Hong Kong Housing Authority v. Wan Chung Construction Co Ltd

HCCT 75/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 75 OF 2005

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BETWEEN

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Before: Hon Reyes J in Chambers

Date of Hearing: 22 February 2006

Date of Judgment: 22 February 2006

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J U D G M E N T

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1.The Authority seeks leave to appeal against the Interim Award on Quantum of Mr. Yeung Ming Tai (the Arbitrator).  By the Award the Arbitrator held that Wan Chung was entitled to prolongation costs of $6,029,968 (that is, costs for 272 days’ delay from 24 August 1998 to 25 May 1999 at $22,169 per day).

2.The Authority engaged Wan Chung to construct housing at Wan Tsui in the New Territories.  By way of a variation, the Authority instructed Wan Chung to lay water mains in Yan Tsui Street, adjacent to the construction site.  The Arbitrator found that, due to delay in giving Wan Chung access to Yan Tsui Street for the water mains works, Wan Chung could not have completed the housing contract until 25 May 1999 at the earliest.

3.Wan Chung did not in fact complete the housing project until 31 May 1999.  The Arbitrator held Wan Chung responsible for delay between 25 and 31 May 1999.

4.The Authority says that the Arbitrator went wrong in law because, although he rightly stated the applicable test for determining whether Wan Chung was entitled to prolongation costs, he wrongly applied that test. 

5.The Arbitrator (the Authority says) correctly stated that, to succeed on prolongation costs, Wan Chung had to show that “as a matter of fact the [delaying] events for which [the Authority] is responsible are the effective or dominant cause of [Wan Chung’s] loss”.

6.The Arbitrator (the Authority submits) went wrong, however, in proceeding on:-

“the entirely hypothetical assumption (it not being the case) that if Wan Chung had not been constructing [the housing block] it would have had to maintain a minimum site establishment from 28/8/98 to 25/5/99 in order to carry out and complete the Variations.”

7.Wan Chung responds that the Authority is attempting to turn a matter of fact into a question of law.  The Authority is constrained to do this (Wan Chung argues) because questions of fact are within the province of the Arbitrator and cannot be appealed to this Court.

8.The Arbitrator (Wan Chung points out) found as a matter of fact, after hearing all the evidence and drawing appropriate inferences, that Wan Chung needed (and did maintain) at least a minimum establishment while waiting for access to Yan Tsui Street.  Wan Chung submits that there was nothing hypothetical about the Arbitrator’s approach.

9.In my judgment, Wan Chung is right. 

10.Perusal of the Interim Award readily establishes that the Arbitrator did not deal with the evidence in any theoretical manner as the Authority alleges. 

11.Mr. Harris (appearing for the Authority) submits that Wan Chung neither kept a minimum establishment nor suggested that it was so doing as a consequence of the Authority’s delay in Yan Tsui Street.  Mr. Harris says that accordingly the Arbitrator did not find that Wan Chung actually provided a minimum site establishment because of the Authority’s delay.

12.I do not accept Mr. Harris’ submission.  It is implicit (if not express) in the Award that the Arbitrator regarded Wan Chung as having kept at least a minimum establishment on site due to the Authority’s default.

13.Thus, at Award §15, the Arbitrator records Wan Chung’s case that the minimum site team:-

“was the team ... needed as a result of the delayed possession of Yan Tsui Street, which was absolutely critical to obtaining FS certification which in turn was necessary for practical completion of the Works, as well as to honour its contractual commitments, and was extracted from the full resources that were actually used during the period of delay”.

14.At Award §60, the Arbitrator repeats Wan Chung’s case that it was claiming for only part of the staff actually deployed, that minimum being (in Wan Chung’s assessment) plainly attributable to the Authority’s delay:-

“I note that the Claimant [Wan Chung] is not claiming the full costs of its site establishment during the said period between August 1998 and May 1999.  Instead, it claims the Cost of the minimum site team which was said to be required as a result of the late possession of site and thereafter carrying out the YTS [Yan Tsui Street] Works.  Further, there was a need under the Main Contract to maintain specific resources in accordance with the Contract requirements.”

15.It seems to me that on a fair reading of Award §64 the Arbitrator expressly found that Wan Chung had to (and did) retain a site agent, a site safety officer, a typist, a driver, a quality control engineer and a building service engineer in consequence of the delay in getting possession of Yan Tsui Street.

16.In Award §65, citing the evidence of Mr. So Kwok Lam (a Wan Chung director), the Arbitrator lists out further personnel kept on site.  Reading that list in context, the Arbitration’s clear implication was that such staff had to be maintained because of the delay over the Yan Tsui Street works. 

17.In Award §§68-71 the Arbitrator discusses his difficulties in connecting certain other staff to delay in the Yan Tsui Street works.  He rejects the evidence of Mr. Mitchell (Wan Chung’s expert) on the time likely spent by such staff because Mr. Mitchell “did not base his estimate on what actually happened on site”.

18.In Award §79 the Arbitrator explains why, on the basis of evidence from Mr. Wong (Assistant Project Manager), he regards the storekeeper as having been actually involved with the Yan Tsui Street works.  He rejects the evidence of Mr. Humphrey (the Authority’s expert) on the matter as being unrealistic on the pertinent facts.

19.Finally, in Award §§93-98 the Arbitrator explains why he finds an assessment by an independent surveyor (Faithful & Gould) of part of the prolongation costs compelling as evidence.  He regarded the surveyor’s calculations as being firmly rooted in fact.  Thus, he states at Award §§93-95:-

“From the evidence I have heard, I find that F&G [the surveyor] has taken active steps in ascertaining the Costs.  F&G has repeatedly asked the Claimant to provide information and substantiation in relation to the figures claimed.  I note that the Claimant did provide extracts of the Claimant’s accounts listing the preliminaries expended on site during the extended period.  The Claimant also provided copies of invoices to F&G in purported substantiation of the figures claimed by the Claimant including the ‘average monthly cost’.  The ‘average monthly costs’ covered the costs incurred by the Claimant in employing those staff identified in F&G’s reports.  The costs included salary as well as bonuses.

I also note that the amounts ascertained by F&G were based on an assessment of the percentages of staff involved in the YTS Works.  Such percentages of involvement were provided by the Clerk of Works of the Respondent, after checking the manpower records.  These manpower records included daily reports compiled by the Claimant. The Claimant’s daily reports showed the number of men working on site.  The Clerk of Works had checked the records to see that the figures claimed by the Claimant were accurate.

Further, F&G had specifically demanded the Claimant to provide details of the Claimant’s staff involved during the period between 11th December 1998 to 20th March 1999 with particular reference to the tasks undertaken by each person during the period of delay and contemporaneous records demonstrate their attendance on site during the delay period.”

20.The Arbitrator observes that the surveyor made a conscious effort to exclude expenditure which would have arisen in any event, notwithstanding delay in connection with the Yan Tsui Street works.

21.Mr. Harris also submits that the Arbitrator’s conclusion is illogical because Wan Chung was only granted a partial extension until 25 (as opposed to 31) May 1999.  The Authority contends that the Arbitrator should have found that the minimum personnel required would have had to be deployed, regardless of delay in the handing over of Yan Tsui Street, to cater for delays on the housing block for which Wan Chung was responsible.

22.I disagree. 

23.Consider a simple, but analogous, example. 

24.Suppose that I need a day to complete Project Y.  I should have completed Project Y by today, but due to my fault I now need an extra day.  Assume that my employer has, however, suddenly asked me to do Job X and logically Job X must be done before I can finish Project Y.  Suppose that my employer delays for 5 days in giving me access to the work site for Job X. 

25.Why should any skeleton establishment that I have to maintain during that period of 5 days’ delay be plainly or necessarily attributable (whether wholly or substantially) to my 1 day’s delay on Project Y?  Why cannot the 5 days’ delay on Job X be validly characterised as the “dominant cause” of prolongation costs incurred by me? 

26.It seems to me that, in cases of concurrent delay, the answers to questions such as those just posed depend on an analysis of the facts of each case.  I see nothing obviously (or even seriously) illogical in the Arbitrator’s conclusion here.

27.It follows that leave to appeal is refused.

28.Lastly, there was some dispute among the parties on whether this was a one-off matter for the purposes of the test for leave in Swire Properties Ltd. v. Secretary for Justice (2003) 2 HKLRD 986 (CFA).  The proposed appeal challenges the application of an accepted principle of law to the facts of a case. However interesting such exercise may be to the construction industry (as the Authority suggests), the appeal by its nature remains one concerned with the peculiar facts of a case.  The appeal is plainly a one-off matter.

Mr. Jonathan Harris, instructed by Messrs Deacons, for the Applicant

Mr. Danny Choi, instructed by Messrs Leung, Chan & Pang, for the Respondent