certificate of practical completion, the Main Contractor shall submit to the Architect the following:". One of the things then listed is "Maintenance and Instruction Manuals". It is a fact that all such manuals had not been submitted prior to 24 June. The effect of SP 17.22 was never argued before the arbitrator, however the answer in relation to both is the same, as follows.

22.Firstly, it is plainly a "one-off" issue and of no general interest to the construction industry or legal profession. It concerns this contract only. In any event, there is a strong argument that the arbitrator was right. Practical completion means completion for practical purposes. It does not mean final completion. SP 17.28 was not overlooked by the arbitrator, he refers to it earlier in the award, before coming to his decision. SP 17.28 places an onus on the Main Contractor to provide documents to the Architect. The Architect is not compelled to wait for each and every single piece of paper. The Architect is entitled to them all before certifying but is not prevented from certifying if one is missing or lost.

(b) Did the arbitrator fail to consider all the relevant circumstances when assessing practical completion? In my judgment this issue falls at every fence. It is primarily a question of fact, it is a one-off point, it is not of any general interest and the arbitrator did not fall into error in making his decision.

23.The primary suggestion is that the arbitrator, once the certificate is challenged, should simply ignore it and start the assessment process from scratch. Not so. The arbitrator's approach, which in my judgment cannot be faulted, was to consider the architect's decision, then consider the respondents' arguments in relation to it, he then decided the architect was right and therefore declined to substitute any other view. It seems to me he followed the approach referred to at p.113 in Merton v. Leach 32 BLR 51 :

"... It is clear in the light of the decision of the Court of Appeal in Crouch that an arbitrator appointed under clause 35 does not perform a purely arbitral function. The nature of his function is I think most clearly put in a short passage at [1984] QB 671; 26 BLR 33-4 where Sir John Donaldson says :

'In principle the exercise by a court of the powers conferred by the JCT contract upon the arbitrator appointed for the purposes of that contract seems to me to involve the exercise of completely novel jurisdiction. The function of the courts is to determine facts and to declare and enforce the contractual rights of the parties. It may be retorted that the same comment can be made about the functions of an arbitrator, and this I would accept. However, the truth of the matter is, I think, that the arbitrator appointed under a JCT contract has a double function. He has first the right and the duty to review the architect's decisions (in which I include certificates, opinion, requirements and notices) and, if appropriate, substitute his own. Second, he has to declare the rights of the parties on the basis of the situation produced by his own revising activity. The latter is truly an arbitrator's function. The former is not.'" (my emphasis)

Mr Wall did not consider it "appropriate".

24.The next submission made by the respondent is that the practical completion certificate was conditional and as the condition had not been complied with, the date could not be set. Again, this is primarily a matter of fact. The arbitrator was aware of the argument and rejected it. He recongized that a date had to be fixed so that the parties would know when the 12-month defects liability period would start to run. It is true that the certificate itself refers to two items which are specifically required to be done thereafter. To suggest that this should in some way erase the date of certificate is an untenable argument. The two matters referred (general cleaning and repairs to the curtain wall glazing) are typical of jobs done within the defects liability period. The arbitrator's findings amount to a finding of fact that the certificate was not and could not be for all practical purposes a conditional certificate.

25.It is further suggested that he should have chosen a later practical completion date because of other post 24 June events. The submission being that certain subsequent events rendered the certified date incorrect and the arbitrator failed to take them into account when he confirmed the date of 24 June. I find there to be no substance in this complaint. The subsequent events relied on did not escape the arbitrator's notice and are, in any event, items which are typically dealt with in the defects liability period. They were items such as, a problem with the water connections, a teething problem with the fire alarm system, cosmetic damage to the glass walling, general cleaning and other minor defects.

26.In short, on none of these matters can it be said that the arbitrator made an obvious error of law or that an obvious injustice may have occurred meriting a remission of the points for his reconsideration.

B. Extension of time

27.Selected extracts form the award which are the subject of complaint by the applicant under this heading are :

"113. Having reviewed all of these matters I FIND as a FACT that SP 8.02 is inconsistent with SP 5.03 and I therefore HOLD as a matter of LAW that upon a proper construction of the Contract SP 8.02 does not modify Clause 23.

114. As a consequence, I HOLD as a matter of LAW that upon a proper construction of the Contract a notice of claim by the Claimant does not have to be given within 14 days of the occurrence of the event and that the notice does not have to contain the detailed particulars set out in SP 8.02.

115. I HOLD as a matter of LAW that the Architect is under an obligation to grant an extension of time to the Claimant if it knows of delaying events, notwithstanding the Claimant's failure to give a notice forthwith as required by Clause 23 of the Standard Form of Building Contract, amended by SP 5.03.

116. I FIND as a FACT that the Architect was or should have been aware of the delaying effects of the eleven matters identified by the Claimant above.

117. I also HOLD as a matter of LAW that a notice by the Claimant under Clause 23 is not a condition precedent to the Architect granting an extension of time.

......

125. I FIND as a FACT that the Claimant has compiled with the requirement of Clause 23(3) of the Conditions of Contract, introduced by SP 5.03, in that it constantly used its best endeavours to prevent delay and did all that was reasonably required to the satisfaction of the Architect to proceed with the Works. In this regard I have taken account of the effects of the non-payment and delayed payment on the Claimant's ability to progress the Works.

.....

151. I FIND as a FACT that the Claimant is entitled to an extension of time of 703 days under the various sub-paragraphs set out under Clause 23. As a consequence of this finding, I HOLD as a matter of LAW that the Respondent is not entitled to deduct liquidated damages for this period of time."

28.It is necessary to set out the relevant parts of clause 23, SP 5.03 and SP 8.02.

"23

Upon it becoming reasonably apparent that the progress of the Works is delayed, the Main Contractor shall forthwith give written notice of the cause of the delay to the Architect, and if in the opinion of the Architect the completion of the Works is likely to be or has been delayed beyond the Date for Completion stated in the appendix to these Conditions or beyond any extended time previously fixed under either this clause or clause 33(1)(c) of these Conditions, ..."

Extension of Time

((a) to (k) are then set out)

"... then the Architect shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the Works. Provided always that the Main Contractor shall use constantly his best endeavours to prevent delay and shall do all that may reasonably be required to the satisfaction of the Architect to proceed with the Works."

"5.0 CONDITIONS OF MAIN CONTRACT

5.03 Amendments to the Standard Conditions of Main Contract (with Appendix) (Cont'd)

Clause 23 - Extension of Time

It is expressly agreed that this clause is deleted and is replaced by the following Clause: -

23(1) Upon it becoming reasonably apparent that the progress of the Works is delayed, or is likely to be delayed, the Main Contractor shall forthwith give written notice to the Architect of the material circumstances including the cause or causes of the delay.

8.0 INSTRUCTIONS, VARIATIONS AND METHOD OF MEASURING AND VALUING

8.02 Contractor's Claims for Extras and Time

The Main Contractor shall give notice of all claims for additional monetary compensation and/or for any extension of time within 14 days of the occurrence of the event giving rise to the claim. Such notice shall give full and detailed particulars of the event giving rise to the claim and of the part or parts of the Works affected. The giving of notice strictly in accordance with this clause shall be a condition precedent to the Main Contractor's entitlement to receive any monetary compensation and/or an extension of time in respect thereof and the Main Contractor shall be deemed to have waived such entitlements in respect of the consequences of any event of which notice has not been given in accordance herewith.

(Note this clause shall not apply to claims pursuant to Clause 24 of the Conditions in respect of which separate notification requirements are provided.)

Claims for Extension of Time/Variations

(a) Notwithstanding the provision of Clause 23 and of the Conditions of the Contract, any claims for extension of time shall include specifically the following information.: -

....."

29.In short, two issues arise under this heading. The arbitrator held that SP 8.02 did not modify clause 23 because SP 8.02 and SP 5.03 are inconsistent with each other. It was not disputed that the respondent did not comply with the notice requirements. The two points of law which the applicant submits are of importance and should be remitted together with an opinion from this court are :

(a) was a written notice a condition precedent to extensions of time under clause 23 and;

(b) does clause 23 as amended provide the only method of calculating extensions of time.

The award gives negative answers to both. The decision is premised on the inconsistency between the two SPs.

30.Miss Cheng's submissions on the point have been carefully and thoroughly advanced but again, in my judgment, do not pass the basic tests. Taking the "notice" point first, I agree with Mr Aiken that it is a "one-off" point. The interaction of clause 23 with SP 5.03 and SP 8.02 concerns this contract only. The applicant has exhibited a single page from another contract as evidence that the profession would welcome clarity and certainty on the point. As Mr Aiken points out not only is only a single page exhibited but even that single page provides for a different time period. It refers to "within 28 days", SP 8.02 requires it to be "within 14 days" and SP 5.03 requires "notice forthwith".

31.In any event, I consider the arbitrator's finding of an inconsistency between SP 5.03 and SP 8.02 to be a finding of fact, with which this court would not interfere. Moreover, the effect of the finding, namely that SP 8.02 does not modify clause 23, is not unreasonable. It is the sort of issue where one can see that in front of another arbitrator the opposing arguments might have found favour. However, given the stringent tests to be applied, it is not the sort of issue which this court could or should revisit and reverse. Mr Wall's analysis recognized that SP 5.03 is called an "amendment" whereas SP 8.02 is not. Also, it is no more than logical to conclude that if contracting parties wished to make an amendment to a particular part of clause 23 they would not do so twice in different places and in different terms.

32.It is worthy of note also that the arbitrator, when considering this issue, rightly applied the contra proferentum principle. The employer was seeking to rely on the notice point and the arbitrator construed it against him.

33.Finally, even if there was an appealable point, the law supports the arbitrator's decision namely that there is no general requirement of giving notice as a condition preceded for the granting of an extension of time. The commentary on issue 14 in Merton v. Leach contains the following :

"(b) The giving of notice by the contractor under clause 23 was not therefore a condition precedent before the architect was due under a duty to consider any possible extension of time."

34.The second issue concerns the method of calculating the extension of time. The complaint is that the method proposed by the applicant's expert, Mr Battersby, was the correct method in law and should have been followed.

35.It is not appropriate for this court to enter the arena of the differences between the experts. Both were respected experts. They had different opinions about how the critical path should be drawn and which critical path should be used as the basis of the calculations. It has not been demonstrated to this court that the difference between them is a well known bone of contention in the industry or that the law clearly shows one method to be correct and the other incorrect. Experts frequently use different methods and disagree over how a calculation should be made and what produces a fair result. Different situations often call for different methods. It is a highly technical area into which the courts should fear to tread. In this context a non legal arbitrator is far better equipped to make a preference between experts than a legally qualified arbitrator or judge. The particular difference of opinion between Mr Battersby and Mr Chan is relevant to this dispute only. It is obviously a one-off issue which the arbitrator addressed and made a decision about. He had to choose one or the other and he made a number of comments which illustrate why he chose Mr Chan. For example :

"By adopting different revised programmes, Mr. Battersby was confused as to what the critical path was in relation to the Works and did not appear to take full account of the fact that the revised programmes already compensated for delay to date as well as predicting future activities."

"Mr. Battersby did not take fully account of the short-term programmes, the site daily records and the minutes of site meetings. Mr. Battersby has been selective in the information that he has used to produce his report."

"Mr. Battersby did not select the base information himself and did not undertake the original research. Mr. Battersby's assistant, Mr. Benjamin Lam, who was not called as an expert witness, undertook this work. Mr. Battersby relied on Mr. Lam to decide what documents and information should be used in the assessment."

36.It is not for this court to go behind these findings and comments. To do so would involve re-opening all the expert evidence and re-evaluating it - a task which is neither possible nor permissible on appeal.

37.If the applicant's argument found favour with the court on this issue, the court would have to embark on a task, virtually amounting to a codification of methods of calculation. In truth it is incapable of codification or even of statements of hard and fast rules. The task would be monumental, of no value and dangerous. The applicants are understandably disappointed that their expert's evidence was not preferred. His method would have resulted in no extension of time being granted at all. The arbitrator allowed 703 days (compared to just under 300 days allowed by the architect). The difference is very substantial and has very large financial consequences, but, it is a classic example of a dispute being entrusted to an arbitrator whose decision has to be lived with by the losing party.

C. Time at large

38.On this issue the arbitrator found :

"166. In the light of the above, I FIND as a FACT that the Claimant was delayed by the Respondent's lack of payment.

167. The Claimant says that an act of prevention by the Respondent sets time at large and that the Respondent is not entitled to deduct liquidated damages and it now has a reasonable period in which to finish the Works. I agree with this contention and I therefore HOLD as a matter of LAW that time was set at large and the Claimant is not liable to pay liquidated damages.

168. As a result of the above the Claimant now has a reasonable time within which to finish the Works but the Respondent is entitled instead to claim general damages, which it needs to prove."

39.The complaint being made in this application is threefold :

(1) This finding is not based any or any proper construction of the Contract, in particular, the express provisions dealing with non-payment or delayed payment by the Respondent.

(2) The Arbitrator failed to distinguish the difference between the cause and effect of the "non-payment" pursuant to clause 22 and that of the late honouring of Interim Payment Certificates.

(3) There is no or no sufficient evidence to show the causal link between either the non-payment or delayed payment to the delay of the particular activities, (namely curtain walling, interior fitting out and testing and commissioning of the E&M works) nor the causal link between the delay in relation to each of these activities to the delay in the completion of the Works.

40.A general point should be made first. The applications under B. Extension of Time and C. Time at Large should be viewed in tandem. If the arbitrators conclusions in respect of either are unappealable then giving leave to appeal the other would be academic. As it happens, my decision is that the applications under both heads must fail. If I am wrong on one or the other, the effect of the award remains unaltered by virtue of the correctness of the other finding.

41.However I now consider the time at large application as a discrete point. In my judgment, each complaint, listed above and carefully enlarged upon by Miss Cheng for Might Foundate in her submissions, can be succinctly dealt with (and were succinctly dealt with by Mr Aiken for CCECC).

42.Firstly, this ground gives rise to no general principle of law which the arbitrator got wrong or that requires clarification for the benefit of the industry. In fact, it is submitted, with some force, that the arbitrator was fully aware of the correct approach and applied it to the facts as he found them. At paragraph 158 of the award he said :

"In order to establish a time at large argument, the Claimant says it requires two-stages. The first stage is to establish that there was an act of prevention by the Respondent which caused delay and that the delay is not covered by the extension of time provision.

The Respondent has admitted it was in breach of Contract in delaying of payment of the Interim Certificates (Nos. 12 to 17). The Claimant says that Clause 23 of the Contract does not cover such default by the Employer. I agree with this view. However, the Respondent has correctly pointed out that there is a third stage and this is that the Claimant needs to show a causative link between the delayed payment/non-payment and progress on site."

43.The complaint arising from this statement that there was no evidence of causative delay is simply not made out. Many letters from complaining sub-contractors were exhibited.

44.It is clear from a reading of the award that the arbitrator was aware of the issues. Miss Cheng complains that it is not good enough simply to aware of the issues, the arbitrator must deal with and give reasons for his decision on each and every issue. In my judgment, on this issue, the arbitrator plainly discharged his duty in a sensible and proper way. He identified the issues, referred to authorities which he considered and decided the time at large issue reasonably, sensibly and correctly. For example he considered Findlay J's obiter remarks in Wui Fu Development Co. Ltd v. Tak Yuen Construction Co. Ltd CT40/1998 where he said :

".... I believe that an architect exercising his balancing function when considering whether or not to issue a notice under clause 25 must consider whether or not a suspension was with 'reasonable cause' when the employer is deliberately, without any reasonable cause, withholding a substantial amount of money rightly due to the contractor. I think that, if an architect had done this, it would have been inevitable that he would have concluded that the suspension was not without reasonable cause because it would be totally unreasonable to expect a contractor not being paid a large sum undeniably due to him to continue with the works and, in effect, finance the employer's building operations to an extent beyond that contemplated by the contract."

45.In our case, there were admitted late payments running into millions of dollars. Sub-contractors depend very heavily on these interim payments. The arbitrator cannot be faulted for making a finding, in this particular set of facts, which recognized the fact that, very often, in Hong Kong a sub-contractor's lot is not a happy one.

46.Next, the applicant makes a particular complaint in relation to paragraph 170 of the award :

"170. I FIND as a FACT that a reasonable time for the completion of the Works is 24th June 1999. In calculating this time, I again conclude that the Claimant is not entitled to rely on the delays to the reinforced concrete frame in determining what is a reasonable time, as this is not a pleaded ground for delay but the Claimant is entitled to rely on the effects of non-payment and late payment of interim payments."

47.Miss Cheng points out that the practical completion date of 24 June is 763 days after the contractual date. If therefore this has to be reduced by 60 days (as found) for the reinforced concrete problem how can the reasonable time for completion still be 24 June? (703 days was the amount allowed by the arbitrator). The answer is simply as follows. If there is an inconsistency in the arithmetic it is the type of error which the parties must live with. What is more, it does not matter. 60 days was disallowed on two grounds, once in the extension of time argument and secondly as a pleading point. It is simply logical to determine, for quantum purposes, that having found time at large, the date for practical completion and the date for reasonable time for completion should coincide. It is not a matter that can or should be re-opened by this court.

48.The final complaint concerns the arbitrator's remarks in paragraph 156 :

"156. The Respondent says that in the case of this particular Contract, a remedy is provided and that if the Respondent does not make payments to the Claimant then the Claimant is entitled to terminate its employment under the Contract by the procedure set out in Clause 26. In fact, the Claimant twice instigated this procedure but did not follow it through as payments were made, albeit late. The Respondent says that this is the sole remedy of the Claimant and that it is not entitled to 'go slow' as a result of non-payment/late-payment."

49.I do not propose to recite clause 26. The applicant complains that the arbitrator did not deal with this issue. I however agree that, by implication, the arbitrator rejected the argument being advanced. It cannot be said that in doing so there is a strong prima facie case that he was wrong. Neither is it a legal point of general interest requiring resolution. It is true that clause 26 envisages a two-stage process and that the claimants only invoked the first stage. The question, which very probably should be answered in the negative, is, by failing to pursue the entire process under clause 26 did the claimants waive such rights as they already had. It is not surprising that the arbitrator impliedly rejected the argument because he recognized that the simple reason the second stage was not pursued was because the claimant received some payments.

50.In conclusion on all the "time" points, I find them all to fall into the "one-off" category. No point of law requiring clarification has been identified. The presumption of finality should apply to those findings of the arbitrator which have been the subject of challenge.

THE "QUANTUM" ISSUES

51.In all the following issues, I agree with the submission of the respondent that these are either one-off issues where it cannot be said that the arbitrator was obviously wrong or are questions of fact which generate no important issue needing clarification.

A. Loss and expense

52.The arbitrator held :

"178. I HOLD as a matter of LAW that on a proper construction of the Contract, Clause 24(2) enables the Claimant to make a claim for damages or for a breach of Contract quite independently of Clause 24(1)."

53.The ground of appeal is that :

"... The Arbitrator erred in law in holding that the Notice of Claim required in SP 8.02 was not a condition precedent to the Claimant's entitlement to extensions of time .."

54.Clause 24 was amended by SP 5.03. There was no evidence that this amendment was anything other than peculiar to this contract. It was a "one-off" amendment. It is basically the same point as hitherto dealt with under the "extension of time" arguments. Here also it is plain that the arbitrator was aware of what was being contended for. He did not accede to the argument and therefore rejected it. He did not reject it in one line. It can be seen he considered and commented on the issues by way of footnotes to his award (at pages 60 and 61 of the award). He construed the notice point under clause 24 against the applicant. In doing this he applied the principle of contra proferentum and common sense. He was not plainly and obviously wrong to do so.

B. Site overheads

55.The complaint here is that the arbitrator's assessment used the wrong approach because it resulted in an inevitable element of double recovery. It was acknowledged that there would be some double recovery. The experts were unable to say what that element was. The arbitrator therefore concluded it would be wrong for him to speculate and made no allowance for double recovery. The applicant now contends that if it was impossible to calculate double recovery, then any assessment would be inaccurate and therefore no award should be made under this heading at all. I do not consider this to be a reasonable approach. The arbitrator's approach was better and does not create grounds for giving leave to appeal.

C. Fluctuations

56.The arbitrator made an award of $148,071 under this heading. The applicant criticizes the way he did it. It is said he did not construe the contract properly and did not base his finding on evidence. This is clearly more a question of fact than law. In as much as it gives rise to questions of construction they are one-off issues concerning this contract. The arbitrator adopted a sensible and rational method "in the absence of any other evidence ...." (paragraph 204 of the award). Further consideration of this issue is not merited.

D. Interest

57.The awarding of interest is discretionary. The arbitrator allowed simple interest at 11.26%. He explained his reasons. It is substantially a question of fact. Even if questions of law are involved in coming to his decision it is unsustainable to suggest that in exercising his discretion the way he did he was obviously wrong. This court certainly cannot substitute a different rate nor should direct the arbitrator to reconsider the rate.

E. General damages

58.No general point of interest arises here either, nor can it be said that the arbitrator made a serious, or indeed any, error. The applicant complains he failed to evaluate the evidence properly. What he said (at paragraph 283) was :

"It was neither here nor there that the evidence of Mr. Cheung Ling Fung was not challenged by the Claimant. Whilst Mr. Andy Chan came over as an experienced and reliable expert witness, his evidence did little to advance the case of the Respondent because of the numerous assumptions which he took into account in his valuation exercise. I therefore agree with the Claimant's view that the Respondent has failed to adduce sufficient evidence to demonstrate that it suffered any actual loss under this particular head of claim."

"I therefore FIND as a FACT that the Respondent was unable to discharge the necessary burden of proof."

59.It is clear that he was aware of the issue, dealt with it in a conventional and reasonable way and made a factual finding. There is no basis on which this court should interfere. It was the respondent's alternative claim, their evidence in support was, quite simply, found to be lacking.

Section 25 application

60.In view of this court's refusal to grant leave to appeal under section 23 and refusal to remit under section 24 the application to remove the arbitrator under section 25, cannot arise.

61.Even if there had been grounds to grant leave or reasons to remit some or all of the points raised by the applicant, I would not have granted the application under section 25.

62.It is a serious application to make and would only be granted in exceptional circumstances. In this case, it seems to me that the application is made for no better reason than the arbitrator consistently made findings contrary to the applicant's submissions (which they no doubt felt were correct) and they therefore lost confidence. What they lost confidence in was not the arbitrator's ability to discharge his duties properly but in the prospects of him making findings in their favour. In my judgment, the section 25 application was a make-weight to the sections 23 and 24 applications and should not have been made.

63.The applications under sections 23, 24 and 25 are refused. I see no reasons why costs should not follow the event and so there will be a costs order in the respondent's favour. I am grateful to Miss Cheng and Mr Aiken for their comprehensive and helpful submissions. I understand there are other summons outstanding which have been stayed pending the outcome of these proceedings. I hope it will now be possible for the parties to agree orders under those summons consequent upon the conclusion of these applications.

Representation:

Miss Teresa Cheng, SC, instructed by Messrs Joseph C.T. Lee & Co.,
for the Applicant in HCCT 24, 25 & 26/2001 and Defendant in HCCT 23/2001

Mr Nigel Aiken, SC, leading Mr James Lee, instructed by Messrs Fung, Wong, Ng & Lam, for the Respondent in HCCT 24, 25 & 26/2001 and Plaintiff in HCCT 23/2001