XCHRX China International Water & Electrical Corporation v. The Secretary for Justice

HCCT136/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO.136 OF 1998

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J U D G M E N T

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1. This is an application by China International Water & Electric Corporation ("the claimant") against the Department of Justice ("the respondent") for leave to appeal from an Award made by Philip Trevor Nunn on 9 December 1998 as an Arbitrator in an Arbitration between those two parties.

2. The application is made on the basis that the experienced Arbitrator had made errors of law in two respects. The first point relied on by the claimant is that there was an error of law in relation to the finding by the Arbitrator that the delay caused as a result of the termination of the sub-contract was not a matter open to the arbitrator or the architect for consideration as special circumstances for time extension by reason of clause 50(1)(c)(iii) of the Conditions of Contract. The ground relied upon by the claimant is that the termination of the sub-contract, in the special circumstance in the case, was a matter falling within clause 50(1)(b)(xi) of the Conditions, namely, providing for special circumstances whereby time extension could be given.

3. The second ground relied upon by the claimant is that under clause 15 of the Conditions, there was an impossibility for the contractor to execute the works in accordance with the contract and, therefore, that allowance should be made by the arbitrator or the architect for such impossibility.

4. I would deal with the question of special circumstances first because it seems to me crucial to the determination of the application.

5. The clause in question, 50(1)(c), reads :

"Notwithstanding the powers of the Architect under the provisions of this Clause to decide whether the Contractor is fairly entitled to an extension of time the Contractor shall not be entitled to an extension of time for the completion of the Works or any Section thereof if the cause of the delay is:-

(i) ...

(ii) ...

(iii) delay on the part of any specialist sub-contractor."

6. The Arbitrator in paragraph 22 of the Reasons for his Final Award said this :

"I do not accept the Claimant's argument that delay on the part of a Specialist Sub-contractor under Clause 50(1)(c)(iii) excludes delay after a Specialist Sub-contractor has ceased work. Delay as a consequence of a Specialist Sub-contractor ceasing work in my view falls within the wording of 'delay on the part of any Specialist Sub-contractor'."

Ms Li submits that that conclusion in paragraph 22 of the Reasons is a clear error of law. I agree. A simple reading of the words "delay on the part of any Specialist Sub-contractor" indicates and clearly suggests that it is limited to the time of delay while the sub-contractor was still afoot as sub-contractor, and not relating to any delay resulting from a sub-contract having been terminated and the necessity to find a new sub-contractor. That seems to me the plain reading of clause 50(1)(c)(iii).

7. That reading of mine is reinforced by the decision of the House of Lords in Percy Bilton Limited v. Greater London Council [1982] 1 WLR 794 where with an almost identical wording in a time extension clause Lord Fraser expressed his view at page 801G that the meaning of the equivalent expression of "delay on the part of the sub-contractor" does not cover a situation of delay after the complete withdrawal of the sub-contractor. There, it was as a result of a concession that both parties agreed that delay on the part of the sub-contractor does not cover delay after the termination of the sub-contract. Lord Fraser endorsed the common view of the parties. So it seems to me that the Bilton case is high authority for the contention of Ms Li that there was clear error of law in paragraph 22 of the Reasons for the Award.

8. Mr Aiken valiantly attempted to defend the position by suggesting that the situation in Bilton was different. It seems to me that there is really no difference in the legal principle and that this is a matter of construction of a well known expression in a sub-clause of the contract. I am of the view, therefore, that there was a clear error of law. That being the case, the court ought to hold that the case should be remitted to the Arbitrator unless the court can be persuaded that there would be no point in so remitting because the claimant is bound to fail before the Arbitrator.

9. The argument of Mr Aiken is that having regard to the wording of clause 50(1)(b)(xi), namely, "any special circumstance of any kind whatsoever", the claimant is bound to fail because the claimant could not possibly succeed in establishing that the delay in completion caused by the termination of the sub-contract would amount to any special circumstance. The burden, I think, of this argument must fall on the respondent.

10. Three points were advanced by Mr Aiken in support of his contention that the claimant must fail on its reliance of clause 50(1)(b)(xi). The first point advanced is that this clause must be construed ejeudem generis and having regard to the previous ten provisions, it does not permit a construction in favour of the claimant where the claimant had itself terminated the sub-contract. All the other provisions were either situations where third party had caused the delay, or the employer had caused the delay. I think the clause must be looked at carefully to see the width of its provision. The width of the provision is "any special circumstance of any kind whatsoever", so it is very wide and I do not see how I should read it narrowly in the same way as the other provisions.

11. The second factor relied upon is that the matter of termination of the sub-contract was clearly within the contemplation of the parties. Reliance was placed on a passage in Keating on Building Contract, 6th ed. to say that therefore that kind of delay should not be acceptable as "special circumstances". There is no decided authority on this point, and in fact Ms Li has pointed out that there is no relevant decided authority on the point of "special circumstances". Forseeability does not preclude special circumstance. I am of the view therefore that the second factor cannot be shown to be clearly in favour of the respondent.

12. The third factor relied on is that the culture of the contract itself, having regard to General Condition 4(4) and Special Condition 5(3) points to Clause 50(1)(b)(xi) being read as containing a limitation, namely the limitation of "not within the control of the contractor or sub-contractor". The suggested limitation however goes against the wide wording of (xi).

13. The view that I have taken is that these are all arguable points but no overwhelming or even strong case had been made out to me that the delay in this case caused by the termination of the sub-contract in the particular situation could not amount to special circumstances. In fact, the Arbitrator, with his considerable legal experience, at paragraph 21 seems to express his view that there were special circumstances in this case and he would be minded to so decide had he not been precluded by his decision on paragraph 22. In paragraph 21 he said :

"Had the Contract not included Clause 50(1)(c)(iii) then there would have been more force in the Claimant's argument that the economic downturn and its impact on this particular Specialist Sub-contractor was a special circumstance."

The Arbitrator seemed to have taken the view that there were more than adequate scope for a finding of special circumstances giving rise to possibilities for granting extensions of time for delay, thereby revising the architect's view of the non-granting of extensions of time.

14. I therefore conclude that a case has been made out by the claimant for leave to appeal and if successful on appeal, for the matter to be remitted to the Arbitrator.

15. Having heard full arguments for a whole day from both parties on this matter, it seems to me that there is no point in going on to the normal stage 2 to have a further hearing on the merits of the appeal. Mr Aiken has very graciously indicated that he does not wish to advance any further arguments at the hearing of the appeal. Therefore, I allow the appeal and direct the remittance of the matter to the Arbitrator for further consideration.

16. In the light of my conclusion on the first point, it is not necessary for me to express any view on the second alternative point relied on by the claimant.

[Submissions on costs]

17. Having heard the parties on costs, I order that the costs of the application be to the claimant, together with a certificate for two counsel.