ISP CONSTRUCTION (ENGINEERING) LTD v. ATAL ENGINEERING LTD

HCCT 116/2022

[2026] HKCFI 4074

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 116 OF 2022

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J U D G M E N T
(PART 1 ISSUES)

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Background

1.  This is Part 1 of the part-heard Trial of this action, originally set down for 12 days, to commence on 11 August 2025.

2.  The action concerns a complex construction dispute, and directions for the filing of expert evidence were made on 3 November 2023. However, the final report on quantum by the Single Joint Expert, Mr TT Cheung (“SJE”), which was expected by 23 June 2025 ahead of the filing of the parties’ opening submissions, was not ready in time. By order dated 28 July 2025, I directed the parties to make submissions on matters as to liability only (save in relation to Lines B and D (defined below)) and for supplemental submissions to be provided once the SJE’s final report was available.

3.  I was informed that a draft expert report was sent to the parties at the early hours on Day 1 of the Trial (11 August 2025), which draft was still pending parties’ review and awaiting submissions and representations from the parties. That was obviously far from ideal and I had no choice but to adjourn the commencement of the hearing for 2 days to 13 August 2025, for the parties to consider and decide on how to proceed with the Trial and to make the best use of the 12 days allocated. Given the short notice, the parties were understandably unable to complete their review of the draft SJE report by Day 2 on 13 August 2025, and the matter was further adjourned to the next day on 14 August 2025. Unfortunately, the hearing on that day was interrupted due to the black rainstorm signal.

4.  On Day 3 (15 August 2025), the parties had helpfully identified, with reference to the Agreed List of Trial Issues, a list of Issues to be dealt with in this first part of the Trial (“Part 1 Issues”). These are set out in paragraph 44 below. Hence, this first part of the Trial only deals partially with the question of liability. The second part (with Trial resuming on 24 August 2026, set down for 5 days) will deal with the remaining questions, especially of quantum.

The contracts and the parties involved

5.  The Defendant (“ATAL”) was the Main Contractor of Hong Kong Airport Authority (“AA”) under AA Contract no C16W003 (“Main Contract”). Under the Main Contract, ATAL was responsible for carrying out Builders’ and Electric & Mechanical (“E&M”) Works for Automation of Arrival Bags Delivery, and to carry out the construction and installation of an automated baggage handling system connecting the newly constructed Midfield Terminal and Terminal 1 at the Hong Kong International Airport (“Project”).

6.  The original scope of work under the Main Contract consists of 9 “Buildings Department/BD packages” (“BD Packages”), each corresponding to a General Building Plan (“GBP”). Each of the BD Packages corresponds to one or more cost centres to which the works under the Main Contract are allocated:

BD Package	GBP	Costs Centres
P1	MFC Destination Coded Vehicle (“DCV”) Tunnel (North)	Cost Centre 8
P2	T1 DCV Tunnel (North) (“NDCV”)	Cost Centre 8
P3	MFC Tunnel Ventilation Building (“MFCTVB”)	Cost Centres 4 & 6
P4	Apron Facilities	Cost Centre 4
P5	Mid Field Concourse (“MFC”)	Cost Centre 4
P6	West Hall TVB (“WHTVB”)	Cost Centre 5 & 7
P7	T1 Remote Transfer Facilities (“RTF”)	Cost Centre 3
P8	T1 Baggage Hall	Cost Centre 2
P9	Early Bags Storage	Cost Centre 9

7.  Completion of the works of the Main Contract were to be achieved by way of 12 “Key Dates”, set out as KD-1 to KD-12 in the Schedule of Key Dates in the Main Contract. The Key Dates were calculated by reference to the number of weeks that have elapsed since the commencement date of the Main Contract. It is common ground that the commencement date of the Works under the Main Contract was 28 June 2017. For ease of reference, only the calendar date is stated below:

Key Date	Date	Status to be achieved by ATAL under the Main Contract (PS 4.2 and PS Appendix B)
KD-1	30 August 2017	“Complete final design presentation and all material submissions and obtain Project Manager review without objection”.
KD-2	13 September 2017	“Complete pre-cast concrete plinth and ductworks modification in AABD/T1/1 and AABD/T1/2 and provide access to BHS Works Contractor [Siemens‑JEC]”.
KD-5	24 January 2018	“Complete MFC High Mast Lighting, tunnel ventilation ducts trench and head of stand roads relocation works in AABD/MFC/1 area and obtain statutory approvals and consent from relevant Authorities”
KD-8	4 July 2018	“Complete MFC modification (AABD/MFC/1) works including new structural openings and canopy extension, obtain all statutory approvals and provide access for BHS Works Contractor to commence their installation on Site” “Complete MFC Tunnel Ventilation Expansion Works in AABD/MFC/1 and obtain Fire Certificate (FS), Occupation Permit (OP) and all other statutory approvals”
KD-9	31 October 2018	“Complete all works in AABD/T1/1, AABD/T1/2 and AABD/T1/3 area and obtain all statutory approvals”
KD-10	26 December 2018	“Complete West Hall Tunnel Ventilation Building Expansion Works in AABD/WHVB/1 works, including but not limited to… obtaining all statutory approvals, obtain Fire Certificate (FS), Occupation Permit (OP)…” “… Complete all structural steel platform works for BHS and provide access to BHS Works Contractor in north DCV tunnel area (AABD/NDCV/1, AABD/NDCV/2 and AABD/NDCV/3 area) except grid line 29-54 area”.
KD-11	29 May 2019	“… Complete all works in north DCV tunnel (AABD/NDCV/1, AABD/NDCV/2 and AABD/NDCV/3 area) including but not limited to testing and commissioning of all systems and obtain all statutory approvals”
KD-12	28 August 2019	“Achieve substantial completion of the Works and vacate the Site”

8.  In addition to the physical works, ATAL was required under the Main Contract to act as the Registered General Building Contractor (“RGBC”) for the Project, or to employ a sub-contractor to take up that role.

9.  As ATAL was not qualified to act as the RGBC for the Project, the Plaintiff (“ISP”) was engaged by ATAL as its subcontractor, and ATAL and ISP entered into a Subcontract (“Subcontract”) for ISP to carry out the Builders’ Work of the Main Contract (but not ATAL’s E&M Works), and to serve as the RGBC for the 9 BD packages in respect of the original scope of the Main Contract works (“Subcontract Works”).

10.  What is not disputed is that the Subcontract consists of:

(1)  A Work Order (WOBIH0022237#) dated 30 December 2017 (“Work Order”), which contains a set of General Conditions (“GC”); and

(2)  A letter of acceptance (“LOA”) issued by ATAL on 20 June 2018 and countersigned by ISP on 25 June 2018. The LOA sought to incorporate into the Subcontract by reference to a number of documents which include “The General Conditions of Contract for Building and Civil Works (Issue no 11) including its Schedules as amended by the Special Conditions of Contract”, as well as various other attachments.

11.  The Work Order refers to a “Programme of Work”, and states thereunder:

“Follow Key Date Schedule of Contract Specification Appendix B”

12.  The Work Order also expressly states that ISP, as the Sub‑contractor, “shall complete Works in accordance of (sic) the Schedule of Key Dates”, and that “liquidated damage will be applied if the Sub-contractor fails to achieve those Key Dates”.

13.  Under “Remarks”, the Work Order further states that “ISP shall carry out sub-contract works to meet construction programme of ATAL/Airport Authority Hong Kong”.

14.  Counsel for ISP in this case has highlighted as a unique feature in this case the fact that ISP, despite being the domestic subcontractor of ATAL which was the Main Contractor in the Project, was itself the RGBC of the Project, which meant (on its case) that it was ISP which had the statutory duty under the Buildings Ordinance (Cap 123) (“BO”): to supervise the carrying out of the building works or street works for the 9 BD packages; to notify the Buildings Department (“BD”) of any contravention of regulations; to undertake due diligence to ensure that the construction works do not diverge or deviate materially from the BD’s approved plans; to observe site safety under the Factories and Industrial Undertakings Ordinance (Cap 59); and to comply generally with the BO, its subsidiary legislation, and any relevant laws, codes of practice and practice notes.

Performance of the contracts

15.  Works under both the Main Contract and the Subcontract commenced on 28 June 2017.

16.  Pursuant to the BO and the Building (Administration) Regulations (Cap 123A), only BD Packages P3 and P6 in this case concerned new buildings and required the obtaining of Occupation Permits (“OP”). For the remaining BD Packages, which concerned existing buildings, OPs were not necessary for the works to be carried out and a Letter of No Objection (following the submission of a Form BA14) would be sufficient.

17.  The status of obtaining the relevant statutory approvals and consent from the BD is not disputed, or is indisputable.

BD Package	Date of form BA13/BA14 submission status as of 31 August 2020	Date of OP	Date of Letter of No Objection
P1	29 January 2024	-	-
P2	29 January 2024	-	-
P3	Submitted	3 August 2020	-
P4	Submitted	23 September 2020	-
P5	4 May 2023	-	19 October 2023
P6	19 February 2021	4 March 2021	-
P7	Still outstanding as of May 2025	-	-
P8	Still outstanding as of May 2025	-	-
P9	Submitted	-	30 August 2021

18.  It is common ground that substantial completion was not achieved by 26 December 2018 (the original KD-10) nor 28 August 2019 (original KD-12). There is also no dispute that only BD Package P3 obtained the necessary OP by 31 August 2020.

19.  According to the Agreed Chronology, by letter dated 13 November 2020, ATAL certified substantial completion of the Subcontract Works on 31 August 2020. By AA’s letter dated 16 November 2020, substantial completion of the Main Contract Works was also certified on 31 August 2020.

20.  Notwithstanding the certification of substantial completion by ATAL and AA, it is not disputed that ISP continued to remain on site to perform works including (i) carrying out the External Louvre and Cladding Works for BD Packages P5 (until around November 2020) and P7, and (ii) retaining site supervisors, safety officers, and technically competent persons on site to maintain site supervision and safety, to fulfil its role as RGBC (on ISP’s case).

21.  ISP disputes that there was substantial completion of the Subcontract Works on 31 August 2020, as purportedly certified by ATAL. On behalf of ISP, Counsel has repeatedly emphasized that there was extraordinary delay in the Project, as can be seen from the fact that whereas the Project was originally scheduled to be completed within 113 weeks (approximately 26 months) with a contractual completion date of 28 August 2019, the Project was still incomplete (on ISP’s case) in May 2025, which was around 413 weeks (approximately 95 months) after the commencement of works. It was pointed out that as of May 2025, 4 out of 9 BD Packages (ie P1, P2, P7 and P8) (according to the Statement of Agreed Facts) had yet to obtain the necessary statutory approvals, and for 2 of those packages (ie P7 and P8), the requisite Form BA 14 had not even been submitted.

22.  By reason of such delay, it was highlighted by ISP that the period of its Subcontract with ATAL had been drastically extended from 18 months (for substantial completion of its builders works, on KD 10) to 57 months, when the Subcontract was terminated by ATAL on 4 April 2022. It is on this basis that ISP claims that the Subcontract had been varied in the period for completing the builders’ works, from 18 months to 57 months, with a commensurate and significant increase in its time related works, including RGBC services and other preliminaries (paragraph 4 of ISP’s Closing Submissions). A significant part of this claim and dispute concerns prolongation costs, to which ISP claims it is entitled by virtue of the drastic extension of the time within which it was required to execute works on the Project.

Termination of the Subcontract

23.  The Work Order states that “12-month defects liability period (“Defects Liability Period”) shall be provided with effect from the date of Practical Completion Certificate issued by AAHK”.

24.  Under the Main Contract:

(1)  General Conditions of Contract (“GCC”) 1.2(k) defines “substantial completion” to mean “substantial completion excluding work in any Defects Liability Period”.

(2)  GCC 1.1 defines “Defects Liability Period” to mean “in respect of any Section or of any other part of the Works for which a Completion Certificate is issued pursuant to Clause 48, the period calculated from the date of substantial completion identified in the relevant Completion Certificate until twelve months after the date of substantial completion identified in the Completion Certificate for the Works; in respect of the Works, the expression means the said twelve months, and, in respect of work executed pursuant to Clauses 50.1 and 51.1(b) (other than work to which Clause 51.2 applies), the expression means twelve months from the date of completion of such work”.

25.  ATAL’s case is that substantial completion was achieved, as certified, on 31 August 2020, and the Defects Liability Period (“DLP”) ran for 12 months commencing on that date and ended on 31 August 2021.

26.  On 27 October 2020, ATAL issued a “Main Contract Outstanding Works List” to AA which recorded, inter alia, the outstanding works as of 31 August 2020.

27.  On 23 November 2020, ATAL issued the “Lists of Outstanding and Defective Items of Works” under the Subcontract to ISP.

28.  On 25 March 2022, Deacons (solicitors for ATAL) served notice on ISP to remedy identified breaches of the Subcontract, referring to ISP’s failure to completely rectify defective items by the end of the DLP. On 4 April 2022, Deacons purported to terminate the Subcontract, and demanded ISP to vacate the site by 8 April 2022. On the same day, ISP wrote to ATAL, to state that ATAL was not entitled to terminate the Subcontract but that it would accept ATAL’s repudiation of the Subcontract.

29.  Whether the Subcontract was terminated by ATAL’s termination, or by ISP’s acceptance of ATAL’s alleged repudiation, is disputed, but it is undisputed that the Subcontract terminated on 4 April 2022.

30.  ATAL continued to cause and permitted further builders’ work to be executed on the site between 4 April 2022 and 2 June 2022. ISP was still the RGBC on the record and it had not submitted Form BA11 to resign as RGBC in respect of the outstanding 5 BD Packages. According to ISP, it was unable to prepare the relevant Form BA11 because it had been evicted from the site.

31.  On 3 October 2022, ISP submitted its Subcontract Final Account to ATAL. ISP divided the final account into various line items:

Line	Subject matter
A	Original scope of the Subcontract Works
B	Positive variations for additional work carried out
C	Negative variations for work omitted and not carried out
D	Abortive work caused by late design changes
E	Additional RGBC services supplied to two other AA direct contractors (Siemens-JEC and Leighton)
F	Acceleration agreement for works instructed by ATAL
G	Prolongation costs
H	Contra-charges levied by ATAL
K	Omission of foul water drainage works

32.  On 19 October 2022, ATAL rejected ISP’s Subcontract Final Account.

33.  At a high level of generality, ISP’s claims in these proceedings are that the Subcontract Works were originally scheduled to be completed within 113 weeks after the commencement of the Subcontract with a contractual completion date of 28 August 2019, but remained incomplete as of May 2025, around 413 weeks after commencement of the Subcontract. On its case, the Subcontract was varied as the period for substantially completing builders’ works was significantly extended from 18 to 57 months, with increase in time‑related works, including RGBC services. ISP is therefore entitled to claim for prolongation costs for 39 months, until the termination of the Subcontract on 4 April 2022. ISP highlighted the fact that after an initial on-account payment of $3 million in around March/April 2020, ATAL had refused to pay further prolongation costs to ISP. On ISP’s case, ATAL had no ground to terminate the Subcontract on the ground of its failure to rectify the allegedly outstanding and defective items, when the DLP had not even started to run, such that ATAL’s purported termination of the Subcontract on 4 April 2022 was wrongful and constituted repudiation of the Subcontract.

34.  On ATAL’s part, it counterclaims for the additional costs of engaging other contractors to complete the Subcontract Works as a result of the termination of the Subcontract. ATAL’s case is that it is entitled to a net amount of HK$5,984,799.64 from ISP.

The disputed claims

35.  At trial, for any claim or contention which is disputed and not agreed, it must be proved by the party asserting it which bears the burden, to the requisite standard of proof on a balance of probabilities in a civil action.  

36.  In construction cases, which commonly includes in one action numerous heads of claims - for costs of work done, for variation of the contract scope and payment by reference to the contract rates of comparable work, for additional costs and expenses incurred as a result of amendment of the original scope of the contract in terms of time or work carried out, for damages represented by alleged loss of profits or the costs incurred to rectify defective work or to complete outstanding works - each claim which is disputed must be particularized and proved in accordance with the applicable contract provisions, and to the satisfaction of the Court or the expert adjudicating on the quantum dispute.

37.  This should be trite.

38.  Parties may for the sake of a commercial and speedy settlement agree on the amounts claimed in lieu of having them proved to and determined by the Court at trial, and in so doing, they may adopt a less stringent approach or standard of proof - by applying their own practical experience and based on what the parties themselves had witnessed on site.

39.  However, if the matter is to be adjudicated by litigation and upon trial, the Court must be satisfied on each and every claim made, to the requisite standard, and established by admissible and clear evidence. For matters in which the Court has no expertise, experts’ assistance will be required, as to whether works had been carried out to the contractual standard or according to what is acceptable in the trade, whether and how the works were defective, and whether the works had been completed in accordance with the specifications set out in the contract. If delay is alleged, a mere assertion is not sufficient. Unless liability for delay is admitted by the party responsible, the claimant alleging delay and the consequences it alleges will have to establish the cause of the delay, the effect of the delay on the relevant works, the period of the delay and the consequences of the delay on the claim made - be it for extension of time, or additional payment, or damages for delay. Unless there is admission of any of these matters, the Court is not in the position to reach a conclusion on the issues simply because a party asserts that there had been delay, with the consequences claimed, or by reference only to the correspondence exchanged between the parties. In lay parties’ correspondence, each party will only assert its own version of the facts, and it is rare for the documents to be conclusive. Correspondence prepared by lawyers will be argumentative and slanted to present the best case for the party. Such correspondence, exchanged after dispute has arisen, is often focused on the presentation of facts which fit into the law as the party seeks to put forward, and may not be entirely representative of the entire and actual factual matrix. If the Court was to rely on and accept such correspondence as complete evidence, that would be a trial by the parties’ correspondence, which is not reliable. Even certificates issued by the architect or other professional can be challenged if the contract does not provide for them to be final, conclusive and binding on the parties.

40.  Parties should realize that preparing a case for trial is expensive and time consuming. If they are not prepared to mediate or compromise, they must then be equipped with all the clear documentary and expert evidence to present at trial. If they come to trial without all the necessary evidence or the witnesses required, they must then accept the risk of having their claims dismissed for lack of proof. If their evidence is inadequate, then they should sensibly consider the alternative of an out-of-court settlement to avoid bearing the costs of the other side.

41.  These observations are made, because the case before this Court at trial involved disputed claims of liability and quantum, of substantial amounts in a large construction project, with pleadings not the easiest to decipher, and which ultimately resulted in an order that issues of liability and quantum had to be split when expert evidence on quantum was not ready by trial. After a trial of 12 days, Closing Submissions exceeding 100 pages were filed by each side, followed by Reply Submissions exceeding 60 and 80 pages respectively. The Scott Schedule which had been ordered with the aim of having disputed issues and each side’s arguments thereon summarized did not serve the intended purpose.

42.  Perhaps dictated by the imperfect state of the pleadings, the Court was informed about 2 months before trial that: “rather than formally amending the pleadings, the parties have agreed that they would not take issue with the other for adopting their respective latest positions as of the factual witness statements (in so far as they differ from their pleaded positions) as if they were the pleaded positions”. That was simply noted by the Court, to avoid any disruption to trial that was scheduled to take place. It is however not a practice to be encouraged, since it is contrary to the cardinal rule that it is the pleadings that define the issues in a trial and dictate the course of proceedings both before and at trial, and where witnesses are involved, it will be the pleaded issues which define the scope of the evidence and not the other way round (Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663). Despite the parties’ indication of their stance as to the pleadings, this cannot prevent the Court from making findings on the disputed issues on the basis of what has been pleaded, which is the notice given to each party of the case and evidence it has to meet.

43.  I have duly considered the detailed submissions made by both parties, and will not further lengthen the Judgment to repeat in detail all the arguments made, or the facts and chronology which are not in dispute, save only to set out as briefly as possible the details of the contract between the parties, the work involved, and the key matters in dispute (as I have done in the preceding paragraphs). I will then go straight to the consideration of the issues which the parties have framed for determination at Part 1 of the trial, with the aim of explaining my findings on the issues in the light of the pleadings and evidence.

The Part 1 Issues

44.  The parties jointly submitted an Agreed List of Trial Issues (consisting of a total of 11 issues) and an Amended List of Quantum Expert Issues. As explained, this part of the Trial only concerns the Part 1 Issues, which are as follows:

No. on the Agreed List of Trial Issues	Issue
1	Did the Subcontract Works achieve Substantial Completion on 31 August 2020? If the answer is in the negative, when, if at all, did the Subcontract Work achieve Substantial Completion?
2(a)-(c)	Is ISP entitled to: (a) A declaration that ATAL repudiated the Subcontract on 4 April 2022? (b) A declaration that ATAL is obliged to indemnify ISP and keep ISP indemnified in respect of all losses, damages and costs relating to any structures caused or permitted by ATAL to be erected, modified and/or demolished on site, for the period from 4 April 2022 until such time as a new RGBC is appointed in place of ISP, including but not limited to those losses, damages and/or costs relating to any investigation and/or regulatory action which may be taken under the BO? (c) A declaration that ATAL is obliged to indemnify ISP in respect of all losses, damages and costs relating to any contravention or breach of laws, regulations or codes of practice, as well as any death, personal injury, or property damage arising from site operations, for the period from 4 April 2022 until such time as a new RGBC is appointed in place of ISP, including but not limited to those losses, damages and/or costs relating to investigations and/or regulatory actions which may be taken by the Labour Department, the Environmental Protection Department and/or the Immigration Department?
7	As to Line F1 (the acceleration claims), is ISP entitled to payment in the amount of HK$6,830,000?
8(a)	As to each of the items in Line G: (a) Is ISP entitled to prolongation costs? If the answer is in the affirmative, what is the total number of days within each of the periods covered by Lines G1, G2, G3 and G4 for which prolongation costs are payable?
9(a)	As to each of the items in Line H: (a) Is ATAL entitled to levy contra-charges?
11(a)	As to ATAL’s counterclaims: (a) Is ATAL entitled to any of the 6 counterclaims?

45.  Of all the Part 1 Issues, only liability is disputed and quantum is not in issue.

Nature and terms of the Subcontract

46.  Before dealing with the agreed issues, it would be more helpful to first set out the dispute on the nature of the Subcontract and my analysis of the applicable terms, since this has impact on the issues which have to be determined.

47.  As summarized in the preceding paragraphs of this Judgment, ISP’s claim for prolongation costs is on the basis of a “variation of the temporal scope of the Subcontract”, as it is indisputable that ISP had continued to carry out works at the site until the date of the purported termination by ATAL on 4 April 2022. ISP claims that this was an extension of the term and duration of the Subcontract, as well as of the quantity of the time-related works carried out by ISP under the Subcontract. The time-related works included the RGBC services provided by ISP on a daily/weekly basis, and ISP had to retain site supervisors, safety officers and technically competent persons on site to maintain site supervision and safety, until the BD issued occupation permits (for packages requiring Form BA 13 submissions), and letters of no objection (for packages requiring Form BA 14 submissions). The same applied to other time-related preliminaries including staff, plant and other overhead costs.

48.  According to ISP, it was entitled under clause 3 of the General Conditions of the Work Order (“GC 3”) to seek payment for the variations in the quantity of the works carried out or provided. GC 3 states as follows:

“Changes and Variations

The Purchaser [ie ATAL] shall have the right to make changes in this Work Order, and no additional charge will be allowed unless authorized in writing by the Purchaser. If such changes affect completion or the amount to be paid by the Purchaser, the Contractor [ie ISP] shall notify the Purchaser immediately and provide proof of its cost in a form acceptable to the Purchaser.

Any alteration to or variation of this Work Order including but not limited to variations in quantity or quality will not be recognized unless covered by the Purchaser’s official Work Order or amendment thereto.”

49.  According to ISP, it is not required under GC 3 to disprove any fault on its part, to show that the variation or the extension of the program dates was caused by matters beyond its control, nor to produce any delay analysis. If ATAL claims that ISP was responsible for delay resulting in the extension of the work program, then the burden is on ATAL to particularize and establish its claim.

50.  On ISP’s case, it has established its entitlement to the additional charge under GC 3 by showing authorization in writing, notification and proof of cost in a form acceptable to ATAL. According to ISP, ATAL had in the course of the Project waived the requirement for an official work order or amendment in respect of variations.

51.  According to ATAL, the extension of the Subcontract period beyond the original completion date is not, in law or fact, a variation of the Subcontract Works on the Subcontract. It was contended for ATAL that ISP’s submission is tantamount to claiming that at the end of the original date stipulated for completion under the Subcontract, ISP would be entitled to vacate the site and to refuse further work, which would hold the main contractor and employer to ransom.

52.  According to ATAL, the Subcontract is not a fixed-term contract with any fixed temporal scope, but rather an ordinary construction subcontract whereby the contractor is required to execute and complete a physical scope of works. According to ATAL, if completion of the Subcontract Works in this case is delayed beyond the original contract period by matters for which ISP is not responsible, ISP has the usual contractual remedies: to claim for extension of time to complete its work, to claim for loss and expense, or seek general damages and a reasonable time to complete - but this in the ordinary course requires ISP to prove the cause(s) of delay, that it was not responsible for the delay, the impact of the delay on its works, and to establish its costs or expenses suffered or incurred as a result of the delay (on the usual “but for test” for recovery of damages).

53.  It was highlighted for ATAL that under the express provisions of the Work Order, ISP was required (under Remarks g) to carry out the Subcontract Works to meet the construction program of ATAL/AA. The LOA further required ISP to commence the Subcontract Works “in accordance with the relevant requirements” as stated in the documents referred to in the LOA, and in accordance with ATAL’s works program. ATAL’s submission is that rather than providing for a fixed temporal term, the effect of the Work Order and the LOA is that ISP is under the obligation to complete the Subcontract Works in accordance with ATAL/AA’s program and schedule for works as may be varied, subject always to any claim that may validly be made by ISP in accordance with the terms and conditions of the Subcontract with regard to extensions of time for completion and additional costs resulting therefrom. Counsel for ATAL also pointed out that under the Subcontract and the Key Date Schedule, it was clear that even after the builders’ work had been completed, ISP still had to remain to carry out work and also to continue its role and corresponding work as the RGBC for the Project. It was never the intention of the parties that ISP would be able to leave the site after KD 10 expires.

54.  In this regard, Counsel for ISP pointed out that it was never their case that the Subcontract was for a “fixed term”, and according to Mr Nip, whether a subcontractor is entitled to stop work and vacate the site, and/or demand additional payment after a completion date has expired, is dictated by the terms of the contract. It was emphasized that in the present case, GC 3 provided ATAL with the right to require ISP to continue working beyond the original completion date, but that this was subject to additional payment to ISP for the increased quantity of the time related costs.

55.  Although ISP and ATAL have made extensive submissions on the temporal scope or nature of the Subcontract, and on whether and what remedies are available to the parties upon the expiry of the original completion date, I have doubts (particularly given Mr Nip’s clarification) whether it is necessary to categorize the nature of the Subcontract in this case, as the real difference and dispute lies in whether the claim made by ISP was validly made under an applicable provision of the Subcontract, and whether the requirements of the relevant contractual provision have been satisfied and complied with, to enable the Court to allow the claim made by ISP.

56.  Whilst ISP maintains that it has a valid claim under GC 3, for prolongation costs, ATAL maintains that a claim for variation should properly be made under clause 52 of the General Contract Conditions (“GCC”) of the Main Contract (“GCC 52”). If there should be a claim for costs and disturbance to the progress of works, it should be made in accordance with GCC 55, while a claim for additional payment in the appropriate circumstances should be made in accordance with GCC 56 where it applies. The evidence from ATAL is that in the course of the Subcontract, the parties had been corresponding and dealing with claims made by ISP by reference to GCC 55 and GCC 56 only. It was only after the parties’ lawyers had been involved when disputes had arisen and litigation was likely, that it was claimed by ISP that they were entitled to prolongation costs under and by virtue of a claim under GC 3.

57.  It is ISP’s case that the claim provisions of the Main Contract, including GCC 55 and 56, have not been incorporated into and do not form part of the Subcontract.

Incorporation of terms

58.  ATAL relies on the LOA, which states: “All of the obligations under the Main Contract shall be on a back-to-back basis in this Sub-Contract” (“the Back-to-back Provision”). The LOA continues to state that the documents which shall form part of the Subcontract include (inter alia):

“4. The General Conditions of Contract for Building and Civil Works (Issue No 11) including its Schedule use as amended by this Special Conditions of Contract (collectively called the Conditions of Contract);

5. The Specification comprising the General Specification (Issue No 9), the General Materials and Workmanship Specification (Issue No 5 - Volumes 1, 2, 3, and 4) and the Particular Specification and its appendices (Builder’s Works only)”

59.  ISP’s pleaded case on the terms of the Subcontract is that (at para 29(3) of the Amended Reply and Defence to Counterclaim (“Reply”)) the Back-to-back Provision in the LOA must be read in the context of the original scope of the Subcontract Works of the Work Order, and only insofar as the Main Contract obligations were to be applicable to the Subcontract Works (namely, the drawings and specifications applicable to those works). It was further claimed that matters such as the Main Contract contractual mechanism as between ATAL and AA would not be imported into the Subcontract mechanism between ATAL and ISP, eg ATAL’s submissions of claims to the Project Manager of AA, the Project Manager making determinations and certifications on such claims, and the Main Contract arbitration clause.

60.  At paragraph 43(1B) of the Reply, ISP claims that the incorporation of the Main Contract General Conditions as part of the documents of the Subcontract does not mean that the Main Contract General Conditions can be read as if the defined term “Contractor” therein refers to ISP instead of ATAL, as ATAL seeks to do. In this regard, I accept the submissions made for ISP, that there is no express provision to such effect in the Work Order and LOA accepted as comprising the Subcontract, and it would require clear and ambiguous language for the court to make such a conclusion.

61.  I also bear in mind ISP’s contention, that the Subcontract makes no reference to any appointment of a Project Manager, who was only appointed under the Main Contract, whereas GCC 55 and 56 refer to the Project Manager and the opinions and decisions or instructions by the Project Manager. In this regard, ISP draws support from the case of Tridant Engineering Company Limited and Mansion Holdings Limited v Mansion Fire Engineering Company Limited & anor HCCT 3 & 66 of 1996, 15 June 2000, where the Court was prepared to find that a clause in a subcontract had been incorporated into a sub-subcontract, because no other additional party (such as the architect under the subcontract) was involved in the clause, apart from the immediate parties to the sub‑subcontract. ISP contends that in a case such as the Subcontract, where a Project Manager under the Main Contract is involved, the Court should be slow to find that such a clause is incorporated to bind a different party in the absence of clear provisions.

62.  ATAL’s contention is that the express Back-to-back Provision is wide, as it refers to “all of the obligations under the Main contract”, and is not restricted to obligations only in relation to the Subcontract Works or the scope or execution of such works. The Main Contract documents including the GCC are then expressly listed out in the LOA. In particular, ATAL highlighted the fact that item 15 of the list of documents set out in the LOA expressly refers to GCC 67, as it refers to it and states:

“Attachment 9 - Interim Payment Schedule. The payment terms should be referred to General Conditions of Contract - Building and Civil Works Issue No 11 (August 2015) Clause 67 including the Period of Interim Certificates and the Period for Honoring Certificates and based on the above Attachment 8 (Schedule of Milestones) and Attachment 9.”

63.  GCC 67 in turn contains express cross references to other GCC clauses including GCC 55.

64.  On the incorporation of documents and contract terms, Counsel for ISP referred to Hudson’s Building and Engineering Contracts at para 9-066 and 9-067:

“As in other areas of commerce, the exchange of documents which lead up to the conclusion of a sub-contract frequently contain references, often in vague terms lacking precision, showing that some other identifiable document or set of contract terms are to apply to the sub-contract. In construction sub-contracts these usually take two principal forms, namely references to a part or all of the main contract itself (or to the Main Contractor’s obligations under it, which, by implication if not expressly, the Sub-contractor undertakes to perform), on the one hand, and secondly references, often garbled and inaccurate, to some known and publicly available set of documents or standard form which it is intended should constitute the formal sub-contract conditions.

The incorporation of relevant main contract terms can give rise to considerable difficulties, where the incorporation is loosely expressed in the most general words and without any precise or careful consideration of the consequences. Each case must be separately considered to determine the precise purpose and extent to which it is desired to incorporate the term or terms of the main contract. It follows from the absence of privity between the Employer and the Sub-contractor that, without incorporation, the terms of the main contract, even though well known to both parties, cannot bind the Sub-contractor. This will be very much a question of interpretation on a case-by-case basis of often informal documentation in an endeavour to ascertain the parties’ objective intentions to be derived from the language used.

The Standard Form Sub-contracts routinely require the Sub‑contractor to observe the main contract terms and conditions as far as they relate and apply to the sub-contract works.

As a matter of first principle and in the light of the usual real-life intentions of sub-contracting parties, doubtful or ambiguous references to main contract documents or terms are much more likely to be aimed at the technical descriptions of the sub-contract work to be found in the drawings, specifications or bills of quantities of the main contract rather than at the contractual or legal provisions in the main contract documentation, it is submitted.

Even where the main contract conditions are incorporated, the sub-contract conditions will generally take precedence over the main contract conditions on any point where there is some irreconcilable difference between the two on a point expressly addressed in the sub-contract”

(emphasis added)

65.  At para 3-025, the learned authors of Hudson’s further state that:

“Sub-contracts, particularly when informally concluded by quotation and order, frequently attempt to incorporate the provisions of the main contract in vague and general language. Unless they are sufficiently explicit, these efforts may fail, because so many main contract provisions cannot be incorporated without modification, or may not apply at all, although misdescriptions of the documents to be incorporated, which are quite common in practice in construction contracts, will be disregarded if they can be sufficiently identified by evidence” (emphasis added).

66.  Counsel for ISP has also referred to this Court’s observations in Colmat Construction and Engineering Co Ltd v Minmetals Condo (Hong Kong) Engineering Co Ltd [2021] HKCFI 2184. Having considered the submissions made for the parties in this case, I have not been persuaded to alter or depart from my views, as expressed at paragraph 24 of the judgment:

“In my view, this is a classic example of a party purporting by vague terms to make inaccurate and garbled references to sets of documents comprising the Main Contract and the Subcontract in this case, and these ambiguous references should be rejected as due incorporation of those documents into the Contract between the Plaintiff and the Defendant. What is required should be a carefully expressed intention to incorporate, in clear and precise terms, the conditions which are to have contractual effect in the parties’ relationship. I cannot find such clear intention from the language used in the Contract. A contracting party should be clear as to the terms which bind it to the agreement, and should not be left in doubt as to the legal consequences this carries. Nor should its counterparty be able to rely on a bundle of documents randomly sent, and to pick and choose, after the event, which documents to rely on, on the basis of vague and garbled language used at the time of the agreement” (emphasis added).

67.  As Counsel for ISP submitted, and I agree, the mere reference in the LOA that “the obligations” under the Main Contract shall be on a back-to-back basis in the Subcontract does not justify or mean a wholesale incorporation of all the terms of the Main Contract into the Subcontract, as if they were to apply automatically to ATAL and ISP mutatis mutandis. Even the reference to and the incorporation of GCC 67 and the payment terms of the Main Contract is not sufficient to incorporate other terms. It is still open to argument and hence subject to tremendous uncertainty, whether any particular term may directly or indirectly affect payment or be relevant to payment, so as to be necessarily included as a term of the Subcontract. There must be sufficiently clear and unambiguous reference to the provision for incorporation. As Counsel for ISP submitted, the reference to payment terms in Item 15 of the LOA, including “the Period of Interim Certificates and the Period for Honoring Certificates”, clearly relate on their face to the timing of the payments, rather than to the scope of the claims that may be made.

68.  Considering the terms and conditions set out in the Work Order and the LOA, I am not satisfied that GCC 52 (on variations), 54 (on valuation), 55 (on cost and disturbance to the progress of works) and 56 (on additional payment) have been incorporated into the Subcontract. As analyzed by Counsel for ISP, the Back-to-back Provision follows the phrase in the LOA which reads: “Detailed scope of works shall refer to documents that form part of this Sub-contract.” The intention of the incorporation or reference must be to identify the scope of works only. The “obligations” under the Main Contract (the language used in the Back-to-Back Provision) should fairly be understood to refer to the obligations in relation to the works to be executed. However, as Counsel for ISP pointed out, GCC 55 confers on the Main Contractor the right to claim loss and expense, as opposed to any obligation on its part, or on the part of the employer. In the same vein, GCC 56 provides for the entitlement and right of the contractor to claim additional payment.

69.  Counsel for ISP highlighted the key role of the Project Manager under the Main Contract and the claim mechanism thereunder. Under GCC 52.1, 54.1 and 55.1, the Project Manager was empowered to instruct and assess variations and other claims, and ATAL as the Main Contractor was required to submit notices of claims to the Project Manager for additional payment under GCC 56.1. In undertaking its functions, the Project Manager was to act fairly and reasonably within the terms of the Main Contract. However, no Project Manager was appointed under the Subcontract, which does not provide for the authority, rights or obligations of the Project Manager with respect to ISP’s claims under the Subcontract. It was highlighted by Counsel that it is common ground that, as a proper construction of the Subcontract, ISP’s financial entitlements under the Subcontract are independent from ATAL’s financial entitlements under the Main Contract, and that ISP’s financial claims are to be assessed and determined by ATAL, and not by AA (paragraph 70.3 of the Re-amended Defence and Counterclaim). This lends support to ISP’s submission on the Back-to-back Provision, against the incorporation of the GCC claim provisions of the Main Contract.

70.  I do not accept the contentions made for ATAL, that references in the Main Contract to “Employer” and “Contractor” can be read, for purposes of the Subcontract, to mean “Main Contractor” and “Sub-Contractor” mutatis mutandi. As Counsel for ISP pointed out, there are provisions where such reading simply would not work and were not in fact applied to ISP, GCC 11, GCC 12 and GCC 15 being examples. These provisions in the Main Contract which require the execution of Articles of Agreement between AA and ATAL, the provision of monthly progress reports and a bond, were not in fact applied to ISP, which was never asked to sign the Articles of Agreement, nor to provide a bond, or the monthly progress reports.

71.  ATAL and ISP may have referred to some of the GCC provisions in their correspondence, but the evidence is not unequivocal in showing that they both agreed that these should form part of the Subcontract. On ISP’s part, it was claimed that they had referred to GCC 55 and 56 at ATAL’s request, for facilitating ATAL’s submission of claims to AA under the Main Contract. In any event, I accept the submissions made for ISP, that even if a party or the parties had, by their conduct after the conclusion of the contract, mistakenly referred to or relied on a provision which was not agreed and which does not form part of their agreement as a matter of law, the incorrect reference cannot alter or add to what they had actually and expressly agreed.

72.  GC 3 makes clear provision for ATAL’s right to make changes to the Work Order, and for when and how additional charges can be allowed for such changes. On its face, GC 3 can operate independently of the GCC variation and cost provisions. Reading the Work Order and the LOA holistically and in the context of the case, I cannot agree that the parties’ intention was for the relevant GCC provisions contended by ATAL to apply to the Subcontract.

73.  Whether ISP has established a claim under GC 3, and whether and how delay comes into issue, will be dealt with below under the claim for prolongation costs.

74.  I turn then to consideration of the Agreed Part 1 Issues.

Did the Subcontract Works achieve Substantial Completion on 31 August 2020?

75.  Even by the time of Closing submissions, there was still dispute as to whether there was common ground between the parties so far as “substantial completion” of the Subcontract is concerned. According to ATAL, ISP changed its case on substantial completion in Closing, by making a distinction between substantial completion of builders’ works under the Subcontract by KD 10, and substantial completion of the Subcontract Works by KD 12 which (according to ISP) is a new case.

76.  The pleadings will have to define the respective case of the parties and what was put in issue.

77.  The relevant pleading at paragraph 41 of the Statement of Claim (“SOC”) is as follows:

“(2) The substantial completion of the Subcontract Works in respect of all 9 BD packages was programmed to be achieved, to all practical intents and purposes, by KD-10 (i.e. 26^th December 2018, Day 547).

(2A) All builder’s work were programmed to be complete by such time with the sole exception under Cost Centre 8 of structural steel platform works in the north DCV tunnel area (AABD/NDCV/1, AABD/NDCV/2 and AABD/NDCV/3 area) between grid lines 29 to 54.

(3) The original subcontract period was, effectively, anticipated to run from 28^th June 2017 (Day 1) to 26^th December 2018 (Day 547), or a duration of some 18 months.”

78.  The Re-amended Defence and Counterclaim (“Defence”) pleads to the above at paragraph 12.5 as follows:

“(b) It is averred that Schedule of Milestones of the Main Contract further the Schedule of Key Dates of the Main Contract provides that the Builders Work under Key Date 11 is all work in the NDCV Tunnel (areas AABDNDCV/1 AABD/NDCV/2 & AABD/NDCV/3) that is not separately identified as being included in Key Dates 1 to 10.

(c) It is further averred that, pursuant to the Schedule of Milestones of the Main Contract further the Schedule of Key Dates of the Main Contract, the following minor items of work in the aforesaid areas of the NDCV Tunnel (Cost Centre 8) were programmed to be completed by the 18^th month after the commencement of the Main Contract (and therefore of the Sub-Contract):

(i) the structural steel platform works in the NDCV Tunnel between grid lines 29-54:

(ii) completing the installation of fire shutter, smoke curtains and smoke outlets;

(iii) construction of lift shaft for installation of a goods lift;

(iv) construction of a circulation staircase leading from level 2 to level 1 of NDCV Tunnel; and

(v) removing and seal off existing unused access hatches.”

79.  From the above, the pleadings were on the basis that the “Subcontract period” was originally for 18 months, up to KD10, and that (as per paragraph 41(2) of the SOC), substantial completion of the Subcontract Works was also to be achieved by KD 10, 26 December 2018.

80.  As ATAL highlighted, that was what they had pleaded to.

81.  Counsel for ISP accepts that there is common ground between the parties that “builders’ works under the Subcontract were programmed to be substantially completed by KD 10, leaving minor works to be completed by KD 11” (para 90 (ii)) of ISP Closing), but he sought to argue (at para 91 of ISP Closing) that “substantial completion of the builders’ works under the Subcontract (KD 10) should not be conflated with “substantial completion of the Works” (KD 12)”, which is said to be central to resolving the issue of substantial completion under Issue 1. This should be contrasted with the pleading at paragraph 41(3) of the SOC, that “the original subcontract period” was from 28 June 2017 to 26 December 2018 (KD 10), for a duration of 18 months, which can only mean that substantial completion of the entire Subcontract Works takes place at the expiration of this original period of duration.

82.  Looking at the evidence on the Subcontract documents themselves, the Work Order refers to “Programme of Work” and this states: “Follow Key Date Schedule of Contract Specification Appendix B”.

83.  There is no dispute that the Schedule of Key Dates set out in Appendix B is contained in the Main Contract itself. KD 9 refers to “complete all works” in specified areas “and obtain all statutory approvals”. KD 11 refers to “Complete all works” in other specified areas, and “obtain all statutory approvals”. KD 12 refers to “Achieve substantial completion of the Works and vacate the Site”.

84.  As Appendix B is the appendix to the Main Contract, the “Works” specified in KD 12 can only be the works which come within the scope of the Main Contract.

85.  There is no description or definition of “Work” in the Work Order issued to ISP, but under “Description”, the Work Order refers to AA’s Main Contract C16W003, “Building and E&M Works for Automation of Arrival Banks Delivery Design, Supply, Installation, Testing and Commissioning of Builder’s Works”. “Builder’s Work” at various destinations are then set out, and it is stated in the Work Order that the Sub-contractor “shall carry out the Scope of Works as described in “General Materials and Workmanship Specification (Issue No 5-Volumes 1, 23 and 4) and the Particular Specification and its appendices; (Builder’s Works only)”. It continues to state that “The Sub‑contractor shall complete Works in accordance of (sic) the Schedule of Key Dates”.

86.  Reading the Work Order as a whole document, since “Builder’s Work” was expressly termed and singled out from “the Scope of Works”, the wider term “Work” in the Work Order must mean both the building and the E&M works included within the scope of the Main Contract. The Work Order’s adoption of the Schedule of Key Dates appended to the Main Contract, without any amendment, can only mean that KD 12 of the Key Date Schedule referred to in the Work Order also refers to the entire scope of the Works under the Main Contract, and that “substantial completion of the Works” on KD 12 of the Key Date Schedule incorporated in the Work Order comprising the Subcontract can only mean the substantial completion of all the Works under the Main Contract.

87.  In ATAL’s Closing, it was accepted that ISP pleaded, and ATAL admitted, that KD 10 constitutes Subcontract Substantial Completion and KD 12 constitutes Main Contract Substantial Completion, and that ISP’s pleaded case relies on KD 10 as the basis for starting its prolongation claim from 27 December 2018.

88.  ISP itself refers to KD 10 as triggering ISP’s entitlement to prolongation costs, and KD 12 as triggering the commencement of the DLP. The latter date is relevant to questions of whether there was breach of contract and lawful termination on the basis of such breach.

89.  It is fair to point out that in its Opening, ISP had referred to the Subcontract being “programmed to be substantially completed by KD 10” (paras 21 and 111 (i) of Counsel’s written Opening), on 26 December 2018, within 18 months from the commencement date. There was no distinction between substantial completion of the Subcontract Works, and substantial completion of the builders’ works.

90.  On the facts, the Project Manager certified that both the Main Contract and the Subcontract achieved “substantial completion” on 31 August 2020. The issue in dispute is whether this can be substantiated.

91.  There is no dispute at least that it was for the Project Manager to certify substantial completion of the Works under the Main Contract, pursuant to his power to do so under GCC 48 of the Main Contract. The Work Order itself states that “12-month defects liability period shall be provided with effect from the date of Practical Completion Certificate issued by AAHK”. This can only refer to the Practical Completion Certificate for the Main Contract.

92.  GCC 48.4 provides as follows:

“If in the Project Manager’s opinion, the Works have been or any Section or any other part of the Works has been substantially completed or substantially completed subject to certain outstanding items (including, without limitation, tests) he may issue a Completion Certificate in respect of the Works, the Section or the other part of the Works and upon the issue of the certificate the Contractor shall be deemed to have undertaken to complete the outstanding items of work during the relevant Defects Liability Period by dates to be instructed”.

93.  I have not been referred to any term in the Main Contract or in the Subcontract which provides that the Project Manager’s certificate is final and binding on the parties, and cannot be challenged.

94.  ISP’s contention is that:

(1)  The Schedule of Key Dates under the Main Contract required (i) completion of all physical works, and (ii) the obtaining of OP and/or statutory approvals for BD packages P3-P9 by KD-10 (ie 26 December 2018) and those for BD packages P1-P2 to be obtained by KD-11 (29 May 2019).

(2)  By 31 August 2020, 8 out of 9 BD packages had not obtained the requisite OP and/or statutory approvals, and there was no basis for the Project Manager to certify the achievement of KD-10 on 31 August 2020 or at any subsequent dates.

(3)  The external louvres and cladding had not been completed for BD Packages P3, P5, P6 and P7, due to no fault on ISP’s part. The outstanding work for BD Packages P5 and P7 were significant.

(4)  ATAL and AA had re-written the criteria for completion under the Main Contract by purportedly certifying substantial completion, when significant works remained outstanding.

(5)  As building works were not completed on 31 August 2020, ISP’s duties as RGBC had not been completed and it continued to perform its statutory and contractual duties after 31 August 2020, for which it was entitled to payment.

95.  On the face of the relevant documents, the Completion Certificate dated 16 November 2020 certified that the Works were substantially completed on 31 August 2020, with reference to the “Original Due Date for Achievement of KD 12” being 28 August 2019. The letter dated 16 November 2020 from the Project Manager likewise referred to the “Completion Certificate for the Works” with specific reference to “KD 12”. The Works include building works (within the scope of the Subcontract) as well as E&M works within the original scope of the Main Contract.

96.  The factual or physical state of the Works as at 31 August 2020 are hardly disputable. There were outstanding physical works, and statutory approval for the works executed were still outstanding. There is dispute as to whether the outstanding works were minor, and further dispute as to whether the obtaining of statutory approval for such works as had been completed was essential to “substantial completion”, in accordance with the Schedule of Key Dates.

97.  In my judgment, the starting point must be consideration of the test accepted by the Court of Final Appeal in the case of Mariner International Hotels Ltd v Atlas Ltd [2007] 1 HKLRD 413 (CFA), at paras 13-16. The term “practical completion” was used in the contract in that case, and Bokhary PJ described such expression as “a well-known legal term of art with an established meaning in building contracts”. Neither ISP nor ATAL has sought to make any distinction between “practical completion” and “substantial completion” as used in the Agreed List of Issues in the present case. I can hardly see any real distinction. The Work Order itself referred to the date of the Practical Completion Certificate issued by AA.

98.  In Mariner, the expression of “practical completion” was recognized as being:

“routinely used to mean a state of affairs in which the works have been completed free from any patent defects other than ones to be ignored as trifling under the maxim de minimus non curat lex (the law does not concern itself with trifles)”. (emphasis added)

99.  According to ISP’s evidence, as at 31 August 2020, not only were the occupation permit for P3 and a letter of no objection for P5 outstanding, but the physical builders’ works were still incomplete. ISP relies on the evidence on the external louvre and cladding works for P5 and P7 (“Louvre Works”) which were still outstanding. According to ISP, the Louvre Works spanned over a substantial area and required installation of cladding in the upper section and louvre in the lower section, with no structural steel framing. The Louvre Works comprised structural steel work, the framing plans for which were decided by the structural consultant on the Project, and required submission to BD for statutory approval.

100.  In this regard, Counsel for ISP highlighted the fact that even Angus Wong of ATAL described the outstanding Louvre Works as “major items” in his witness statement, although he attempted to downplay his description in cross-examination, by claiming that they were only major in comparison with the other defect items.

101.  As the Court pointed out in Mears Ltd v Costplan Services (South East) Ltd [2019] 4 WLR 55 (at para 74), whether or not an item is trifling is a matter of fact and degree. The Court in Mears also pointed out that in relation to latent defects, the cases show that there is no difference between an item of work that has yet to be completed (ie and outstanding item) and an item of defective work which requires to be remedied.

102.  Having considered the evidence and the submissions made for the parties, I cannot agree that the nature and extent of the Louvre Works which were still incomplete as on 31 August 2020 can be described as “trifling”, which can be ignored under the de minimus rule. They were part of the structural steel work requiring statutory approval, and could hardly be dismissed as simple, or unimportant. The fact that the building affected may be completed and capable of practical use has been rejected by the Court in Mariner as being adequate to evidence practical completion.

103.  The above finding should be sufficient to dispose of Issue 1, but there was much argument as to whether the absence of the necessary occupation permits and letters of no objection for any part of the Works prevents the achievement of substantial completion in this case. According to ATAL, it is not uncommon for some statutory approvals to the obtained only later, in the process of the completion of physical works on site, and the obtaining of statutory approvals does not form part of the completion criteria under either the Main Contract or the Subcontract. On ATAL’s case, substantial completion only concerns the completion of the physical construction works on site.

104.  I do not doubt that in practice, parties may still be seeking and awaiting the necessary statutory approvals when the physical works have been completed. However, whether or not substantial completion or practical completion as required under the contract obviously depends on the contract conditions and requirements. Parties are free to agree on what they would regard as completion of works to a state they consider acceptable or complete, and they can so specify their standard in the contract.

105.  In this case, it is indisputable that the Work Order and the LOA which refers to the requirements stated in the Work Order incorporate and refer to the Key Date Schedule of the Main Contract, being the agreed contractual program and requirements so far as dates are concerned. An express condition of the Work Order is that the Sub‑contractor shall complete the Works in accordance with the Schedule of Key Dates, and liquidated damages will be applied if the Sub‑contractor fails to achieve those Key Dates. It further contains the condition that ISP shall carry out the Subcontract works to meet the construction program of AA.

106.  Under the Schedule of Key Dates (“Schedule”), the parties chose to particularize and describe each key date by reference to the work described in the Schedule, and the dates by which the described work was to be completed. It is clearly stated in the Schedule that: by KD 5, statutory approvals and consent from the authorities had to be obtained for the relevant work described (inter alia MFC High Mast Lighting, tunnel ventilation ducts trench and head of stand roads relocation works); by KD 8, amongst other things, all statutory approvals had to be obtained for the relevant works specified, and Fire Certificates, Occupation Permits and other statutory approvals had to be obtained; by KD 9, all works in the various designated locations had to be completed and all statutory approvals, Fire Certificate and Occupation Permits had to be obtained; by KD 11, other designated works had to be completed and all statutory approvals had to be obtained. It was in such sequence that the Schedule states that “substantial completion” of the Works was to be achieved by KD 12, for the site to be vacated.

107.  Objectively reading and construing the Work Order, the parties could only have intended, by setting out all the description of the work to be undertaken and completed by each key date, that the work to be completed and the stage to which the work should be completed before achieving the final stage of “substantial completion” by KD 12 should include the obtaining of the statutory approvals, Fire Certificates and the Occupation Permits for the designated work, as specified, and that all the specified work described should be achieved by the Key Dates specified. This is on a clear reading of the Schedule, and the express and unambiguous language used by the parties involved. The parties to the Main Contract and Subcontract are experienced in the construction field, and should be taken to know the requisite standard for statutory approval to be obtained for the relevant Works described in the Schedule. If for whatever reason they had not intended the obtaining of the statutory approval to be achievable by the Key Dates specified, and had intended or agreed that statutory approval and the relevant certificates could be obtained later, after the expiry of the Key Dates, there was no reason whatsoever why they did not make their intention clear, by excluding all the references to obtaining statutory approval by the Key Dates.

108.  I accept the submissions of ISP, that ATAL’s contention that statutory approval of the relevant works was not a criteria for completion plainly ignores the clear and express language used in the Schedule of Key Dates incorporated in the Work Order, and such contention should be rejected.

109.  On the evidence, as at 31 August 2020, not only were the Louvre Works incomplete, but 8 out of 9 BD packages had not obtained the necessary occupation permit or letter of no objection, notwithstanding the express requirements of the Schedule. Even if the Project Manager had power or discretion under GCC 48 to certify substantial completion of the Works, subject to outstanding items, if the outstanding items (stated in the certificate to include the Louvre Works) were not trifling, there was no “substantial completion” as recognized in law, and the Project Manager had no proper basis to issue the certification of substantial completion. The motive behind the certification, as alleged by ISP, is not in my judgment material, if there was no proper basis to support the certification at all.

110.  In conclusion, my finding is that substantial completion of the Works had not been achieved on 31 August 2020.

111.  On the evidence, the necessary letters of no objection for P1 and P2 had not been issued by the end of May 2025, and on my construction of the meaning of Substantial Completion for KD 12 as stated in the Schedule of Key Dates, substantial completion had not been achieved by the end of May 2025. I do not consider that I have the necessary evidence to find when all works had been completed, free from any patent defects other than ones to be ignored as trifling.

Is ISP entitled to a declaration that ATAL had repudiated the Subcontract on 4 April 2022?

112.  The Work Order stipulates a 12-month DLP from the date of the Practical Completion Certificate issued by AA. It was in reliance on the issue of the Practical Completion Certificate, that Substantial Completion had been achieved on 30 August 2020, that ATAL purported to terminate the Subcontract on 4 April 2022 on the basis that ISP had failed to rectify the outstanding defects during the DLP which commenced on 1 September 2020 and expired on 31 August 2021.

113.  It follows from my finding on Issue 1 that the DLP did not commence on 1 September 2020, and that ISP cannot be said to have been in breach of the Subcontract by failing to rectify the defects complained of before 31 August 2021.

114.  Submissions were made to the effect that the termination on 4 April 2022 also relied on the additional fact, of ISP’s failure to provide warranty certificates, mill certificates and hot dip galvanized certificates (collectively referred to as “Certificates”). In this regard, it is clear from the evidence at trial that physical works for the Louvre Works had still not been completed in April 2022, and there was no urgency for the Certificates which were for submission to the BD upon completion of the relevant works. Angus Wong sought to justify ATAL’s demand of the Certificates from ISP at the relevant time, by reference to various practical notes and Code of Practice, but these were not in evidence and there was never any plea that the said documents formed part of the Subcontract and that ISP was in breach of these requirements. On the evidence, the submission to BA for Form BA 14 in respect of the works to which the Certificates relate for P1 and P2 was not made until January 2024, and the submission for Form BA 14 for P7 and P8 had not been made in May 2025 (which was 37 months after the termination in April 2022). As Counsel for ISP pointed out, ATAL only approached the other contractors for the remaining certificates in March 2023, which was almost one year after the termination. In the light of such evidence, I accept the submissions made for ISP that the provision of the Certificates and any breach by failure to provide the Certificates, as complained of by ATAL, was not material, and was not a valid ground for the purported termination of the Subcontract in April 2022.

115.  I am not satisfied that ISP has any basis to claim that the non-provision of the Certificates was induced by ATAL’s failure to make payment to ISP. Its own financial difficulties is not an excuse to any non‑performance or delayed performance of the Subcontract, if the non‑performance and its materiality can be established.

116.  I grant the declaration sought by ISP, that ATAL had repudiated the Subcontract by its purported notice of termination on 4 April 2022.

Is ISP entitled to declarations that ATAL is to indemnify ISP in respect of works caused or permitted by ATAL and any contravention of laws from 4 April 2022?

117.  As ATAL submitted, the jurisdiction of the Court to grant declaratory relief is discretionary, and the applicant must demonstrate a genuine need for the declaration and further, that the declaration would serve a useful and practical purpose.

118.  The declarations for indemnity are sought by ISP, by reason of the fact that after the purported termination of the Subcontract in April 2022, ATAL had caused or permitted the execution of various builders works at the site, before the formal appointment of a new RGBC in place of ISP, and that ISP was at risk of incurring liability or loss as a result of any investigation or regulatory action which may be taken by the authorities under the BO, or as a result of any breach of laws, regulations or codes of practice arising from works carried out or site operations after 4 April 2022.

119.  As pointed out by ATAL, the purported termination took place on 4 April 2022, and on 28 April 2022, the authorized person of the Project had written to BD to inform BD of the fact that ISP would not continue its role as RGBC for the works in the Project, and that the works on the site had been suspended. The work which ATAL had executed or permitted on the site was minor work on the cladding and some painting work, which work had ceased on 2 June 2022. The replacement RGBC which was appointed in place of ISP was appointed in August 2022 and notified to the BD. Pertinently, since the relevant termination and works in April and June 2022, more than 4 years have elapsed and there is no evidence of any possible investigation by or of any complaint or claim from the BD or any third party.

120.  In the premises, I see no real necessity for the declaration, nor any useful purpose to make the declaration now sought.

Is ISP entitled to Line F acceleration costs?

121.  Neither the claim nor the defence can be said to be clear from the evidence.

122.  It is not disputed, that as evidenced by the “Regular Coordination Meeting Minutes” of a meeting held on 26 September 2018, additional underground utility diversion works had to be carried out, due to the discovery of the presence of underground utilities at the construction area of the WHTVB. It is not disputed that this part of the underground utility diversion works (“Diversion Work”) was not within the original scope of work for either ATAL or ISP. AA therefore invited quotations to be submitted for the relevant Diversion Work, and the diversion of various cables was subcontracted by ATAL to PCCW. Angus Wong explained in his witness statement that because it took time to complete the underground services Diversion Work, the original time for ISP’s construction of WHTVB was unavoidably shortened, and ATAL had to pay ISP “acceleration costs” in order to meet the targeted completion date for the WHTVB construction. As ISP therefore emphasized, the delay was not attributable to any fault on its part.

123.  According to Angus Wong (paragraph 166 of his witness statement), there were 4 items of ISP’s work which were to be accelerated, for which cost estimates were requested by ATAL and received from ISP:

(1)  Transformer Room No 4 & 5 with Switch Room at WHVB;

(2)  Transformer Room No 2 & 3 with Switch Room at WHVB;

(3)  Transformer Room No 1 with Switch Room and VB at WHVB; and

(4)  MFC.

124.  On ISP’s evidence, it issued three “cost estimates for expediting progress” (“Quotations”):

(1)  Quotation sent under cover of its letter dated 16 January 2019 (“Q1”), by which cost estimates were given for the Transformer Rooms No 2, 3, 4 and 5 and for the MFC, and the cost for Transformer Room No 1 was stated to be “under review”;

(2)  Quotation sent under cover of its letter dated 15 February 2019 (“Q2”), by which cost estimates were given for all the 4 work items: the costs for Transformer Rooms 2, 3, 4 and 5 being the same as those given in Q1, and the cost for Transformer Room No 1 was stated to be $3.9 million, giving a total cost of $6.83 million;

(3)  Quotation sent under cover of its letter dated 19 February 2019 (“Q3”), by which the cost estimate for Transformer Room No 1 only was given, in the same sum of $3.9 million as stated in Q2.

125.  On ISP’s case, Q3 was issued pursuant to the request made by ATAL, that the estimate for Transformer Room No 1 was to be given “separately”.

126.  Each of Q1, Q2 and Q3 were accompanied by a construction program and layout plan in respect of the works. The cover letters in question all asked for ATAL’s “early acceptance” of the Quotations.

127.  By the time of Closing, the grounds of defence maintained (according to the agreed Scott Schedule) are that:

(1)  it is unclear which Quotation, and which rooms or items of work, form the basis of the parties’ agreement on the costs;

(2)  there was no binding agreement reached as to a fixed sum to be paid to ISP; and

(3)  ISP had failed to achieve the target dates forming the basis of the acceleration.

128.  I find these grounds of defence to be rather contrived.

129.  Contrary to ATAL’s contentions, there is nothing confusing about the Quotations. There are no contradictions between Q1 and Q2, Q2 simply providing the figure which was still being reviewed and missing from Q1 (namely the cost estimate for Transformer Room No 1). Q3 singled out the cost estimate for Transformer Room No 1, as (according to ISP’s evidence) a separate quotation as requested by ATAL. Again, the figure for the Transformer Room No 1 remained unchanged and was the same.

130.  Also contrary to ATAL’s contention that Q3 somehow replaced Q1 and Q2 in respect of the work items covered, the Work Order ATAL subsequently issued for the works and the costs involved, dated 14 September 2020, referred expressly to “Additional Resources for Acceleration of Construction Works at MFCTVB and WHTVB”, namely, the location of all the Transformer Rooms as well as the location at MFC, set out in Q1 and Q2. There was no doubt that ATAL had in mind all the work and costs set out in the Quotations, and were not confined to the Transformer Room No 1 covered by Q2 separately.

131.  I accept the submissions made for ISP, that Angus Wong only claimed for the first time in the course of cross-examination, that the works and quoted costs for Transformer Rooms Nos 2, 3 and 4 were not contained in Q3 dated 19 February 2019 because by that time, ATAL had already been given access to the Transformer Rooms. This significant fact was never mentioned in his witness statements at all, which suggests that it was only an excuse given, after the event, in the witness box. Further, such a claim is contradicted by ISP’s email of 19 February 2019 which recorded ATAL’s request only to issue a cost estimate “separately” for Transformer Room No 1, and also by ATAL’s own Work Order dated 14 September 2020 which covered all the Works at MFCTVB and WHTVB. MFC was included in Q1, and not in Q3 which ATAL contends to be the only necessary and relevant Quotation.

132.  As for whether and when the Quotations were accepted by ATAL, it cannot be disputed that ATAL authorized and agreed to ISP commencing the work on site as covered by the Quotations.

133.  ATAL contends that any agreement evidenced by the Quotations was not for payment of a fixed sum to ISP but was to pay for such costs as may be substantiated and proved. Again, I find such a claim incredible. The context in which the Quotations were sought was that the utilities were discovered only in the course of the works at the site, there was already delay in the works, and it was recognized that Diversion Works had first to be carried out before ISP could continue or carry out the necessary Subcontract Works pursuant to the Key Dates. At the material time, the parties recognized that additional costs were payable to ISP, and the Quotations were asked for on that basis. If ATAL’s contention is to be accepted, it would mean that ISP would still have to prove that the work it had to carry out in order to make up for the lost time was in fact justified, before the quoted sums could be paid. In all the circumstances, it is not probable that the Quotations were considered and accepted by ATAL on the basis that ISP’s entitlement would have to be further assessed and considered later. They were for the fixed sums quoted.

134.  On ATAL’s case, the eventual works which were the subject matter of the Quotations were not completed in accordance with the agreed programme and the accelerated target dates were not in fact achieved to entitle ISP to the payment claimed. As ISP pointed out, this meant that on ATAL’s case, a condition of the agreement to pay accelerated costs was that the allegedly agreed target dates must be achieved by ISP.

135.  ISP highlighted the fact that none of the contemporaneous documents and correspondence states or records the fact that ATAL’s acceptance of the Quotations, and ISP’s claims for acceleration costs, was subject to any further substantiation or assessment, or to any target dates being met.

136.  I can understand that the acceptance of the Quotations and the agreement to pay acceleration costs would be based on a programme for the works to be carried out and completed. The Work Order dated 14 September 2020 only refers back to the Key Date Schedule, as the purpose of the costs was for the Subcontract Work to be completed notwithstanding the additional Diversion Work required.

137.  However, there has to be satisfactory evidence on the agreed programme and completion dates, before ATAL’s defence that the target dates were not achieved can succeed.

138.  In respect of the allegedly agreed target dates, I accept that there are inconsistencies in Angus Wong’s evidence as to what had been agreed, and which ISP had failed to achieve, to render ATAL’s claims in this regard unreliable.

139.  At paragraphs 166 to 171 of his 1^st witness statement, Angus Wong had referred to the different Quotations and the different construction programmes, the last Quotation and programme being dated 19 February 2019. At paragraph 172 of his statement, he referred to an updated construction programme of 20 February 2019. Another updated programme dated 12 March 2019 was referred to, at paragraph 173.

140.  Although Angus Wong was not able to specify when ATAL had agreed with ISP on the precise programme as the target dates for completion, he claimed that it was the 19 February 2019 version which had been agreed. This, however, is contradicted by the fact that in ATAL’s claim letter which purported to record ISP’s delay in providing access for ATAL’s installation works, ATAL referred to and relied on the programme submitted on 12 March 2019. He also stated in cross‑examination that the 12 March 2019 version of the programme superseded the earlier version of February 2019.

141.  In all, I cannot accept Angus Wong’s evidence, that ATAL and ISP had agreed on target dates for the work covered by the Quotations, and that these allegedly agreed target dates had not been achieved. Angus Wong admitted in cross-examination that there was no provision in any of the relevant documents including the programmes provided which state that ISP had to achieve any target date as a pre‑condition for payment of the accelerated costs.

142.  As Counsel for ISP pointed out, the dates were continually shifting as the acceleration works progressed, and the continually revised programmes cannot give rise to any contractual obligation or condition precedent to payment. I accept his submission, that ISP had agreed to provide additional labour to accelerate progress, but did not guarantee that any specific dates set out in the various programmes would be achieved. I also agree, that if there had truly been an agreement that payment of acceleration costs was conditional upon ISP achieving specific target dates, and if it was clear that ISP had failed to do so by the alleged target dates in 2019, it would have made more sense for ATAL to certify $0, rather than $1.3 million, as the acceleration costs in the interim payment certificate No 32 in September 2020.

143.  As I am not satisfied that ISP had agreed to any target dates, it has not been established that the target dates were not achieved and that ISP was not entitled to payment.

Is ISP entitled to Line G prolongation costs?

144.  This claim is at the heart of the parties’ dispute.

145.  ISP’s claim for prolongation costs has been summarized in the preceding paragraphs of this Judgment under the heading “Nature and terms of the Subcontract”. In gist, ISP claims that there was a change in the temporal scope of the Work Order and incidentally also a change and increase in the quantity of works carried out by ISP during the extended period. On ISP’s case, it is entitled under GC3 to prolongation costs from the original date when the parties had agreed that the builders’ works under the Subcontract would end, which is KD 10, until the date when the builders’ works were actually completed, but as a result of the unlawful termination of the Subcontract, ISP claims these costs up to 4 April 2022 only, when ISP ceased work.

146.  ISP maintains that delay does not preclude it from claiming prolongation costs, as GC 3 does not on its face require it to prove absence of fault on its part.

147.  ATAL’s complaint is that ISP’s claim can only be made under GCC 55/56, but even accepting and considering ISP’s claim as one made under GC 3, I do not accept that delay and responsibility for the delay in completion, or the reason why the “temporal term” of the Subcontract had to be extended, or why (as ISP frames its case) ATAL had to make changes to the time for completing the Works under the Subcontract, are all irrelevant to ISP’s claim for costs.

148.  Under the Subcontract consisting (on ISP’s case) of the Work Order and the LOA, ISP was required to (1) complete the Works in accordance with the Schedule of Key Dates, and be liable for liquidated damages if it fails to achieve the dates, and (2) to carry out the Subcontract Works to meet the construction programme of ATAL and AA. Even without disputing that ATAL had instructed ISP to continue to work after the expiry of any Key Date, ISP was contractually required to comply with the instructions in accordance with ATAL’s/AA’s programme, as under GC3, ATAL had the right to vary or change the Work Order. If ISP is entitled to seek additional costs or damages as a result of any matter or instruction not attributable to its fault, it can of course make and prove such claim against ATAL. However, it is also open to ATAL to claim under the Subcontract that any instruction to change or vary the work programme was as a result of ISP’s breach or lack of progress in the execution of the Works. Leaving aside the dispute as to whether ISP’s claim should properly be one made under GC 3, or GCC 55/56, that is in fact how the parties have, in substance, made their respective claims in the pleadings insofar as prolongation costs are concerned (although one does have to go through a maze of assertions and pleas to decipher or understand the real claims made). This can be borne out from the pleas made in paragraph 45 of the Defence, to the claims of design changes and gross delay made in the SOC, and the particulars of delay asserted by ATAL at paragraphs 47, 48, and 76 of the Defence as being the responsibility of or caused by ISP.

149.  I cannot dismiss ATAL’s claims, that at least a part of the delay in completion of the Works was attributable to ISP, as a red herring or as “smoke and mirrors”, as ISP asserts. The Project Manager (Angus Wong) gave evidence that ISP had caused delays, and there were contemporaneous correspondence and records of the complaints made by the Project Manager/ATAL of the lack of progress or delay on ISP’s part. On behalf of ISP, Counsel pointed to the fact that the delay as complained of by ATAL against ISP (as particularized at paragraph 76 of the Defence) only accounted for 164 days (approximately 5 months) from 13 June 2020 to 23 November 2020, and that this cannot justify the 39 months’  delay from 27 December 2018 (the original KD 10) to 4 April 2022 (the date of termination), nor the 77 months’ delay up to 31 May 2025 (when letters of no objection for 4 packages were still outstanding).

150.  ATAL’s claims that ISP was responsible for at least a part of the delay has to be considered in the light of ISP’s claim that it should be paid prolongation costs for the entire period commencing 27 December 2018 (the original KD 10) right up to May 2025 and beyond that date, until the actual date when Substantial Completion can be said to have been achieved by the parties’ intended target of having all statutory approvals obtained. Any delay beyond 31 August 2020, the challenged date of Substantial Completion, has to be analysed, for its effect on the delay in completion.

151.  It has been highlighted throughout the trial, that there is no expert evidence in this case on programming and delay. If delay is in issue and is relevant to any finding to be made by the Court on any claim made for costs, expenses, or damages, there has to be expert evidence to assist the Court. Prior to trial, expert evidence had been opposed and claimed by ISP (in November 2023) to be either inappropriate in the absence of any clear pleading by ATAL on critical delay and effect on the Works, or as unnecessary since (on ISP’s case) the documents speak for themselves as to the existence of gross delay which was not attributable to ISP.

152.  The passages cited by Counsel for ISP from Walter Lilly & Company Ltd v Giles Patrick Cyril McKay, DMW Developments Ltd [2012] EWHC 1773 (TCC) cannot assist in this case. The observations made by the Court in Walter Lilly were that ultimately, claims by contractors for delay or disruption related loss and expenses are to be proved as a matter of fact. At paragraph 486 (d), the Court stated:

“It will generally have to establish (on a balance of probabilities) that the loss which it has incurred… would not have been incurred in any event. …. It will need to demonstrate in effect that there are no other matters which actually occurred (other than those relied upon in its pleaded case in which it has proved our likely to have caused the loss). It is wrong, as Counsel suggested, that the burden of proof in some way transfers to the defending party. It is of course open to that defending party to raise issues or adduce evidence that suggests or even show that the accepted tender was so low that the loss would have always occurred irrespective of the events relied upon by the claimant contractor or that other events (which are not relied upon by the claimant as causing or contributing to the loss or which are the ‘fault’ or ’risk’ of the claimant contractor) occurred may have caused or did cause all or part of the loss.”

153.  ISP sought to place reliance on the observation made by the Court that the fact that:

“one or a series of events or factors (unpleaded or which are the risk of fault of the claimant contractor) caused or contributed (or cannot be proved not to have caused or contributed) to the total or global loss does not necessarily mean that the claimant contractor can recover nothing. … It depends on what the impact of those events or factors is…”

Even from this passage, the impact of the factors said to be the contributing cause of delay is still a relevant and necessary consideration.

154.  Counsel also referred to the observations made in John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] SC 713, that the question of causation must be treated by the application of common sense to the logical principles of causation, and that if an event or events for which the employer is responsible can be described as the “dominant cause” of an item of loss, that will be sufficient to establish liability, notwithstanding the existence of other causes that are to some degree at least concurrent.

155.  On the facts of the present case, in the overall period of delay in completion from the original KD 10 of 26 December 2018 or KD 12 of 28 August 2019, to the certified date of substantial completion on 31 August 2020, or up to May 2025 (as ISP has put focus on) or up to trial in August 2025, however small may be the part of the delay said to be caused by or attributable to ISP, the Court needs to have expert analysis on whether the delaying causes were on the critical path, whether the delaying factors were minor and irrelevant as ISP claims, and what impact the delay had ATAL and on ISP’s performance under the Subcontract, to justify the extension of or “change to” the time for execution of the Works, before it can allow any part of ISP’s claim for prolongation costs. The correspondence and the notices of delay relied upon by both parties identify facts or events, but the Court is in no position to know whether these facts were significant or not to the progress of the Works, and whether and how they contributed to the delay complained of by either party. The Court cannot simply make a rough guess of whether 10%, or 70% or more of the prolongation costs should be allowed for delay due to design changes (as ISP alleges) or any matter for which ISP was not responsible. Neither party has suggested that such an approach should be taken. Apportionment of the loss, depending on what can be found to be the “dominant” or “significant” cause of the loss, cannot be properly made without assistance from an independent expert, and there must be evidential foundation for such apportionment. In a complex case such as this, the cause and effect of delay cannot be decided by “common sense”.

156.  The matter therefore has to be decided on the burden of proof. In this case, it is ISP as plaintiff which seeks payment of the prolongation costs. ATAL has claimed that ISP is not entitled to the payment by reason of the fact that the variation ISP claims was caused by delay in ISP’s progress of works, and other breaches of ISP’s obligations under the Subcontract. The contemporaneous documents of complaints on which ATAL relies are sufficient in my judgment to raise a prima facie and arguable case of delay in ISP’s work, but ISP has not been able by credible evidence to prove to the satisfaction of this Court, on a balance of probabilities, that ISP should be allowed either the full amount of the prolongation costs it claims, or any part thereof that is not attributable to any breach on its part. As such, I can only conclude that ISP has not proved its entitlement to the prolongation costs.

Whether ISP can rely on estoppel

157.  ISP makes its claim on an alternative basis, of estoppel by convention or by representation (pleaded at paragraph 119A of SOC). This was on the basis of an agreement claimed to have been made between ISP and ATAL in November 2020, during the course of the Subcontract, that ISP would be paid prolongation costs from 27 December 2018 (after the original KD 10) up to 31 December 2020, being the date of certified Substantial Completion of the Subcontract Works.

158.  On ATAL’s part, it was pointed out that there is in fact no clear or express pleading by ISP in the SOC and in the Answer to the Request for Particulars as to the facts constituting any common understanding, nor the representations allegedly made by ATAL and when they were made, to support ISP’s claim of either estoppel or common understanding.

159.  In support of the alleged agreement between the parties and the alleged common understanding, that ISP would be entitled to prolongation costs, and that the period of its entitlement was from January 2019 (after KD 10) until December 2020, ISP appears to rely on:

(1)  an email dated 19 June 2020 from Angus Wong to Anderson Chow and Gary Tse of ISP, referring to their discussion on 16 June 2020, when AA had asked for the construction period of the Louvre Works to be shortened, and that the MF canopy works were expected to be completed “by end August 2020”;

(2)  a telephone discussion between Angus Wong and Anderson Chow on 13 November 2020, when Angus Wong allegedly informed Anderson Chow that due to commercial considerations, AA and ATAL intended to backdate substantial completion to 31 August 2020, and Angus Wong allegedly agreed that ISP was entitled to prolongation costs from 28 August 2019 up to 31 August 2020;

(3)  a meeting which allegedly took place on 23 June 2021, which was attended by Angus Wong and Eric Yim of ATAL and Gary Tse of ISP, when it was agreed that ISP was entitled to its prolongation claims for the extended period to 31 December 2020;

(4)  ATAL’s continuous requests to ISP to submit its monthly staff overheads and records of its claims, for submission to AA, and ATAL’s incorporation of ISP’s claims and records in ATAL’s own submission to AA for prolongation costs; and

(5)  the interim draft accounts and the draft final account, which recorded ATAL’s assessment of ISP’s prolongation costs up to 31 December 2020.

160.  Counsel for ISP highlighted throughout that the only witness called by ISP for the Part 1 Trial (Simon Wong) was not present in any of the meetings and discussions claimed, and was not involved in the early stages of the Works at all, and could not give any useful evidence within his personal knowledge, apart from what he could understand from reading the contemporaneous or subsequent documents. There is force in the argument, which I have duly taken into account.

161.  Having considered the documents and the evidence of Angus Wong and Eric Yim, I cannot accept that there was a clear agreement, or any common understanding, between ISP and ATAL, as alleged, that ISP would be entitled to payment under its claim for prolongation costs for the period in time sought. My reasons are as follows.

162.  The interim accounts and the draft final account only provide for ATAL’s payment of prolongation costs “on account”. The draft final account on which ISP relies clearly provides that the expenses and costs for the period from 29 August 2019 up to 31 December 2020 were qualified, as being either “subject to valid substantiations provided by ISP”, or as being “outside EOT period” and subject to substantiation and attendance records being provided by ISP. This is precisely the position maintained by ATAL, that whatever agreement that had been reached was subject to substantiation by ISP providing clear and satisfactory records of their alleged costs, and were paid or assessed on account only, subject to such verification and ATAL being finally satisfied on the evidence and amount claimed.

163.  On ISP’s side, the evidence on the alleged meetings and agreements came from Simon Wong, who was never present at the alleged meetings and was not a party to the alleged telephone discussion.

164.  ISP relies on an email from Simon Wong to Eunice Mak of ATAL on 8 July 2021, which referred to the meeting on 23 June 2021, and the agreement reached that ISP would be entitled to its prolongation claims from 31 August 2020 to 31 December 2020, with quantum to be further assessed.

165.  As ATAL emphasized, Simon Wong was not present at the 23 June meeting, and what he stated in the email was allegedly based on what he had understood from Gary Tse (who was never called to give evidence).

166.  Simon Wong’s statement in the email of 8 July 2021 was also immediately corrected by ATAL, when Eunice Mak (who was the Senior Quantity Surveyor of ATAL) replied by email on the same day, to say that “only prolongation cost during the period from 29 August 2019 to 31 August 2020 will be assessed by AA”, because the Practical Completion Certificate was issued on 31 August 2020. Eunice Mak stated in her email that at the meeting held on 23 June 2021, what had been mentioned was that “ATAL is considering ISP’s entitlement” for the period from 1 September 2020 to 31 December 2020. Of course, Eunice Mak was not present at the June meeting either, and it can only be assumed that the statement made in her email was likewise based on what she had understood from those present, namely Angus Wong and Eric Yim, and that they had disputed what ISP claimed had been agreed. Eunice Mak’s email was at least an immediate denial on behalf of ATAL, and contradicts the assertion that these was any understanding on ATAL’s part, which was in common with or which shared ISP’s understanding, of its entitlement to prolongation costs from 1 September 2020 up to 31 December 2021.

167.  The letter dated 16 February 2022, which attached ISP’s own prepared “version” of the final account meetings including the alleged meeting on 13 November 2020, was only sent to ATAL over a year after the alleged meeting in 2020 between Angus Wong and Anderson Chow of ISP where it was allegedly agreed that ISP was entitled to prolongation costs up to 31 August 2020. The meeting was not attended by Gary Tse who signed the letter of 2022. Angus Wong claimed he had no recollection of such meeting having taken place.

168.  Whilst ISP relies on the fact that Angus Wong accepted in cross-examination that “there was no dispute about ISP’s entitlement to prolongation costs up to 31 December 2020” at the relevant time, this has to be read in the entire context including the contemporaneous documents.

169.  What Counsel for ISP focused on in submissions was that it was clear from all the evidence that at all material times, ATAL knew that it had to pay ISP’s prolongation costs, as evidenced by the claims made by ISP, the overhead costs submitted and accepted, and the assessments in the interim and draft final accounts. Despite the distinction made by Counsel for ATAL that the claims had been made as GCC 55/56 claims and the correspondence exchanged was in the context of their being GCC 55/56 claims, I can accept that ATAL had knowledge that ISP had made and pursued its claims for payment for the extended period of the Subcontract. However, I find it hard to believe that in the circumstances of the extended delay in completion of the Works, and the discussions which had taken place, ATAL would have agreed unconditionally to ISP’s claim, and it is more probable than not that (as Angus Wong and Eric Yim sought to explain in their testimony) any agreement on liability for ISP’s claim had been made on the understanding that ISP would be able eventually to substantiate its claim by the necessary documents and evidence in support. In my judgment, the interim payment certificates and the draft final account clearly reflect such understanding as being conditional to proper substantiation in due course. ATAL’s knowledge of the fact that ISP had made claims for costs, in the amounts ISP asserted, cannot per se be sufficient to constitute ATAL’s agreement to pay for such claims.

170.  Simon Wong’s evidence (at paragraph 179 of his 1^st witness statement) was only that because of Eunice Mak’s email reply of 8 July 2021 (that ATAL would be assessing/considering ISP’s prolongation costs), and because ATAL then carried on an audit of ISP’s prolongation records, he had been “given the impression” that ATAL would pay for ISP’s prolongation costs. As contended for ATAL, given ATAL’s email of 8 July 2021, this is insufficient evidence of any common understanding which was shared by ATAL and ISP.

171.  As for Angus Wong’s evidence, he stated at paragraph 209 of his witness statement that he had agreed with Anderson Chow of ISP on 16 July 2020 that substantial completion of the Subcontract Works would be certified to be 31 August 2020, and that it was further agreed that this date of 31 August 2020 would be the cutoff date for any entitlement that ISP had for prolongation costs. He stated that he had never agreed that ISP was entitled to prolongation costs up to the date of certified Substantial Completion, only that he had made it clear that ISP could not claim after that date. He claims that his email to Anderson Chow of 19 June 2020 confirmed that AA wanted the louvre and canopy works to be completed by the end of August 2020.

172.  Having considered Angus Wong’s evidence, my understanding thereof and conclusion therefrom is that if there was any agreement concluded between the parties in July 2020 at all, the agreement would more probable that not be that substantial completion would be certified to be 31 August 2020, and on that basis, ISP’s claim for prolongation costs would only be allowed to 31 August 2020. It makes sense and is very probable that Angus Wong would have wanted to have ISP’s agreement to having substantial completion certified at 31 August 2020, to cut off any entitlement which ISP may have to prolongation costs from that date, rather than to simply agree to allow ISP’s claim for prolongation costs up to 31 August 2020. ISP has denied throughout that there was any agreement on 31 August 2020 being the date of substantial completion. It is more probable that because of that, there was no agreement concluded that prolongation costs would be payable up to that allegedly agreed date.

173.  I bear in mind the fact that by July 2020, there were already issues of delay which had surfaced, ISP was in financial difficulties and had informed ATAL of that, and it is therefore unlikely that ATAL would at that time have unconditionally accepted liability for the payment of prolongation costs without any amount having been agreed upon as having been substantiated to ATAL’s satisfaction. As Counsel for ISP highlighted, the claim for prolongation costs made in March 2020 was already as substantial as $82 million.

174.  ISP sought to rely on the concessions made by Eric Yim and Angus Wong in cross-examination, that they knew that ATAL had to pay ISP prolongation costs.

175.  In my judgment, that is a rather unfair summation of Eric Yim’s evidence in cross-examination. Eric Yim was first taken to the parties’ Supplemental Agreement, to pay $7 million to ISP on account by 26 June 2020, in order to relieve ISP’s financial burden and to maintain the operation of ISP for completing the Subcontract Works. He was then referred to ISP’s application for interim payment in March 2020, and the fact that ATAL only certified and paid $2.89 million out of the amount of $82 million applied for by ISP. It was pointed out to Eric Yim that ISP’s application for interim payment included a sum of $38 million for ISP’s claimed prolongation costs, and that a total sum of $3 million (only) was paid to ISP on account in March and April 2020, in respect of ISP’s prolongation costs claims.

176.  Eric Yim was then referred to what he had stated at paragraph 24 of his witness statement, where he had referred to the Supplemental Agreement in June 2020, and the payment on account of ISP’s prolongation costs claims, and stated that:

“These payments on account were subject to ISP subsequently demonstrating their entitlement to the prolongation costs (which they never have done).”

177.  Counsel for ISP then asked Eric Yim if he would agree that when ATAL made the $3 million on account of prolongation costs in March and April 2020, “ATAL knew that ISP should be paid prolongation costs because otherwise ATAL would not have requested ISP to submit the monthly records”, and Eric Yim said that was correct. However, when he was asked why there was no agreement to record the fact that the payment of prolongation costs was subject to ISP demonstrating their entitlement by documents, and whether Eric Yim would agree that “in reality ISP’s entitlement to prolongation costs was not in dispute”, but was just a matter of quantum, Eric Yim proceeded to explain that he did not know “whether it was quantum or liability, because in terms of prolongation costs, the quantum related to the cost build up is one thing”. He continued to explain:

“Now, these are the costs, but in terms of entitlement, we have to consider also the culpable delay.”

178.  Eric Yim’s testimony was that the major problem was that for costs, ATAL could assess it on one hand, but for liability, ATAL would need ISP to demonstrate excusable delay, to demonstrate that the overall impact was not caused by ISP.

179.  As I endeavored to explain above, ATAL’s knowledge of a claim having been made by ISP is not tantamount to its acceptance of liability for the claim, irrespective of the cause of the extension of the Subcontract period and whether or not the costs claimed could be substantiated (not only in terms of amount but also the cause of the costs having been incurred). Eric Yim had been at pains to point out in his cross-examination that the payment on account to ISP of $7 million did not represent ISP’s entitlement by that time, and the fact that ISP had claimed or applied for $82 million (including a substantial amount for prolongation costs without sufficient justification and breakdown) did not and does not mean that they have sufficient support to justify the payment of the amounts applied for, which had to be assessed by ATAL.

180.  If the prolongation costs had indeed been agreed, then there is no good reason why they were not reflected as such under the “remark” column in ISP’s interim payment application, when other claims were stated to be “agreed”.

181.  As for Angus Wong’s evidence, paragraph 209 of his first witness statement has been referred to above. ISP has highlighted the fact that in the course of his cross-examination, Angus Wong had agreed with Counsel’s statements, that ATAL knew that it was liable to pay prolongation costs to ISP and the payment was “on account” only because the quantum still had to be assessed, but in re-examination, Angus Wong had clarified that by that, he meant that ATAL still required ISP to provide substantiation which would include a detailed program analysis, identification of the relevant events and effect, as well as the time and costs implications. This would not be subject to quantum only.

182.  Although Angus Wong agreed in cross-examination that he had agreed with Gary Tse that prolongation costs would be assessed beyond August 2020, he also clarified that in his discussion with Gary Tse, Tse had asked about the extension of ISP’s prolongation costs claim from after August 2020 to 31 December 2020, but Tse had been told that ATAL would consider it, but that it had not been confirmed. The more contemporaneous email dated 8 July 2021 from Eunice Mak had already corrected the statement made in ISP’s email as to the alleged agreement made on 23 June 2021, by pointing out that the discussion with Gary Tse on 23 June 2021 was that ATAL would only be considering ISP’s entitlement from 1 September 2020 to 31 December 2020 (but there was no agreement).

183.  Even the ISP version of the meetings (sent with ISP’s letter of 16 February 2022) did not mention that Gary Tse and Angus Wong had agreed on 23 June 2021 that ISP’s prolongation costs would be assessed up to 31 December 2020.

184.  As for ATAL’s requests for ISP’s monthly expense records and its incorporation of such claim and records into its own submission to AA, I accept the explanation made by ATAL. ATAL had its own interests to serve and own claims to make to AA under the Main Contract. ATAL would need to obtain details of ISP’s claim, before it can ascertain its own exposure to costs and make its own claim to AA. The fact that a claim has been made by ISP against ATAL under the Subcontract and that a claim has been made by ATAL against AA under the Main Contract does not amount to any admission of ATAL’s liability for ISP’s claim. It is common in the construction industry for claims to be made and processed first, and for liability to be dealt with and decided later when the final accounts are finalized, agreed or otherwise determined in the adjudication process.

185.  On the state of the evidence, I am not persuaded on a balance of probabilities that there had been any agreement concluded on ATAL’s liability for ISP’s prolongation costs. The claims of common intention and estoppel have not been established.

Is ATAL entitled to Line H contra charges?

186.  The Line H costs are monthly expenses incurred by ATAL for access to the work locations during the prolongation of the Subcontract Period. ISP disputes liability for these costs after KD 10, the original date for completion of the Subcontract Works, and claims that these costs should be added to its prolongation costs claim. On its part, ATAL disputes liability for these costs after KD 10 on the same basis that it disputes ISP’s prolongation costs.

187.  The parties accept in their closing submissions that the claim under Line H stands or falls with ISP’s claim for prolongation costs, and I have found against ISP on the latter claim.

Is ATAL entitled to its counterclaim?

188.  The counterclaim stands or falls depending on my decision on ATAL’s termination, which I have found to be unlawful since the DLP did not commence as ATAL claimed. It follows that ISP is not liable in respect of ATAL’s counterclaim.

Disposition

189.  In view of the findings made and conclusions reached in this Judgment, parties should submit a draft order for approval by this Court as to the orders to be drawn up. No submissions were made on costs for the Part 1 Trial, and it may be that costs can only be decided after the conclusion of Part 2 of the Trial, and the outcome in terms of the amounts payable can be ascertained.