Mitsui Construction Co Ltd v. Attorney General
Read the full judgment text of HCCL 1/1983 on BabelCite. This HCCL judgment.
1. In 1977, the Hong Kong Government (hereafter referred to as "the Government") introduced a new edition of standard Conditions of Contract for Civil Engineering Construction. Those standard Conditions of Contract have already engaged the attention of the courts on the meaning of their provisions relating to the topic of interim arbitrations on "money certificates" and "time certificates": See Costain International Ltd. etc. v. The Attorney General. (1)
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HCCL000001/1983 Commercial Law - Building Contract Where, under the P.W.D. Standard Conditions of Contract for Civil Engineering Works (1977 Edition), the contract includes a Bill of Quantities, the combined effect of General Condition 73 and 74(4) is that if the executed quantities of an item exceed the billed quantities of that item, the Contractor may seek a re-fixing of the rate for that item, although the increase in quantities results not from an order of the Engineer but is the result of the automatic increases in quantities necessary to complete the works. IN THE SUPREME COURT OF HONG KONG COMMERCIAL LIST SPECIAL PAPER LIST 1 OF 1983 _______ BETWEEN
Coram: Hon. Rhind, J. Date: 10th June 1983 __________ JUDGMENT __________ 1. In 1977, the Hong Kong Government (hereafter referred to as "the Government") introduced a new edition of standard Conditions of Contract for Civil Engineering Construction. Those standard Conditions of Contract have already engaged the attention of the courts on the meaning of their provisions relating to the topic of interim arbitrations on "money certificates" and "time certificates": See Costain International Ltd. etc. v. The Attorney General.(1) 2. The present proceedings call for answers on some fundamental questions which can arise under these standard Conditions of Contract when, with Bills of Quantities forming part of the contract documents, the actual quantities executed substantially exceed the billed quantities. It is, of course, to the Government's advantage to assert that, the excess quantities notwithstanding, the billed rates still continue to apply, whereas the contractor's interest will, obviously, be best served by con-tending that the excess amounts to a variation which brings the re-rating provisions of the contract into play. 3. The actual contract the court has to consider in the present proceedings is one embodied in Articles of Agreement made the 28th March 1979 between the Government of the one part and Mitsui Construction Company Limited ("the Contractor") of the other part. 4. Broadly speaking, the contract required the contractor to lay a bulk water main over 3,000 metres long, enlarge an existing tunnel of approximately 3,780 metres, and construct two new tunnels, one of which was to be approximately 2,073 metres long and the length of the other was to be approximately 3,227 metres. It is this latter tunnel of approximately 3,227 metres which has given rise to the problems leading to the present case. 5. The contract is described as being for "Pipelines And Tunnels From River Indus Pumping Station to Plover Cove", and it forms part of the system for amplifying Hong Kong's water supply by bringing water from China to Plover Cove. 6. For the completion of the work, two years was originally allowed under the contract. Because of the difficult conditions below ground which necessitated more time for the excavation and lining of this tunnel of approximately 3,227 metres, the Government, through its representative, the Engineer, granted the Contractor an extension of over two years (784 days, to be precise). 7. Resulting from the rough going under ground, there were some spectacular increases in actual over billed quantities used on this tunnel. 8. For example, Item E108 of the Bills of Quantities showed 275 metres of excavation for a particular lining known as type I. The quantity of this item which in fact had to be executed was 2,337.105 metres. The rate shown in the bill for that item is $4,050 per metre. 9. Item E301 is 40 tons of steel ribs and other material for support and lining. The unit rate was $4,000 per ton. The executed tonnage turned out to be 2,943.681 tons. 10. One more item worth mentioning is E325, which relates to lining type I. Here the quantity in the bill was 275 metres, for which the rate quoted was $1,538 per metre. In the end, 2,448.20 metres were executed. 11. It is well known that if a contractor has to execute substantially larger quantities than he has estimated for, particularly where delay is involved, there is a likelihood he will lose money if he is not entitled to charge more than the originally agreed unit rate. That originally agreed unit rate is not likely to compensate him for additional indirect costs by way of overheads in' the event of executed quantities overrunning billed quantities. 12. That is what the Contractor is complaining has happened here, but the Government disputes any liability to pay a higher rate. 13. The dispute has been referred for arbitration in accordance with Clause 120 of the Conditions of Contract. The arbitrator chosen was His Honour Judge Edgar Fay, Q.C. formerly one of Her Majesty's Official Referees. 14. The arbitration took place in London but, in accordance with the Conditions of Contract, Hong Kong law applied. 15. On agreed facts, the learned arbitrator was asked to rule on three issues as preliminary points of law. 16. The agreed facts were set out in a statement which read as follows -
17. Accompanying that Statement of Agreed Facts were -
18. The three issues for determination as preliminary points of law by the learned arbitrator were the following -
19. His answers seriatim, which were in the form of a special case for the decision of this court, were as follows -
20. Before any consideration can be given to those issues in detail, it will be necessary to take a look at the steps leading to the formation of the contract between the parties, and at some of the pro-visions of that contract. 21. The Contractor was one of at least eleven contractors who participated in the tendering process which led up to the contract now before the court (see Contract Documents Vol. l at p. 10). The tender documents comprised (inter alia) -
22. The Conditions of Tender were headed "Remeasurement Contract", but I do not think any significance can be attached to a heading like that (see Clause 2(3) of the General Conditions), and, in any event, I am far from persuaded that contracts attracting the label "Remeasurement" must necessarily exclude re-rating provisions. 23. Under Clause 1.2 of the Particular Specification the works to be undertaken under the contract were described as, inter alia - ".........
24. The drawings, which are obviously an important part of a civil engineering contract of this nature, are dealt with by Clause 1.5 of the Particular Specification, as follows -
25. Ultimately, the real issue, in broad terms, is, which of the parties according to the contract took on itself the risk either in whole or in part of bearing the cost of adverse ground conditions which might be encountered as the tunnelling progressed? 26. According to the Government, it has been made clear to the Contractor all along that all risk stemming from adverse ground conditions has rested with the Contractor. 27. For a start, so the Government points out, the drawings showed that the Government had caused only a limited number of bore-holes to be drilled. 28. Elaboration on the geological position was contained in Clause 1.13 of the Particular Specification as follows -
29. Together with all other tenderers, the Contractor attended a site meeting on the 8th November 1978, when the Government's representatives made it clear that there were no site investigation bore-hole results beyond those already detailed in the tender documents. 30. A further minor matter tending to support the view that the Contractor assumed responsibility for what he encountered on the site is to be found in the Form of Tender which begins with the Contractor's recital "Having inspected the site .........". 31. It is, however, in the General Conditions themselves that the Government can be seen to be at its most explicit in seeking to manifest an intention that the financial consequences of adverse ground conditions were a risk which the Contractor had to bear. Clause 15 is the relevant provision -
32. Related to Clause 15 of the General Conditions is paragraph 2.6.18 of the Particular Specification, which is as follows-
33. Before continuing any further with the exercise of identifying the contractual provisions relied upon by the Government in rebuttal of r the Contractor's quest for a re-rating of the unit prices in the Bills of Quantities, it might be as well to say a word about the documents comprising the contract. 34. In Clause 1(1) of the General Conditions, "Contract" is defined to mean "the Articles of Agreement, Tender (including the Appendix thereto) and the acceptance thereof by Government, drawings, Conditions of Contract, Specifications, Bills of Quantities and Schedules of Rates (if any)". 35. That definition is echoed in the first recital to the Articles of Agreement, which reads -
36. With so many different types of document featuring as part of the contract, the question naturally arises as to what the position will be if there is conflict between a provision in one of the documents and another. 37. A partial answer to this problem is to be found in Clause 6 of the General Conditions which is as follows -
38. In due course, it will be seen that I take the view this Clause has considerable significance for the purposes of the present case, where there is an irreconciliable difference between the status accorded to Bills of Quantities by the Preamble to the Bills of Quantities and that accorded by one of the clauses of the General Conditions. 39. Meanwhile, I will continue my survey of the remaining contractual provisions which, so the Government contends, combine to make it proof against any re-rating attempt by the Contractor. 40. Pre-eminent in the Government's defence against the Contractors' claim is paragraph 3 of the Preamble to the Bills of Quantities, which is as follows -
41. Were there nothing elsewhere in the contract documents to undermine paragraph 3, the government would appear to have an unanswerable defence to the Contractors' claim. In particular, the final sentence of that paragraph 3 gives the appearance of seeking to confer on the Government the type of absolute immunity from re-rating which is associated with a Schedule of Rates contract. The Government position, if I understood it correctly, is that it is in effect in the same position as if it had a Schedule of Rates contract. It is hard not to suppress the thought that a great deal of trouble and uncertainty all round would have been saved if the Government had gone for a straight Schedule of Rates style of contract rather than what has been devised here. 42. Needless to say, though, the court has to accept the contract as it finds it, and do its best to interpret it. 43. Besides paragraph 3 of the Preamble, account has also to be taken of paragraph 4, as follows -
44. In particular, the Government seeks comfort in (v), (vi) and (vii) of that paragraph 4. 45. From the Particular Specification, Clause 1.15 tends to assist the Government's contentions -
46. Still on the topic of Bills of Quantities, the Government considers its case helped by Clause 91 of the General Conditions. That states -
47. Clause 92(1) needs also to be included at this point, for the sake of completeness -
48. Other provisions of the General Conditions, referred to on behalf of the Government can be mentioned as follows. 49. The court was referred to the definitions of "Additional Works" and "Extra Works". 50. "Additional Works" means "all such works which in the opinion of the Engineer are of a character similar to those contemplated by the Contract and which can be measured and paid for under items in the Bills of Quantities or Schedule of Rates." 51. "Extra Works" means "all such works as are not, in the opinion of the Engineer, of a character similar to those contemplated by the Contract and which cannot be measured and paid for under items in the Bills of Quantities or Schedule of Rates". 52. Then there was the definition of "Contract Sum". 53. "Contract Sum" means "the sum named in the Article of Agreement for the construction, completion and maintenance of the works". 54. In this case, the amount of the "Contract Sum" was $82,816.657, which was arrived at by a totting up exercise after multiplying the quantities shown in the Bills of Quantities by the unit rates quoted by the Contractor. 55. Next there is the "Final Contract Sum". 56. "Final Contract Sum" means "the Contract Sum subject to such additions thereto or deductions therefrom as may be made under the provisions hereinafter contained. 57. "Works" is defined in Clause 2 of the General Conditions as meaning "all the work and things to be executed or supplied by the Contractor under the Contract and includes Temporary Works". 58. That is 'amplified in Clause 5, which states -
59. Lastly, of the provisions which the Government claims assist it in particular, there is Clause 65(2) and (4) of the General Conditions -
60. It is convenient now to turn to the provisions in the General Conditions dealing with variations and re-rating. They are Clauses 73, 74 and 75. Each side contends they dispose of the issues decisively in its favour. 61. I set out those provisions -
62. For ease of exposition, I find it convenient to deal with Issue (C) first. 63. Were there no provisions in this contract other than the ones I have set down so far, the Government would' in fact be set fair to win this case on all issues. On Issue (C) in particular - whether an excess of executed over billed quantities without having been ordered by the Engineer as a variation was within the re-rating provision, clause 74(4), - the Government's case looks almost unassailably strong, so long as one is prepared to overlook the, provisions of Clause 13 of the General Conditions. I set out that Clause 13 -
64. That provision is, to my mind, the Achilles' heel of the Government's case. For the Government, it was urged that Clause 13 is tautologous or meaningless: it does no more than declare the obvious that the Contract Sum is made up of the totals for the quantity of work set out in the Bills of Quantities. 65. Unfortunately for the Government's case,. the effect of Clause 13 cannot be made to go away so easily. 66. It is highly significant, I think, that Bills of Quantities are singled out for separate mention from Schedule of Rates, which are dealt with in Clause 14-
67. According to the line of argument adopted on behalf of the Government, there is no difference between one of its contracts with Bills of Quantities and one with a Schedule of Rates when it comes to the matter of whether there can be a re-rating under Clause 74(4) in respect of what are known as "automatic increases in quantities" i.e. increases in the quantities in the Bills of Quantities which do not require an order from the Engineer. My own view is the Government is wrong on that, and I will be upholding the learned Arbitrator on his finding that there can be a re-rating in a case with Bills of Quantities like the present. 68. The effect of treating the quantity of the work included in the Contract Sum as being the same as that set out in the Bills of Quantities in my view is that the billed quantities become the measure of the work included in the Contract Sum, so that any excesses over billed quantities, provided they are sufficiently substantial to make existing rates unrea sonable, can amount to variation. 69. Adopting this interpretation of Clause 13 has implications for the meaning of "Additional Works" under the contract, because it becomes arguable that any work beyond that priced and described in the Bills becomes "Additional Works". Additional Works, of course,feature in the variation and re-rating provisions in Clauses 73 to 75. 70. Were it not for Clause 13, the Government could justifiably urge an interpretion of Clauses 73 to 75 similar to that adopted by the Appellate Division of the Supreme Court of South Africa in Grinaker Construction (TVL) (PTY) Ltd. v. Transvaal Provincial Administration (2) where the South African court was called upon to interpret a civil engineering contract with provisions broadly similar to our Clauses 73 to 75, but without the equivalent of our Clause 13 hovering in the background. 71. Without our Clause 13, I would have followed Grinaker, the reasoning in which I thought was unassailable in relation to the contract there under consideration. 72. The very essence of the Grinaker decision was that, on the contract there under consideration, it was a fallacy to equate a variation of the quantity of the works as envisaged in the equivalent of our Clause 73(1) with an increase or decrease of the quantities in the Bills of Quantities. However, the position is quite otherwise in the contract I have to consider. Clause 13, on the view I take, makes the quantities in the Bills the measure of the work included in the Contract Sum, so there is no reason why an increase or decrease in the quantities of the Bills should not amount to a variation of the quantity of the works. 73. The reasoning which was so cogent for the Grinaker situation founders on the obstacle of Clause 13 of the General Conditions in the present case. 74. Unlike in Grinaker, I see no reason in logic why under the Government's contract the so-called "automatic increases in quantities" required for the completion of the works does not amount to a variation for the purposes of Clause 73. On a straight-forward reading of Clause 73, I am satisfied that a variation of the type occurring through the "automatic increase in quantities" does not require an order in writing from the Engineer. I can see no impediment to an automatic increase in quantities qualifying for re-rating under Clause 74(4) which does not impose any requirement of an order. Moreover, the notice requirements of Clause 75 do not present any problem because, on the view I take, the automatic increase in quantities constitute Additional works so that under the proviso to Clause 75 they fall to be measured as constructed. 75. Although Clause 13 seems to open the way for a re-rating where executed quantities substantially exceed billed quantities, how can such a result be achieved in the face of provisions elsewhere in the contract which apparently point to a contrary conclusion? In particular, there is Clause 15 of the General Conditions which points strongly towards the risk of adverse financial consequences from unfavourable ground conditions resting with the Contractor, and paragraphs 3 and 4 of the Preamble to the Bills of Quantities which militate against the possibility of any re-rating. 76. In so far as there are conflicts in meaning between the Conditions of Contract and provisions elsewhere in the contract documents, Clause 6 of the General Conditions shows that the Conditions of Contract are to prevail; when it comes to one clause of the General Conditions contradicting another, there is the contra proferentem rule to resolve the dispute against the party responsible for drawing up the contract - in this case the Government. 77. It is more than a little surprising that the Government has managed to devise a contract capable of such diametrically opposed interpretations. The Government has all the advantages when it comes to drafting its contracts: It is not inhibited by any of the joint consultative processes which give rise to, say, the standard forms of ICE Conditions of Contract, in the U.K. Despite those advantages, it manages to come up with a contract of fiendish complexity, containing a provision like Clause 13 which even its own counsel is reduced to acknowledging is, at best, tautologous or meaningless. With respect, I would have thought that a somewhat simpler form of contract, with a less archaic style might have served the public interest better - something, say, like the relatively straight-forward Schedule of Rates contract used by The Electricity Commission of New South Wales in Arcos Industries Pty. Ltd. v. The Electricity Commission of New South Wales.(3) 78. However, I take the contract as I find it, and applying the contra proferentem rule, as I must, against the Government, Clause 15 can be of no avail against the Contractor who is able to pray in aid Clause 13 in combination with Clauses 73 to 75. Paragraphs 3 and 4 of the Preamble to the Bills of Quantities as well as such provisions as paragraph 2.6.18 of the Particular Specification fall foul of Clause 6 of the General Conditions. 79. If, and insofar as there is any conflict between Clause 91 and Clause 13 of the General Conditions, Clause 91 must surely yield. However, the conflict between those two provisions is perhaps more apparent than real. For the purpose of pricing, Clause 13 deems the quantity of the work to be that which is set out in the Bills of Quantities, but that is in no way inconsistent with the quantities in the bills being estimates only. It is inevitable in tunnelling operations that quantities can be estimates only. 80. Stating as it does that the quantities set out in the Bills of Quantities are estimates only, Clause 91 marries up satisfactorily which Clause 74(4) in that, if the quantities are so far out as to make the rates unreasonable or inapplicable, there can then be a re-rating. 81. Clause 91 also acknowledges the Contractors' common law obligation to complete the works. The Preamble to the Articles of Agreement, reciting that the Contractor had to do such additional works as might be required, echoes the idea behind Clause 91 that the Contractor will have to complete the works, and, towards that end, he will without any need for an order supply the "automatic increases in quantities." 82. There can be no doubt that the necessity to exceed the billed quantities to such an extent, and the need for an extension of tine under Clause 65 of the General Conditions have a common cause, namely, the adverse ground conditions. 83. For the Government, it was argued that Clause 65(4) meant that, the Government having ordered a 784 day extension of time by means of Variation Order No. 16, the Contractor was precluded from seeking a re-rating, as the Variation Order was "deemed to be in full compensation and satisfaction for and in respect of any actual or probable loss or injury sustained or sustainable by the Contractor in respect of any matter or thing in connection with which such extension shall have been granted ........." However, Clause 65(4) happens to be qualified by "except as provided elsewhere in the Contract", and in my opinion the re-rating provisions culminating in Clause 74(4) are just such a provision "elsewhere", which override the effect of Clause 65(4). 84. In view of the foregoing, the court is willing to hold that the "automatic increase in quantities" without the order of the Engineer is a variation within Clause 74(4). 85. However, before leaving this Issue (C), there is a further point to dispose of. According to the Government, there is no causal connection between the "automatic increase in quantities" constituting the variation and the increase in indirect costs for which the Contractor wishes to claim in the re-rating exercise. Any in crease in costs, so the Government contends, is due to adverse ground conditions which gave rise to an extension of time and that is what has caused the increase in overheads. True, it was the adverse ground conditions which led to the extension of time; the Contractor acknowledges that. However, I do not see that as an answer to the Contractor's claim under Clause 74(4). The adverse ground conditions did lead to a manner of excavation and tunnelling which required additional quantities, amounting to a variation. The adverse ground conditions produced a chain of causes and effects. The Contractor seeks to be re-rated for the additional quantities used in excavating and tunnelling, not for ground conditions. 86. Once the quantities were increased, this in its turn would lead to a rise in overheads. I fail to see how in such circumstances there is a lack of causal link between the increases in quantities and the rise indirect costs for which re-rating can make provision. 87. I tend to the view that once a variation has been established, it does not really matter for the purposes of Clause 74(4) what caused the variation. Clause 74(4) gives the impression of being concerned with the effects of a variation, not its causes. 88. Having decided to uphold the Arbitrator in his ruling on Issue (C), I find it convenient next to consider Issue (A), which is whether the Contractor is entitled to further compensation for any losses sustained by reason of the extra time required to cope with ground conditions. I do not think the question embodied in that Issue (A) necessarily permits of a straight-forward "Yes" or "No" answer. It was conceded by counsel for the Contractor that in the context of Issue (A), the only head under which compensation could be claimed was Clause 74(4). I think that any answer should make it clear that the Contractors' claim for further compensation should be limited to the extra time required for using the excess quantities to cope with ground conditions. Some sort of causal link must be maintained between the extra time and the extra quantities. 89. I would amplify the Arbitrator's answer to Issue (A) to the effect that the Contractor is entitled to further compensation under Clause 74(4) for any losses sustained by reason of the extra time required for using the excess of executed over billed quantities to cope with ground conditions. 90. In view of my positive finding in favour of the Contractor on Issue (C), my answer on Issue (B), which is whether the Site Instructions were variation orders for the purpose of Clause 73 of the General Conditions, is rendered of no more than academic interest. Nonetheless, I will go on to express my finding on this Issue. Whereas the Arbitrator ruled that the Site Instructions were Variation Orders for the purpose of Clause 73, I have reached the opposite conclusion. 91. I think that the Contractor faces an insuperable hurdle in having to show that the Senior Engineer, Construction, who signed the Site Orders, enjoyed delegated powers and authorities for the purposes of Clause 73. 92. The "Engineer" named in the Article of Agreement for the purpose of satisfying the definition of "Engineer" in Clause l(1) of the General Conditions was the Chief Engineer, Construction, Water Supplies Department, P.W.D. I set out that definition:
93. The powers of the Engineer to delegate are set out in Clause 2(3) -
94. I took it to be common ground that the Senior Engineer, Construction satisfied the definition of "Engineer's Representative". 95. The material delegation of authority made by the Chief Engineer to the Senior Engineer was by means of a letter to the Contractor, dated 4th April 1979 in the following terms -
96. What strikes one immediately about that letter of course, is that while specifically delegating power's and authorities to the Senior Engineer under more than twenty different General Conditions, it nonetheless, fails to make any explicit reference to Clause 73 (neither to 74 nor 75). That omission need not be fatal, the Contractor argues. According to the Contractor, the Senior Engineer's authority to order variations under Clause 73 derives from the delegation made to him in respect of "All clauses of the Particular Specification". 97. It is to Paragraph 2.6.30 of the Particular Specification that one needs to look, according to the Contractor, to find the source of the Senior Engineer's power to issue Site Instructions enjoying the character of variation orders for the purposes of Clause 73 of the General Conditions. I set out Paragraph 2.6.30 -
98. Assuming that the orders the Senior Engineer gives by means of the Site Instructions for the various types of permanent lining are in fact variation orders, I, nonetheless regard it as incorrect to argue that because the Senior Engineer enjoys delegated powers to make variation orders under 2.6.30 of the Particular Specification that in some way clothes him with delegated powers to make variation orders under Clause 73 of the General Conditions. 99. Having expressly stated the particular General Conditions under which he has delegated his powers, I see no scope for arguing that the Engineer might have intended that further delegation should be made by implication. If the Engineer had intended any measure of delegation under Clause 73, what could have been easier for him than to say so directly when writing his letter of 4th April 1979? 100. Moreover, I do not find myself in agreement with the argument advanced on behalf of the Contractor that, in effect, the Site Instructions ordering permanent lining are per se variation orders because the scope of the works is merely for an unlined tunnel, and there will only be lining in the event of the Engineer intervening to make an order that permanent lining should be installed. 101. Whether one chooses to think in terms of the scope of the works or in terms of the scope of the contract, I consider the obligation on the Contractor was to build a tunnel with permanent lining. I agree with counsel for the Government that it is "fanciful" to contend that the obligation on the Contractor at the outset of the contract was to build an unlined tunnel. Both sides, all along, at every stage, have contemplated a tunnel with permanent lining, in my opinion. 102. Whilst it was no doubt correct to observe on behalf of the Contractor that an order from the Engineer or his authorised representative was a prerequisite for the installation of permanent lining, it was equally correct to point out on the Government's behalf the fallacy of supposing that just because there is an order it is necessarily a variation order. 103. Besides the provisions of paragraphs 2.6.30 of the Particular Specification to the effect that the tunnel will remain unlined without an order, the Contractor also pointed to paragraph 2.6.11 of the same document, as well as to Items like E104 to E110 of the Bills of Quantity in support of the theme that the Contractor's obligation was limited to building an unlined tunnel, unless otherwise ordered. 104. The Contractor thought its argument was advanced by the provision in Clause 17(2) of the Conditions of Contract that the Contractor was not responsible for the design or specification -
105. There were also the alignment plans (No. 23 to 27) which did not show any section of the tunnel as lined (except for a small section near the portals).I did not think those plans were of any help in showing that it was an unlined tunnel which was in the basic contemplation of the parties. It is of the very essence in tunnelling contracts that the Engineer will not know what type of lining he will need for any particular section of the tunnel before excavation so the fact that the alignment plans do not show any lined section (except at the portals) is a neutral circumstance. 106. On the present point, perhaps the strongest argument in the Contractor's favour was the one based on the case of J. Crosby and Sons Ltd. v. Portland Urban District Council (4) There the parties had used the ICE Conditions (4th Edition). The specification stated that the pipes to be used for the purposes of the contract should be either Stanton's or Staveley's . 107. In choosing the one brand of pipe rather than the other, the engineer 's conduct in that case was held to amount to a variation. 108. Crosby's case was said to support the proposition, in effect, that where an engineer has to intervene by making a choice, the result of his choice will amount to a variation. Thus, in the present case, if the Engineer opts for permanent lining rather than no lining, this is said to amount to a variation, even though either permanent lining or absence of lining had both been contemplated by the contract. 109. I do not find myself persuaded that there was a variation even in the Crosby case itself. I find it difficult to accept that where the engineer has to choose between items which are both within the contemplation of the contract he is somehow making a variation. 110. I was convinced by the arguments on behalf of the Government that, insofar as the Site Instructions ordered permanent lining within the scope of the works they were not variation orders. In other words, if the billed quantities were not exceeded, there was no variation. 111. Without Clause 13 of the Contract Conditions, and the effects I have already attributed to it, I would have been prepared to hold that Site Instructions ordering permanent linings even in excess of billed quantities were not variations. However, the view I take of Clause 13 produces the effect that to the extent that Site Instructions result in an excess of executed over billed quantities they are variations for the purpose of Clause 73 by virtue of the so-called "automatic increases" amounting to variations. 112. Saying I am wrong about Clause 13 having the effect I have just mentioned, then I think the Government is correct in its argument that the Site Instructions for permanent lining do not amount to variations, because permanent 'lining was always within the scope of the contract as work that the Contractor was obliged to carry' out from the very beginning of the contract. 113. A large number of arguments were mustered on the Government's behalf as to why the contract work should not be treated as if it were for an unlined tunnel. 114. The most telling of all the points made on the Government's behalf, in my view, was the fact that the Bills of Quantities abound with Items for a lined tunnel. There is no need to look further than the Items under the Bills of Quantities' section E3 where the "Description of Work" is "Support and Lining". Why include all those items for lining in the Bills of Quantities if this was an unlined tunnel? 115. Then there is Drawing No. 60 showing "Typical Cross Sections" for the five different types of lining provided for in the contract. It also shows a cross section for an unlined sector. On that plan, there is a notation in respect of the different hydraulic characteristics for the unlined and lined section of the tunnel and another notation to the effect that the choice of the type of lining is to be proposed on site by the contractor and agreed by the engineer. Everything about that Drawing No. 60 points unmistakably to the parties having proceeded from the outset on the basis that this was a contract for a tunnel with lining. 116. Numerous paragraphs of the Particular Specification only make sense on the assumption that the parties must all along have contemplated that lining was within the description of the works e.g. Paragraphs 2.6.1; 2.6.10; 2.6.11 and 2.6.18. 117. From the above, my formal answers on the three issues raised by the Special Case, can be seen to be as follows -
118. In arriving at its decision, the court can in no way be result-oriented. The court has to give effect to the intention of the parties, and if that produces a harsh result, so be it. Counsel for the Government did not shrink from acknowledging that, with the interpretation he urged for it, Clause 15 of the General Conditions could in practice operate severely on a contractor who had the misfortune to encounter adverse ground conditions. If he wanted the contract, the contractor had in effect to gamble that what he found below ground would not detain him too long, for otherwise the financial consequences could prove ruinous to him. 119. Clause 13, for reasons I have explained, opens the way for a re-rating under Clause 74(4), so that the gambling factor under the Government's General Conditions in practice no longer looms large. 120. From the Government's point of view, the worst that can happen on the interpretation that the Arbitrator and I have adopted in relation to Issue C is that the Government will finish up paying no more than a reasonable rate for the excess of used over billed quantities.
Representation: M.r M. Waller, Q.C. and Mr. R. Kotewall (L.W. & K.) for Claimant Mr. M. Graham, Q.C. and Mr. G. Wheatley (Legal Dept.) for Respondent (1) C.A. No. 22 of 1983. On appeal from M.P. No. 1898 of 1982 (2) (1982) S.A.R. 78 (3) (1973) 2 N.S.W.L.R. 186 (C.A.) (4) 5 B.L.R. 121 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||