W. Hing Construction Co Ltd v. Boost Investments Ltd

HCCT 1/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 1 OF 2006

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BETWEEN

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Before : Deputy High Court Judge Westbrook, SC in Court

Dates of Hearing : 5–9 and 12–15 January 2009

Date of Judgment : 17 February 2009

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J U D G M E N T

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Introduction

1.This construction dispute concerns the Main Contractor's (“plaintiff's”) entitlement to extensions of time for delays for which the Developer is responsible and the Developer's (“defendant's”) associated entitlement to levy liquidated damages for the Main Contractor's own culpable delay.

2.In particular, the defendant relies on a notice provision in the extension of time (“EOT”) clause which is framed as a condition precedent, with which the defendant alleges the plaintiff has not complied, thus barring any EOT claim (subject to a question of waiver).

3.Contra the plaintiff, who relies in particular on the absence of any certificate from the Architect as provided for in the liquidated and ascertained damages (“LADs”) clause (or the entitlement to one) certifying the Architect's opinion that the works ought reasonably to have been completed by the Date of Completion.  This issue raises a novel point of construction, upon which there does not appear to be any direct authority.  There is also an issue as to whether this court has power to issue such a certificate itself, or waive the requirement for one.

Background

4.In the summer of 2002, Get Luck Development Ltd (“Get Luck”), the predecessor of the defendant decided to renovate the five floors of a shopping centre, which it owned, called Concord Square at 88 Chuen Lung Street, Tsuen Wan, New Territories.

5.Get Luck first engaged SIB Anterior (HK) Co. Ltd (“SIB”) as the designer who drew up the initial plans.  Get Luck however, appreciated that an architect, an authorised person (“AP”) and a registered structural engineer (“RSE”) would need to be engaged for the project in order to submit formal plans to be approved by the Buildings Department (“BD”) and to supervise the works.  Such roles were eventually filled by Leung King Partners Ltd. (“LKPL) as Architect under the contract.

6.Sister companies from both parties had previously worked on a club renovation project in Guangzhou, PRC and Edmund Li (“PW2”) introduced his boss Edward Tse (“PW1”) a director of the plaintiff to K.C. Lam (“DW1”) and K.C. Leung (“DW2”) of the defendant.

7.The defendant was impressed with the fact that PW1 was a fully qualified architect before he turned to the contracting business, with much experience in similar renovation projects.  The original idea was that PW1 be temporarily attached to an architect's firm he had recommended, namely LKPL to oversee the work as Architect.  Contracts were signed between the defendant and LKPL to that effect in July and September 2002 (Exhibits D2 and D3 refer).

8.Thereafter there is some divergence in the evidence.  PW1 says that in the event his own company, the plaintiff, tendered for this project in October 2002 and shortly afterwards, PW1 told DW1, DW2 and LKPL that, to avoid a conflict of interest, he would not act as the Architect in charge of the project.  This would, he said, be a breach of the Architect's professional code of conduct to be a director of the Main Contractor and the Architect in charge of the same project, because of the inevitable conflict involved in such an arrangement.

9.DW1 and to a greater extent DW2 both say that this message did not get through to them and that throughout the project they believed that PW1 was both the boss of the Main Contractor and the Architect in charge.

10.Both of them explained, somewhat naively, that they thought this an ideal arrangement whereby the Main Contractor was in effect performing the architect's job both under the service agreement and under the Main Contract as well as the job of Main Contractor, thus ensuring perfect co-ordination.  In their view all responsibility for the project thus lay with PW1 and the plaintiff.

11.Even by the time of giving evidence in 2009, they did not seem to appreciate the almost impossible conflict of interest this would create, e.g. where the Architect is tasked to assess and certify applications for EOT by the Main Contractor (i.e. his own company).

12.This naivety (which is not intended in any pejorative sense) is explained by the backgrounds of DW1 and DW2.  DW1 was an experienced project manager but at his level was not apparently involved in the contract with the Architect.  He only knew that PW1 and LKPL were well familiar with each other and thus he expected close co-ordination between them.

13.DW2, however, who had no prior experience in managing a construction project, steadfastly maintained that he believed PW1 was the Architect in charge of the Project throughout its duration.

14.PW1 was very experienced both as an architect and a contractor.  He gave his evidence in a careful and thoughtful way.  He was well aware of the conflict involved in performing both roles.  My finding of fact is that PW1 would have and did inform the defendant that he could not be the Architect in charge, as originally proposed, once his company was chosen as the Main Contractor.  No doubt he would have gone on to assure the defendant that they would still get the benefit of his architectural background and experience so as to reassure them that LKPL would perform a professional job.  This finding is reinforced by the fact that the defendant could not point to a single document throughout the contract which was signed by or indicated that PW1 was acting on behalf of LKPL.

15.I find this misunderstanding was a key element in the disputes that arose and helps to explain why each side has steadfastly maintained that the other side is responsible for the delays which later occurred.

16.I return to the events.  According to DW2, the defendant's was the lowest tender received (in October 2002) and after extended post-tender negotiations, a letter of acceptance was sent out by the defendants on 14 March 2003 and countersigned by the plaintiff on 22 March 2003.  This was later replaced by two letters of acceptance but nothing turns on this.

17.This letter of acceptance was the only contract document signed by the parties but it specifically incorporated the drawings, specifications and tender documents, as well as certain correspondence into the contract.  The tender documents included a standard form of Hong Kong Building Contract containing General Conditions of Contract (“GCC”) as amended by certain Special Conditions of Contract (“SCC”).

18.The contract sum was a fixed price lump sum of $42.9 million, subject only to adjustment for variations or provisional sums ordered.

19.It was a 90-day contract which commenced on 24 March 2003.  The date of completion was thus 21 June 2003.  However the Architect did not certify the works as practically complete until 13 September 2003, a delay of 84 days.

20.At the outset of the trial, the parties sensibly and helpfully agreed certain matters viz:

(1)  that the sums certified by the Architect, but unpaid, were due and owing to the plaintiff; and

(2)  that the counterclaim based on damages to be assessed for alleged defective works would not be pursued.

21.The claim and counterclaim thus boiled down to the plaintiff's claim for an EOT for the 84 days and the defendant's counterclaim for LAD's for the same 84 days.

The issues

22.The remaining live issues raised by the pleadings may be summarised as follows:

EOT CLAIM

(1)  Subject to Issue 2, is the plaintiff entitled on the facts to a full 84 days EOT under GCC 23 or was the plaintiff itself in delay for all or any part of that period?  If there were concurrent delays, should the plaintiff nevertheless be granted an EOT?

(2)  Subject to Issue (3), has the plaintiff complied with the notice condition precedent in GCC 23?  If not, is the plaintiff irrevocably debarred from any grant of an EOT by such non-compliance?

(3)  Is the defendant estopped from relying on the notice condition precedent in GCC 23 by reason of representations made by the defendant and relied on by the plaintiff to its detriment?

(4)  Whether or not the Architect validly granted an EOT of 65 days in March 2005, does this court have the power to re-open, review and revise the grant of an appropriate EOT?

LAD CLAIM

(5)  On a proper construction of GCC 22, is the defendant entitled to levy LADs simply if the date of completion is not achieved or is a Certificate of Non-Completion (“CNC”) a further pre-requisite, requiring an independent exercise of judgment by the Architect/the court, going beyond the fact that an EOT has or has not been granted?

(6)  Does this court have the power to issue a CNC itself (or waive the requirement for one), in circumstances where the Architect has not done so and has never been asked to do so?

(7)  If this court does have such power, should the court issue such a certificate in all the circumstances or waive the requirement for one?

EXTENSION OF TIME ISSUES

Issue 1 – Subject to Issue 2, is the plaintiff entitled on the facts to a full 84 days EOT under GCC 23 or was the plaintiff itself in delay for all or any part of that period?  If there were concurrent delays, should the plaintiff nevertheless be granted an EOT?

23.The main body of GCC 23(1) – as amended by the SCC – provides, materially, as follows:

“23  Extension of Time

(1)  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,

…

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

(l)  any act of breach or prevention by the Employer, his servants or agents not already mentioned in the foregoing sub-paragraphs of this clause 23

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.”

24.The details of the plaintiff's pleaded case for an EOT is set out in Appendix 2 to the Amended Defence to Counterclaim and lists five events said to be the responsibility of the defendant which are said to have caused critical delay to the project.

25.The focus at the trial was almost exclusively on Events 1 and 2, since (apart from a few days at the end) Events 3, 4 and 5 were all concurrent with the admitted delay in Event 2.

(a)  Event 1 :  Change to “lightweight” block walls

26.According to the specified list of materials and the tender drawings, the plaintiff's tender included items on all floors for “supply and install 100 mm thick Block wall”.

27.On 27 March 2003 (three days after contract start) the plaintiff was re-issued with the same tender drawing now marked “For Construction”.

28.In view of the tight 90-day programme, the plaintiff immediately began to build the block walls (which partitioned the shops etc.) and by 11 April 2003 had completed 98% on the 2^nd floor and 20% on the 1^st floor.

29.On that day, PW2 says that he first received the Architect's plan approved by the BD on 18 March 2003 for which he had been pressing.  On examination it was immediately obvious that the block work specification had been changed to “new lightweight block wall” and indeed a particular lightweight block manufactured by Y-Tong was further specified.  The block work installed so far was neither lightweight nor Y-Tong.  PW2 says he then ceased installation work immediately for these block walls.

30.The change to lightweight block walls was apparently introduced to allay concerns that the existing structure in this renovation project was not sufficiently strong to support ordinary block walls.

31.This problem was discussed at the next site meeting on 14 April 2003.  The plaintiff was required to submit fresh shop drawings for construction of Y-Tong blocks and LKPL were required to report to the defendant.

32.After enquiries, PW2 later reported that sufficient quantities of the Y-Tong blocks could not be sourced within a reasonable time and the plans were then further amended to delete Y-Tong blocks and replace them with blocks with a specified KPa value, supported by further calculations by the RSE.

33.By the site meeting on 22 April 2003, PW2 reported that a small quantity of lightweight blocks were delivered that day and the rest were expected two days later.  The question also arose as to whether the block walls already built would need to be demolished and replaced.

34.At the site meeting on 28 April 2003, the RSE reported that the BD had agreed that the existing block walls could remain and the remainder would be built using the lightweight blocks.

35.In evidence, PW2 said that in fact the bulk of the lightweight blocks did not actually arrive on site until early May and that work was resumed only after the RSE/defendant reconfirmed after a letter on 14 May 2003 from the plaintiff that the existing block work could remain.

36.It was clear to me after reviewing all the evidence that a change to lightweight blocks was proposed in January 2003 and approved on 18 March 2003 but no one informed the plaintiff who was, it will be recalled, supplied with the original tender drawing now marked “For Construction” on 27 March 2003 without any indication of any changes to the type of block work.  Prima facie this fell under GCC 23 sub-clauses (e) or (l) entitling the plaintiff to an EOT for the delay caused.

37.Mr Douglas Lam for the defendant suggested two answers to this claim.

(1)  Plaintiff's failure to comply with Specification Preliminaries (“SP”)

38.SP 2.05, 4.06 and 4.07 all provide that samples of materials and specimens of finishes must be submitted to and approved by the Architect before orders of materials are confirmed.  It is not disputed that the plaintiff did not submit or get approval for samples of the blocks before they were ordered and installed.

39.PW2 maintained that in practice this requirement mainly concerned finishes and so far as e.g. ordinary sand, cement or concrete blocks were concerned, nobody was expected to submit such samples, nor was it done — to which Mr Lam riposted that such practice is irrelevant, unless pleaded as a universal custom or usage in the trade and the contract must be strictly complied with.

40.I have not found this an easy point to decide as I can see force in both sides' point of view.  In the end, I have decided against Mr Lam on this basis: even if samples of every conceivable material, including the concrete blocks, had been submitted to the Architect for approval, it is not clear to me that the Architect would have spotted the mistake, simply by looking at all these materials.  The Architect clearly made a mistake in not advising the plaintiff of changes to the plans and I am not convinced that if shown the block material he would have checked it against the latest approved drawing, realised the blocks were non-compliant and then have immediately issued the necessary Architect's instruction to correct the mistake, before construction work commenced.

41.Neither side took up the option of calling the Architect as a witness on this or any other point, so there is no firsthand evidence of what the Architect says he would or would not have done if such materials had been submitted to him for approval.

42.What is clear is that nobody from the defendant or SIB spotted that the materials did not comply with the latest plans when delivered and installed and I am not convinced, in the absence of evidence, that the Architect would have done any better.

43.Mr Lam's second point concerned the length of the proper EOT, if I was against him on his first point.  He submits that compliant lightweight blocks began to arrive on 22 April 2003 and the site meeting minute of 22 April 2003 shows that the rest “could only arrive 2 days later”.

44.In evidence, PW2 stated that the balance from various sources only started to arrive 2 days later and that the bulk did not arrive until early May.

45.I agree with Mr Lam that it was unreasonable for the plaintiff to wait until it was re-confirmed at the site meeting on 12 May that the existing block walls did not need demolishing; the plaintiff had already been told this at the site meeting of 28 April and in any event, this would not have prevented the plaintiff from proceeding with the same work on other floors in the meantime.

46.Further, the plaintiff in its EOT application alleged and the Architect later accepted in a letter that the works in fact resumed on 6 May 2003.

47.Doing the best I can on the available material, and bearing in mind that the Architect upon his review, was prepared to recommend an EOT of 30 days (albeit on unknown reasoning) I find that the block work wall installation could and did recommence on 6 May 2003.

48.Since there is no evidence to contradict PW2's evidence that he first received notice of the change via the approved plan on 11 April 2003, I take a start date of 12 April 2003.

49.Both sides' witnesses, importantly, conceded that delay to the block work walls was critical delay to the plaintiff's programme, hence I find on the facts, subject to the issues below, that the plaintiff is entitled to an EOT for Event 1 from 12 April to 5 May 2003 inclusive i.e. 24 days.

(b)  Event 2 :  Demolition of parapet walls and replacement with railings and handrails

50.It is not disputed that some time in June 2003, the defendant advised the plaintiff that it was considering demolishing the parapet walls in various areas of the site and replacing them with railings and handrails, for purely aesthetic reasons.

51.PW2 maintains that he received this indication as early as 11 June 2003 and immediately suspended any work (such as plastering and painting) on the original parapet walls, so as to avoid abortive costs for the defendant.  There are no minutes or letters to support this date.

52.DW2 says that the change was first proposed by his boss, Mr Wong Sai Chung, at a meeting on site on 28 June 2003 together with PW1 and PW2.  Further discussions took place in their offices on 30 June 2003 and a quotation for the work was requested from the plaintiff.  On 3 July 2003, the plaintiff wrote to the defendant: “We refer to the verbal instruction made by SIB and the client regarding the captioned variation works” and submitted a quotation and time estimate for these works.

53.The defendant says that the quotation was accepted seven days later on 10 July 2003 which is the same day that amendments to the approved plan were completed for submission to and approval by the BD.

54.The defendant accordingly maintains that the plaintiff was only instructed to suspend work on the parapet walls as of 10 July 2003 and hence that is the start date of the EOT.

55.In view of the “verbal instruction” referred to in the letter of 3 July 2003, I do not find it would have been reasonable for the plaintiff to have continued with work that was by then very likely to prove abortive.  Equally, I am not convinced that the plaintiff received this instruction as early as 11 June, and then nothing was done about it for two to three weeks thereafter.

56.Again, doing the best I can, I would select 1 July 2003 as the start date of this delaying event, as the date on which it would have been reasonable for the plaintiff to suspend work on the existing parapet walls until the proposed variation was either issued or abandoned, i.e. the day after the meeting on 30 June 2003.

57.The only other point raised by the defendant was that by that date the works were already in delay, simply because of slow progress by the plaintiff as exemplified by the weekly progress reports which showed that a fair amount of unaffected work under the contract was still in progress and which does not appear to have been substantially completed until around mid-August 2003.

58.As a result of my finding of critical delay on Event 1, the contract date for completion is liable to be extended from 21 June for 24 days i.e. until 15 July 2003.

59.What then of the delay between 15 July 2003 to say 15 August 2003?  The defendant says the plaintiff was by then in culpable delay anyway and the late variation for Event 2 did not cause any actual delay until say 15 August 2003.

60.The plaintiff responds that it is relieved of any liability for its own delay (if any) because the variation order for Event 2 would in any event have prevented practical completion being achieved any earlier than it was i.e. on 13 September 2003.

61.Much case law has developed on this thorny question of concurrent delay, which turns on the wording of each particular EOT clause, as well as considerations of e.g. what is the “dominant” delay.  The relevant case law has been helpfully reviewed by Lord Drummond Young in the recent Scottish case of City Inn Limited v. Shepherd Construction Limited [2007] Scottish Court of Sessions CSOH 190 (30 November 2007) at paragraphs 10 – 21, in which he reached the following principal conclusions, with which I respectfully agree –

(1)  the Architect ought not to assess delay using a “coldly logical approach”, but instead should use a “practical common sense approach”, bearing in mind that the over–riding objective under the EOT clause is to grant a “fair and reasonable” EOT.

(2)  the fact that the contractor is already in delay himself is not, in itself, a sound reason not to grant an EOT; what is fair and reasonable is a question of fact to be determined according to the judgment or discretion of the Architect on the particular facts of each case.

(3)  where there is true concurrency in delaying events it may, in some cases, be appropriate to apportion responsibility for the delays between the two parties so as to arrive at a fair and reasonable assessment.

62.In view of the findings which I make later on Issues 5 to 7, it is unnecessary to decide this point conclusively and I decline to do so in the context of this particular case.  Suffice it to say that if called upon to decide it, my tentative view is that this instruction satisfies the requirements of GCC 23(1)(e) that “by reason of Architect's instructions, the completion of the works is likely to be or has been delayed beyond the Date for Completion”.  This belated instruction was bound to and did cause serious delay to the project, such that the works could not have been completed any earlier than as certified by the Architect, so that the plaintiff is entitled to “a fair and reasonable extension of time for completion of the Works”.  The contractor was thus relieved of any responsibility he might otherwise have had for the delay, even assuming that his own works were behind programme.  The EOT would thus run from 1 July 2003, albeit partly concurrent with that granted for Event 1.

63.As for the end date, the BD certified the parapet demolition work and its replacement complete by 9 September 2003, whereas the PCC was issued on 13 September 2003./p>

64.Albeit no one thought to investigate the 4-day difference with any of the live witnesses, I do receive some help from the plaintiff's formal EOT submission to the Architect dated September 2004 at page 20 which records that certain finishing works could only be completed after the BD inspection was concluded.

65.I accept this as the best available evidence and conclude that the remaining four days from 9–13 September 2003 was also caused as a direct result of Event 2.

66.Accordingly, I find that Event 2 caused delay to the works from 1 July 2003 until 13 September 2003 i.e. 74 days (of which 14 days were concurrent with Event 1).

67.The net result is that I find an EOT was justified on the facts, for the entire 84-day period from the original date for completion (21 June 2003) until PCC completion (13 September 2003), subject only to the issues below.

Issue 2 - Subject to Issue (3), has the plaintiff complied with the notice condition precedent in GCC 23?  If not, is the plaintiff irrevocably debarred from any grant of an EOT by such non-compliance?

68.GCC 23 (as amended by the SCC) continues after the part cited in paragraph 23 above as follows:

“In determining any extension of time to which the Main Contractor may be entitled, the Architect shall not be obliged to take into account any cause or event unless the Main Contractor shall have notified the Architect in the manner specified in clause 23 of the Conditions, and in addition has within 28 days of the cause or event supplied to the Architect:-

(i)  full details of the effect of the event on the progress of the works on site;

(ii)  full details of the effect of the event on other trades or activities, including the works of sub-contractors on site;

(iii)  full details of the steps to be taken by the Main Contractor to comply with his obligation to prevent the delay.

Provided that the Main Contractor's compliance with these requirements shall be a condition precedent to his entitlement to an extension of time.

(2)  At any time before the issue of a Final Certificate in respect of the Works the Architect shall be empowered, either upon the application in writing of the Main Contractor or Employer or upon his own motion, to review and amend in any manner whatsoever any previous decision made under sub-clause (1) or sub-clause 22(3) PROVIDED THAT in relation to such previous decision the Main Contractor has fully complied with the requirements of this clause.”

69.It is thus expressly provided that the plaintiff's compliance with the requirements are a condition precedent to his entitlement to an EOT and that the requirements are that the plaintiff, once delay is reasonably apparent, shall forthwith give written notice of the delay and within 28 days supply full details of the effect on site progress to his works as well as to other works and activities and of the steps proposed to prevent (or mitigate) the delay.

70.As to Event 1 (block work walls) the plaintiff relies on two letters written on 23 and 26 April 2003, within the 28-day limit, as complying with the condition precedent.  Those letters refer to the following matters:

(1)  that the revised approved plans received by the plaintiff on 11 April 203 revealed the change to lightweight blocks;

(2)  to avoid abortive works, all related site works are stopped until the matter is sorted out by the defendant/Architect with the BD;

(3)  that the whole site is waiting for the defendant's instruction whether or not to demolish the walls already constructed (about 30%);

(4)  that the issue affects the work programme (i.e. it is a critical); and

(5)  the plaintiff reserves the right to claim for extra cost caused thereby and the subsequent claim for EOT on this issue.

71.The condition precedent is an onerous condition inserted for the defendant's benefit and I am thus prepared to allow some latitude to the plaintiff in deciding whether those letters comply with GCC 23(1).  Clearly the amount of “full details” which can be given within 28 days, may not be as great as may be later apparent.  Nevertheless, in my view the plaintiff has clearly identified in these letters the cause of the delay, has indicated that effect is to stop all related works on site and that the delay is out of its hands until sorted out with the BD and necessary instructions are given.  There is also a specific reference to claiming an EOT for this cause of delay.

72.In all the circumstances, I find that this is a sufficient notice to comply with GCC 23(1) and that the condition precedent is thus complied with for Event 1.

73.In so far as Event 2 (parapet walls) is concerned, the plaintiff does not allege any written notice was issued.  Accordingly, subject only to Issue 3 below, the condition precedent was not complied with for Event 2.

74.I did not understand Mr Peter Graham, for the plaintiff, to argue that the clause should not otherwise be given its plain meaning and I so find.  As the condition precedent was not complied with, neither the Architect nor this court is now in a position to grant any EOT for Event 2 (subject to Issue 3).

Issue 3 - Is the defendant estopped from relying on the notice condition precedent in GCC 23 by reason of representations made by the defendant and relied on by the plaintiff to its detriment?

75.By the Rejoinder to the Reply to the Amended Defence and Counterclaim (not filed until March 2008), the plaintiff pleads that the defendant is estopped from relying on the above condition precedent so as to deny the plaintiff's entitlement to an EOT, by reason of the representations and/or promises made by the defendant and relied upon by the plaintiff viz:

(1)  After contract commencement DW1 (the project manager) of the defendant repeatedly represented to PW2 that it was not necessary for the plaintiff to formally seek EOT, as he would instruct the Architect to certify EOT until actual completion.

(2)  After the original completion date DW1 told PW2 to concentrate on mitigating the delay caused by Event 2, instead of lodging an EOT claim.  He also confirmed D would not levy LADs.

(3)  In reliance on these representations, the plaintiff put all its resources to site works and did not make a formal comprehensive submission during the contract period.

76.For the defence, Mr Douglas Lam takes two main points:

(1)  that the evidence of these representations/promises is not credible, alternatively whatever was said was not a clear and unambiguous waiver of the contract terms; and

(2)  that the representations/promises must come from someone who has authority to make such a waiver on the defendant's behalf; an agent's words (such as from a project manager) can only be relied on where he is clothed with ostensible authority to make such promises/representations on behalf of the defendant.

(1)  Did K.C. Lam make clear and unambiguous representations to waive the contract condition precedent in the EOT clause?

77.Apart from a brief reference to an assurance by DW1 that “an appropriate EOT” would be given for Event 2 which is contained in PW2's 2^nd witness statement made in September 2005, there is nothing pleaded or allegedly said until the Rejoinder dated March 2008 and PW2's 3^rd statement made in April 2008.  This is surprising, given that the defendant had been denying entitlement to an EOT and claiming full LADs since the Defence and Counterclaim was filed in August 2004.

78.In his evidence-in-chief PW2 referred to the notice letter dated 23 April 2003 relating to Event 1 and referred only to the fact that after receiving it DW1 told him that his boss did not like to see such “controversial letters” and that since they had had no problems in an earlier contract involving the same people, he thought he could rely on them and therefore “we did not issue such letters again”.

79.It was also not clear whether the alleged assurances related to not submitting formal EOT claims, rather than giving notice of delaying events in accordance with GCC 23.  Certainly I did not understand either the pleadings or the oral or written evidence to refer to the critical issue of giving notice of delay rather than pursuing EOT claims.  Similarly the evidence about assurances that the defendant would not levy LADs was less than clear.

80.Mr Graham made the point that after the letters of 23 and 26 April no notices of delay were issued for any subsequent delaying event (of which there were many) which an experienced contractor such as the plaintiff would not fail to do, absent some assurances from the other side.

81.In the end, I am left in some real doubt as to exactly what was said.  I am convinced that some assurances were given, otherwise I agree with Mr Graham that other notices would almost inevitably have followed.  However those assurances may have been rather vague, and I am not convinced they amounted to an unequivocal waiver of the contractual obligation on the plaintiff to give notices of delay within the 28-day period allowed, nor that the right to levy LADs was unequivocally abandoned for the entire period of delay.

(2) Authority to make such binding representations

82.It is well settled that an agent cannot clothe himself with authority – it must come from the principal:

“No representation by the agent as to the extent of his authority can amount to a “holding out” by the principal”: Attorney–General for Ceylon v. Silva [1953] A.C. 461 at 479.

83.Unless there is actual evidence of authority (in this case there was none), the question is one of fact in all the circumstances, including in particular the position in which the principal has placed the agent and the usual authority of that type of agent: see Bowstead and Reynolds on Agency (8^th Ed.) para 8 – 018.

84.Specification Preliminaries 3.06 provides as follows: –

Project Manager

The Project Manager shall have access to all parts of the works at any time and may issue instructions through the Architect to the Main Contractor as may be necessary for the proper execution of the Works in accordance with the drawings and specifications.  He will be readily available to assist in the co–ordination of the progress of the contract …. to ensure that the work proceeds smoothly and expeditiously.

85.The principal functions of the Project Manager are thus to supervise and co–ordinate the works, but he may only issue instructions through the Architect.  I bear in mind that under GCC 2 and GCC 10, any oral instruction of either the Architect or the clerk of Works must be confirmed in writing.

86.Albeit PW2 for the plaintiff and DW1 for the defendant were the principal points of contact between the two sides, both of them emphasised that important decisions, especially involving money, would need to be referred to their respective “bosses” for approval or confirmation.

87.Two aspects of the evidence from PW2 troubled me in particular.  After receiving the first letter giving notice of delay on 23.3.2003, PW2 said the DW1 told him that his boss did like to receive such letters and that the plaintiff should just get on with the work and appropriate extension of time would be granted later.  It was not entirely clear to me whether this was a direct message from his boss or whether this was DW1's own impression of his boss' feelings.

88.This concern was reinforced when it was put to PW2 in cross–examination that the alleged promise not to levy LADs was never mentioned in correspondence.  PW2 replied that if he had written such a letter “it would put KC Lam on the altar table” i.e. would get him into trouble with his boss.  If DW1 was merely passing on messages which truly came from his boss, how would confirming such messages get DW1 into trouble?

89.In the end, I was left in very real doubt as to whether whatever was said came from or even appeared to come from DW1's boss and consequently I was not satisfied that DW1 had any actual or even ostensible authority to make the alleged representations or promises on behalf of the defendant.

90.Accordingly, for both the above reasons, I am not satisfied either in fact or in law that an estoppel or waiver operates so as to relieve the plaintiff from giving contractual notices of delay pursuant to GCC 23.

Issue 4 – Whether or not the Architect validly granted an EOT of 65 days in March 2004, does this court have the power to re-open, review and revise the grant of an appropriate EOT?

91.As a first point, it must be noted that the contractual machinery in GCC 23 does not actually require the plaintiff to apply for an EOT – all that is required is for the plaintiff to give written notices of the cause of delay and it is then up to the Architect “so soon as is able” to estimate and grant the appropriate EOT.

92.Nevertheless, the practice seems to have grown up for contractors to submit “formal” EOT claims before the Architect actually considers the claim.

93.In this case, the formal EOT submission was not made by the plaintiff until September 2004 and then only after receiving the Defence and Counterclaim pleadings in this action, when (the plaintiff says) it became apparent for the first time that no EOT was going to be granted and indeed full LADs were being claimed.

94.The Architect finally responded by letter dated 8 March 2005 in these rather curious terms “We summarize hereunder a brief cause of the delay event with which granting of EOT is recommended in accordance to the captioned contract for your consideration”.  The Architect then proceeded to “recommend” an extension of time of 30 days for Event 1 and 35 days (consecutive) for Event 2 but without giving any indication as to how those periods were calculated.  The letter then concluded “Of the causes of delay stated above, after our close examination, we estimate the length of the delay beyond the Date of Completion which granting of EOT recommended are total 65 calendar days”.  There was no hint of consideration of the condition precedent in this letter.

95.It was reasonably clear to me from this letter that the Architect misunderstood his duties under the contract and, instead of making an extension of time for completion of the works, he recommended that the owner grant the EOT, whilst ignoring the condition precedent requirements.

96.Mr Lam thus submitted that this was not a contractual grant of an EOT, but merely the Architect's recommendation and that no EOT should have been granted anyway for failure to comply with the condition precedent.

97.Mr Graham faintly suggested that this was a proper grant of an EOT by the Architect, but then maintained that it was too short.

98.In the event, neither side asked me to apply the Architect's assessment as it stood and both sides invited me to re–open the matter.

99.After considering the speeches of their Lordships in Beaufort Developments (N.I.) Ltd. v. Gilbert–Ash N.I. Ltd. [1999] 1 A.C. 266I am satisfied that, as a judge, I have similar powers to an arbitrator to open up, review and revise the Architect's decision regarding the appropriate extension of time (if any) under GCC 23, which is the exercise I have already performed above.

100.The decision (if any) of the Architect in March 2005 then falls away, except to note that he was prepared to recommend an EOT albeit for opaque reasons.

101.The related question as to whether I have power to issue the Architect's certificate under GCC 22 is by no means so straightforward and is dealt with under Issue 6 below.

LIQUIDATED AND ASCERTAINED DAMAGES (“LADs”) ISSUES

Issue 5 - On a proper construction of GCC 22, is the defendant entitled to levy LADs simply if the date of completion is not achieved or is a Certificate of Non-Completion (“CNC”) a further pre-requisite, requiring an independent exercise of judgment by the Architect/the court, going beyond the fact that an EOT has or has not been granted?

102.Taking stock of this judgment so far, the position is as follows.  Accepting that I have power to reconsider the appropriate EOT which the Architect should have granted under GCC 23 (Issue 4), I have found that the plaintiff gave sufficient notice of delay to comply with the condition precedent for Event 1 but not Event 2 (Issue 2).  Since no operative waiver of the clause has been established for Event 2 (Issue 3) the only extension of time I can grant is for Event 1, which I have assessed at 24 days, thereby extending the Date for Completion until 15 July 2003 (Issue 1).  There is thus a potential exposure to LADs until Practical Completion was certified on 13 September 2003 i.e. for 60 days at $50,000 per day.

103.As amended by the SCC, GCC 22(1) provides as follows –

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 Contractors 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.

104.After providing for a power of review in subsection (2), GCC 22(3) provides –

In the event that, in the period subsequent to the Date for Completion of the Works, the progress of the Works is delayed by the occurrence of any of the causes referred to in paragraphs (e), (f), (h), (i) or (l) of sub-clause 23(1), the Main Contractor shall not be entitled to any extension of time for completion of the Works, but, subject to compliance by the Main Contractor with the requirements of clause 23, the Architect shall as soon as he is reasonable able to estimate the length of that portion of the overall delay to completion of the Works occasioned by the occurrence of the said causes, certify the length of the said portion and, upon the issue of the said certificate, the Main Contractor shall be relieved of the obligation to pay or allow Liquidated and Ascertained damages in relation to the portion of delay so certified and the Employer shall repay to the Main Contractor any Liquidated and Ascertained Damages already paid or allowed in respect of the said portion of delay.  No cause of delay arising after the Date for Completion of the Works (as extended or adjusted as aforesaid) shall entitle the Main Contractor to any extension of time, set time at large or (save as set out in this sub-clause) prejudice or invalidate the Employer's right to the payment or deduction of Liquidated and Ascertained Damages.

105.According to the plain wording of GCC 22(1) two conditions need to be satisfied before the Main Contractor is liable to pay LADs to the Employer viz.

(1)  The Main Contractor fails to complete the Works by the original or extended Date for Completion, and

(2)  The Architect certifies in writing that in his opinion the same ought reasonably so to have been completed (emphasis added in italics).

106.Mr. Douglas Lam argued forcefully that these conditions should be applied only after considering both GCC 22 and GCC 23, especially in the light of the SCC amendments.  In particular, he submitted that GCC 23 laid down a clear protocol for assessing EOT, which is and was intended to be conclusive of such matters.  Consequently, he argues, if no extension of time is in fact granted, for whatever reason, then the Architect is bound to certify that the Works ought reasonably to have been completed by the Date for Completion (as may be extended).

107.He further drew my attention to the judgment in Hong Kong Institute of Education v. Aoki Corporation (No. 2) [2004] 2 HKC 397where Mr. Justice Reyes (at paras. 91–96), despite the virtually identical wording of GCC 22(1), declined to grant the Main Contractor leave to appeal the arbitrator's refusal to relieve the Main Contractor of LADs, even though the judge accepted, as a fact, that Architect's Instructions were issued that would have accounted for almost all of the period in which LADs were claimed.

108.One of the principal complexities of construction law is that previously decided case law is rarely determinative, even of an identical issue for the simple reason that the conditions of contract are rarely identical; and increasingly so, in modern times, where the various standard form contracts are almost invariably heavily amended by the S.C.C. for each particular contract.  Thus Lord Wright in Luxor v. Cooper [1941] A.C. 108 at p. 130 observed –

“To some extent decisions on one contract may help by way of analogy or illustration in the decision of another contract.  But however similar the contracts may appear, the decision as to each must depend on consideration of the language of the particular contract read in the light of the material circumstances of the parties in view of which the contract is made”

109.Condition (2) in GCC 22 owes its origin to the 1963 JCT form of contract.  In my view, it is not without significance that the 1980 JCT form of contract deleted condition (2) and replaced it with these much simplified opening words –

“If the Contractor fails to complete the Works by the Completion Date then the Architect shall issue a certificate to that effect”.

110.In their commentary on the revised JCT form, the learned editors of Keating on Construction Contracts (8^th Ed.) at para. 19–118 have this to say –

“The nature of the certificate under Clause 2.31 is significantly different from that formerly issued under Clause 22 of the 1963 Form.  Clause 22 required a certificate of the Architect that “in his opinion [the Works] ought reasonably … to have been completed” by the Date for Completion is extended.  The giving of that certificate required, it is thought, the expression by the Architect of a judgment and opinion independent from and additional to that required of him in granting extensions of time.  This opinion reflected the law as exemplified by Peak Construction v McKinney Foundations to the effect that liquidated damages are not payable under a building contract if the Employer causes delay to the completion of the works in circumstances where the contract does not provide for an extension of time for completion.  In those, and perhaps other circumstances, the Architect might conclude that he could not certify that the Contractor ought reasonably to have completed the Works by the extended Completion Date.  Clause 2.31 provides for a certificate which requires no additional exercise of judgment by the Architect.  It is a simple statement that the Contractor has failed to complete the Works by the Completion Date (as extended, if appropriate).” (Italics added)

111.Given the antiquity of condition (2) and its appearance in so many forms of building contracts, it is rather surprising that there is, apparently, no decided case as to the meaning to be given to these words.

112.If, as Mr Lam in effect contends, the words add nothing to condition (1), one wonders why they have been included at all.

113.In the absence of binding authority or guidance as to the meaning to be attributed to condition (2), the exercise in construction begins with a careful examination of the language used.  The use of the italicised words “in his opinion” and “reasonably” lead me to conclude (in agreement with Keating) that the Architect is required to form and express an opinion of his own that the Works ought reasonably to have been completed by the specified or extended Date for Completion, which goes beyond the mere consideration of whether or not any EOT has been granted.

114.Albeit, in most cases, this opinion will likely coincide with the related opinion he has probably already reached as to the appropriate EOT, this will not necessarily be the case.

115.Take this case as an example.  The Architect may be driven by the language of GCC 23 to conclude that he cannot grant an EOT, no matter how clear on its merits, simply because the Main Contractor has not complied with the condition precedent as to notice.

116.Nevertheless, when he comes to form an opinion under GCC 22 as to whether he should certify that the works ought reasonably to have been completed by a specific date, is the Architect not entitled or even obliged to take into account the fact that the contractor was ordered to execute certain variation orders (Event 2), which could not possibly be completed by the specified date, and accordingly to refuse to issue the certificate?

117.Even if such a meaning is fairly clear on the face of the words used, Mr. Lam then invited me to follow certain authorities which suggest that even clear prima facie meanings should be modified or even ignored, when examined in the overall context of the agreement concluded: see e.g. Hornburg Hortionport BV & Ors v. Agrosin Private Ltd. [2004] 1 A.C. 715 at paras. 9–13.

118.Mr Lam then suggested that the various amendments in the SCC to GCC 22 and GCC 23 made it clear that no further independent opinion of the Architect could or should be employed, beyond considering whether an EOT should be granted.

119.In my view this submission simply assumes the intended result and then strains the language to fit it.

120.For myself, I see nothing necessarily inconsistent in the parties setting down certain contractual conditions which have to be met before an EOT is granted (GCC 23) and then further agreeing that LADs are only payable, so long as the Architect certifies that the Works could reasonably have been completed by a specified date (GCC 22).

121.I further bear in mind that the 2 issues are not entirely two sides of the same coin.  For example, without an EOT, the contractor may be unable to recover the associated cost (prolongation costs), irrespective of whether the Employer is entitled to LADs; thus a loss to one side may not always be a corresponding gain to the other.

122.In the Aoki case referred to above, Mr Justice Reyes noted that GCC 22 had been “heavily revised” by the SCC and set out the relevant provisions in full.  In particular, sub–clauses (3) and (4) and the proviso (which do not correspond with the present form of contract) expressly provided that Architect's Instructions (“AIs”) issued when the Contractor was already in culpable delay would not relieve him of the obligation to pay LADs, except for any period where “critical delay” was caused by the AIs.  Consequently, the Aoki case does not assist Mr Lam when construing quite different contract terms.

123.In this case, the only clause which gave me pause for thought, against following the plain meaning of the words in Condition (2) was GCC 23(3).

124.The principal purpose of this sub-clause seems to be to prevent time being set at large and thus defeating the Employer's entitlement to LADs by AIs or variation orders issued after the Contractual Date for Completion.  In simple terms, it provides for relief from LADs, but no EOT, in those circumstances.

125.Mr Lam submitted that the rather different certificate which the Architect is empowered to issue under GCC 22(3) is specifically made “subject to compliance by the Main Contractor with the requirements of clause 23”, which (as amended) includes the condition precedent as to notice.

126.It has to be said that it is rather odd that the Architect's certificate under GCC 22(3) for delays occurring after the Contractual Date for Completion is subject to compliance with the condition precedent in GCC 23, whereas (arguably) there is no such requirement before issuing the Architect's certificate under GCC 22(1) for delays occurring before the Date for Completion arrives.

127.Nevertheless, this oddity has not driven me to modify the meaning of Condition (2) to that contended for by Mr Lam.  In the first place, there is, strictly speaking, no need for me to consider GCC 22(3).  It is not applicable to this case, now that I have determined under Issue 1 that the Date for Completion is extended to 15 July 2003 and Event 2 occurred as from 1 July 2003, since GCC 22(3) only relates to delays occurring subsequent to the Date for Completion.

128.Even if I had to consider it, there is no reason, in principle, why the parties cannot agree that pre and post Completion Date delays be considered in different ways.  It may be rather odd, but if the parties have so agreed, using plain words, it is not for the courts to re–write the bargain in to which the parties have chosen to enter.  It may well be that the defendant now wishes that it had deleted or amended Condition (2), when drafting the amendments in the SCC, but that is an exercise in wishful thinking, not of construction of the contract.

129.As a final point, I am not entirely convinced that the condition precedent is actually imported in to GCC 22(3).  The condition precedent only applies when “determining any extension of time to which the Main Contractor may be entitled”, whereas GCC 22(3) specifically provides that “the Main Contractor shall not be entitled to any extension of time” for post Completion Date delays.  It is thus arguable that the condition precedent does not apply.  However, I do not need to decide this point in view of the other conclusions reached above.

130.I thus conclude that condition (2) of GCC 22(1) does require the Architect to form an independent opinion, which goes beyond the fact that an extension of time has or has not been granted under GCC 23.

Issue 6 - Does this court have the power to issue a CNC itself (or waive the requirement for one), in circumstances where the Architect has not done so and has never been asked to do so?

131.LADs cannot be levied under GCC 22(1) without the Architect's certificate and, in that sense, it is settled law that such a certificate is a condition precedent to the defendant's right to payment see Pyrok Industries Ltd. v. Chee Tak Engineering Co. Ltd. [1988] 41 BLR 124 and J.F. Finnegan Ltd. v. Community Housing Association Ltd. [1993] 65 BLR 108 at 113.

132.The agreed facts are that –

(1)  The Architect has never purported to issue such a certificate.

(2)  This is not a case where the Architect has issued a non–complying certificate after being asked to do so.

(3)  The final account has still not been drawn up and the Contract hence still subsists.  I was informed from the Bar table, during closing submissions, that the Architect was belatedly asked, for the first time, to issue such a certificate on the second day of the trial, but had not yet responded when the trial hearing concluded 9 days later (on 15 January 2009).  However, this is now subject to post script at paragraph 150 et seq. below.

133.The House of Lords in Beaufort Developments were concerned with the question whether Interim Payment Certificates (“IPCs”) issued during the course of the contract could be re–opened and revised, not only by an arbitrator, but also by the courts.  Having noted that such certificates (unlike the Final Certificate) were not provided for as conclusive evidence of the matters certified, Lord Steyn succinctly concluded (at page 270G)

“There is no need for the contract to confer on the courts power to open up and revise interim certificates.  The power already exists, as part of the court's ordinary power to enforce the contract in accordance with its terms”.

He also held that the giving of such a specific power to the arbitrator under the arbitration clause did not operate so as to exclude the court's power (page 271 C).

134.However, what I am asked to do in this case, is not to open up and revise an IPC or some other interim certificate, or even to state entitlement to such a certificate where the Architect, on request, has failed or refused to issue one.  Instead, I am invited to exercise the Architect's power for myself and to decide whether, in my opinion, the works ought reasonably to have been completed by the Completion Date, presumably as extended by my determination in Issue 1 above.

135.When considering this question I bear in mind the unusual nature of a construction contract, which provides for the obligations, not only of the parties i.e. the Main Contractor and the Employer, but also of the Employer's agent, the Architect, who is not himself a party to this contract, but is given various certifying powers, which he is expected to exercise impartially.

136.In the ordinary way, if the Employer is dissatisfied with the way his agent has or has not carried out his duties, he would presumably sue the agent directly: see e.g. Wessex Regional Health Authority v. HLM Design Ltd. [1995] 71 BLR 32.  If one talks about the court's “ordinary power to enforce the contract in accordance with its terms”, it seems rather odd for the Employer to sue the Main Contractor (in this case by way of counterclaim) for something this own agent (the Architect) has failed or omitted to do, more especially when the agent has never even been asked to perform the duty (until apparently at the last minute).

137.Even if this matter were being heard as an arbitration, the problem may still arise.  In this case the arbitration clause (GCC 35) specifically provides inter alia

“(1)  Provided always that in case any dispute or difference shall arise between the Employer or the Architect on his behalf and the Main Contractor, …. as to any matter or thing of whatsoever nature arising thereunder or in connection therewith (including any matter or thing left by this Contract to the discretion of the Architect or the withholding by the Architect of any certificate to which the Main Contractor may claim to be entitled …..) then such dispute or difference shall be and is hereby referred to the arbitration and final decision of a person to be agreed between the parties….

(3)  Subject to the provisions of clauses 2(2) and 30(7) of these Conditions the Arbitrator shall, without prejudice to the generality of his powers, have power to …. ascertain and award any sum which ought to have been the subject of or included in any certificate and to open up, review and revise any certificate, opinion, decision, requirement or notice and to determine all matters in dispute which shall be submitted to him in the same manner as if no such certificate, opinion, decision, requirement or notice had been given.”

138.Thus GCC 35(1) talks about disputes arising between “the Employer or the Architect on his behalf (on one side) and the Main Contractor (on the other side)”.  It then goes on specifically to refer to matters left to “the discretion of the Architect or the withholding by the Architect of any certificate to which the Main Contractor may claim to be entitled”, but says nothing about certificates to which the Employer may claim to be entitled.  On the fact of it, GCC 35(1) does not apply to the present “dispute”.

139.As for GCC 35(3), this is not a case of “ascertaining any sum which ought to have been the subject of or included in any certificate” since the certificate in question under GCC 22 does not ascertain any sum – it merely certifies that the works ought reasonably to have been completed by the Date for Completion.

140.As for the power to “open up, review and revise any certificate, opinion or decision”, there is, as yet, no certificate in existence and also no evidence that the Architect has ever formed any opinion or made any decision, so that there is nothing to open up, review or revise.

141.In this context I note the observations of Mr Justice Hunter in Hsin Chong Construction Co. Ltd. v. Hong Kong and Kowloon Wharf and Godown Do. Ltd. HCA 283 of 1984 at paras. 7–9.  In that case, the Architect failed, despite repeated requests by the Main Contractor, to issue his maintenance certificate.  After several months, the Main Contractor referred the issue to arbitration, as to whether the maintenance certificate ought to have been issued by a particular date.

142.At paragraph 9, Mr Justice Hunter held that this was a personal function of the Architect and there was no way he could be displaced from the performance of that function.  He further held that a similar arbitration clause did not give the Arbitrator power to issue the certificate himself; the arbitrator could only decide the issue referred namely whether the maintenance certificate ought to have been issued by a certain date, but no more.

143.I am aware that, elsewhere in that judgment, he relied on the then recent authority of Northern Regional Health Authority v. Derek Crouch Construction Co. Ltd [1984] Q.B. 664 which has now been over–ruled by the Beaufort Developments case (supra) but, as I see it, his reasoning on the extent of the arbitrator's powers is unaffected.

144.Since the issue of a GCC 22 certificate is a condition precedent to the right of the Employer to levy LADs (see above), then, unless I have the power to issue the certificate myself, the claim to LADs must fail.  Equally, I do not see on what basis the court has power to waive such a contractual requirement.

145.In this case, I do not even have the powers conferred by the arbitration clause, and I am at a loss to discern from where the power of a court to issue such a certificate is derived, or even to waive or ignore the requirement for one.

146.I am fortified in this conclusion by the judgment of Higgins J. in the Northern Ireland case of Savage Brothers Ltd. v. Shillington (Heating and Plumbing) (1985) Const. L.J. 295.  In that case the second question in the case stated was whether the claimant (in an arbitration) could sustain a claim for damages, in the absence of valid and lawfully issued certificates.  The form of contract in question contained a simple arbitration clause which merely provided for the dispute to be referred to arbitration, i.e. without giving the arbitrator any specified or expanded powers; thus the arbitrator's powers were similar to those of a court.

147.In a discussion beginning at page 304, Higgins J. relied on and followed the English Court of Appeal decision in Brightside Kilpatrick Engineering Services v. Mitchell Construction Ltd. [1975] 2 Lloyd's Rep. 493 which held that the Architect's certificate was a condition precedent to recovery and its absence was fatal to a claim for damages.

148.In so doing, he, like the Court of Appeal in Brightside, distinguished the case of Ramac Construction Co. Ltd. v. J.E. Lesser (Properties) Ltd. [1975] 2 Lloyd's Law Rep. 430 (upon which Mr Lam relied) and disagreed with the suggestions made by Mr I.N. Duncan Wallace, both as editor of Hudson's Building and Engineering Contracts and in his own book that an arbitration clause in general form empowers an arbitrator (or a court) to disregard a certificate or the absence of one and to open up and decide the matter for himself.  He then concluded –

“The proviso to clause 8(a) makes the issue by the architect of the requisite certificate a condition precedent to the claimant's entitlement to claim loss or damage for delay.  It is my view that under the terms of clause 24 of the sub-contract the arbitrator in the present case is not empowered to waive the requirements of the proviso to clause 8(a) and, because the condition precedent to the claimant's entitlement to claim has not been fulfilled, the arbitrator is not entitled to investigate the claim in respect of delay or to assess damages in respect thereof.

Moreover, the decision in Brightside Kilpatrick Engineering Services v. Mitchell Construction Limited is directly applicable to this case and….I consider, with respect, that this decision of the English Court of Appeal was correct and, for the reasons given by Buckley L. J., hold that the failure of the architect to issue in the form required by clause 8(a) of the sub-contract a certificate concerning delay by the respondent is not an issue to be arbitrated upon between the claimant and respondent under this sub-contract.”

149.I therefore hold that I have no such power and that the claim for LADs must fail in the absence of the GCC 22 certificate, which is a condition precedent to the Employer's right to levy or claim LADs.

Post Script

150.As I was about to hand down this judgment, I received a letter from the Defendant's solicitors, enclosing 2 further letters: one from the Defendant's solicitors to the Architect dated 5 January 2009 inviting the Architect to issue a CNC and the other a reply from the Architect dated 4 February 2009 refusing to issue one on two grounds, namely (1) that his assessment for a grant of EOT of 65 days remained unchanged and (2) that certain unspecified correspondence between the parties in his view fulfilled the notice requirement in GCC 23.

151.The Defendant's solicitors then suggested that this response removes any “potential jurisdictional uncertainty” the lack of a response might otherwise cause.  I was invited to reconvene the hearing, if necessary.

152.There are a number of difficulties with this belated evidence viz.

(1)  This decision self-evidently did not exist in 2004 when the Defendant filed its counterclaim.  There is thus a question mark over my jurisdiction to re-open a decision which had not been made when those proceedings commenced.

(2)  I would need to hear the parties before admitting fresh evidence at such a late stage of the proceedings.

(3)  Even if I were to admit the evidence, I have already held that a CNC is a condition precedent to the Employer's right to claim LADs and it is now clear that the Architect is never going to issue one.

(4)  The only way around this problem is for me to issue the CNC myself, or at least to find that one should have been issued and then to declare the parties' right as if one had been issued.  However, I have also found that the Court does not, in my view, possess such a power, particularly where it is the Employer suing the Main Contractor, who is not responsible (and neither is any agent of his) for issuing it.

(5)  Finally, even if I had such a power, for the reasons given under Issue 7, I would decline to exercise it.

153.For all these reasons, I decline the invitation to reconvene the hearing, to deal with this late development.

Issue 7 – If the court does have such power, should the court issue such a certificate in all the circumstances or waive the requirement for one?

154.In view of my conclusion on Issue 6 above, Issue 7 does not arise.  However, if I am wrong and the court does possess such a power or at least has the power to say that such a certificate ought to have been issued, then I go on to consider whether such power ought to be exercised in this case.

155.I observe first, on the wording of this particular clause, that the Architect only has power to certify that the works ought reasonably to have been completed by the Date for Completion, as may be extended.  No other date is possible.  Assuming I am right in my conclusions in the EOT section of this judgment, the extended Date for Completion is now 15 July 2003, and accordingly the sole question is whether, putting myself in the shoes of the Architect, in my opinion I should certify that the works ought reasonably to have been completed by 15 July 2003, bearing in mind the conclusions I reached in Issue 5 above.

156.It is clear from my findings on Event 2 above (under Issue 1), that the defendant ordered demolition of various existing parapet walls and their replacement with railings shortly before the extended Date for Completion and the defendant does not dispute that, including the time taken for BD approvals and inspections, it reasonably took about 2 months to complete this work.

157.In those circumstances, it seems to me impossible to form the requisite opinion so as to certify that works including this AI or variation order ought reasonably to have been completed by 15 July 2003.

158.Since, as already observed, 15 July 2003 is the only date for me to consider, there is no need for me to go on to consider any apportionment or issues of criticality as were necessary for the Arbitrator to carry out in the Aoki case on the much more sophisticated provisions of that particular contract, so as to arrive at some later date.

159.I therefore conclude that neither the Architect nor this court ought to issue a certificate under GCC 22(1) and for this reason too, the defendant's claim to LADs would fail.

CONCLUSION

160.Since the sums certified by the Architect are not disputed by the defendant, I order that judgment be entered for the plaintiff in the sum claimed of $4,186,253.52.

161.I further order that interest be payable on that sum, carrying interest at the usual rate of prime plus 1% starting from 30 days after each portion of that sum was certified by the Architect (and remained unpaid) in the interim payment certificates issued under GCC 30, until the handing down of this judgment and thereafter at the court's judgment rate until payment is made.

162.The counterclaim for LADs is dismissed.

163.I further make an order nisi that the defendant do pay the plaintiff's costs of this action.

164.It only remains for me to thank both counsel for their valuable assistance in this interesting case.

Mr Peter Graham, instructed by Messrs LCP, for the Plaintiff

Mr Douglas Lam, instructed by Messrs T.C. Foo & Co., for the Defendant