The Incorporated Owners of Repulse Bay Towers v. Bolton Construction Co Ltd

HCCT105/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO.105 OF 2002

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Coram: Hon Burrell J in Chambers

Dates of Hearing: 14 April and 13 June 2003

Date of Decision: 3 July 2003

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D E C I S I O N

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1.This is an application for leave to appeal an arbitrator's award. The claimant in arbitration and the respondent to this leave application was Bolton Construction Co. Ltd ("Bolton" hereafter). The respondent in arbitration and applicant here was The Incorporated Owners of Repulse Bay Towers ("The I.O." hereafter).

2.In 1996, Bolton had agreed to carry out renovation works at Repulse Bay Towers for a sum of $15,700,000. Disputes arose between the parties which became the subject matter of arbitration proceedings. In November 2002, the arbitrator, Mrs M. Whittaker (who was nominated by The I.O.), published her interim award.

3.In order to appreciate the issues in this application, it is necessary to set out, at rather greater length than usual, the relevant extracts from the award. The extracts relate to the three decisions which are at the heart of this application. Firstly, her decision that a new architect, Patrick (Wai Kee) & Associates Ltd ("PAL") had not been validly appointed to replace the former architect, Ling Chan & Partners ("LCP"). Secondly, that PAL's final account and final certificate were invalid. Thirdly, that time for completion was rendered at large and thus The I.O. were not entitled to liquidated damages.

4.Her conclusions were as follows :

(1) Paragraph 27

"a) The Respondent did not prevent the Architect LCP from carrying out measurement and valuation of the Works and certifying against Application for Interim Payment No.10, and to that extent did not act in breach of Clause 30(5)(a).

b) The Respondent failed to nominate another Architect in breach of Article 3 of the Contract, to discharge the duties of the Architect including the measurement, valuation and certification against Application for Interim Payment No.10, and to that extent was also in breach of Clause 30(5)(a).

c) The purported Final Account issued by Patrick (Wai Kee) and Associates Ltd (PAL) in February 2001, and the 'Final Certificate' dated 19th June 2001 are invalid.

d) As a result of the Respondent's breach of Article 3, the Claimant is entitled to recover damages."

(Article 3 states :

"3 The term 'the Architect' in the said Conditions shall mean the said Ling Chan and Partners of 19/F., Hing Yip Commercial Centre, 280 Des Voeux Road, Central, Hong Kong or, in the event of his death or ceasing to be the Architect for the purpose of this Contract, such other person as the Employer shall nominate for that purpose, not being a person to whom the Main Contractor shall object for reasons considered to be sufficient by an arbitrator appointed in accordance with clause 35 of the said Conditions. Provided always that no person subsequently appointed to be the Architect under this Contract shall be entitled to disregard or overrule any certificate or opinion or decision or approval or instruction given or expressed by the Architect for the time being."

Clause 30(5)(a) and (b) (under the heading of payment certificates) state :

"(5)(a) The measurement and valuation of the Works shall be completed within the Period of Final Measurement and Valuation stated in the appendix to these Conditions, and the Main Contractor shall be supplied with a copy of the priced Bills of Variation not later than the end of the said Period and before the issue of the Final Certificate under sub-clause (6) of this Condition.

(b) Either before or within a reasonable time after Practical Completion of the Works the Main Contractor shall send to the Architect all documents necessary for the purposes of the computations required by these Conditions including all documents relating to the accounts of Nominated Sub-Contractors and Nominated Suppliers.")

(2) Paragraph 28

"a) The liquidated damages (LD's) rate of $20,000.00 per day was not a penalty; it was genuinely covenanted and there is no evidence that it was not a pre-estimate of damage.

b) The certificate issued by PAL on 19th June 2001 was not a valid non-completion certificate.

c) A non-completion certificate properly issued by the Architect was a pre-condition to the Respondent's recovery of LD's under the terms of the Contract.

d) The arbitrator cannot validate PAL's non-completion certificate, nor issue such certificate under Clause 22 of the Conditions; if applicable, I could declare a date by which the works ought reasonably to have been completed pursuant to determination of the dispute over entitlement to LD's, no challenge to my jurisdiction in this matter having been made at the appropriate time; no such declaration of a date by which the Works ought reasonably to have been completed in terms of Clause 22 is appropriate.

e) Time for completion was rendered at large by reason of:-

i) the uncertainty as to time for completion arising from Item SP/6E of the Specification Preliminaries.

ii) taking into account the relevant implications of Item SP/26F, the late issue of drawings/amendments by the Architect.

iii) variations issued after the Date for Completion, on account of Clause 23(1)(e) being inapplicable at that time.

f) If time for completion had not been rendered at large, the Claimant would not have been entitled to full EOT for completion of the Works, regardless of provisions of Clause 23(2) on page C/95."

(3) Paragraphs 32 to 34

"32. The PAL Final Account dated 20th February 2001 is not valid and not binding.

33. The Clause 22 certificate issued by PAL is not valid and not binding.

34.	a) The Respondent acted in breach of Article 3 of the Articles of Agreement following termination of LCP's engagement, in consequence of which it failed to procure a valid measurement and valuation of the works and certification of the Claimant's payment against its application for IPC No.M-10.
	b) The Respondent did not act in breach of Clause 30(5)(a) in regard to the Architect LCP."

(Clause 22 provides :

"22 Damages for Non-completion

If the Main Contractor fails to complete the Works by the Date for Completion stated in the appendix to these Conditions or within any extended time fixed under clause 23 or clause 33(1)(c) of these Conditions and the Architect certifies in writing that in his opinion the same ought reasonably so to have been completed, then the Main Contractor shall pay or allow to the Employer a sum calculated at the rate stated in the said appendix as Liquidated and Ascertained Damages for the period during which the Works shall so remain or have remained incomplete, and the Employer may deduct such sum from any monies due or to become due to the Main Contractor under this Contract."

Clause 23 provides :

"23 Extension of Time

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,

...."

23(1)(e) :

"(e) by reason of Architect's instructions issued under clauses 1(2), 11(1) or 21(2) of these Conditions, or"

23(1)(f) (which was deleted from the contract) :

"(f) by reason of the Main Contractor not having received in due time necessary instructions, drawings, details or levels from the Architect for which he specifically applied in writing on a date which having regard to the Date for Completion stated in the appendix to these Conditions or to any extension of time then fixed under this clause or clause 33(1)(c) of these Conditions was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same, or"

SP/26F (which was introduced into the contract) :

"F No claim of disruption/extension of time due to late issue of drawings/amendments by the Architect.")

5.The learned arbitrator's reasons were as follows :

"A. Validity of PAL's Appointment and Breach of Clause 30(5)(a)

There was no dispute that:-

a) On 15th June 1999, the Architect LCP issued to the Respondent a fourteen-day notice to terminate its appointment, and it was duly terminated on 29th June 1999.

b) On 12th June 2000, FPD Savills, building managers of Repulse Bay Towers, advised the Claimant by letter that the Respondent had appointed Patrick (Wai Kee) and Associates Ltd (PAL) to act as Architect under the Contract in lieu of LCP.

c) If PAL was not validly appointed as replacement Architect, then the Clause 22 Certificate issued by PAL would be invalid, along with the PAL Final Account.

d) The Contract includes an implied term that the Respondent would not hinder or prevent the Claimant from carrying out its obligations under the Contract."

(The learned arbitrator then set out the submissions of the two parties)

"The Arbitrator's conclusions are that :

a) The evidence of PAL's letters dated 23rd June 1999 and 20th July 1999 was that PAL's proposal was to inspect the renovation works, record any defective or outstanding works, estimate the cost of remedying the outstanding and defective works, and to prepare a Final Account for the works carried out by the Claimant. FPD's acceptance, if it was such, dated 25th August 1999 of PAL's proposal was that PAL was to prepare a Surveyor's report, including issue of the following:-

i) defects list

ii) Bill of Variations

iii) Final Certificate

Notwithstanding that these are functions of the Architect under the Contract neither PAL nor FPD mentioned any appointment as 'Architect', such as fully embraces the Architect's role under the Contract.

b) FPD did not inform the Claimant of PAL's alleged appointment as Architect until 12th June 2000, nearly ten months after PAL's proposal was accepted.

c) On the evidence, FPD by letter dated 2nd August 1999, recommended PAL be appointed by the Respondent for preparation of a defects list and final account for the renovation work. There is no countersignature of the Respondent indicating acceptance of FPD's recommendation. In the circumstances, I find that FPD had no actual authority to appoint PAL and that in any event the appointment envisaged did not specifically include any appointment as Architect under the Contract.

d) I find that Mr W.W. Lau's profession of building surveyor did not preclude PAL's being appointed as, or carrying out duties as, the Architect under the Contract.

e) As to Article 3 of the Contract, on my interpretation a formal process of nomination, lack of reasonable objection and appointment is required. Neither FPD nor, on its advice, the Respondent, considered that any formalities were necessary. If no opportunity for objection was given, it cannot be said with certainty that no reasonable objection would have been made to PAL's nomination. In terms of Article 3, it cannot be said that 'nomination' could mean 'appointment', and it plainly is not the case that it is simply for the Employer to choose a replacement Architect and proceed to appoint. The letter of the Respondent's solicitors dated 21st October 1999 did not put any name forward, did not clearly state that an appointment as 'Architect' under the Contract was the topic and did not invite the Claimant to act towards PAL in such capacity. Accordingly, I find that the Respondent was in breach of Article 3 and hold that, in absence of any nomination of PAL as Architect, its alleged appointment as such was invalid. It follows that the purported Clause 22 and Final Certificates incorporated in PAL's letter dated 19th June 2001 were also invalid.

f) To the extent that it may be relevant, I find that PAL was not in fact formally appointed to act as 'Architect' under the Contract.

g) To the extent that it may be relevant, whilst the Claimant may not have been aware of any cause for objection to a nomination of PAL in October 1999, it now has good grounds for objection, in particular because of PAL's failure to allow in its purported Clause 22 certificate for the 65 days' EOT which LCP had opined would be allowed; this was a breach of Article 3 of the Contract.

h) On the evidence, I find that the Respondent initially endeavoured to procure a Final Account, but that the procedure adopted suggest an intention to interfere with LCP's function as certifier; however, the evidence before me does not lead me to conclude that interference in issue of the Final Account was the cause of LCP's resignation, and I do not find that there was breach of Clause 30(5)(a) due to any interference of the Respondent.

i) Notwithstanding the foregoing, the Respondent was nevertheless in breach of Clause 30(5)(a) in that, by acting in breach of Article 3, it failed to procure measurement and valuation of a valid Final Account by virtue of the absence of a properly nominated and appointed Architect.

...

D2. Time at Large

1. There was no dispute that:-

a) If PAL had not been properly nominated as Architect under the Contract then the Clause 22 certificate of non-completion which it issued was invalid.

b) The works were practically completed on 14th October 1997.

c) PAL's letter dated 19th June 2001 gave the date of 27th September 1996 (the Contract completion date) as the date by which PAL considered the works should have been completed."

(The learned arbitrator again set out the competing submissions)

"4. The Arbitrator's conclusions are as follow:-

a) Because PAL was not properly nominated or appointed as Architect under the Contract the purported Clause 22 Certificate issued by PAL's letter dated 19th June 2001 was invalid; in any event, it failed to take account of the expressed opinion of LCP that it would grant 65 days' EOT and was thus in breach of Article 3 of the Contract.

b) The Claimant failed to raise any jurisdictional point as to my review or revision of PAL's invalid Clause 22 certificate at the appropriate time, and the challenge comes too late to be considered; it makes no sense to review or revise a certificate which should not exist, however there is a dispute as to entitlement to LD's and if time is not at large, I consider that a declaration of a date by which the works ought reasonably to have been completed would be essential to assessment of the quantum of any entitlement; this is not re-writing history, nor review and revision of PAL's purported Clause 22 certificate nor substitution of my own certificate, it is an element of my decision on a disputed matter.

c) If the Claimant's contentions as to time being at large under provisions of the Contract are correct, then I would agree that there was no requirement to apply for EOT within the seven days stipulated in Clause 23(2) of the Contract, since none would have been available under Clause 23 as amended, nor would the threat of LD's have called for any response; neither of these failures to act would indicate that the Claimant did not consider that it had been delayed by acts of the Respondent and/or Architect; however, the same logic would not apply if time were at large solely on account of the Architect's failure to award EOT; the Claimant was obliged to give notice of delay by Clause 23(1), but I do not see that breach of this obligation would have any effect if time was in fact at large.

d) I am persuaded that the Claimant is correct in its contention that the Clause SP/26F 'late issue of drawings/amendments by the Architect' cannot be referring to the same late issue of amendments as were referred to under Clause 23(1)(f) but deleted; they would not necessarily be amendments or variations which the Claimant was expecting and obliged to wait for; I would agree that the relevant amendments would be those instructed after the original or extended date for completion thus preventing completion of the works within the prescribed time; because there is no entitlement to EOT in respect of such variations there can be no date fixed from which LD's might run and time must be at large; the Respondent's point in respect of Balfour Beatty v Chestermount is only applicable in the absence of express words to the contrary; the Respondent points to the major cause of delay, post-completion, being the replacement of tiling with paint finish, and I have not found the Claimant liable on this point.

e) I accept the Claimant's contention that Clause SP/6E causes uncertainty as to the time for completion; the Clause does not reflect the normal operation of the Contract provisions; it could be taken to mean that the contract period would inevitably be extended to the date of practical completion; however, it is sufficient to say that the Clause causes such uncertainty as to render time at large.

f) The Architect's failure to award EOT of 65 days (to which it apparently considered the Claimant entitled) is not a matter which I need consider here, since I have found time at large for other reasons; I note that PAL was not in a position to award any EOT.

g) The Respondent will have no entitlement to LD's."

(Clause SP/6E provides :

"E The time for completion is 150 calendar days as stated in the Form of Tender after the Date for Possession or such extended time which may be authorized under the terms of the Conditions of Contract, signified by the issue of a Certificate of Practical Completion by the Architect.")

6.Arising out of these findings The I.O. now seeks leave to appeal on the following grounds. Grounds 1 to 5 all relate to the validity of the appointment of PAL. Ground 6 relates to her finding that time was at large. In abbreviated form, they are as follows :

"(1) The Arbitrator erred in law in holding that the Respondent in the arbitration failed to nominate an Architect in breach of Article 3 of the Contract and was thereby in breach of Clause 30(5)(a) of the Contract (Paragraph 27(b) of the Interim Award and Paragraph 34 of the Interim Award.)

(2) The Arbitrator erred in law in holding, in consequence of the holding above, that (therefore) valuation and certification issued by Patrick (Wai Kee) & Associates Limited ('PAL') namely the 'purported Final Account' of February 2001, and the 'Final Certificate' dated 19th June 2001 are invalid (Paragraph 27(c) of the Interim Award and Paragraphs 31-32 of the Interim Award), and in further holding that the certificate issued by PAL on 19th June 2001 was not valid as a certificate of non-completion under the Contract (Paragraphs 28(b) and 33 of the Interim Award).

(3) The Arbitrator erred in law in holding that, in further consequence, the Claimant in the arbitration was entitled to damages in respect of the said breaches of contract (Paragraph 27(d) of the Interim Award), and that the Respondent in the arbitration could not recover liquidated damages for the delay in completion of the works.

(4)(c) The Arbitrator found, and held, that the letter of 21st October 1999 'did not put any name forward, did not clearly state that an appointment as 'Architect' under the Contract was the topic and did not invite the Claimant to act towards PAL in such capacity'. In so doing, the Arbitrator misconstrued the plain words of the correspondence and further fell into error in inferring that an appointment of a replacement Architect under Article 3 of the Contract required an invitation to the Claimant in the arbitration to act towards the replacement Architect in some particular manner when, on a true construction of Article 3,

(i) the function of Article 3 was, in the event of the existing Architect passing away or ceasing to be the Architect, to enable the Employer (the Respondent in the arbitration) to appoint a replacement Architect to take the place of the previous incumbent, which the Respondent in the arbitration did; and

(ii) the only action available to the Claimant in the arbitration in this regard would have been to object to the appointment, which the Claimant in the arbitration did not do, giving reasons considered to be sufficient by an arbitrator in support of the objection, which the Claimant in the arbitration did not give.

(d) The Arbitrator further erred in that she took no account of the letter of 12th June 2000 sent by the Building Manager on the spurious basis that the Building Manager 'had no actual authority to appoint PAL' when the issue between the parties was as to whether PAL, having been appointed and engaged by the Respondent in the arbitration (not by the Building Manager), had been properly nominated in accordance with the said Article 3.

(5) The Arbitrator further erred in law in holding:

'The arbitrator cannot validate PAL's non-completion certificate, nor issue such certificate under Clause 22 of the Conditions; if applicable, I could declare a date by which the works ought reasonably to have been completed pursuant to determination of the dispute over entitlement to LD's, no challenge to my jurisdiction in this matter having been made at the appropriate time; no such declaration of a date by which the Works ought reasonably to have been completed in terms of Clause 22 is appropriate.' ...

(6) The Arbitrator erred in law in holding that time for completion was rendered 'at large' by reasons of :

'i) the uncertainty as to time for completion arising from Item SP/6E of the Specification Preliminaries.

ii) taking into account the relevant implications of Item SP/26F, the late issue of drawings/amendments by the Architect.

iii) variations issued after the Date for Completion, on account of Clause 23(1)(e) being inapplicable at that time.' ..."

The law

7.The applicable principles in applications for leave to appeal an arbitrator's award are well settled. There is a presumption of finality in arbitration awards. The ease or difficulty with which that presumption may be rebutted depends on where the issues on appeal fall in the "P.T. Dover"¹ scale. I simply repeat the frequently cited extract from that case :

"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, eg. 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.'

I have cited this passage in full because, to my mind, it shows the true ambit of the phrase 'clarity and certainty'. It is not being used in the general sense of the resolution of some interesting point of law, or of the filling of some lacuna in the books, for the benefit of the public and lawyers generally. I would be minded to regard it as questionable whether leave should ever be given for that purpose. This phrase and 'public benefit' relate I think to a particular class of the public, to those participating in the particular group or trade that uses the common form of contract in question. In those circumstances both the parties and other participants in that trade may have both a present and a future interest in the true construction and effect of the particular clause. The courts can still on occasion play a useful role in fostering uniformity of approach. ... Even in such circumstances as these leave should only be granted if a strong prima facie case of error is made out."

(per Hunter JA).

8.The head note summarises the situation as follows :

"..... a distinction is to be drawn between questions of law arising in 'one-off' cases, and those of general importance to a substantial section of the commercial community. The implementation of the overriding statutory intent requires the notional creation of a scale of cases ranging from the 'one-off' contract giving rise to no question of construction, or involving peculiar or special facts, or in which the general market and the commercial fraternity has no interest on the one hand to those arising from standard form contracts, relating to events which are likely to recur and which have given rise to questions of law decided by non-legal arbitrators on the other.

In categorising the case as concerning a standard form contract, the judge misdirected himself. The matter in dispute is a 'one-off' case at or near the top of the scale, with no question of clarifying any particular area of law arising (The Kelaniya [1989] 1 Lloyd's Rep 30 followed). The arbitrator was not 'obviously wrong'."

9.A further principle should be borne in mind. It remains a guiding principle in Hong Kong, as stated by Leonard J in The Garden Co. Ltd v. On Lee General Contractors Ltd 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."

10.The application before this court, for leave to appeal, has occupied two full days. The submissions advanced by the applicant have, in my view, been elaborate.

11.The learned arbitrator's consideration of all the issues was careful and comprehensive. It was her obvious aim to do justice between the parties. Nonetheless almost all her decisions are being challenged. The competing submissions made in this application, made on the one hand by Ms Gladys Li, SC, for The I.O. are that her decisions were "nonsense", "off the rails", "illogical", "absurd" and "plainly wrong", and on the other hand, made by Ms Teresa Cheng, SC, for Bolton, that far from being even prima facie arguably wrong they were in fact "plainly right" and "logical".

The application of the P.T. Dover scale to the issues in this application

12.Ms Li submits they fall at the bottom of the scale where the presumption of finality is at its weakest. Ms Cheng submits they are primarily one-off issues.

13.The following factors are not disputed :

i) it is a dispute between Hong Kong parties;

ii) which arises out of a standard form of contract; and

iii) decided by a non-legal arbitrator.

However,

i) The non-legal arbitrator has considerable experience in Hong Kong and with the complex issues involved in this case. (It is worth mentioning in passing that she was nominated by The I.O.);

ii) The time at large issue involves, in part, the effect of "S.Ps" i.e. special provisions which were unique to this contract and therefore one-off issues concerning these parties only;

iii) As will be seen, the construction of Article 3 was rendered academic by her findings on time at large. Therefore, as she said, even if she were wrong on Article 3, her final decision would be the same, therefore;

iv) It did not substantially affect the rights of the parties.

14.Generally speaking therefore the issues are neither at the top of nor the bottom of the scale. They are issues upon which there is a burden on the applicant to demonstrate with a degree of simplicity that a very convincing prima facie case exists that the learned arbitrator was wrong. This choice of words is intended to reflect a burden lower than the one-off burden but higher than where the presumption of finality is at its weakest. It is acknowledged also that different issues were at different places on the sliding scale. None however are at the top and none at the bottom either.

15.As will be seen from what follows I have come to the conclusion that leave should not be granted in this case. I have done so having given considerable thought to all the competing submissions.

16.However, the brief reasons which follow concentrate on the submissions advanced by Ms Cheng for Bolton. It must be remembered that this is an application for leave, not the appeal itself. The answer to such an application should be expressed, if possible, concisely. The simple fact is that I have preferred and been persuaded by Ms Cheng's arguments. Ms Li's submissions, although carefully constructed, have failed to discharge the burden placed on her lay client.

The construction of Article 3

17.It is fair to say that Article 3 is capable of being construed in different ways. The issue is, applying the test I have outlined, is the arbitrator's construction appealable? In my judgment, her construction of Article 3 is a logical interpretation of the actual words in the Article. Her decision is simple to understand and reasonable. The three key words in the Article are "nominate", "object" and "appointed". It seems logical to me to say that it envisages a three-stage process. Firstly, a new architect is "nominated", then the main contractor can "object", thereafter the "appointment" may come into effect. Nominate and appoint are words with different meanings. Ms Li's argument gives them the same meaning. The I.O.'s submission is that Bolton has no say in the selection of the new architect. They say Article 3 merely informs them who it shall be. Ms Li's construction is not devoid of merit by any means but if her interpretation were the right one, one would expect different words to be used to convey that meaning. For example, it would use the word "appoint" or "select" instead of "nominate". Also, in the latter half it would not say "subsequently appointed", it would say instead "so appointed". The use of the word "subsequent" also supports the arbitrator's construction as it suggests that the appointment comes later than the nomination. The reference to objections coming in between.

18.Ms Li submits that Bolton had no right to object to the first architect at the start of the contract so why should they have the right to object to a replacement architect. This ignores the fact that at the start of the contract, Bolton would know who the architect is, which is not the same as having a new one thrust upon them.

19.The actual complaint by Bolton was that there had been no nomination of the replacement architect at all by The I.O. This is plainly correct. All that was said in correspondence by The I.O., through their solicitors was, on 21 October 1999 :

"Our client has instructed a surveyor to take up to remaining duties which the architect should have performed under the contract."

It should be noted that no name of the surveyor was mentioned in this letter.

20.Then, on 12 June 2000 a letter containing the following was written :

"In those circumstances, the IO subsequently appointed Patrick Wai Kee & Associated Limited ('PAL') to act as the IO's architect in place of Ling, Chan & Partners for the said renovation works.

We now write to inform you that PAL is the replacement architect for the said renovation under the said 'Building Contract.'"

21.The arbitrator's finding of fact that there had been no nomination and that Article 3 had not been complied with is not a matter upon which leave to appeal will be granted. The applicant's case falls well short of the test laid down in P.T. Dover.

22.As already mentioned the issue is rendered academic in view of her findings in relation to the "time at large" issue. It is academic for the following simple reason. The Arbitrator said that even if she had accepted that the replacement architect had been validly appointed, in spite of there having been no nomination, she would have come to the same figure for the value of the Final Account and would therefore have awarded the same sum to Bolton. It would not, in those circumstances, have been damages but would have been the sum she would have determined that the replacement architect, validly appointed, should have certified as due for payment.

23.Her consideration of Clause 30(5)(a) (set out at page 3 of this decision) is relevant in this context.

Clause 30(5)(a)

24.Ground 1 of The I.O.'s grounds of appeal states that the arbitrator erred in findings that because The I.O. did not comply with Article 3 they were thereby also in breach of Clause 30(5)(a) of the contract.

25.Clause 30(5)(a) requires the architect to value and measure. In the contract the time specified for this is within six months of Practical Completion. It seems obvious to me that the architect's duty to measure and value does not simply stop after six months. The duty continues but they will be in breach of the time condition which may have an effect on future costs, damages or interest. In this case, if a new architect was not validly appointed then the breach of Clause 30(5)(a) simply continues.

26.The measurement and valuation required by Clause 30(5)(a) is for the purpose of producing the Final Account. The I.O.'s case depends on the validity of PAL's appointment and therefore the acceptance of the Final Account, or alternatively, to assess an appropriate sum by way of review. Consequently, as referred to above, the arbitrator ruled that she would have held Bolton entitled to the same sum anyway, either way. The I.O. therefore, for the purposes of this leave application does not persuade the court that the issue relating to Clause 30(5)(a) could substantially affect the rights of the parties.

27.On any view, one keeps returning to the point that her construction of Article 3 is far from being wrong to the extent that it is appealable.

28.To complete this part of The I.O.'s application for leave, Bolton rightly made the following point. There are two primary grounds for appeal; firstly, the validity of PAL's appointment and secondly, the time at large issue. The two are inextricably connected. Being successful on the Article 3 issue, on its own, gets The I.O. nowhere. For the appeal to have any purpose they must succeed on both issues. Therefore losing either is fatal.

29.For the sake of completeness I will nonetheless, with as little elaboration as possible, deal with the remaining issues.

Time at large

30.Extensions of time for variations preserve the employers' rights to liquidated damages if the extended time is not met. The arbitrator, on the whole of the evidence, determined that the employer had lost its right to liquidated damages as she decided that time had been rendered at large. Clause 23 is set out from page 5 of this decision. The arbitrator's reasons are at page 9.

31.The arbitrator followed the same approach as that adopted by a renowned arbitrator in "Construction Award No.3 (1987)" reported in the 1994 Construction Law Year Book, to which Ms Cheng helpfully referred this court, in some detail. The conclusion was simply stated as follows :

"Conclusion

26. If, as I hold, there is no power to extend time under Clause 23 in the circumstances under consideration, a Variation Order issued after the current date for completion is an act of prevention which on the authorities helpfully reviewed in the SMK case releases the contractor from his express obligations in relation to the time for completion of the works and disables the employer from claiming liquidated and ascertained damages."

32.Once again, the task for this court is to decide if the arbitrator's decision is appealable, even if the issue is towards the end of the P.T. Dover scale where the presumption of finality is at its weakest. In my judgment, a brief review of her reasons set out in paragraph 4 of her award demonstrates that leave should not be granted in this case.

33.In paragraph 4(a), she rules that the Clause 22 Certificate is invalid because PAL's appointment was invalid. Even if they had been validly appointed they breached the proviso in Article 3 because they did not follow the opinion of their predecessor's, LCP, that 65 days of extension would be granted to Bolton. She found Article 3 had been doubly breached which would, on its own, disentitle The I.O. to liquidated damages.

34.In paragraph 4(b) she states that a review of the Clause 22 Certificate is not required because time was at large.

35.In paragraphs 4(d) and (e) she deals with two specific clauses which were peculiar to this contract and therefore "one-off" issues in the context of the P.T. Dover scale. The two special clauses, her consideration of which caused her to decide time was at large, were SP/26F (at page 6 supra) and SP/6E (at page 11 supra). The grounds of appeal only refer to SP/26F. However, submissions in relation to both were advanced on the application for leave.

SP/6E

36.This clause refers to the time for completion. By the terms of the contract, such date can become a moveable feast. It is either the original date of completion or a future date. The certificate of Practical Completion identifies the date that the works are, in fact, practically completed. 14 October 1997 was certified. The original date for completion was 27 September 1996. The arbitrator highlighted the uncertainties which arose from the different interpretations. It is not necessary in this application to analyse the clause any further. It was a special clause, inadequately drafted by The I.O., which was deemed to be "uncertain". Such a finding was neither remarkable nor appealable.

SP/26F

37.This special provision has to be read in conjunction with Clauses 23(1)(e) and 23(1)(f) (also at page 6 supra). In the arbitration, Bolton had relied on SP/26F, arguing that a number of the variation works came within it. Once again, it should be remembered that it is a Special Provision, drafted and introduced into the contract by The I.O. The arbitrator had the task of deciding to what it referred. She decided that it referred to late drawings/amendments issued after the original date for completion. In effect, it limited The I.O.'s power to grant extension of time which would, in turn, have preserved their potential right to liquidated damages. The arbitrator confronted the issue, decided it is a reasonable and understandable way. Her decision, in all the circumstances, falls well short of being appealable.

38.In short, her conclusion was that time was rendered at large as a result of the introduction of SP/6E, SP/26F and the deletion of Clause 23(1)(f). These are peculiar to this contract.

39.The applicant's application for leave to appeal is dismissed. I make a costs order nisi in the respondent's favour on this motion and on the applicant's summons dated 3 January 2003.

40.I finally direct, also on a nisi basis, that the sum of $6,797,907.88, paid into court as a result of the court's order dated 28 March 2003, plus such interest as may be due thereon, to be agreed between the parties, be paid out to the respondent within seven days hereof.

Representation:

Ms Gladys Li, SC and Mr Anthony Houghton, instructed by Messrs Tai, Tang & Chong, for the Applicant

Ms Teresa Cheng, SC, instructed by Messrs Ho & Ip, for the Respondent

1 In re P.T. Dover Chemical Company and Lee Chang Yung Chemical Industry Corp. [1990] 2 HKLR 257