MANSION FIRE ENGINEERING CO. LTD. v. TRIDANT ENGINEERING CO. LTD.

HCCT 3 & 66 of 1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION & ARBITRATION PROCEEDINGS

NO. 3 & 66 OF 1996

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C O N T E N T S

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J U D G M E N T

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BACKGROUND:

1. Kumagai Gumi (HK) Limited and Gammon Construction Ltd (hereinafter called "Kumagai-Gammon Joint Venture" or "KGJV") were the Main Contractor responsible for building the Sky Central Plaza in Guangzhou, the tallest building being built in China, if not in the world, at the time. They sub-contracted works described in the "M & E Package Sub-contract" to Tridant Engineering Company Limited (hereinafter called "Tridant").

2. Then by two letters of agreement both dated 30 April 1994, Tridant further sub-sub-contracted the fire services works and the plumbing and drainage works to Mansion Holdings Limited (hereinafter called "Mansion Holdings") on a back to back basis. These are respectively the fire services subordinate contract (hereinafter called "the FS sub-contract") and plumbing and drainage subordinate contract (hereinafter called "the PD sub-contract"). In October 1994, Tridant entered into another sub-contract in respect of temporary fire services and plumbing and drainage installation (hereinafter called "the temporary works contract") for the Sky Central Plaza with Mansion Fire Engineering Company Ltd (hereinafter called "Mansion Fire"). Mansion Fire is a subsidiary of Mansion Holdings. Unless where a distinction is necessary, Mansion Holdings and Mansion Fire are collectively referred to as Mansion. The contract price for these three sub-contracts were respectively $55 million, $21 million and $4.20 million.

3. On 10 October 1995, Tridant terminated all the three subordinate contracts allegedly because Mansion failed to execute the works with due diligence and regularly. Tridant then instituted proceedings against Mansion Holdings under Action No. Con-3 of 1996. One of Mansion Holdings' defence is that these subordinate contracts were entered into between Tridant and Mansion Fire. Then Mansion Fire instituted Action No. Con-66 of 1996 against Tridant for their alleged wrongful repudiation of all the three subordinate contracts. These two actions were consolidated. At the hearing, as a result of documents discovered in the course of discovery, Mansion conceded that Mansion Holdings, and not Mansion Fire, were the contracting party to the FS and PD subordinate contracts. There is no dispute that Mansion Fire was the contracting party to the temporary works sub-contract.

AGREED LIST OF ISSUES:

4. Prior to the hearing, counsel agreed to a list of 15 issues. In view of the concession made above, only Issues 4 to 15 remains to be determined. These issues are as follow:

Implied Terms

4 Was there an implied term in any of the material sub-contracts that Mansion would (i) execute and progress the works with due diligence and regularly and/or (ii) in accordance with the Plaintiff's programme and/or progress on site?

5. In considering the question in 4 above, was any such term displaced or made unnecessary by any other contractual provision including the express term pleaded in paragraph 8(1) of the Statement of Claim and/or Clause 25 of the KGJV/Tridant sub-contract?

Delay

6. Whether the two Subordinate Contracts works were delayed. If so, whether the causes of delay were due to: -

(a) Tridant's failure to supply Mansion Fire with a copy of the Sub-contracts.

(b) Tridant's failure to timeously supply Mansion Fire with a handover schedule.

(c) Tridant's failure to afford Mansion Fire timeous access to and possession of relevant parts of the site.

7. If the delay (if any) was caused by Tridant's failures as stated above, whether time for completion of the Subordinate Contracts works was rendered at large as at 10 October 1995.

Termination

8(a) Whether Mansion (be it Fire or Holdings) failed to execute and progress its works with due diligence and regularly.

(b) Whether Mansion (be it Fire or Holdings) failed to provide adequate resources and supervision for the two Subordinate Contracts works.

(c) Whether Mansion (be it Fire or Holdings) [was as at 10 October 1995] wrongfully refused [refusing] to arrange for materials to be delivered for the installation works unless and until two Contracts with Mansion Fire was entered into by Tridant in relation to the two Subordinate Contracts works. [NB Square brackets represent Mansion's proposal].

(d) Whether one or all of the grounds above amounted to repudiation on the part of Mansion (be it Fire or Holdings).

(e) Whether Tridant was entitled to terminate either or both of the two Subordinate Contracts with Mansion (either Holdings or Fire depending on the findings of the issues) above on 10 October 1995.

9. If Tridant was entitled to terminate either or both of the two Subordinate Contracts, and/or the Temporary Contract, what is the measure of damages that Tridant is entitled to recover and from which party, Mansion Fire or Mansion Holdings.

10. Whether Tridant is entitled to an indemnity to be provided by Mansion in relation to all claims, cost and expenses incurred and loss and damages suffered and/or to be incurred and suffered arising from Mansion's breaches and repudiation.

11. Whether Tridant wrongfully terminated the two Subordinate Contracts and/or the Temporary Contract with Mansion Holdings. If so, what damages would Mansion Holdings be entitled to recover arising from the wrongful termination.

Payment for works done

12. What is the entitlement of Mansion (be it Fire or Holdings) to payment for works which it had done under the two Subordinate Contracts?

13. Whether Mansion Fire is entitled to payment in respect of the works carried out under the Temporary Subordinate Contract in the sum of HK$2,244,724.87 or some other sum.

Costs and Interest

14. What is the measure of interest due to either Tridant or Mansion as a consequence of any judgment awarded to either of them?

15. What costs should be awarded to which party?

THE FS SUB-CONTRACT AND PD SUB-CONTRACT:

5. The FS sub-contract and PD sub-contract are evidenced in two similar two page letters dated 30 April 1994 from Tridant to Mansion Holdings. The two sub-contracts contain identical conditions as follow:

"1. The sub-contract entered between us is on back to back basis. Except payment terms, you are deemed to have full knowledge about the contract, which we have entered into with the Employer (the "Contract") and further unconditionally commit to undertake full responsibility of the Contract .....

2. You should provide all adequate resources and supervision as required by Tridant and allocate both at site and in office for site operation and logistic support.

3. Payment terms:

3.1 5% of the Price shall be paid upon signing of this agreement.

3.2 From time to time, you should submit monthly interim progress claim for us to incorporate into our claim. ..... Based upon such accumulated value of work done, the Employer will make payment to us on 31 August 1996. Upon receipt of such payment, we shall release the apportioned payment to you within 14 days.

3.3 Should the actual completion be earlier than 31 August 1996, you shall be entitled to get apportioned payment within 14 days upon our receipt of payment from the Employer.

3.4 The schedule of payment mentioned in 3.2 and 3.3 serves as indication of our agreement on payment terms with the Employer. ....."

Both letters provided that a formal sub-contract shall be entered into at a later date but until the formal sub-contracts are executed these letters of agreement shall be binding upon the parties.

Time obligation and time not of the essence:

6. Since the sub-contracts were on a back to back basis with the KGJV/Tridant sub-contract, Tridant's time obligations under their sub-contract with KGJV were incorporated into their sub-contracts with Mansion. Under Condition A-4 of the Tender Specification, the completion date for the fire services installation as well as the plumbing and drainage work shall be 30 November 1995 for the apartment and podium floors and 30 June 1996 for the office tower. Condition A-4 also provided as follows:

"The Sub-Contractor is to note that the completion date of the whole project given above is the date when the complete building is to be handed over to the Employer and the Sub-Contractor will be required to complete his work in advance of the above date to enable other trades to complete their works.

The Sub-Contractor shall conform to the Main Contractor's programme of works and shall include everything necessary to complete the Sub-Contract Works within this programme and in a sequential manner acceptable to the Main Contractor.

The above dates are given expressly without guarantee that they can be met and are to be taken as a guide line only for the Sub-Contractor's programming purpose. The Sub-Contractor is deemed to have allowed in his tender for all extra costs and expenses that may be incurred due to early or delayed completion of the individual stages or of the whole development."

7. Condition A-14 provides:

The Sub-Contractor is deemed to have allowed in the Sub-Contract sum the necessary expenses for overtime and night work in order to complete the (plumbing, drainage, fire services as appropriate) installation, including testing and commissioning to suit the Main Contractor's programme of works for the whole project. ....."

8. These completion dates were given without guarantee that they can be met. They were to be taken as a guide line only for programming purpose. The sub-contractor was deemed to have allowed for extra costs and expenses including overtime and night work that may be incurred due to early or delayed completion of the individual stages of the development. Thus these completion dates were for indication only and were not fixed or definite completion dates. Tridant's principal obligation, therefore, was to "conform to the Main Contractor's programme of works". This obligation was, in turn, incorporated on a back to back basis into the Tridant/Mansion sub-contracts.

9. Paragraph 3.3 of the letters of agreement between Tridant and Mansion suggests that the completion date was 31 August 1996. As this date was stipulated in the letters of agreement signed by the parties subsequent to the Tender Specification, I consider this date over-riding. I therefore accept 31 August 1996 as the indicated completion date for both the apartment blocks and the office tower for both sub-contracts, which because of the back to back incorporation of Condition A-4, was subject to the Main Contractor's programme of works for the whole project.

10. The same conclusion could be reached from a reading of the Works Orders issued by Tridant to and accepted by Mansion, which provided that the completion date was "31 August 1996 and suit construction progress". In my view, these words have the same effect as those under Condition A-4 of the KGJV/Tridant sub-contract, i.e. the completion dates were for indication only and Mansion's principal obligation was to conform to Tridant's or KGJV's programme of works.

11. It is important to note that under the Tridant/Mansion sub-contracts there were no definite completion dates, or key dates for the various stages of works and that under the Works Orders the indicated completion date was "31 August 1996 and suit construction progress." The completion dates were therefore "ambulatory". This finding is important for two reasons. Firstly, there were no fixed completion dates under these sub-contracts, which is a very important feature that distinguishes the present case from many of the authorities cited by counsel for Mansion. Secondly, as there were no fixed completion dates or key dates and the sub-contracts specifically provided for early and equally delayed completion, in my view, time cannot be of the essence in the two PD and FS sub-contracts and in turn, the temporary works contract.

12. In summary, these contracts were extremely unfavourable, or even draconian, to the sub-contractor. Not only was there no certainty as to time, the Main Contractor could change the programme of works, or even accelerate the programme. The sub-contractor was bound to conform to the programme without compensation.

13. I note in passing that the payment term was also extremely unfavourable to the sub-contractor. Mansion were paid 5% upon signing the contract. They would not be paid any further amounts until 31 August 1996 or completion, if earlier. Mansion had to spend huge amounts in terms of overhead, capital outlay, costs for plant, equipment and materials, wages and finance costs in the meantime. None of those payments would be reimbursed until completion.

Whether Clause 25 of KGJV/Tridant sub-contract incorporated into the PD and FS sub-contracts:

14. Mr Graham submitted that as the sub-contracts were back to back, Clause 25 of the KGJV/Tridant sub-contract was incorporated into the Tridant/Mansion FS and PD sub-contracts.

15. On the other hand, Mr Scott SC argued that Clause 25 is not the sort of clause that could be imported by the use of the vague phrase "back to back". He submitted that the Architect had a certain role to play under Clauses 21 to 24 in respect of certain claims for damages or extension of time as between Tridant and KGJV but the Architect would not become involved in similar disputes between Tridant and Mansion. In my opinion there may be ways in which Tridant could stand in the place of Mansion and bring in the involvement of the Architect. If any of these provisions were inappropriate, they may be left out. In other words, the terms of the KGJV/Tridant sub-contract may only be incorporated in so far as they are appropriate and capable of incorporation. In any event, Clause 25 is capable of being so incorporated into the Tridant/Mansion sub-contracts without any other parties being involved.

16. Mr Scott SC referred to Jardine Engineering Corporation v. Shimizu Corporation, (1992) 63 BLR 96 at pp. 105-107, in support of his proposition. In that case, the main contract and the sub-contract were separate and integral contracts. There were corresponding provisions in the two contracts, save as to provision for compensation. It is not entirely clear if the words "back to back" had been used. Kaplan J refused to fill the lacunae in the sub-contract by incorporating the terms of the main contract.

17. In my view, whether the main contract terms are incorporated into the sub-contract is a matter of construction of the terms of the sub-contract. The present case is distinguishable from Jardine Engineering Corporation v. Shimizu Corporation in that the terms of the Tridant/Mansion sub-contracts were contained in a two page letter. There were few provisions in those two pages, which were mainly concerned with contract price and payment. Also, the letter of agreement expressly incorporated the main contract by the use of the words "back to back". In the present case without incorporation of the terms of the main contract, there can hardly be any meaning in the two page document. Accordingly, I find that Clause 25 of the KGJV/Tridant sub-contract was incorporated into the Tridant/Mansion sub-contracts by reason of the back to back provision.

18. The particular provision that the parties are concerned with is Clause 25(iii). This clause provides as follows:

"If the Sub-Contractor shall make default in any of the following respects viz.:

(iii) If he fails to proceed regularly and diligently with the Sub-Contract works;

then, if such default shall continue for ten days after a notice by registered post or recorded delivery specifying the default has been given to him by the Main Contractor, the Main Contractor may without prejudice to any other rights or remedies thereupon by notice by registered post or recorded delivery determine the employment of the Sub-Contractor under this Sub-Contract; provided that notice in pursuance of this clause shall not be given unreasonably or vexatiously and shall be void if the Main Contractor is at the time of the notice in breach of this Sub-Contract."

19. For the above reasons, I find that this clause had been incorporated into the Tridant/Mansion sub-contracts with the modification that the words "Mains Contractor" and "sub-contractor" shall be replaced by "Tridant" and "Mansion" respectively. There is no dispute that the procedure under Clause 25(iii) had not been invoked in the termination of the Tridant/Mansion sub-contracts.

ISSUES 4 & 5: IMPLIED TERMS:

20. Having found that Clause 25 of the KGJV/Tridant sub-contract was incorporated into the Tridant/Mansion sub-contracts, the inevitable consequence is that Mansion had a similar obligation expressly imposed on them under Clause 25 to proceed regularly and diligently.

21. Thus Clause 25 and Condition A-4 which were incorporated into the Tridant/Mansion sub-contracts together impose on Mansion an obligation to progress the works with due diligence and regularly and in conformity with Tridant's programme and/or progress on site. As such, there is no necessity or room for identical terms to be implied into the Tridant/Mansion subordinate contracts by the Moorcock principle. The innocent bystander would say "there is no need to imply that which is already there." Thus my finding in respect of the 4th issue is "no" and in respect of the 5th issue is "yes".

22. The above would have quickly disposed of these two issues by taking an approach different from that as framed in the List of Issues. I shall, however, deal with the issues in the way they are framed. But my conclusion is the same.

23. Mr Scott SC referred to the following passages in Hudson's Building and Engineering Contracts (11th Ed.) at pages 564, 1108, 1109, 1115, 1124 and 1125 in support of his argument for implying the term into the two sub-contracts:

"In fact, even in the absence of such [express] provisions, it is submitted that there must be an implied term that the contractor will proceed with reasonable diligence." [page 564]

"..... an obligation to complete by a certain date (even if coupled with liquidated damages provisions) is in reality of little value to an owner, for example where serious and unacceptable delays by the contractor are often seen to develop during the construction period well before completion date, which indicate clearly that completion by that date is never going to be attained. The overriding necessity to take much earlier action, and the wide spread use of express terms requiring due diligence by the contractor throughout the construction period, enforceable by the owner through termination clauses expressly conditioned on a failure of such diligence, does much to explain the comparative rarity of case law on rescission or termination for late completion." [p. 1108]

"While there is an apparent absence of authority on this point in England it is submitted ..... that, despite a relatively recent dictum to the contrary, construction contracts in general are subject to an implied term of due diligence on the part of the Contractor which in appropriate cases, and particularly after notice, will entitle an owner to rescind the contract at common law in the absence of an express termination clause." [p. 1109]

"..... as a matter of business efficacy, there must be a term implied by law in Building and Engineering contracts generally that the Contractor will proceed with reasonable diligence and expedition." [p. 1115]

"..... it is submitted that even in the absence of an express term for due diligence and of any linked to express termination clause, both such terms require to be implied by law, in construction contracts and sub-contracts generally, as a matter of business efficacy ....."

"Furthermore, where a contractor persists in a rate of progress bearing no relation either to a contractually promised or reasonable date of completion, and the owner accordingly gives notice requiring a reasonable rate of progress but the contractor then fails to proceed at a reasonable rate, it is submitted that he will be evincing either inability to complete or an intention no longer to be bound by the contract, in either case justifying rescission by the owner. Otherwise, provided the builder does not by unequivocal refusal openly evince an intention no longer to be bound (thus exposing himself to the assertion of an anticipatory repudiatory breach), the owner will, in the absence of such an implied term, be without remedy until the completion date has passed ....."

"It would be absurd, it is submitted, if the owner was to be without remedy until after a perhaps distant completion date, and then only for the perhaps inadequate damages resulting from late completion simpliciter ....." [pp. 1124-1125]

These are very powerful arguments and from a well researched and respected work.

24. Mr Graham, on the other hand, referred to Greater London Council v. The Cleveland Bridge and Engineering Co. Ltd and Another, (1986) 8 Con LR 30, in which the Court of Appeal held that the term as to due diligence did not fall to be implied into the agreement and no such term was necessary to give business efficacy to the contract on the Moorcock principle. In my view, the dictum in that case is not intended to be as wide as counsel put it. That case is clearly distinguishable from the present case and the dictum has to be limited to the peculiar facts of that case. As distinguished from the present case, there were contractual key dates and a completion date under the GLC contract and Clause 51 provided a formula for calculation of manufacturing cost. GLC sought to imply an obligation that Cleveland should time the manufacture in such a way as to enable GLC to pay Cleveland at the lower rate in accordance with the formula in Clause 51. The Court of Appeal therefore held that Cleveland's principal and express obligation was to comply with key dates and there was no room for implying due diligence into the contract. Thus what really was decided was that there is no room for implying due diligence if the contractor's obligation is clearly defined in terms of key dates and completion date. None of those dates were provided in the Tridant/Mansion sub-contracts.

25. The building of the Sky Central Plaza was an enormous project. There was no fixed completion date. For a project of this size, involving numerous works contracts and sub-contracts, it is clear that the parties did not intend that Mansion would be permitted to proceed at whatever pace they chose irrespective of the progress of the rest of the site, especially as the sub-contracts provided that the sub-contractor shall conform to the Main Contractor's programme of works. If Mansion's progress was out of tune with the other sub-contractors', the progress of the whole project would be severely affected. As a result not only Tridant would have to pay heavy liquidated damages, they might also face their own termination by KGJV. If, as submitted in Hudson's Building and Engineering Contracts, the obligation to proceed diligently and regularly is implied by law in building and engineering contracts generally, then under the particular circumstances of the present case, the term must also be implied into the Tridant/Mansion sub-contracts as a matter of business efficacy. In my view, applying the reasonable bystander's test, the obligation to progress work with due diligence and regularly could be readily implied for the reasons as submitted in Hudson's Building and Engineering Contracts. Thus if this obligation was not incorporated into the Tridant/Mansion sub-contracts under the back to back provision, it was readily implied under the Moorcock principle. However, as I have already found that Clause 25 had been incorporated into the Tridant/Mansion sub-contracts, there is no need for this obligation to be implied (see pages 13 to 15).

26. I think counsel's dispute is one without difference. Mr Graham's case is that Mansion were under a duty to progress the work diligently and regularly because Clause 25 had been incorporated into the Tridant/Mansion sub-contracts, but that Mansion were not terminated in accordance with the procedure under Clause 25. On the other hand, Mr Scott SC's case is that Clause 25 had not been incorporated and Tridant's case was one of termination at common law because of Mansion's breach of their implied duty was such as to evince an intention no longer to be bound by the sub-contracts. Both counsel agreed that Mansion were under such a duty. In my view, it really makes no difference whether the duty was incorporated under the back to back provision or implied by law, especially as counsel for Mansion did not seek to argue that Tridant's common law right to accept a repudiation has been modified or displaced by Clause 25 (see pages 66 to 70). Issues 4 and 5 should not have been raised at all.

ISSUE 6: WHETHER FS AND PD SUB-CONTRACTS WERE DELAYED BY TRIDANT:

27. I am satisfied that the performance of these two sub-contracts were delayed. To avoid repetition, I shall leave this part of the issue to be fully considered under Issue 8(a) (see pages 28 to 35). For the purpose of disposing of the remaining part of Issue 6, the question is whether the causes of delay were due to Tridant's fault.

Issue 6(a): Whether Tridant failed to provide Mansion with a copy of the sub-contracts:

28. The allegation that the delay was caused by Tridant's failure to provide Mansion with a copy of the sub-contracts is obviously unsustainable. Mansion tendered for the M & E package together with Tridant and had a complete set of the sub-contract documents. According to Tridant's Senior Resident Engineer, Mr Henry Liu, Tridant and Mansion shared a two storey site office, with Tridant occupying the first floor and Mansion occupying the ground floor. A full set of the sub-contracts were kept in Tridant's site office and were at all times available to Tridant's sub-contractors, including Mansion, for inspection. According to Mr Liu, Mansion's staff had often visited Tridant's site office to inspect the sub-contracts during the currency of the PD and FS sub-contracts. For Issue 6(a), I conclude that the causes of delay were not due to Tridant's failure to supply Mansion with a copy of the sub-contracts.

Issue 6(b): Whether Tridant failed to timeously supply handover schedules:

29. As for timeous supply of handover schedules, programmes, approvals, revised drawings and instructions, Mr Liu said that these were provided to Mansion timeously and that Mansion as with the other sub-contractors were kept fully briefed of the development of the main contract, the M & E Package sub-contracts and the other sub-contracts. These documents were kept in Tridant's site office and were available for inspection by the staff of Mansion.

30. Mansion's staff was required by Tridant to attend with Tridant's and KGJV's representatives, various meetings with the Architect, the Employer, the Consultant and Guangzhou Gas Company, internal meetings, M & E site meetings, technical meetings and Co-ordination meetings. Copies of the minutes were also forwarded to Mansion. As a result, they were kept abreast of site development.

31. All the up-dated master programmes, M & E programmes and short term programmes were prepared based on inputs from all sub-contractors, including Mansion. Mansion must therefore be fully aware of the progress and programme including handing over dates for commencement of the sub-contract works.

32. According to Mr Liu, neither was there any handing over schedule as such nor was Tridant under any contractual obligation to prepare and provide such a schedule. However, information about handover dates was recorded in various minutes of meetings and correspondence which were forwarded to Mansion and the other sub-contractors. Mansion were therefore aware of the handing over dates of various areas of the site. It was never suggested at the time that Mansion were unable to plan or mobilise for installation works by reason of not knowing which area of the site had been handed over.

33. Mr Liu's evidence was not contradicted. I have no difficulty to find in relation to Issue 6(b) that the causes of delay were not due to Tridant's failure to timeously supply Mansion with handover schedules, etc.

Issue 6(c): Whether Tridant failed to provide Mansion with timeous access to relevant parts of the site:

34. Mansion pleaded that the delay was occasioned by Tridant's failure to provide them with timeous access to and possession of relevant parts of the site. Each floor of the apartment towers and office tower was programmed to be concreted in a 4 to 5 days cycle. Mansion were required to install concealed conduits and pipes in conjunction with the concreting process. After the concrete core wall, columns and floors were concreted and the formwork removed, Mansion were required to further install concealed conduits and pipes in the brick works. Some delays were occasioned in the process, but they are not relevant to the present issue.

35. Shortly after that, the floor was to be shared by various sub-contractors to install electrical, HVAC, fire, plumbing and drainage services as well as builder's works. Mansion's expert, Mr Chang, commented that priority for the use of the site was given to the HVAC sub-contractors. This is disputed by Tridant's expert, Dr Shillinglaw. There were no ventilation works to be installed in the apartment towers. So Mansion could not complain that their progress in the apartment towers was obstructed by the HVAC sub-contractor. In fact it was in the apartment towers where Mansion were the worst behind.

36. In the office tower, the PD works were confined to the toilet areas where there was minimal electrical or ventilation work. There was some delay caused by changes in the layout of the executive toilets. However, the delay was not critical as there were many other risers for Mansion to work on.

37. As for FS installation, Mansion could easily progress with the works in the office space and corridors without conflict with the ventilation works and electrical works. There was generally no conflict over areas to be worked between the various trades. The space between the false ceiling and the concrete slab above where the HVAC and fire services pipes were to be installed, was enormous. There was plenty of space to install whatever was needed to be installed.

38. While a small percentage of the site might not be available to Mansion, the majority of the site was available for Mansion to execute the works. The site was an enormous site. As Dr Shillinglaw put it, it was like three Exchange Squares put together. Thus there could be no difficulties for various contractors to share the site. If there were any real difficulties, these could have been resolved during the site meetings or in consultation with Tridant or the HVAC sub-contractor. There are no contemporaneous documents to support such complaint. As the HVAC works were 26 floors ahead of Mansion's, there could be no truth that Mansion were obstructed by the HVAC sub-contractor.

39. Mr Liu admitted that there were areas which were not available for Mansion's exclusive possession. There were a number of pump rooms. This may delay the installation of the pumps but should not significantly affect the pipe work installation.

40. As for Mansion's schedule showing areas which were only partially made available to Mansion, Mr Liu's evidence is that it could not be true because the Daily Labour Report shows there were FS and PD activities in those areas, indicating that the areas were made available to Mansion. Both Mr Liu and Dr Shillinglaw are of the opinion that the amount of work available for Mansion was enormous, particularly when compared with the small labour force deployed by Mansion. In my opinion, as the HVAC works had progressed beyond those areas and far ahead of Mansion, the inference is that the areas had been substantially available for Mansion to work on but Mansion did not have the resource in terms of materials and labour to carry out the works (see pages 39 to 44 and 49 to 51).

41. Mansion complained that there was inadequate spacing for installation of the fire hydrant system between the false ceiling and beam from Level 7 upwards in the apartment towers and no solution had been made before their sub-contracts were terminated. This is not disputed by Tridant. However, the three month short term programme dated 30 June 1995 has been reprogrammed. According to the programme dated 4 September 1995, the sprinkler branch pipe installation was rescheduled to begin on 5 September, while completion of the quality control floor was delayed from July to 15 September. Thus the September programme had allowed Mansion time for the spacing problem.

42. A more substantial complaint of Mansion is that they were held up by G2, the concreting sub-contractor of KGJV, in the main pipe duct in the office tower where 50% of the vertical risers were to be installed. However, this did not cause a critical delay for two reasons. Firstly, the working area in the duct was very small and only a few men could work in the confined space there. Secondly, there was no reason why those few men could not have been diverted to working elsewhere, e.g. to the office floor, the horizontal risers etc.

43. From a methodology point of view, the proper work sequence is to work on the vertical risers first and then the horizontal risers. It may not be desirable to reverse the work sequence. However, this is not impossible. There may be some slight technical difficulties in subsequently connecting the horizontal risers to the vertical risers which were installed later. But as demonstrated by Mr Chang, in a different context in relation to the Victaulic couplings, such difficulties could be easily overcome by the use of elbows and couplings or adaptors.

44. Mr Chang argued that Mansion should be free to decide their work sequence. I agree that working out of proper sequence may cause additional work or costs, which in my view would be very minimal. However, Mansion's obligation was to conform to Tridant's programme of works and to suit site and construction progress. Under Condition A-14, Mansion was deemed to have allowed for the necessary expenses to suit the Main Contractor's programme of works for the whole project. Mansion were obliged to accommodate the inconvenience caused by the hold up. They should reschedule their work sequence and re-allocate their work force to cope with site condition, so that they may work in other areas so as to absorb the delay in riser work in the main pipe duct. In view of their obligation under Condition A-14, Mansion would be failing in their duty of exercising due diligence, if they did not change their sequence of work to cope with KGJV's site condition or site progress so as to meet their three month short term programmes or in the longer term, the appropriate Master Programme. In fact, according to Dr Shillinglaw's progress chart as at 25 October, the sprinkler branch pipe work had progressed two floors ahead of the risers. This shows that it was possible to re-sequence the work that way and Mansion knew about that. They were re-sequencing their work, but only that their progress was still not good enough. Though sympathy may lie with Mansion for they had entered into two sub-contracts on very harsh terms, the hold up by G2 simply did not avail them.

45. Mr Graham submitted that according to the first Master Programme dated 28 April 1994, installation of the branch pipes in the upper floors of the office tower was to be done at a suitable distance behind the riser installation. That Master Programme had been drawn up a year

and half ago. It was replaced by Revision A. So far as short term works were concerned, the three months working programmes applied. According to the three month short term programme, the works whether the risers or the branch pipes were programmed to be done together. For reasons as explained in the preceding paragraph, Mansion were in breach of the duty of due diligence if they did not alter their sequence of work so as to complete the installation to suit KGJV's programme of works for the whole project.

46. Another complaint by Mansion is the delay caused by G2 in setting out lines, making good concrete, hacking off excess bulges, bonding, rendering, tiling and further setting out lines before Mansion could install the risers. Mansion also complained of obstruction in the light wells by the formwork left by G2. These are documented. For a enormous project such as this, complaints of this nature is bound to arise. In my view, these are trivial complaints and could be resolved by rescheduling their work or changing the work sequence. Indeed Mansion should reschedule their work or their work sequence to ensure that they meet their own programme. If Mansion really had no other work to engage their work force, they could, as suggested by Dr Shillinglaw, have installed the riser brackets leaving the risers to be installed after the concrete has been rendered or the wall surfaces tiled. But the fact is there were plenty of work available for Mansion but they lacked the resources in materials and labour (see pages 39 to 44 and 49 to 51). In my view, the delay caused by G2 was not critical.

47. It is very difficult to look back at what had happened five years ago, especially in the absence of witnesses from Mansion, except their expert witness, Mr Chang, who had never been on site when the work progressed. However, there are documented and contemporaneous complaints from Mansion's own FS labour sub-contractor about lack of materials and Mansion's own complaints against their PD sub-contractor about lack of labour. On the other hand, there were no evidence of contemporaneous complaints of critical delays caused by insufficient area to work on or about working out of sequence. In the light of all these, the inference is that the complaints now raised do not have much substance. My finding in relation to Issue 6(c) is in the negative.

48. To conclude, I find that the causes of delay were not due to Tridant's failure to supply Mansion with a copy of the sub-contracts, or to timeously supply Mansion with a handover schedule or to afford Mansion timeous access to and possession of relevant parts of the site.

ISSUE 7: WHETHER TIME FOR COMPLETION AT LARGE:

49. In view of my findings in respect of Issue 6, there is no need for me to deal with Issue 7, which is framed on the basis of a positive finding of fault on the part of Tridant in Issue 6. Further, I concur with Mr Scott SC's view that the suggestion that time is rendered "at large" can only be advanced where there is a fixed date for completion which can be extended, for example, by one of the specific delaying events found in Clause 23 of the HKIA standard form of condition of contract. There is no fixed date for completion under the two sub-contracts, which provided that the indicated completion date shall conform to the Main Contractor's programme of works. Accordingly, my finding on this issue is "no".

ISSUE 8(a): FAILURE TO EXECUTE WORK REGULARLY AND DILIGENTLY:

Meaning of "regularly and diligently":

50. Mansion were under an obligation to execute the works regularly and diligently. What do these words mean? In Hounslow London Borough v. Twickenham Garden Developments Ltd [1970] 3 All ER 326, Megarry J said at 356:

"These are elusive words, on which the dictionaries help little. The words convey a sense of activity, of orderly progress, and of industry and perseverance; but such language provides little help on the question of how much activity, progress and so on is to be expected. They are words used in a standard form of building contract in relation to functions to be discharged by the architect, and in those circumstances it may be that there is evidence that could be given, whether of usage among architects, builders and building owners or otherwise, that would be helpful in construing the words. At present all that I can do is to say is that it remains somewhat uncertain as to the concept enshrined in these words.

51. In West Faulkner Associates v. London Borough of Newham, (1994) 42 BLR 1 at pp. 11 to 15, Brown LJ after referring to the above dicta and to Building Contract Dictionary and the Architectural Journal Legal Handbook said:

"My approach to the proper construction and application of the clause would be this. Although the contractor must proceed both regularly and diligently with the works, and although each word imports into that obligation certain discrete concepts which would not otherwise inform it, there is a measure of overlap between them and it is thus unhelpful to seek to define two quite separate and distinct obligations.

What particularly is supplied by the word 'regularly' is not least a requirement to attend for work on a regular daily basis with sufficient in the way of men, materials and plant to have the physical capacity to progress the works substantially in accordance with the contractual obligations.

What in particular the word 'diligently' contributes to the concept is the need to apply that physical capacity industriously and efficiently towards that same end.

Taken together the obligation upon the contractor is essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work."

52. I adopt the above definition of the term "regularly and diligently". Under the above definition, the obligation to progress regularly and diligently does not exist in vacuo. It has to be measured against, on the one hand, the contractual requirements as to time, sequence, quality of work and programme of works and on the other, supply of labour and materials.

53. Mr Graham referred to Piggot Foundations Ltd v. Shepherd Construction Ltd (1993) 42 Con LR 98 and submitted that the obligation to progress works regularly and diligently does not require Mansion to comply with Tridant's programme of works. In that case, the plaintiff piling sub-contractor contracted to complete piling work for a 14-storey office block in Coventry within 10 weeks. The sub-contract incorporated the JCT Standard Form of Domestic Sub-contract (DOM/1) which included a clause providing that the plaintiff shall carry out and complete the sub-contract works "reasonably in accordance with the progress of the works". HH Judge Gilliland QC held that those words did not as a matter of construction require the sub-contractor to comply with the main contractor's programme of works nor did they enable the main contractor to claim the sub-contractor must complete a particular part of the sub-contract works by a particular date in order to enable the main contractor to proceed with other parts of the work. He held that those words only required that the sub-contractor carry out his works so that they would not unreasonably interfere with the actual carrying out of other works which can conveniently be carried out at the same time.

54. That case was not concerned with interpretation of the term "regularly and diligently". The issue there was whether the obligation to carry out works "reasonably in accordance with progress of work" includes an obligation to comply with the contractor's programme of works. Of course, it cannot, so long as Pigott completed the works within 10 weeks. But in the present case, there is no fixed completion date under the Tridant/Mansion sub-contracts and more importantly, Mansion were under an express obligation to conform to Tridant's programme of works. I do not think it can hardly be argued that under the terms of the Tridant/Mansion sub-contracts that Mansion did not have to comply with Tridant's or KGJV's programme of works. The decision in Pigott Foundations is inapplicable to the present case.

The applicable programmes for measuring Mansion's progress:

55. To determine if the works under the two sub-contracts were delayed, it is necessary to decide which programme or programmes are to be used as the yardstick for measuring Mansion's progress. There are a number of programmes. The first master programme is dated 3 October 1994, which was attached to the contract documents. It programmed a completion date for the entire project on 31 August 1996. Allowing for time for testing and commissioning of the PD and FS installations, the completion date for the PD and FS sub-contract works would be mid July 1996. This programme was then superseded by Revision A, which programmed a completion date in May and June 1996 respectively for the PD and FS works. This programme was not approved by KGJV. After incorporating some minor revisions, this programme became Revision B dated 18 September 1995. According to Tridant, this programme was delivered to Mansion shortly after it was received. That would be towards the end of September, or about two weeks before the Tridant/Mansion sub-contracts were terminated. Mansion disputed this programme as being applicable. In addition, every now and then there were three month short term programmes prepared by Tridant for KGJV information and comment. As stated in Tridant's covering letter dated 3 July 1995, these are basically forecasts according to site construction condition.

56. As a result of delay in concreting work, Mansion's programme had been compressed. Mansion would be bound by any of these programmes because of the very harsh terms of the sub-contracts they had entered into. So far as their contractual relations with Tridant was concerned, it did not matter if Tridant's programmes had been approved by KGJV or not. But in fairness to Mansion, I consider the three month short term programmes should be used for measuring their progress. These programmes were drawn up in conjunction with Mansion and must be regarded by Mansion as realistic programmes. Mansion's expert, Mr Chang, also confirmed that these short term programmes provide a bench mark against which one can measure Mansion's performance. There are two relevant short term programmes. One is dated 30 June 1995 for the months of July to September. The other is dated 4 September for the months of September to November. The September programme is much tighter than the June programme. It is understandable that once the mock up or quality control floor had been completed with all the technical problems surfaced and solved, it was reasonable to proceed with greater expedience under the September programme. As the end date of the June programme is closer to Mansion's termination date, I place greater weight on the June programme for measuring Mansion's performance; but I shall also bear in mind the first ten days of October when Mansion were required to work under the tighter September programme.

Gauging Mansion's performance:

57. According to the June programme, in respect of fire hydrant and sprinkler mains installation in the office tower, Mansion were programmed to complete up to Level 13 by the end of September; while under the September programme they were programmed to complete up to Level 40. Thus Mansion were required to complete 27 floors within the 61 days in October and November, i.e. four and half floors within ten days. Thus by 10 October when Mansion were evicted from the site, they should have installed fire hydrants and sprinkler mains up to Level 17 and finished half of installation work in Level 18 in the office tower. Installation of the sprinkler branches was programmed to be 4 floors behind.

58. In respect of FS works in the apartment towers, Mansion were programmed to finish installing fire hydrant mains up to Level 12 and Level 30 by the end of September and November respectively. They were required to install the fire hydrant mains in 18 floors within 61 days, i.e. 3 floors in ten days and should have completed the installation of the fire hydrant mains up to Level 15 by 10 October.

59. In respect of sprinkler mains installation in the apartment tower, Mansion were required to complete up to Level 12 and Level 20 by the end of September and November respectively. They were required to complete 8 floors in October and November and should have completed the sprinkler mains installation up to Level 13 and about one third of the installation in Level 14.

60. Similarly, in respect of sprinkler branch installation in the apartment tower, they were required to complete up to Level 12 and Level 28 by the end of September and November respectively. Therefore, they were required to complete 16 floors in October and November and should have completed the installation work up to Level 14 and about two third of the work in Level 15.

61. In respect of PD works in the office tower, Mansion were programmed to complete up to Level 10 by the end of September and Level 40 by the end of November. Thus they were required to complete 30 floors within 61 days, i.e. one floor in every two days. They should have completed the installation work up to Level 15 by 10 October 1995.

62. As for PD works in the apartment tower, Mansion were programmed to complete installing the rain water down pipe, soil water down pipe, and gas up feed pipe up to Level 15 and Level 30 respectively by the end of September and November. Thus they had to complete 15 floors in October and November, i.e. one floor in four days. They should have completed the installation work up to Level 17 and finished half of the work in Level 18.

63. I use Tridant's expert, Dr Shillinglaw's progress chart as at 25 October instead of the one as at 27 September, as evidence of Mansion's progress. I consider the charts as at 25 October more reflective of Mansion's progress as at 10 October, which was only 15 days earlier. Between 10 and 25 October, the replacement sub-contractors provided only about 60% the manpower previously supplied by Mansion. Probably negligible progress had been contributed by the replacement sub-contractors for those 15 days because of their smaller labour force, lack of tools and the need for mobilisation.

64. With that in mind, how Mansion performed as against their own three months short term programmes can be assessed if a line representing Mansion's scheduled progress as at 10 October 1995 is superimposed on Dr Shillinglaw's charts of 25 October 1995.

65. This line shows that in the office tower, Mansion were seven and a half floors behind in fire hydrant installation. Of the seven floors that had been installed, the work was only about 75% complete. That is equivalent to five completed floors. Sprinkler branch installation was five and half floors behind while sprinkler riser had not been installed at all. They achieved less than half of their scheduled progress.

66. In respect of FS works in the apartment towers, Mansion progressed twelve floors beyond their programme in No. 1 Riser in Apartment West, but the work was mainly incomplete and equivalent only to three and half completed floors beyond their programme. They progressed ten floors beyond their programme in No.1 Riser in Apartment East, but the work was mainly incomplete. They progressed ten floors beyond their programme in No.2 Riser, but again the work was only 30% complete. Work in the remaining three risers in Apartment West and the remaining two risers in Apartment East had hardly begun. In overall terms, they achieved about one third of their scheduled progress in FS works in the apartment towers.

67. In respect of PD works in the office tower, Mansion should have progressed to Level 15. They were three floors behind, while of the nine floors that were installed, the work was about 60-95% complete and is equivalent to seven completed floors. Thus they achieved about 60% of their scheduled progress.

68. As for PD works in Apartment East, Mansion progressed slightly beyond their programme with air conditioning condensate drain, but were about 8 floors behind in domestic drainage installation and 60% behind in the down-feed risers, up-feed risers and other external pipe works, while the work in Apartment West had hardly begun.

69. I therefore conclude that Mansion were badly behind their own programmes. It is difficult for me to assess how far they were behind as the experts have not assessed Mansion's progress against the three months short term programmes. By way of an overall impression, I think Mansion achieved less than 40% of their programme at the time when their sub-contracts were terminated by Tridant. That in my view is the fairest way to gauge how badly behind Mansion were in relation to the programmes applicable to Mansion. But even on such a fair view of the evidence, Mansion were badly behind and were in breach of their duty to progress works regularly and diligently and in accordance with Tridant's programme of works.

Availability of work is irrelevant:

70. Mr Scott SC submitted that work done against work to be done is also a measure of Mansion's performance. He referred to Dr Shillinglaw's progress charts in attractive colours for 22 August, 4 September, 27 September and 25 October and submitted that they show vividly that Mansion were falling further and further behind the progress of the construction of the reinforced concrete frame of the building.

71. I have no doubt about the accuracy of Dr Shillinglaw's charts. They give a vivid illustration that Mansion were indeed falling further and further behind the progress of the reinforced concrete frame of the building and the progress of the HVAC sub-contractor. In an ideal situation, all sub-contractors should progress together with the HVAC sub-contractor leading in some of the floors followed by Mansion and with Mansion leading in the other floors followed by the HVAC sub-contractors and then change over the completed floors, so that they would not obstruct one another. This may perhaps have been what was in the minds of Tridant and KGJV. That explains why they were so dis-satisfied with Mansion's progress and level all the blame on Mansion.

72. However, Mansion's obligation under these very draconian sub-contracts was to conform to the programme of works. The programmes then applicable were the three months short term programmes of June and September 1995. The original master programme of 1994 was out dated. Revision A of the master programme was not finalised, while Revision B was not then in existence. The short term programmes were the ones that were agreed upon by Mansion and Tridant. Mansion should be measured against those programmes, though other sub-contractors performed better under their respective programmes.

Progress of HVAC sub-contractor is irrelevant:

73. Mr Scott SC submitted that the performance of Mansion should be measured against the performance of the other sub-contractors, namely the HVAC sub-contractor doing similar type of work. He referred to Mr Liu's evidence that Mansion were 26 floors behind the HVAC sub-contractors. I have held that Mansion's obligation was to conform to the three month short term programme and not to follow the concreting contractors or to compete with the HVAC sub-contractors. It appears from the correspondence that both KGJV and Tridant were persistently criticising Mansion for falling behind the HVAC sub-contractor. That, in my view, is an incorrect way to measure Mansion's performance and added an unjustified taint to Mansion's already poor performance.

74. It should also be noted that according to the three month short term programme of June, the HVAC sub-contractors were programmed 5 floors ahead of Mansion in FS works and 8 floors ahead in PD works. They were to complete up to Level 18 in the office tower by the end of September. According to Dr Shillinglaw's chart of 27 September, except for Level 16, they have substantially finished up to Level 27. They have progressed beyond their own schedule by 9 floors. From Dr Shillinglaw's chart of 25 October, it is likely that the HVAC sub-contractors would also have progressed beyond their three month short term programme ending in November.

75. Counsel have spent some time arguing whether the work of the HVAC sub-contractor was different from Mansion's. In view of my finding above, there is no need to deal with this issue because Mansion's performance is to be measured against the programmes applicable to Mansion and not against availability of work or performance of other sub-contractors. If there was no applicable programme to measure against, then performance of other sub-contractors doing identical work, or failing that doing similar work, may be used as a comparison. But this is not the case.

76. If I have to come to any opinion on this issue, I agree with that of Mansion's expert, Mr Chang. Except for installing risers, the work of the HVAC sub-contractor was different and the environment they worked under was also different. They installed vent ducts. They could start working once the formwork was removed. They were less dependent on the other sub-contractors. They work principally in the void space between the false ceiling and the floor slab above. In respect of the majority of their work, they did not have to wait for G2 to mark the setting out lines, to render concrete, to plaster the wall surfaces or to fix mosaic tiles on the external surfaces, etc. They worked under less constraint than Mansion.

77. To consider if Mansion had failed to execute their works diligently and regularly would in accordance with the principle in West Faulkner Associates v. London Borough of Newham require an analysis of supply of materials and labour. But the issue as framed precludes me from dealing with it under this sub-issue. Thus on Issue 8(a), I find Mansion have failed in progressing the works regularly and diligently as measured against the three month short term programmes applicable to Mansion.

ISSUE 8(b): RESOURCE:

(i) Materials:

78. According to the definition of Brown LJ in West Faulkner Associates v. London Borough of Newham, the duty to progress work regularly and diligently includes essentially the duty to proceed continuously industriously and efficiently with appropriate physical resources. So far as supply of materials is concerned, the contractor has to plan his requirements ahead and ensure that the materials of the right quality and in the right quantity are available at the right time. This is to enable the works to progress continuously, industriously and efficiently. The most ideal situation would be to arrange delivery to coincide with work progress so that the materials will arrive at the site precisely when they are wanted and be delivered to where they are required. This saves handling, storage costs, and reduces risks of theft or damage at site. If such precise delivery is not possible, at least the contractor should ensure that a minimum stock is kept on site which is sufficient to provide for the time required for placing order and delivery plus reasonable provision for contingency. Otherwise, labour will be wasted while waiting for materials and delay will result.

79. So far as FS works were concerned, Mansion had failed utterly. There is undisputed and documented evidence from their own labour sub-contractor, Kin Ying Engineering Co Ltd, that Mansion had failed to provide them with materials and fittings in sufficient time despite repeated requests. As a result of that, Kin Ying had to stop working. On 21 August 1995, Kin Ying wrote to Mansion as follows:

"It is the crucial time for installation of fire services at the Sky Central Plaza. However, your company has not yet delivered the pipe materials and fittings into the site. The speed of the delivery is far behind from the work progress. There is no planning for the delivered pipes and fittings. There is no arrangement, no specific person-in-charge, no place for storing the pipes, everything is in a mess. For example, in the second delivery, half of the 600 boxes of fittings are not of the required brands. Some important fittings, for example, victaulic couplings and tee couplings are not delivered into the site. The staff of our company has to stop the works. The second lot of pipes are planned to be used in L3 to L9 rooms of the Office Towers. However, your company has not followed the original plan and time schedule to do the works. L3 to L10 are finished by the other trades. Our company has missed the loading platform on L4, L6, L9 for material hoisting, and the pipes have to be delivered to L17 and L21 of the Office Tower and back to L3 - L9. It is a waste of manpower and time for our company to deliver the pipes of hundreds tons to L3 to L9 in a short period of time. Besides, our company has delivered the third list of pipes to the site manager C J Cao (曹礎基) on 2 Aug 95, but the pipes did not arrive at the site until 15 Aug 95. Your company has asked our company to go to pick up the materials at the pier together without good arrangement beforehand.

However, your company did not take any action without giving the reason. The pipes delivered are not what we ordered. The pipes are in different kinds and are piled up in a mess. The material required for L10 to L20 are not there. There are only small number of pipes delivered to L34. Pipes with diameter under 65 are urgently needed. However, there is no pipe of this size delivered to the Office Tower.

Besides, your company does not have any fixed mid-way transfer warehouse at the site. The pipes have to be delivered to the floors after arrival at the site. It is difficult to handle hundred tons of pipes within one or two days. Under the present condition, more than 1700 tons of pipes and more than 1000 tons of fittings are needed for the Sky Central Plaza site. It is hard for our company to accept that if there is no mid-way transfer warehouse for the materials.

For this reason, according to the present situation, our company hope that your company should pay serious attention to the supply of pipes and materials and to promptly adopt measures to coordinate the various sections to provide a mid-way transfer warehouse. If the delivery of pipes is not in line with our company's original plan, the progress of installation will be affected, the work will be delayed and the reputation of your company would be damaged. The consequence is hard to be imagined.

Now, installation of L15 is carried out by other trades. However, your company has not yet provided a set of complete fittings for the completion of a whole floor. Our company stopped at L5 mock-up room of the Office Tower. It is hard for our company to understand how your company think of this matter."

80. Again, Kin Ying wrote on 5 September 1995 as follow:

"The fire services of Sky Central Plaza should have been installed 3 to 4 months before. However, the works have not been started yet. The main reasons are as follows:

1. The supply of materials and fittings are not provided in time. No planning. No mid-way transfer site:

Our company has given your company the material submission schedule several months before. However, the pipe materials and fittings are not sent to site at this late stage. Our company has urged your company in writing for many times and in the meetings. Though your company always promised to solve the problem promptly, your company has delayed the matter from 15 May, 15 June, 15 July, 15 August and 31 August. As of 5 September, there were not many fittings arrived at the site, except for some fittings delivered to site in early July. However, 30% of those fittings are not up to standard and not fit to the requirement. This is a substantial waste of manpower. The installation works at L5 mock-up room of the Office Tower have not finished after it started for five months ago. There were 12 fittings for L8 mock-up room of the Apartment Towers delivered on 5 September 95. Our company was asked to finished the works within two days. It was impossible. Besides, as a perfunctory gesture, your company has delivered some pipes that were not urgently needed to the site. These pipes were piled up at several levels of the Office Tower. Our company had to replace those pipes and move them to difference levels. Our company has wasted much manpower in the delivery of materials, fittings and pipes. We were at the status of "stop working".

2. The drawings were not sent in time and not in line with the progress:

The works has progressed to L41, our company have only one set of drawings of installation of the Office Tower, and there are frequent amendments. Up till now, there are only two sets of approved drawings with regard to L5, L3. As a result, our company has no way to do the preparation works before installation with regard to other levels.

Our company have reported the above mentioned problems to your company for many times. We do not know why there is no reply. We now repeat that your company should solve the problem in the aspect of materials and fittings; otherwise, our company would not bear the consequences of delay in works."

81. These memoranda precisely describe the factual site situation and reflect the sentiment felt at the site by those working for Mansion. They are strong evidence of Mansion's breach of their obligation to progress diligently and regularly.

82. They also showed a lack of planning on the part of Mansion in their supply and delivery of materials. Mansion did not respond despite repeated reminders on 15 May, 15 June, 15 July, 15 August, 21 and 31 August, a communication on the 15th day of each month since they took over the works in May. Only few fittings arrived in early July, but 30% were not up to standard. 300 boxes of fittings were not of the right brand. As a perfunctory gesture, pipes which were not urgently needed were delivered. There was a general lack of pipes of diameter of 65 mm and fittings like Victaulic couplings and tee couplings. As a result, work stopped and there was no progress.

83. These were complaints from Mansion's own labour sub-contractor. They were contemporaneous, repeated, documented and not rebutted by Mansion. They described exactly the condition at the site, the total lack of co-ordination and management on the part of Mansion, how the untimely delivery caused additional work for Kin Ying which resulted in work having been suspended. The result is fairly reflected in Dr Shillinglaw's progress charts. I give full weight to these complaints.

84. The Victaulic couplings were approved on 20 December 1994 but were not ordered until 9 June 1995 and not delivered to site until 15 September 1995. This is clear evidence of lack of due diligence in material planning and supply. Though Mr Chang ingeniously pointed out that other pipe works could progress pending the arrival of the Victaulic couplings or the resolution of the thread problem in some other fittings, apparently this was not what Mansion did until perhaps at a very late stage (in respect of the sprinkler branch pipe in two floors in the office tower), as there was delay. In their letter dated 4 September 1995, KGJV pointed out that the lack of Victaulic couplings was holding up the installation works. I have no doubt that KGJV's complaint was genuine.

85. As for PD materials, as noted by Dr Shillinglaw, there was a general shortage of D I pipes which delayed the progress on the cold water risers. There was also a shortage of PVC pipes and valves. Again, as complained by KGJV's M & E manager, Mansion were short of pipe brackets, U-channels, angle iron, G I pipe fittings, caulking compound, R C pipe fittings, copper pipe fittings, rain water outlets, rockwool, D I pipe and fittings and AFA trunking. Except for the AFA trunking, these are just off the shelf items which Mansion should not have problem in obtaining except for lack of planning or due diligence.

86. That was the position up until the end of September 1995. Thereafter, Mansion stepped up their delivery of materials. According to Mr K P Sin's survey, as at 10 October 1995, there were unfixed materials delivered by Mansion at site to the value of $5,711,445.00. According to Mansion's own estimate, material cost, excluding the cost of capital items of plant and equipment, under the two PD and FS sub-contracts was $38,205,408. The unfixed materials was therefore about 15% of the materials required to be fixed. This is not an insignificant quantity. If they were of the right kind and quality required at the time, they would provide sufficient materials to work with for about 6 weeks. But this is no answer to an allegation of failure to provide the right materials at the right time and as Kin Ying's complaints show, much of those materials may not be wanted at the time and some were not of the right brand or standard. However, in all fairness to Mansion, while they had been in serious breach of their duty in ordering materials, they had been rectifying their breach and by early October 1995, the situation had been rectified just before their subcontracts were terminated.

(ii) Plant and equipment:

87. On the capital items of plant and equipment, Tridant's case is as follow. The dates on which the relevant plant and equipment were required to be delivered to site were as shown in the material submission schedules prepared and issued by Mansion on 22 September 1994. The schedules have been revised and amended repeatedly. The latest schedule for the PD plant and equipment is Revision 27 dated 14 September 1995. All the plant and equipment under that schedule had been approved by the Architect by August 1995 and should have been delivered on site from early 1995 to early 1996. They were not so delivered.

88. The FS plant and equipment schedule was prepared by Mansion on 22 September 1994 and amended and updated repeatedly until its latest Revision 30 dated 12 October 1995. Only three items had been approved by the Architect in late 1994 and April 1995. The approved items should have been delivered on site from late 1994 to October 1995 or June 1996 at the latest. Despite numerous requests by Tridant, Mansion failed to order the plant and equipment. For example, 21 pump rooms had been handed over on 30 September with another four by 10 October, but the fire service pumps were not delivered before those dates.

89. These plants and equipments are specialist items which have to be ordered and made to design. The procedure in the trade is that a contractor places a "preliminary order" with a manufacturer, stating the quantity required, the estimated dimension and specification. Presumably, he has to pay a deposit as well. The manufacturer will then prepare shop drawings for approval by the Architect. Once the Architect's approval has been obtained, and where necessary the approval of Guangzhou Fire Bureau as well, a "firm order" is placed. The preparation of shop drawings and approval by the Architect may take a couple of months on top of manufacturing time and delivery time. Mr Graham tried to excuse Mansion's failure by referring to a correspondence instructing Mansion to withhold ordering the plant and equipment. I find that to mean withholding the "firm order" and not the "preliminary order". There is no justification for Mansion not to place the "preliminary orders", which is necessary to start the preparation of shop drawings.

90. Mr Graham submitted on the authority of Greater London Council v. The Cleveland Bridge, that if the access dates, key dates and completion dates are varied or extended Mansion could not be said to be lacking in due diligence if it paced its work so as to ensure delivery consistent with the appropriate access and key dates. Hence he took the view that as certain items were not in fact required on the scheduled dates, Mansion were at liberty not to order them. He suggested saving of finance costs and advantages in preserving the guarantee period in support of Mansion's delay in ordering the items.

91. With respect to Mr Graham, as I have held earlier, Greater London Council v. The Cleveland Bridge was a case with fixed completion date and it was thus decided that the contractor's obligation was to meet key dates rather than to conform to contractor's programme of works. If that date becomes at large, then of course, the contractor is at liberty to pace its work so as to ensure delivery consistent with the extended completion date. In the present case, Mansion's obligation was to conform to Tridant's programme of works. It was not for Mansion to query the utility of the programme. Mansion may of course have inputs in formulating the programme and material submission schedule and may persuade Tridant to make revisions as it had done before.

92. In my judgment, it is not for the Court to go back in time to decide whether at the time when the material submission schedule was drawn up or revised, the delivery dates were appropriate. I agree with Mr Scott SC that the schedules should be taken at their face value because they were prepared by Mansion at the time. They must reflect the need recognised at the time as described in Tridant's letter dated 14 and 24 September and the minutes of meeting dated 28 September 1995. It is not up to Mansion to contradict what they agreed at the meeting of 28 September 1995 when the urgency of the plant and equipment was not disputed.

93. Mr Graham submitted that different items of plant and equipment were not "critical" in September 1995 in the sense that they may not have been needed at that precise moment. He overlooked the important fact that it might take one to two months to obtain Architect's approval and four to five months between placing a "firm order" and delivery.

94. As submitted by Mr Scott SC, in relation to some of the items, Tridant had a real concern. Four pump rooms up to Level 40 had been handed over by 10 October 1995. No fire pumps had been delivered prior to that date. The manufacturer, Wai Tat, had not been issued the appropriate letters of credit. A delivery period of 20 weeks delay there was serious and critical. Similarly, 21 pump rooms had been handed over on 30 September 1995. With a delivery time of 16 weeks, the delay was serious.

95. Mr Graham submitted that Mansion could not be criticised for not ordering the fire shutters in October 1995 as in any event, after Tridant took over, they only ordered the fire shutters for delivery in March or April 1996. With respect to Mr Graham, since obtaining Guangzhou Fire Services Bureau approval on 20 June 1995, no order for the fire shutters had been placed by Mansion. After Mansion's termination, Tridant promptly invited tenders on 20 October 1995. With a delivery time of four to five months, the earliest date these fire shutters could be delivered would be March or April 1996. That was what Tridant could have done at best as a result of Mansion's breach of their duty of due diligence.

96. The scheduled handover date for the transformer room was 30 October 1995. The Guangzhou Electricity Company required the CO2 system to be installed before they would energise the entire project. No order had been placed by Mansion. With a delivery time of 4 months and allowing for another month for the Architect's approval, it would take until March 1996 before the system could be delivered. As the power sub-station had to be completed six months before completion of the project in August 1996, Mansion's delay caused critical delay to the completion of the entire project. Mr Graham said that the power sub-station was in fact not ready as scheduled. On the contrary, the evidence suggests that had the CO2 system been available, the power station could have been handed over in time.

97. The AFA trunking was another specialist item which was classified as urgent materials to be ordered at the meeting of 28 September 1995. This should have been delivered before September 1995 in order to avoid delaying the installation of the AFA system. Again, no order had been placed by Mansion by the date of their termination.

98. Mr Graham argued that even after Tridant took over, many of these items were not delivered until much later. Mansion had caused delay and their termination had caused disruption. The evidence shows that after Mansion left, Tridant promptly placed orders. The late delivery was the result of the disruption caused by Mansion's delay. I do not think Mansion could count on their default to their benefit.

99. I agree with Mr Scott SC that the material submission schedule should be taken at its face value and Mansion's failure to order in accordance with the schedule is prima facie breach of their duty to proceed regularly and diligently.

(iii) Labour:

100. Based on his experience and his recollection of the site circumstances, Mr Liu opined that the labour employed by Mansion were insufficient. On the basis of the Daily Labour Report, Dr Shillinglaw showed mathematically that the labour employed for the PD works was inadequate to catch up with the other trades. He is certainly right. However, as I have pointed out, Mansion's obligation was not to catch up with the HVAC sub-contractor who had progressed beyond their programme.

101. Manpower is a function of the materials available for installation. For the FS work, it appeared from the complaint of Kin Ying that probably they had sufficient manpower, but not materials to work on. That may well be true within the constraint of Mansion's supply of materials as there was no point for Kin Ying to increase their labour when there was no or insufficient materials to work on. But it could well be, when measured against Mansion's programme, that Mansion were failing in both supply of materials and labour.

102. In relation to the labour for the PD works, Mr Newman Tso, Mansion's Resident Manager, wrote numerous site memos throughout September and October to their PD labour sub-contractors, Man Kee, complaining of inadequate manpower. He was of the opinion that 10 skilled workers were needed to complete one floor of PD works in the office tower in 15 to 20 days, but Man Kee only had 8 to 9 workers. That in Mr Tso's or Mansion's own opinion was insufficient both in terms of number and skill level. Even on 2 October, Mr Tso was complaining of Man Kee's shortage of labour. According to the three month short term programme dated 4 September, Mansion should complete one floor in two days. On my calculation based on Mansion's data, 75 to 100 men were required to meet that programme for the office tower alone. According to the Daily Labour Report, Man Kei only supplied 113 men per day during October, and much less in September. On that calculation and the figures supplied by the Daily Labour Report, I am satisfied that Mansion were manifestly short of labour for the PD works.

103. Mr Chang said that after April 1995, Mansion's manpower increased by "leaps and bounce" and that by September 1995 it had increased by 273% in FS works and 900% in PD works. That may be factually correct, but utterly misleading. In April 1995, there was no installation work to be performed by Mansion. The only work was to insert sleeves or concealed conduits in the concrete frame which did not require as extensive a labour force as it did with installation work. The issue as Mr Scott SC pointed out is not whether Mansion increased its labour force in relative percentage terms but whether in absolute terms it provided enough labour to enable Mansion to conform to Tridant's programme of works.

104. A comparison of the labour supplied by the replacement sub-contractors shows that the labour they supplied was more than double that by Man Kee and more than triple that by Kin Ying. In October, Man Kee and Kin Ying engaged on the average 113 and 63 men per day respectively. Their replacement sub-contractors engaged respectively between 200 and 311 men and between 200 and 230 men per day for most of the time (see pages 74 to 75). The works were completed in November 1996, which was three months beyond Mansion's original indicated completion dates. The labour force would have to be further increased if the original indicated completion dates were to be kept. With that and my calculation, I can safely conclude that the labour provided by Mansion in the two sub-contracts were utterly inadequate.

(iv) Supervision:

105. The PD and FS sub-contracts were very substantial contracts for works in two apartment towers of 38 storeys and an office tower of 80 storeys. The office tower was one of the tallest, not only in the PRC but internationally, being constructed at the time. The successful performance of the sub-contracts was very much dependent on its management.

106. At the top of Mansion's site management team was Mr Simon Ng. However, he was a "remote project manager". He only turned up at site meetings and at site inspections about four times a month.

107. At the initial stage of the project from June to September 1994, a foreman Mr F Y Chiu (also known as F Y Chin) was in charge. He was only trained in the plumbing and drainage discipline. From July to October 1994, Mr Sunny Yip and Fai Yeung were engaged at the site as resident engineers for the FS and PD works respectively. According to Mr Liu, there was virtually no supervision and management prior to mid-September 1994. That part of the works was concerned with inserting sleeves and conduits during the concreting process. There were some complaints but that part of the sub-contract was substantially performed.

108. Starting from March 1995, Mr Y B Chan was the resident engineer for the PD works. Mr Ng Chi Kin became the supervisor of FS works from November 1994. Mr Bobby Tang was the resident engineer/project coordinator since November 1994. In addition a Mr Newman Tso, also known as Newman Cao or Newman Tsao, also attended site co-ordination meetings with Tridant, but he had no authority or knowledge to reply or answer requests raised at the meetings. These were Mansion's resident staff until their termination.

109. On the other hand, Tridant's Mr Liu worked 5 days a week in Guangzhou. According to Mr Liu, he seldom saw Mr Tang at the site and Mr Tang could not answer the questions he raised. He thought Mr Tang had little knowledge and experience in either PD or FS disciplines and was unable to discharge his duty as resident engineer or project coordinator. He also found difficulties in contacting Mr Simon Ng, Mansion's project manager, as he only came at most four times a month for meetings and would only stay at the site for a few hours.

110. Mr Liu said that Mansion's locally hired supervisors or foremen rarely showed up at site and could not be contacted. Even when they showed up, they were not useful and they were unable to understand the drawings, instructions or related correspondence and specifications which were usually in English. They also lacked experience in high-rise building works, not at least of this altitude. Apparently, Mansion lacked suitably qualified and experienced local supervisors.

111. Mr Liu had raised the problems with Mansion verbally and in writing but received no response. He annexed a list of 35 complaints to Mansion since July 1994. Those complaints were mainly about absence of site staff during working hours or at meetings.

112. Mr Graham submitted that the question of supervision is very subjective. He said that there were even more trenchant criticisms of Tridant's failure to adequately supervise its sub-contractors long after Mansion were off the site. This, of course, is irrelevant. However, having read the complaints and related correspondence and putting myself in the context of the situation then, I am satisfied that KGJV's complaint against Tridant was really the inevitable consequence of the disruption caused by the termination of Mansion and the transitional difficulties in arranging replacement sub-contractors, ordering and importing tools taken away by Mansion's sub-contractors, and the time lag in mobilisation. This cannot be allowed to adversely reflect on the lack of supervision on the part of Tridant or account for KGJV's complaint against Mansion.

113. Mr Graham also accused Tridant of misunderstanding totally what Mansion's role was. Such misunderstanding, counsel says, was as reflected in Tridant's letter dated 6 September 1995 in which Tridant wrote:

"We ..... remind you of your obligation under the sub-contracts to assume our obligation to Kumagai Gumi ..... including ..... site management, site coordination, coordination with construction programme, communication with contractors ....."

114. Mr Graham submitted that Mansion did not and could not have a duty to coordinate other trades and take over Tridant's site management role. I do not think Tridant's letter should be read in that light. Tridant had a much stronger management team on site than Mansion and a full time senior resident engineer on site. I am satisfied that Tridant understood its overall and not just residual management and supervisory function in all the sub-contracts. I am satisfied that by that letter Tridant meant to remind Mansion of their own obligation to provide site supervision and management necessary to carry out their obligations under the PD and FS sub-contracts. Site coordination and communication with contractors in this letter must be taken to mean those coordination and communication at Mansion's appropriate level. Of course for a project of this size involving so many different trades, coordination among the different trades was required. It would be ridiculous, for example, that Kin Ying's site foreman should refer a minor conflict with Man Kee or with Tridant's HVAC sub-contractor all the way up to Tridant for coordination and for Tridant to give directions all the way down for resolution. This should be resolved at the appropriate level. This is the way that letter should be read.

115. Complaints against sub-contractors are to be expected for any construction project. It is the cumulative effect of the complaints together with Mr Liu's observation that is important. Mr Liu worked full time on site 11 hours a day and 5 days a week. His evidence was not rebutted by any evidence from Mansion and was supported by documented complaints from Tridant and corroborated by complaints it received from KGJV. Given Mr Newman Tso's complaint against their own sub-contractor of insufficient labour and insufficient skilled workers on the one hand, and Kin Ying's complaint against Mansion of their failure to arrange delivery of materials on the other, all these reflect Mansion's lack of supervision of their sub-contractors as well as Mansion's own staff. On the other hand, there is no credible evidence from Mansion to displace Mr Liu's evidence. I am satisfied that a case of inadequate supervision has been fairly made out.

116. As for Issue 8(b), my finding is that Mansion failed to provide adequate resources in terms of supply of materials, plant, equipment and labour, and supervision for the two subordinate contracts works. But so far as supply of materials is concerned, the situation has been rectified before 10 October 1995.

ISSUE 8(c): RECANTATION:

The Issue:

117. Counsel differed slightly in the framing of this issue. The issue as framed by Mr Scott SC is whether Mansion wrongfully refused to arrange for delivery of materials. The defence of Mansion is that the refusal has been recanted. As Tridant had not accepted the refusal as repudiation at the time of the refusal and in view of the defence now pleaded by Mansion, I agree with Mr Graham that the issue should be framed in accordance with his version. The issue therefore is:

Whether Mansion were as at 10 October 1995 wrongfully refusing to arrange for materials to be delivered for the installation works unless and until two Contracts with Mansion Fire were entered into by Tridant in relation to the two Subordinate Contracts works.

Background:

118. Despite their pleadings that Mansion Fire and not Mansion Holdings were the contracting party to the FS and PD sub-contracts, in the course of discovery it became clear that Mansion Holdings were the contracting party to the two sub-contracts which then further sub-sub-contracted the works to their subsidiary, Mansion Fire on 30 June 1994. While the issue as to who were the contracting parties is no longer a life one, it is still relevant in three respects. Firstly, Mansion's refusal to order materials was illegitimate and not justified by the terms of the letters of agreement of April 1994. It casts serious doubts on the integrity of the management of Mansion Holdings at the time in disputing their identity as the contracting party. Secondly, it casts doubts whether Mansion Holdings entertained any genuine intention to be bound by the two sub-contracts. Thirdly, it sets the background leading to the events which occurred shortly before Mansion's termination

119. While Mansion Holdings were the contracting parties to the two sub-contracts, much of the liaison took place between Mansion Fire and Tridant because Mansion Fire were the sub-contractor of Mansion Holdings and were actually on site performing the work. It then came a stage towards the end of October 1994 when Mr Yip of Mansion Holdings requested Tridant to agree to have Mansion Fire replacing Mansion Holdings in the two sub-contracts. That was refused by Tridant. Then Mr Yip informed Mr James Cheung of Tridant that Mansion Holdings had financial problem and wanted Tridant to help with financing the purchase of materials, plant and equipment. No agreement was reached. Then came Mr Albert Yeung's statement to Mr Liu on 5 September 1995 that if no formal contracts were entered into between Tridant and Mansion Fire, Mansion will not order any materials in respect of the two sub-contracts. Tridant's response was documented in their reply dated 8 September.

Meeting on 25 September 1995:

120. In view of that, Mr James Cheung became very concerned and called for a meeting with Mansion at Tridant's office in Tsimshatsui on 25 September 1995. The meeting was attended by Mr Cheung, Mr Liu, Mr Lo and very briefly by Mr Mak on behalf of Tridant, and by Mr Albert Yeung, Mr Henry Chan and Mr Simon Ng on behalf of Mansion.

121. Mr Liu first discussed with Mansion about aspects of programme, progress and material delivery. Then Mr James Cheung took over about the issue of Mr Yeung's statement that ordering materials could only be considered after executing formal contracts with Mansion Fire. Mr Yeung said that Mansion would order the materials and equipment according to their financial planning. He elaborated by saying "We will buy if we have the money. We will not buy if we do not have the money." Mr Cheung replied that Mansion should not plan their works, including purchase of materials and equipment, based on their financial planning and threatened to perform the sub-contract works by themselves and take appropriate action if Mansion failed to improve their installation progress and material delivery within one week.

122. Mr Henry Chan then asked if Tridant would take back the supply part of the two sub-contracts. Mr Cheung refused saying that Mansion should stick to the letters of agreement dated 30 April 1994. At that stage the conversation became heated. Mr Chan grumbled, "Mansion is your sub-contractor and working for you. If you squeeze your sub-contractor to death, who is going to work for you? Then we will follow the original contract."

123. A number of points arose out of these exchanges of conversation. Firstly, Mr Graham said Mansion Holdings had recanted the demand to have themselves substituted by Mansion Fire as the contracting party to the sub-contracts when Mr Chan said they would follow the original contract. Secondly, Mr Graham submitted that Tridant is pleading a new case based on refusal to arrange delivery. Thirdly, Mr Graham accused the witnesses of fabricating evidence about the conversation at the meeting.

124. Mr Scott SC took great exception to the pleading point and accused Mr Graham of attacking not just the good faith of Tridant but also that of their legal advisers. He referred to the ruling of Findlay J in allowing the amendment, in which Findlay J held that the amendment sought does not raise a radically new case and rejected Mr Graham's argument of bad faith. Mr Scott SC said that the ruling of Findlay J had not been appealed against. In my judgment, the issue before Findlay J was just an interlocutory matter on an application to amend the pleading. His ruling, though not appealed against, does not prevent me from hearing the matter on its own merit and in no way prevents me from finding as a matter of fact whether a new case is in fact raised or whether Tridant's witnesses were telling the truth. Mr Graham's submission could in no way be treated as an attack on the integrity of Tridant's legal advisers.

125. Mr Scott SC asked me to draw adverse inference on Mansion's unexplained failure in calling Mr Chan or Mr Yeung to rebut the allegation of Tridant. I do not think there is any substance in that submission. The evidence that Mansion wished to rely on as proof of recantation is there from the words of Tridant's Mr Cheung and Mr Liu and from the documents. If Mr Graham is contented with those evidence, I do not consider any adverse inference should be drawn against Mansion for not calling any witnesses to repeat the evidence which is not in dispute.

126. Having said that, I find both Mr Cheung and Mr Liu are credible witnesses. Their evidence are not contradicted by credible evidence whether from Mansion or from the documents. Their evidence are also consistent with Mansion's expressed intention at the time. In fact Mansion's lack of good faith helped to boost the credibility of Mr Cheung and Mr Liu. I accept that the facts were as related to me by those witnesses, whose honesty I have no reason to doubt.

127. The real issue is whether on the basis of what Mr Chan is alleged to have said, the way he said those words and in the totality of the evidence Mansion had recanted.

128. Mr Cheung did not consider Mr Chan's words that Mansion "will follow the original contract" should be taken seriously. He said Mr Chan was grumbling in dis-satisfaction. He said that Mr Chan was accusing Tridant of "pressuring Mansion into a corner to death" and it was only out of that context that Mr Chan uttered those words in dis-satisfaction, and in a negative way, I should say. I have asked the witness to repeat in Cantonese what was alleged to have been said in as near the tone as Mr Chan used. I am satisfied from the tone and phrase used that it was a grumble. A possible interpretation of Mr Chan's statement is that it is a warning that if Tridant insisted on the strict terms of these sub-contracts Mansion would be forced out of these sub-contracts (i.e. Mansion would repudiate) leaving no one to work for Tridant. But in fairness to Mr Chan who was not before me, the tone and the words are not sufficiently unequivocal as to take away the ordinary meaning those words convey. They are equivocal whether Mansion's real intention was to perform or not to perform in accordance with the letters of agreement.

129. Secondly, Mr Cheung said that those words are not referable to Mr Albert Yeung's statement of September 1995. He said they were response to Tridant's refusal to purchase materials only.

130. There were two topics. One was about Mansion Fire substituting Mansion Holdings as a condition for purchasing materials. The other was about Mansion Holdings' obligation to purchase materials as the original contracting party. Both topics were related to purchase of materials. In my view, when Mr Albert Yeung responded to Mr Cheung, he was either avoiding the issue about contracting party or he was not addressing his mind to that issue. I do not think his reply should be taken as an implied withdrawal of the demand to have Mansion Holdings substituted by Mansion Fire.

131. In that context, it cannot be sure whether when Mr Henry Chan picked up the conversation by asking if Tridant would take over the purchase of materials, plant and equipment, he was talking in terms of the existing contract between Tridant and Mansion Holdings (the "original contract" as Mr Chan called it) or about the terms of the new contract to be entered into between Tridant and Mansion Fire. That is not important as the essential words which Mr Graham relied upon as evidence of recanting were the words "we will follow the original contract". I do not have the benefit of hearing from either Mr Albert Yeung or Mr Henry Chan as to what was in their minds then. On the face, Mansion were not addressing the issue of substituting Mansion Holdings by Mansion Fire and they had not expressly withdrawn from their previous position. Does this conversion amount to recanting or does it not? One must look at the objective facts at the time.

Surrounding circumstances:

132. What were the surrounding circumstances? On 28 September Mansion wrote to Tridant and confirmed what Mr Albert Yeung had told Mr Liu, i.e. Mansion will not order any materials if no formal contracts were entered into between Tridant and Mansion Fire. On 29 September Mr Liu had a site meeting with Mr Simon Ng. He chased Mr Ng for the materials and equipment. Mr Ng replied that Mansion had not placed orders for the major materials and equipment as the execution of the formal sub-contracts between Tridant and Mansion Fire was still outstanding. Though Mr Ng was not a member of the top management of Mansion, he was a senior executive and the resident manager for this very project. He was present at the meeting of 25 September when the question of Mansion Fire substituting Mansion Holdings was raised. What he said must be reflective of the stance of Mansion especially in the light of Mansion's letter dated 28 September. All these later circumstances indicate that Mansion had not recanted on 25 September.

133. Indeed on 9 October, Mansion Fire wrote to Tridant enclosing their version of the minutes of the meeting. In the minute, they described each of the representatives of Mansion as coming from Mansion Fire. It could be argued that these representatives had dual capacities in both Mansion Fire and Mansion Holdings and that they were representing Mansion Fire as sub-contractor of Mansion Holdings. That may not be reasonable for a meeting at that level, especially as the purpose for which Mr Cheung called for the meeting was to discuss about the obligation of Mansion Holdings as the contracting party and also in the light of what Mr Ng said on 29 September. In that letter, Mansion Fire said it was "financially imprudent" for them to fulfil the purchase orders all at once and asserted that the letters of agreement dated 30 April 1994 were merely "agreements to further agree". This stance of Mansion Fire was repeated in the assertion of Mansion Fire in their letter dated 11 October 1995 and various correspondence thereafter as well as the statement of claim in Cons 66. The inference is that as at 9 October 1995 Mansion were still insisting that Mansion Holdings should be substituted by Mansion Fire otherwise no major plant and materials would be ordered.

134. On a separate front, on 10 October Mansion's solicitors, Messrs. Kwok & Chu, wrote to Tridant's solicitors enclosing a draft form of contract for execution by Tridant and Mansion Fire, under which Tridant were to purchase the necessary materials on behalf of Mansion Fire. This also reflects that Mansion had no intention to recant.

135. Mr Graham submitted that truckloads of materials were still being poured into the site in September. These deliveries reflect that Mansion had recanted or in any event Mansion did not evince any intention not to perform the sub-contracts. He referred to Mr Evenlyn Kwok's report, of which there is no dispute. The report shows that Mansion placed purchase orders on 1, 2, 5, 7, 12, 16, 18, 20, 21, 22, 26, and 28 September. From Mr Evenlyn Kwok's delivery schedule the following deliveries could be noted:

4 September:	Conduit pipes and accessories - these were probably the ones which Kin Ying said were not urgently needed
6 September:	Cast iron pipes
8 September:	Cast iron pipes, galvanized iron pipe fittings
12 September:	Butterfly valves
15 September:	Victaulic couplings worth $1,182,400.00
16 September:	Galvanized iron pipe, fittings, ductile iron pipes
17 September:	Iron pipes
18 September:	Iron pipes
19 September:	Iron pipes
20 September:	Pump of value $247,350.00
21 September:	Iron pipes
23 September:	Iron pipes
28 September:	Iron pipes
9 October:	Galvanised iron pipe fittings worth $1,299,788.95

The value of unfixed materials left on site after Mansion was evicted from the site was $5,711,445.00, according to Mr K P Sin's report. From these deliveries, purchase orders and stock, Mr Graham submitted that Mansion had recanted and did not evince any intention not to be bound by the contract.

136. Mr Scott SC rightly argued that the materials delivered in September were ordered much earlier as allowance had to be given to ordering time, processing time and delivery time to Guangzhou. In fact the invoices show that the materials delivered were mainly ordered from May to September, with most falling in August 1995.

137. Reviewing Mansion's summary of purchase orders, it appears that materials had been ordered regularly until 28 September 1995. Thereafter no further purchase orders had been issued between then and 10 October 1995. No materials had been ordered for twelve days. This is in striking and stark contrast to their usual practice. According to Mr K P Sin's report, on 10 October 1995 there were unfixed materials delivered to the site worth $5.71 million. If these were the right materials and accorded with work requirement, they would supply enough materials for Mansion to work on for 6 weeks. Even discounting for the fact that some of these materials were not wanted for the time being, there were nevertheless a good stock of materials for Mansion to continue working for some time. Thus Mansion may have an innocent explanation for not ordering. However, Mansion had no idea that they would be terminated on 10 October. The fact that they stopped ordering must be a conscious decision to meet a certain objective. This then brings me back to what Mr Ng said to Mr Liu on 29 September: Mansion had not placed order for the major materials and equipment as the execution of the formal sub-contracts between Tridant and Mansion Fire was still outstanding. In view of what Mr Ng said, I find that the sudden cessation in ordering materials was not for operational purpose but for the purpose of coercing Tridant into meeting their demand to substitute Mansion Fire for Mansion Holdings and to re-write the contract by passing the burden of supplying plant and equipment to Tridant.

138. This fact is also significant when placed in the context of the letter from Mansion Fire dated 5 October and 11 October 1995 and the draft contract prepared by Messrs. Kwok & Chu and sent to Tridant's solicitors on 10 October 1995 which sought to radically revise the payment terms of the April 1994 letters of agreement. I therefore find that Mansion had refused to order plant and equipment and with effect from 28 September they stopped ordering any materials altogether.

Inference: no recantation:

139. Based on all these facts, I draw as the only reasonable inference that Mansion had not recanted from their stance by words at the meeting of 25 September or by conduct thereafter. Even if they were taken to have recanted by words they had withdrawn their recantation by their subsequent letters and conduct.

140. Mr Graham submitted that the plant and equipment were not needed or not critical at the time and it was reasonable for Mansion not to order them. I have rejected that submission. For the major plant and equipment such as the fire shutters and CO2 system, it is important that the "preliminary order" be placed to set the manufacturing process in motion. For the purpose of determining this issue, I think whether the refusal to order is reasonable or not is irrelevant. Even if it were reasonable not to order, by insisting not to order materials or plant and equipment unless their demand was met is evidence that Mansion had not recanted.

141. In respect of Issue 8(c), I find that Mansion had not recanted from their position. They had refused and were as at 10 October 1995 wrongfully refusing to arrange for materials to be delivered for the installation works unless and until two contracts with Mansion Fire were entered into by Tridant in relation to the two subordinate contracts. Since 28 September 1995, they have ceased ordering any materials altogether.

ISSUE 8(d) & (e): REPUDIATION AND TERMINATION:

Whether common law right to accept repudiation displaced by Clause 25:

142. I have found Mansion failed to execute works regularly and diligently when measured against the three month short term programmes for July to September and September to November 1995. They failed to provide adequate labour and supervision. Mansion also wrongfully refused and continued to refuse to order plant and equipment for the installation works unless and until Tridant entered into the two contracts with Mansion Fire. The issues here are whether one or all of these grounds amounted to repudiation on the part of Mansion and whether Tridant were entitled to terminate either or both of the two subordinate contracts with Mansion. I think both issues can be considered together.

143. I have found that Clause 25 of the KGJV/Tridant sub-contract had been incorporated into the Tridant/Mansion subordinate contracts. Tridant's case is that this is a case of termination by Tridant exercising their right to accept Mansion's repudiation at common law and not a case of termination under Clause 25. At the outset, counsel argued whether in view of the termination provision in Clause 25, the common law right to accept repudiation is no longer available to Tridant.

144. In Lockland Builders v. Rickwood (1995) 77 BLR 38, Clause 2 of the contract provided a machinery for resolving dispute and termination. Russell LJ held at p.46:

"My own view - returning to the facts of the instance case - is that clause 2 and the common law rights to accept a repudiatory breach can exist side by side, but only in circumstances where the contractor displays a clear intention not to be bound by his contract, for example walking off the site long before completion (as suggested during the course of argument by Hirst LJ) or, by way of further illustration, failing to comply with plans in a very fundamental way, for example, by not building a third storey when contractually bound to do so."

145. In my view, whether a termination clause, like Clause 25 in the instance case, co-exists with the common law right to accept a repudiation is a matter of construction of the terms of the contract. It is open to the parties by contract to exclude a remedy for breach of contract which would otherwise arise by operation of law. But in construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption: see Modern Engineering (Bristol) Ltd. v. Gilbert-Ash (Northern) Ltd [1974] AC 689 per Lord Diplock at page 717. In the instance case, Clause 25 in the KGJV/Tridant sub-contract, is expressly stated to be without prejudice to the parties' other rights or remedies. This suggests that Clause 25 was not intended to modify the parties' common law rights.

146. At paragraph 12.006 of Hudson's Building and Engineering Contract, the learned author explained the objectives of a contractual termination clause are as follows:

"..... the principal objectives of a contractual termination clause are two-fold. The first will be to define those situations in which a right to terminate will arise, and where difficulties of fact or law might make it difficult to establish a common law determination --for example failure of the contractor to remove or remedy defective work within10 days of being ordered to do so, or failure to proceed generally with due diligence. .....

The second objective of a contractual determination clause will be to provide ancillary rights and remedies for the determining party which a common law determination would not do, such as forfeiture or seizure and continued use of plant and materials or their value in order to complete the project, or the assignment to a determining owner of any desired sub-contracts.

These various factors will mean that, in the absence of express provision, contractual determinations by either party are not intended as a substitute for, or to exclude, the common law rights to rescind. While some standard form determination clauses contain express "without prejudice to other rights or remedies" wording, this is not in fact necessary, and it is submitted that, in the context of construction contracts generally, neither owners' nor contractors' determination clauses should be treated as impliedly excluding the parties' common law rights."

147. At page 1108, the learned author attributed the reasons for the wide spread use of such contractual termination clause expressly conditioned on a failure of due diligence as follows:

"..... an obligation to complete by a certain date (even if coupled with liquidated damages provisions) is in reality of little value to an owner, for example where serious and unacceptable delays by the contractor are often seen to develop during the construction period well before completion date, which indicate clearly that completion by that date is never going to be attained. The overriding necessity to take much earlier action, and the wide spread use of express terms requiring due diligence by the contractor throughout the construction period, enforceable by the owner through termination clauses expressly conditioned on a failure of such diligence, does much to explain the comparative rarity of case law on rescission or termination for late completion ....."

148. The term "regularly and diligently" must incorporate a wide spectrum of diligence and regularity. At the one end of the spectrum are breaches which are just short of due diligence and regularity, such as falling slightly behind schedule or causing some minor interruption. At the other end are severe breaches amounting to non performance, such as doing no more than keeping a watchman on the site, or perhaps proceeding with less than minimal work force while directing the major labour work force to other more profitable projects. Both are breaches of duty but with very different consequences. The former is a minor breach sounding in damages, while the latter is a repudiatory breach as it evinces an intention on the part of the contractor no longer to be bound by the contract.

149. The contractual termination clause is to cater for situations where a contractor's breach of duty of due diligence falls short or just short of a repudiatory breach but his performance is nevertheless such as to make it necessary for the innocent party to take much earlier action before irreparable damage is done, for example, the innocent party may have to pay penalty under the head contract out of all proportions to what it may recover from the guilty party or may even suffer its own termination. The system of notice gives the party under notice fore warning that due diligence and regularity will be regarded as an important term and gives him time to rectify. Failing that the sanction will be invoked.

150. Understood in this light, it is impossible to suggest that Clause 25 is intended to modify the common law rights of the parties so that when the guilty party clearly evinces an intention not to be bound by the contract, for example, by walking off the site, the innocent party may not forthwith put an end to the contract, but had to undergo the notice procedure, thereby further aggravating its damage. Similarly, it is ridiculous to hold the innocent party to the contract even for a short notice period, when the guilty party is committing or threatens to commit breaches which have resulted or will result in irreparable damage, or have deprived or will deprive the innocent party of substantially the whole of the benefit which it will receive under the contract.

151. In my judgment, Clause 25 is intended to give an additional contractual remedy and not in substitution of the parties' common law right to accept repudiation. It only provides a mechanism whereby Tridant may terminate the sub-contract by a procedure involving giving of notice of default and an opportunity for rectification for breaches of the obligation to progress the work regularly and diligently which is short of repudiation. In my opinion, Tridant may accept Mansion's repudiation and terminate the contract, without invoking the procedure under Clause 25.

Did Mansion repudiate:

152. Mansion never expressly refused to perform, except that they wanted to perform in ways not contemplated by the original subordinate contracts. Short of an express refusal to perform, the test whether Mansion repudiated is whether the breaches are such as to lead a reasonable person to conclude that Mansion no longer intended to be bound by the contracts. The test is an objective one. The question is whether, objectively regarded and in all the circumstances of the case, Mansion's breach can properly be said to strike at the root or essence of these two subordinate contracts : see Federal Commerce v. Molena Alpha [1979] AC 757 at 778, per Lord Wilberforce.

153. Stated in another way, short of an outright refusal to perform, a contract may nevertheless be repudiated if performance is such as to deprive the injured party of substantially the whole benefit which it was the intention of the parties that the injured party should obtain from the further performance of the contract: see Hong Kong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 per Diplock LJ at p.72. But where the consequence of the breaches if continued or the consequence of the threatened breaches is such as would deprive the injured party of a substantial part of the benefit to which he is entitled under the contract so that it would be unfair to the injured party to hold him to the contract and leave him to his remedy in damages, then the breach is a repudiatory breach: Decro-Wall Industrial SA v. Practitioners in Marketing Ltd [1971] 1 WLR 361.

154. Counsel have no dispute about these general propositions of the law. How are these propositions to be applied in the context of a construction contract? As submitted in Hudson's Building and Engineering Contracts at paragraph 9-004:

"..... construction contracts differ markedly from nearly all others in that the contractor can be expected to have expended very heavily in performing the contract, prior, for example, to a relatively trivial delay ... and also upon fixing of the work to the soil the property in it will have passed to the owner irrespective of the degree of payment, thus conferring a major and irretrievable benefit on the owner as against a possibility of only minor or nominal loss suffered by him. No doubt for these reasons the courts have shown an exceptional assiduity in avoiding a time of the essence interpretation of the contractor's completion obligation in construction contracts .... even in cases where express language is used.

For precisely the same reason, I think the courts should be careful before deciding a contractor's breach is a repudiatory breach. While the standard of proof is on a balance of probability, this standard is nevertheless a very high one in the case of construction contracts.

155. This attitude of the court is reflected in Lockland Builders v. John Kim Rickwood where Russell LJ gave examples where a contractor may be said to display a clear intention not to be bound. The examples are: walking off the site long before completion or failing to comply with plans in a very fundamental way, like by not building a third storey when contractually bound to do so.

156. As submitted by Mr Graham, the examples given by Russell LJ were deliberately chosen and illuminating. They exclude breaches of contract such as ordinary delay, failing to progress the works as quickly as the owner or head contractor would desire, or defective works. I agree. The very high standard of proof is probably one of the reasons for the wide spread use of termination clauses which relieve the owners of this high standard of proof in cases where the contractor's breach of his duty of due diligence falls short of repudiation. Thus as Tridant's case is founded on common law right to accept repudiation, Tridant have to establish repudiatory breaches by strong and cogent evidence.

157. Mr Scott SC referred to the following passages from page 564, 612, 613 and 615 of Hudson's Building and Engineering Contract:

".... failure to proceed expeditiously after reasonable notice whether before or after the completion date will, it is submitted, evince an intention no longer to be bound and so justify the owner in rescinding and treating the Contract as at an end." [page 564]

"It is evident, particularly in relatively long term contracts, that the remedy of a right to damages while remaining obliged to continue, or to attempt to continue, with the Contract to the end will for practical purposes often be quite inappropriate remedy for an innocent party, whether an owner faced by wholesale incompetent and defective work or by extreme delay or abandonment on the part of the Contractor." [page 612]

"Where there is breach of a term which, while not by itself sufficiently serious, may be so protracted or repeated, despite protest or notice by the innocent party, that either evinces a subjective intention not to be bound by the Contract, as in the case of delivery and continued breaches (however minor) or simply an objective involuntary inability to perform the Contract properly."

"Where a party actually informs the other that he intends not to perform the Contract as a whole, or any part of it, either presently or in the future, or where he acts in such a way as to render his own future performance impossible, these are usually called 'anticipatory' breaches" [page 613]

"Moreover, it is submitted that in failing to proceed with due diligence, if persisted in after reasonable notice, would entitle an owner to rescind for breach of an implied fundamental term. No owner can be expected to wait and hope for completion, it is submitted, where the Contractor, for example maintains a small hut and watchman on site and without justification proceeds to more profitable work elsewhere while promising to return at some unspecified future dates....." [page 615]

He submitted that numerous warning notices had been given to Mansion between 4 September and 7 October 1995 making time or performance of the essence. He submitted that Mansion's failure to improve despite these warnings evinced an intention no longer to be bound by the sub-contracts. Some of these notices contained very substantial complaints. The minute of the meeting on 25 September 1995 almost sounded like an ultimatum.

158. I have found Mansion in breach of their duty to proceed regularly and diligently in that they were behind their programme, they failed to supply adequate manpower, and supervision, they had refused and continued to refuse to order plant and equipment in accordance with agreed schedule. They rectified their breach in their failure to supply materials; and materials to the value of $5.71 million had been accumulated on site at the time when Mansion were evicted from the site.

159. I shall now use Mansion's progress as at 27 September, which was two days after the date of that minute, as the starting point to consider how Mansion reacted to Tridant's warning. Comparing Dr Shillinglaw's progress chart as at 27 September and 25 October, Mansion made some progress in installing most of the sprinkler branch pipes in Level 3 to Level 12 in the office tower, while the riser works fell further behind. They made slight progress in Riser No.1 in Apartment West (finishing 15-20% of Riser No.1 from Level 19 to Level 27), while no progress was made in respect of the other risers, which was falling further behind. They made good progress in Apartment East. They installed 30% of the risers in No.4 Riser from Level 7 to Level 25 and in No.1 Riser from Level 19 to Level 25. No work was done for Riser No.2 and No.3, which progress was therefore falling further behind. Thus overall speaking, they were falling further behind, though they had some slight improvement. However, there was some indication that Mansion were starting to re-sequence their work, with the sprinkler branch being installed before the risers and leading the riser installation by two floors. This showed that they were taking a more positive attitude to cope with either the obstruction by G2 or their inadequate supply of suitable materials.

160. As for PD works in the office tower, Mansion were only 3 floors behind their programme. Excluding brickwork or concealed pipe work, they made some progress in Apartment East, but there was no progress at all in Apartment West. Again overall speaking, they were falling further behind, despite some slight improvement.

161. Looking at their manpower input, the number of workers engaged in FS works remained more or less the same throughout from July to October, around 64 to 68 men per day. This probably explains their lack of improvement. Compared with their replacement sub-contractor, Suen Tat, which engaged between 200 workers most of the time to 230 during the peak period, Mansion's manpower was manifestly inadequate.

162. For PD works, there had been a gradual increase from an average of 24 men per day in July to 113 men per day in October. Mansion maintained over 100 workers since 25 September. This is evidence that Mansion were stepping up their labour force. But compared with Ready System, which engaged about 200 workers most of the time during their term and up to 311 during the peak period, Mansion's manpower was also obviously inadequate.

163. As for materials (as distinguished from plant and equipment), Mansion had increased their material supply on site very substantially. By 10 October materials worth $5.71 million had been accumulated on site. Mr Graham submitted that during the last 10 days of Mansion's engagement on site, they incurred almost $4 million in performing the sub-contracts. Mansion expended $226,880 on labour, expended $835,511 in deliveries of materials to the site and to their warehouse, placed orders with suppliers to the value of $2,601,405 in respect of which it incurred liabilities; and have not been reimbursed any of those expenses. Mr Scott SC rightly pointed out that the labour cost was in fact for the period between 1 to 17 October, and after apportionment to 10 October, the labour cost incurred by Mansion was only $133,511. Among the 44 purchase orders, were one purportedly issued to Bun Kee (International) Limited in the amount of $984,137.98 and four purportedly issued to Yue Hing Machine Factory totalling $465,426.25. The proprietors of these two companies confirmed that they have never received these invoices. Thus $1,449,564.42 worth of purchase orders are shown not to be genuine. After making these adjustments, Mansion committed themselves to the extent of $2,120,810 during the last ten days of their engagement on site. Of course, at the time, there were on site materials worth $4.87, which together with the $835,511 value of materials arriving during those ten days make up the $5.71 million worth of materials left on site. In view of such commitment, did Mansion evince any intention not to be bound by the sub-contracts?

164. As submitted in Hudson's Building and Engineering Contracts at paragraph 9-004, construction contracts differ markedly from nearly all other contracts in that the contractors can be expected to have expended very heavily in performing the contract. This is particularly so for Mansion as they were not to be paid until completion and in the meantime upon fixing of the materials to the soil, the property in those materials were passed to the owners of the Sky Central Plaza. Thus Mansion's commitment during the last ten days and the materials worth $5.71, which had accumulated on site before 10 October, was inconsistent with a contractor who had no intention to perform. On the other hand, the substantial supply of materials have set the scene for a corresponding increase in labour. This is evidence of mobilisation. There is also evidence that the manpower engaged in the PD works was gradually increasing. If Mansion would further increase their labour, there was probably still time to catch up with the delay.

165. Thus the position between 27 September and 10 October was that though Mansion's progress was falling further behind and manpower remained inadequate, they were making some slight improvement in progress and were stepping up with manpower in PD works and more importantly, in supply of materials (ignoring for the time being their cessation in ordering materials after 28 September and their continued refusal to order plant and equipment). Mansion were still lacking in diligence, but they have shown some improvement, though not enough improvement. In simple language, Mansion were not as bad as they were before, but were not yet up to mark; and were therefore falling further behind.

166. For construction works of this scale, improvement cannot be brought about overnight. Materials could not be made available overnight. Not until materials have become available does it make any sense to increase labour. As the problems which faced Mansion's replacement sub-contractors showed, even tools took some time to be imported into China and brought to the site. In short, it takes time to mobilise. To expect Mansion to be able to catch up with their programme within two weeks is to cry for the moon.

167. Mansion were clearly in breach of their duty to progress the works regularly and diligently and in conformity with Tridant's programme. But in view of the above analysis and bearing in mind the very high standard of proof that is required in construction contract cases to establish an intention no longer to be bound by the contract, I cannot in fairness say that such an intention has been proved against Mansion merely on the basis of their breach of duty of due diligence. Nor can I say they were wholesale incompetent as to evince an intention no longer to be bound by the two sub-contracts. Further, there was probably still time to catch up, if Mansion would further step up their labour. Thus, I cannot say at that early stage of performance that the breaches had actually and substantially deprived Tridant the whole benefit which Tridant were intended to obtain. Thus performance-wise, Mansion's breach was just short of repudiation.

168. However, my finding against Mansion in Issue 8(c) assumes greater importance. The evidence demonstrates that Mansion evinced an intention no longer to be bound by the sub-contracts or to perform the sub-contracts in accordance with their terms. Mansion Holdings' position in 1994 and 1995 was that they were not the contracting party. They maintained that position in the pleadings and the list of issues was drafted on the basis that there had been a consensual novation among Tridant, Mansion Holdings and Mansion Fire which resulted in Mansion Fire replacing Mansion Holdings as the contracting party to the two subordinate contracts. Mansion threatened not to order major materials, plant and equipment unless Tridant entered into formal agreements with Mansion Fire. This threat became very real as it came out of the mouth of Mr Simon Ng on 29 September and as evidenced by the total cessation in ordering of materials since that date. Not only that Mansion sought to change the contracting parties and re-write the subordinate contracts passing the obligation to purchase materials and plant and equipment to Tridant, they meant what they said as evidenced by their continued refusal to order plant and equipment and their sudden cessation in purchasing other materials. Further they said on 9 October 1995 that it was "financially impudent" to fulfil the purchase orders as scheduled and that the letters of agreement were merely "agreements to further agree". On 10 October, their solicitors sent draft contracts, which sought to radically revise the payment terms of the letters of agreement, to Tridant's solicitors for execution. In my view, Mansion have completely put the two sub-contracts aside.

169. In summary, Mansion were denying that the letters of agreements of 30 April 1994 were binding and they wanted to change the parties and re-write the sub-contracts. In effect they are saying "We still want the contract and the benefit of the contracts. But we want them to be performed by our subsidiary and in the way we want them to be performed. We want you to purchase the materials, plant and equipment and bear the finance costs. We want to progress at the speed we want and not in accordance with the main contractor's programme of works. We are not going to order plant and equipment in accordance with our agreed schedule because it is financially impudent for us to do so. We have also stopped ordering materials. And unless you agree to re-write the sub-contracts in accordance with our terms, we are not going to order materials, plant and equipment." Putting this more simply, Mansion were holding the proper performance of these two sub-contracts at ransom.

170. Tridant was seriously concerned that Mansion were seeking to substitute Mansion Fire for Mansion Holdings as their contracting party. The concern is obvious. Mansion Holdings is a public listed company while Mansion Fire is an under capitalised company and may not be in a position to compensate Tridant in the event of breach. The cost for plant and equipment for the two sub-contracts was about $15.98 million, while the cost of materials was $38.21 million, totalling $54.19 million. This had significant cost implication for Tridant. This would mean $5.42 million to Tridant at a finance cost of 10%. Of course if Mansion should progress at its own pace which did not conform to the programme of KGJV, Tridant might have to face huge penalties and suffer their own termination as well. In fact, Tridant had received warning that KGJV might terminate their sub-contract because of lack of progress in the PD and FS works.

171. Mr Graham argued that despite Mansion's intimidation that they would not purchase materials unless Tridant agree to substitute Mansion Fire for Mansion Holdings, Mansion did in fact purchase further materials and materials kept pouring into the site until 9 October. However, this argument fails on two grounds. Firstly, the materials that were delivered were materials which had been ordered prior to 28 September, but no further orders have been placed since. Moreover, Tridant's greater concern was Mansion's refusal to order plant and equipment, such as the fire shutters, AFA trunking and CO2 system. Mansion refused to order those plant and equipment in accordance with schedule. Secondly, even if they did not mean what they had threatened, they did not withdraw or decant from their position. On the contrary, on 29 September, Mr Simon Ng confirmed that their position was they would not place any orders. And what he said was precisely what Mansion did, a total cessation of ordering of new materials and continued refusal to order plant and equipment. If what they did on an objective view amounted to a threatened repudiatory breach, their subjective desire to maintain the sub-contracts cannot prevent Tridant from drawing the consequences of their action: see Molena Alpha, per Lord Russell of Killowen at page 780.

172. All these proposed changes struck at the very root or the fundamental terms of the original subordinate contracts. I have held that Mansion were in breach of their obligation to progress work regularly and diligently because of their falling behind their own programme, failure in supplying sufficient labour and failure in ordering plant and equipment. When examining those breaches in isolation, I have adopted the more assiduous attitude of Russell LJ in Lockland Builders v. John Kim Rickwood and held that those breaches were not in themselves sufficient to evince an intention no longer to be bound by the sub-contracts. However, when those breaches were married to Mansion Holdings' denial that they were the contracting party to the sub-contracts, their insistence that the letters of agreement were not binding, their insistence to have Mansion Fire to replace them as the contracting party, their refusal to order the plant and equipment unless Tridant met their demand to re-write the sub-contracts with significant cost implication to Tridant, I am satisfied on an objective view that Mansion had evinced an intention no longer to be bound by the two subordinate contracts. On that basis, Tridant were entitled to accept Mansion's repudiation.

Waiver:

173. Mr Graham submitted that Tridant have lost the right to accept Mansion's repudiation because they affirmed the contract up until 9 October 1995. The law on affirmation or waiver is well settled in Peyman v. Lanjani [1985] Ch 457. An innocent party is entitled to choose whether to treat the contract as continuing or to accept repudiation and treat himself as discharged. The innocent party may elect one way or the other. But once he has made his election, the choice becomes irrevocable. If an innocent party unreservedly affirms the contract, he may not consider himself as being discharged from his performance by reason of the previous breaches. The affirmation, in order to be effective, has to be communicated to the other party by unequivocal act or unequivocal statement which demonstrates to the other party that he still intends to proceed with the contract, notwithstanding the relevant breach. Thus if the innocent party unreservedly continues to press for performance or accepts performance by the other party after becoming aware of the breach and with knowledge of his right to elect he will be held to have affirmed the contract.

174. Mr Graham relied on the minutes of the meeting on 28 and 29 September, 4, and 5 October as evidence that Tridant still expected and required Mansion to complete the sub-contracts and as a result Mansion spent $4 million in terms of materials and labour costs during the ten days between 30 September and 10 October (actually $2,120,810, see page 75). Did Tridant affirm?

175. All these must be examined in the context of the meeting on 25 September. During that meeting Mr Liu warned as recorded in the minute, "if Mansion could not improve the installation progress and the delivery status within one week, Tridant would act on their behalf without further advance notice to take appropriate action." While Tridant were pressing for performance with knowledge of Mansion breach, they did so with the warning that they will take further action, impliedly including termination of Mansion's engagement on site. I do not think what Tridant did amounted to acceptance. There were no unequivocal act or statement which demonstrated to Mansion that Tridant still intended to proceed with Mansion's engagement unconditionally. On the contrary, it was an indication that Mansion's performance would be of the essence and if they continued to be in breach, their engagement would be terminated. Whatever that happened after 25 September, including all requests for performance, revised programme and delivery schedule etc must be viewed in this perspective. I am satisfied that there was no unequivocal act or statement which demonstrated to Mansion that Tridant still intended to proceed with Mansion's engagement on site after the end of September 1995 unconditionally. The defence of waiver is not available to Mansion.

Whether Tridant could terminate on other grounds:

176. Mr Graham referred to the letters of termination dated 10 October 1995 in which Tridant purportedly terminated the subordinate contracts because Mansion failed to execute works regularly and diligently which evinced an intention no longer to be bound by the sub-contracts. He acknowledged the well settled rule that a party who refuses to perform a contract, giving a wrong or inadequate reason, or no reason at all, may justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal. However, he submitted that a party cannot rely on a ground which he did not specify at the time of his refusal "if the point which was not taken could have been put right: Healer v. Anglo-Daly Ltd, [1954] 1 WLR 1273 at 1278. He therefore submitted that without giving advance notice that Tridant would regard Mansion's failure to order or deliver any particular item by any specified date it is evidentially impossible for Tridant to contend that Mansion evinced an intention not to be bound by the contract by failing to order any particular item, or deliver the same by any particular date.

177. Mansion's refusal to deliver materials, plant and equipment was very unequivocal and straight forward. They said firstly, they would deliver them in accordance with work requirement but not in accordance with their agreed schedule. But more importantly is their second contention. They would not order any materials, plant and equipment until Tridant entered into new contracts with their subsidiary Mansion Fire.

178. It is part and parcel of the contractor's duty of due diligence to arrange for timeous delivery of materials required for the contract: see West Faulkner Associates v. London Borough of Newham. Refusal to order materials is evidence of a type of lack of "due diligence and regularity" as referred to in the termination letters and had in fact been relied upon at the time of rescission. As Findlay J held when allowing the specific amendment, it is "simply more specific" of the old case.

179. In any event, the Mansion's refusal and Tridant's insistence that they should order and deliver materials and plant are unequivocal. The parties knew of their differences. In particular, Mansion Holdings ought to know that they were the contracting party and that they sub-contracted the works to Mansion Fire. They know the letters of agreement are valid agreements and not just agreements to further agree. Mansion were not just failing in their performance or failing in ordering a particular plant or equipment. They were deliberately holding proper performance at ransom and acting totally out of bad faith. This is not the case of "a point which was not taken but which could have been put right." The point has been made by Tridant but Mansion simply refused to adhere to the sub-contracts. Their refusal to perform under such circumstances cannot in equity be the type of breach which an innocent party must put up with. There is nothing unfair to allow Tridant to rely on this refusal to perform as justifying rescission.

Temporary plumbing and fire services sub-contract:

180. There is no dispute that Tridant and Mansion Fire were the contracting parties to the temporary works sub-contract. This subordinate contract was terminated by Tridant together with the FS and PD subordinate contracts on 10 October 1995. In Con 3, no relief is sought against Mansion Fire. In Con 66, Mansion Fire claimed damages for wrongful termination of this sub-contract based on 5 payment applications made under the sub-contract. Tridant admitted that 4 of the payment applications had been made by Mansion Fire under the sub-contract and the 5th application was made after the termination. No substantive defence other than a small counterclaim was pleaded.

181. While conceding that there is no particular evidence of inadequacy in the temporary plumbing and drainage works, Mr Scott SC submitted there is strong evidence that the fire services temporary works were not operational at all prior to Mansion's departure from the site and had led to the local fire authority threatening to close down the entire site. However, the evidence is that the works had been installed roughly in accordance with building progress. There was no complaint about the temporary plumbing and drainage works. The fire services works were not operational or fully operational on 29 September due to some electrical problem that had to be resolved. The problem was only one of adjusting the setting on the pump or other instrumentation and installing the control panel. There is also no evidence that the works were not operational by 10 October 1995.

182. Mr Scott SC sought to draw support for Tridant's termination of this subordinate contract from Mansion's quantum expert, Mr Kwok. Mr Kwok confirmed that the temporary works were run under the same management as the FS and PD subordinate contracts and it would have been entirely impractical to disassociate the temporary works from the permanent works when it comes to reviewing progress on site. I agree with Mr Kwok entirely. What he said makes good business or management sense. But that cannot afford a basis for termination in the absence of any evidence of a repudiatory breach by Mansion Fire. While it makes good sense to terminate the subordinate contract, Tridant have to pay damages for the termination which was wrongful in law.

183. My conclusion in respect of Issue 8 is that Mansion are liable to Tridant in respect of their repudiation of the PD and FS subordinate contracts and Tridant are liable to Mansion Fire in respect of the termination of the temporary works subordinate contract.

ISSUE 9: QUANTUM - TRIDANT'S CLAIM UNDER THE TWO SUBORDINATE CONTRACTS:

184. This Court has been greatly assisted by the experts on quantum from both parties. Both experts are very experienced quantity surveyors who are very thorough in their work and reasonable in their approach. The "overnight schedule" prepared by Mansion's expert, Mr Evenlyn Kwok and as revised by him in the course of his evidence on 16 December 1999 is a particularly useful summary of the competing positions as regards the quantification of Tridant's claim against Mansion on the FS and PD subordinate contracts. The schedule forms the basis of my assessment on damages.

185. I also accept the accuracy of the report by Mr K P Sin who checked the quantities after Mansion left the site. There were some suggestions from Mr Graham that Mr Sin's report is inaccurate. The same sentiment was echoed by Mr Kwok. But having read the report and heard the evidence, I am satisfied that counsel had misunderstood Mr Sin's report and Mr Kwok was probably misguided by counsel's cross examination and failed to follow the re-examination.

Plumbing and drainage works:

186. On the PD works, Mr Charlton quantified Tridant's claim at $32.03 million, while Mr Kwok's quantification is $25.20 as revised after cross examination, a difference of $6.83 between experts. I have included in these figures certain items regarded by the experts as miscellaneous expenses for all the three sub-contracts together, which I think should properly be allocated to the appropriate sub-contracts.

187. Mr Kwok demanded very exacting proof of all purchase orders, material delivery forms, delivery dates and delivery locations before accepting a claim from Tridant as evidence of materials purchased. As cross examination showed, more than half a million dollars claim has been excluded by Mr Kwok due to the usual typographical errors on the date on some of the purchase orders, which were to be expected during the year end transition from 1995 to 1996. I also accept that deliveries to Tridant's office should be accepted as evidence of delivery. On that basis the difference between the two experts on materials and equipment purchased by Tridant is narrowed down from over $6.15 million to just $188,469, a difference of only 1.26%. I accept Mr Charlton's figure that the amount spent by Tridant on materials and equipment, subject to a deduction of $483,398 for electrical items which should be excluded, is $15,423,144.

188. There is also a difference of $902,618 between the two experts on the amount of sundry materials bought by Tridant's replacement sub-contractor, Ready System. Mr Scott SC did not pursue a similar course of searching cross examination. Mr Charlton's figure is based on paid invoices, etc whereas Mr Kwok's assessment is, in my view, unduly exacting and cautious. There is no reason to disbelieve Ready System's claim for these sundry materials, which have been paid by Tridant. For similar reasons, I accept Mr Charlton's figure of $2,249,453.

189. Both experts agreed that the value of unfixed materials purchased by Mansion but left on site and used by Ready System was $2,969,293.

190. After making the above adjustments and giving allowance for Mansion's materials used by Ready System, I assess the total cost of materials and equipment incurred by Tridant for completing the PD works was $12,647,557.

191. On labour cost, the two experts differ by $4.91 million. Mr Charlton assessed Tridant's labour cost as $14,109,457. Mr Kwok considered that Tridant should, as part of their duty to mitigate the damage, have continued to engage the services of Man Kee, instead of inviting Ready System to provide the labour for the works. I do not agree. Man Kee had demonstrated their inability to supply labour with appropriate skill and in adequate numbers. From a management point of view, it makes good business sense not to engage Man Kee. In my view, the law does not impose an unreasonable burden on the plaintiff and the onus is on Mansion to prove any failure to mitigate. Mansion failed to do so.

192. The tender amount Tridant paid to Ready System to complete the PD sub-contract was $41,605,816. Mr Kwok noted an apparent tender calculation error of $325,273.05 in Ready System's tender. This has not been addressed to by Tridant's expert. Even if this amount had been erroneously paid by Tridant, Mansion should not be held responsible. Accordingly this amount should be deducted from the contract sum.

193. Mr Charlton allowed an additional acceleration cost of $3,719,560 and gave credit to $1,802,500 being saving in supervision cost as a result of acceleration. Mr Kwok does not agree that acceleration cost should be paid. I think, their difference is just a matter of terminology. The cost was not really for acceleration cost as such, but was just part and parcel of the cost for Ready System to finish the work in the time frame allowed by Tridant in the circumstances. It was not for acceleration beyond the original time frame programmed for Mansion. The net amount of $1,1917,060 should therefore be allowed.

194. Tridant's claim for cost for rectifying Mansion's defective work was $343,320. The defective work was evidenced by record of surveys carried out by Ready System. Mr Charlton has examined the record and trimmed the cost down to $159,200. Mr Kwok thought no rectification work was necessary. I do not agree. I accept Mr Charlton's figures.

195. Both experts agree that the value of the materials as priced by Ready System in the amount of $29,387,805 should be excluded from the contract sum.

196. Based on Mr K P Sin's report, Mr Charlton assessed Mansion's work as at 10 October 1995 at $184,813.10. Mr Sin's report is not intended for the use of assessing work done. It is wrong to use it as a basis for assessing Mansion's work done. Even Tridant themselves assessed Mansion's work to be $1,500,998.40. The PD subordinate contract was priced at $21 million. On the basis of Mr Charlton's assessment, Mansion had only performed 0.88% of the works, or say 0.7 floor in the office tower and 0.33 floor in the apartment towers. That must be patently wrong in the light of Dr Shillinglaw's progress chart as at 25 October 1995.

197. Mr Kwok assessed Mansion's work at $2,689,808, which is 12.81% of the entire contract, or equivalent to completion of the installation of 10.25 floors in the office tower and 4.87 floors in the apartment towers. That is more in line with Dr Shillinglaw's progress chart than Mr Charlton's assessment, but is obviously over-assessed. Dr Shillinglaw's progress chart shows that work had been carried out on 10 floors with various types of installation works completed between 35% to 95%. I assess that to be equivalent to about 7 completed floors in the office tower. Mansion's progress in the apartment towers is difficult to assess in terms of completed floors. I assess their progress as 3.5 completed floors at the highest.

198. In my view, the value of Mansion's work can also be more accurately assessed on the basis of the labour it expended as a percentage of the total labour engaged in completing the sub-contract. The labour engaged by both Mansion and Ready System was 6,177 man-day and 69,769 man-day respectively. The contract price net of contingencies is $19,000,000, which is the productivity of the total of Mansion's and Ready System's labour force of 75,946 man-day. On this basis, the productivity per man-day is $250.1775 ($19,000,000/75,946) and the value of Mansion's work is therefore $1,545,348 (i.e. $250.1775 X 6,177). This is 7% below the average of the assessments by the two experts, which in my view, reflects the progress by Mansion better than the assessment of either Mr Charlton or Mr Kwok. This assessment is also in closest agreement with Dr Shillinglaw's progress charts. I therefore assess the value of Mansion's PD works as $1,545,348.

199. After making the above revision, I assess Tridant's labour costs as $12,423,650. A full breakdown of my assessment is at Schedule 1, annexed to this judgment which together with the other Schedules form part of this judgment.

200. Mr Charlton allowed $4,985,511 in respect of gas installation work. Mr Kwok scaled that down to $4,237,848 to exclude the cost of building a gas sub-station which was not included in the original sub-contract. I concur with Mr Kwok's assessment.

201. Mr Charlton assessed the tax payable by Mansion in respect of the PD subordinate contract which had been paid by Tridant was $261,533. Mr Kwok considered Mansion's tax liability should be apportioned to 10 October 1995. I do not agree. Had there been no breach by Mansion, Mansion would have completed the sub-contract and paid all taxes in accordance with the letter of agreement. I accept Mr Charlton's figure.

202. I also include the charge on completion in the sum of $27,609 as properly recoverable by Tridant against Mansion.

203. Taking all the aforesaid adjustments into account, I assess the amount Tridant spent in completing the PD works as $29,598,197. A comparison of my assessment and the two experts' is shown in Schedule 2.

Fire services works:

204. The difference between the assessments of the two experts in respect of the FS works is $9.51 million. Firstly, there is a sum of $2,262,600 for installation of dropper pipes which Mr Kwok considered to be cost for additional works. However, on cross examination, it became clear that the works had been included in the original FS sub-contract between Tridant and Mansion, though unusual as it might be. Thus this amount should be allowed.

205. Secondly, Mr Kwok disputed an amount of $1,181,421 identified as acceleration cost. For similar reason as in the PD works, this is only a misleading terminology and the amount should fairly be included in Tridant's claim.

206. Mr Charlton allowed $170,000 for rectifying 680 incorrectly installed conduits at $250 each. Mr Kwok considered the unit price should be reduced to one third. For work being carried out in mass scale in a construction site and in Guanzhou where the cost of labour is much cheaper than that in Hong Kong, $250 per item is excessive. I agree with Mr Kwok's assessment of $56,000.

207. There is a difference of $4.20 million in the assessment of the value of Mansion's works. Again, based on Mr K P Sin's report, Mr Charlton arrived at a lower figure of $2,327,073. Mr Kwok's assessment of $6,524,367 is based on the claims for payment filed by Mansion amounting to $14.11 million less materials on site to the value of $2.74 million and further discounted by $4.84 million to allow for possible differences. The contract sum under the FS sub-contract is $52 million net of contingencies. This amount includes cost of labour, materials and plant and equipment none of which had been purchased or installed by Mansion. Thus excluding the total cost of plant and equipment purchased by Tridant in the amount of $15,583,165, the cost of labour and materials is $36,416,835. Again, I tested the assessments of the two experts against this sum in a similar manner as I did for the PD works. According to Mr Charlton's assessment, Mansion would have finished work of 5.11 floors in the office tower and 2.42 floors in each of the apartment towers; while according to Mr Kwok's assessment, Mansion would have finished 14.33 floors in the office tower and 6.81 floors in each of the apartment towers.

208. According to Dr Shillinglaw's progress chart as at 25 October, only 75% of the fire hydrants in seven floors in the office tower were installed, which was equivalent to slightly more than 5 completed floors; while sprinkler branch installation was up to about 8 completed floors. I assess Mansion installed equivalent to about 5 completed floors in each of the apartment towers. Mansion's progress was certainly nowhere near 14.33 floors in the office tower or 6.81 floors in the apartment towers as indicated by Mr Kwok's assessment, but certainly not as little as 5.11 floors in the office tower and 2.42 floors in the apartment towers as assessed by Mr Charlton.

209. The labour expended by Mansion was 8,458 man-day and that by Suen Tak was 64,691 man-day, totalling and 73,149 man-day. The contract price net of contingencies and the cost of plant and equipment is $36,416,835. The productivity per man-day is therefore $497.8446 ($36,416,835/73,149) and the value of Mansion's work is therefore $4,210,770 (i.e. $497.8446 X 8,458). This is 4.86% below the average of the assessments by the two experts of $4,425,720. It is also in broad agreement with Mansion's progress as indicated on Dr Shillinglaw's progress charts. I therefore assess the value of Mansion's FS works as $4,210,770.

210. Both experts agreed on the value of materials purchased by Mansion was $2,742,152 which should be deducted from Tridant's claim.

211. Mr Charlton assessed the cost of specialised equipment purchased by Tridant to be $15,583,165, while Mr Kwok's assessment is $14,422,273, a difference of 7.45%. I accept Mr Charlton's assessment as correct.

212. For similar reasons as in the case of the PD works, I consider the tax and charges on completion paid by Tridant in respect of the FS works in the amount of $685,020 and $72,311 respectively recoverable against Mansion.

213. Both experts agreed that the application fee for FS design approval in the sum of $275,701 is properly recoverable against Mansion.

214. After making the above adjustments to the experts' assessments, I assess the amount Tridant spent in completing the works under the FS subordinate contract was $53,400,696. A comparison of my assessment and the two experts' is at Schedule 3 annexed to this judgment.

215. On miscellaneous costs and expenses, Mr Charlton assessed Tridant's extra supervision cost for having separate FS and PD sub-contractors to be $1,156,896. The FS and PD subordinate contracts are separate and independent contracts and were separately tendered for. Tridant had responsibility for primary co-ordination between the two PD and FS sub-contractors and between the two of them as well as between either of them with the other sub-contractors. I agree that the amount of co-ordination work must be reduced if the two subordinate contract works were performed by the same sub-contractor. But in any event, Tridant had to supervise the two sub-contractors and they would also attend site meetings and co-ordination meetings. I am of the opinion that the additional cost of co-ordination was not substantial and I am not satisfied that the costs of additional co-ordination as claimed is reasonable. I therefore disallow that item of claim.

216. Accordingly, I assess Tridant's damages against Mansion Holdings in the amount of $15,798,893 which is calculated as follows:

	Mr Charlton	Mr Kwok	Assessment
	$	$	by Court $
PD sub-contract:	32,031,667	25,157,773	29,598,197
FS sub-contract:	55,398,393	45,885,380	53,400,696
Extra Supervision:	1,156,896	0	0
Tax for temporary works contract:	82,249	0	0
	88,669,205	71,043,153	82,998,893
Less:
PD contract sum:	(19,000,000)	(19,000,000)	(19,000,000)
FS contract sum:	(52,000,000)	(52,000,000)	(52,000,000)
	17,669,205	43,153	11,998,893
Add:
Deposit paid:	3,800,000	3,800,000	3,800,000
Total:	21,469,205	3,843,153	15,798,893

ISSUE 10: INDEMNITY:

217. Tridant's final account with KGJV has not yet been finalised and some of their material suppliers have not yet been paid in full. It is possible that further items of expenditure may arise which cannot be dealt with by an award in damages in this trial. Having found Mansion Holdings liable to Tridant for their wrongful repudiation of the two FS and PD sub-contracts, I grant Tridant the indemnity in the terms sought in the statement of claim. In due course, when such claims arise, they can be brought forward before a master, if necessary, and the amount claimable under such indemnity calculated and translated into a judgment sum.

ISSUE 11: MANSION'S CLAIM IN RESPECT OF THE PD AND FS SUBORDINATE CONTRACTS:

218. My finding in respect of Issue 8 makes it unnecessary for me to deal with the first part of Issue 11. Assuming that I were wrong, I shall, nevertheless, for completeness, deal with the second part of this issue on quantum.

Whether Mansion have the option to claim on a quantum meruit:

219. The important legal question is whether Mansion may have the option to claim either on a quantum meruit or damages for breach of contract. Under the former option, Mansion's claim shall be assessed on the basis of cost plus overhead and profit. Under the latter option, Mansion's damages shall be assessed as if the sub-contracts had been performed, i.e. Mansion shall be compensated at contract rate. Mr Graham submitted that Tridant having repudiated their own contracts with Mansion, could not claim the benefit of the contract rates as a ceiling for assessing Mansion's damages, if the contracts had been under priced and the works had actually cost more to execute than was anticipated. He referred to Renard Constructions (ME) Pty Ltd v. Minister for Public Works (1992) 3 Con LR 71, and the line of authorities cited therein in support of his proposition. On the other hand, Mr Scott SC submitted that upon repudiation of the contract, the contract does not disappear in a puff of smoke but remains alive for the purposes of calculating the damages payable to the innocent party. He referred to Bank of Boston v. European Grain & Shipping Ltd [1989] AC 1056 and related line of authorities.

220. There is indeed a dichotomy of authorities on this issue. The House of Lords decision in Ranger v. Great Western Railway Company (1854) 5 HLC 72 is a convenient starting point. The appellant's case was that he was proceeding to complete the works according to the terms of the contract when the respondents wrongfully took possession of all his stock of materials, tools and implements, turned him off from the site, and took the completion of the works into their own hands. He contended that was in effect an abandonment, or a repudiation of the contract; so that he was entitled to have an account taken of the value of the work actually done, and of the machinery, tools, materials etc taken possession of by the respondents. He sought remedy through the medium of a suit in equity.

221. The House of Lords held that his right was strictly a legal right and the payment ought not to be sought through the medium of a suit in equity, but of an action at law. The Lord Chancellor then went on and said at page 95 to 97:

"I come next to consider whether he has made any case for equitable relief by reason of the course taken by the Respondents in taking possession of the works on the 2d of July 1838. ..... I do not think that even if the Appellant has made out what he contends for, namely, that in taking possession of the works the Respondents were guilty of a wrongful act, that they did what the contract did not authorise them to do, the consequence would have been to entitle the Appellant to the relief which he asks. If, while he was duly proceeding to fulfil his contract, he was wrongfully impeded by the Respondents, and by them prevented from doing what he had undertaken to do, they would be answerable to him in damages for all the consequences of their wrongful act. Such damages would of course be in part calculated on the value of the plant and other articles of which he had been wrongfully deprived; but the effect would not be to alter the relative position of the parties as to the contract itself, to entitle the Appellant to say there had been no contract, or that he was to be paid for what he had done without reference to the contract. That would not be the consequence of the act of the Respondents, even treating it as wrongful. The right of the Appellant would be, to recover such amount of damages as would put him in, as nearly as possible, the same position as if no such wrong had been committed - that is, not as if there had been no contract, but as if he had been allowed to complete the contract without interruption. This was his legal right, and I can discover nothing entitling him to any relief beyond that resulting from enforcing that right - nothing that can enable him to convert a wrongful act which might entitle him to damages, into an act which entitles him to an account of work already done, to be taken on terms different from those for which he had contracted."

222. At page 118, Lord Brougham repeated in similar terms:

"But the sixth prayer is to pass by the contract altogether, and in respect of the tortious possession to disaffirm or set aside the contract, and to give the contractor the benefit of a quantum meruit, as if there had been no contract. Now I entirely agree with my noble and learned friend, that this is what we cannot do, and what the Court of Chancery, from which the appeal proceeds, could not do, and that the Appellant must be left, on that ground, to his action at law, and that this act of the Company assuming it to be tortious did not get rid of the contract, and entitled him to go beside, above or beyond it, and to obtain the account thus sought for. Nor do I think that the deviation in the line put an end to the contract, and enable the Appellant to call for an account in Equity, as on the principle of a quantum meruit; for a deviation of 100 or 200 yards, for a short distance, was no more than might have been expected in such a contract ....."

223. The ratio decidendi is that the appellant was not entitled to seek his remedy by a suit in equity but should seek his remedy at a suit of law. Whatever is said about the effect of repudiation of the contract is obiter. Both the Lord Chancellor and Lord Brougham took the view that repudiation does not get rid of the contract as to entitle the innocent party to claim on a quantum meruit as if there were no contract; and the right of the innocent party would be to recover such amount of damages as would put him in, as nearly as possible, the same position as if no such wrong had been committed. The obiter view supports Mr Scott SC's contention.

224. At about the same time were three cases to the contrary. The first one is De Bernady v. Harding (1853) 8 Exch 822. The defendant erected seats for viewing the public funeral of the late Duke of Wellington. He entered into an agreement with the foreign plaintiff agent to make the scheme known abroad and to dispose of tickets for the seats. The plaintiff was to be remunerated on a percentage of the tickets he sold. After the plaintiff had incurred expenses in advertising and in making other arrangements, the defendant told the plaintiff that he would sell the tickets on the spot. When sued by the plaintiff, the defendant paid the printers and others employed by the plaintiff for their work but refused to pay the plaintiff. Alderson B held at page 824:

"Where one party has absolutely refused to perform, or has rendered himself incapable of performing, his part of the contract, he puts it in the power of the other party either to sue for a breach of it, or to rescind the contract and sue on a quantum meruit for the work actually done."

This is a clear statement of the innocent party's option to sue for damages or on a quantum meruit.

225. In Prickett v. Badger (1856) 1 CB(NS) 296, the defendant employed the plaintiff as a commission agent to sell land at a given price. Upon the plaintiff finding a willing purchaser, the defendant declined to sell and rescinded the plaintiff's agency. Crowder J held at page 305:

"..... the plaintiff having thus done all he could to entitle him to the stipulated commission, the Lord Chief Baron ruled, that, although the plaintiff could not maintain an action upon the special contract, he was nevertheless entitled to recover upon the common count a reasonable remuneration for his work and labour. In this I am of opinion he was quite right. His ruling is perfectly consistent with the law as laid down in the notes to the case of Cutter v. Powell, in 2 Smith's Leading Cases, 1.

This case also supports the innocent party's right to a claim on quantum meruit.

226. In Appleby v. Myers (1867) LR 2 CP 651, the plaintiff contracted to erect certain machinery on the defendant's premises and to keep it in repair for two years. After partially installing the machinery, the defendant's premises were burnt down. Blackburn J held that both parties were discharged from further performance and that the plaintiff could not recover anything unless the whole work was completed. He also held at page 659:

"..... we agree with them in thinking that, if by any default on the part of the defendant, his premises were rendered unfit to receive the work, the plaintiffs would have had the option to sue the defendant for this default, or to treat the contract as rescinded, and sue on a quantum meruit."

This is a clear but obiter statement that the innocent party has the option either to sue for damages for breach of contract or to sue on a quantum meruit.

227. Then came the Privy Council decision in Lodder v. Slowey [1904] AC 442, which is heavily relied upon in Mr Graham's line of authorities. This was an appeal from the Court of Appeal of New Zealand. The Privy Council at page 453 accepted, without argument, the decision of the New Zealand Court of Appeal that the innocent party may treat the contract as at an end and sue for work and labour done instead of suing for damages for breach of contract.

228. In that case, Edwards J in the Supreme Court of New Zealand cited the dictum of the Lord Chancellor in Ranger v. Great Western Railway Company which I refer to above and held that the plaintiff could not claim on a quantum meruit. On appeal, Slowey v. Lodder (1901) 20 NZLR 321, Williams J held that the plaintiff had the option to recover either damages for breach of contract or on a quantum meruit on the basis of the decision of the Court of Exchequer Chamber in Appleby v. Meyers and the notes to Cutter v. Powell in Smith's Leading Cases. He said at page 356:

"Is, then, the plaintiff entitled to recover on a quantum meruit? and, if so, on what principle ought the amount which he can recover to be fixed? The law is stated by Mr J W Smith, in the notes to Cutter v. Powell in Smith's Leading Cases as follows: "It is submitted that it is an invariably true proposition that, wherever one of the parties to a special contract not under seal has in an unqualified manner refused to perform his side of the contract, or has disabled himself from performing it by his own act, the other party has thereupon a right to elect to rescind it, and may, on doing so, immediately sue on a quantum meruit for anything which he had done under it before the rescission." Mr Smith's notes to the leading cases are classical: they are cited in every text-book, and references to them appear frequently in the judgments of the Courts in England. The doctrine above laid down has been universally recognised. It is illustrated in Anson on Contracts in the following terms "Thus, where a contract between A and X is discharged by the default of X, A may sue at once upon the contract for such damages as he has sustained by its breach, or, if he has done all or a portion of that which he promised, so as to have a claim to a money payment for such performance, he may treat such a claim as due upon a new contract arising upon the promise which is understood from the acceptance of an executed consideration.

(Williams J then referred to Appleby v. Meyers and continued.)

"The right to sue on (quantum meruit) rests on this: that the defendant has done something which is equivalent to an abandonment of the contract on his part. Then the right arises for the plaintiff to say, "You have abandoned the contract. So be it; let the contract be rescinded. But you have in your hands the fruits of my labour: pay me for the work I have done and the materials I have supplied." And, as the defendant has accepted and retained this work and these materials, the law implies a new contract to pay for them, arising, in the words of Sir W. Anson, upon the promise which is understood from the acceptance of an executed consideration.

"As the defendant has abandoned the special contract, and as the plaintiff has accepted that abandonment, what would have happened if the special contract had continued in existence is entirely irrelevant."

229. He then dismissed the dicta of the Lord Chancellor in Ranger v. Great Western Railway Company as being obiter, which they certain were. He said at 359:

"If Lord Cranworth's observations are to be taken literally they mean that a plaintiff in such a case could not sue at law on a quantum meruit, at all. A solitary dictum of a single Judge, however eminent, respecting a matter which was not properly before him, can hardly be treated as binding, especially when it is absolutely unsupported by any authority, and is opposed to well-recognised principles."

230. Conolly J was of the same opinion. He referred to Prickett v. Badger and to the dictum of the Lord Chancellor in Ranger v. Great Western Railway Company which was referred to by Edwards J in the court below. He held at page 363:

"I also fail to follow the learned Judge in the Court below, and to hold that the question has been determined by the case of Ranger v. Great Western Railway Company. It appears to me that all that that case decided was that the appellant had no claim to equitable relief, but had his remedy at law. ..... (he then quoted the Lord Chancellor's dictum). Now, as I understand these dicta, they amount to no more than that if the party has a remedy by way of quantum meruit upon the abandonment of a contract, it exists at law, and not in a Court of equity. They do not go so far as to rule that no such right exists.

He then held the plaintiff was entitled to treat the contract as at an end, and to sue in respect of works and extra done under the contract of which the defendants had the benefit.

231. Next are three House of Lords authorities which Mr Scott SC relied on. These are Johnson v. Agnew, [1980] AC 367, Photo Production Ltd v. Securicor Transport Ltd, [1980] AC 827 and Bank of Boston v. European Grain & Shipping Ltd, [1989] AC 1056. They are not directly on the point as to whether an innocent party can claim on a quantum meruit, but are strong authorities for the proposition that repudiation does not effect a rescission ab initio. Johnson v. Agnew, turned on whether the vendor could elect at trial either to pursue the remedy of specific performance or damages. The House of Lords in Bank of Boston v. European Grain & Shipping Ltd decided that the owner's right to freight which accrued prior to the termination of the charterparty, survived the termination. In both cases, the House of Lords cited with approval the dicta of Dixon J in McDonald v. Dennys Lascelles, (1933) 48 CLR 457, a decision of the High Court of Australia to the effect that upon repudiation, a contract is determined only in so far as it is executory.

232. The issue in Photo Production Ltd v. Securicor Transport Ltd is whether an exclusion clause survived repudiation. Lord Wilberforce gave a detailed analysis of the effect of repudiation. He said at page 844:

"A vast number of expressions are used to describe situations where a breach has been committed by one party of such a character as to entitle the other party to refuse further performance: discharge, rescission, termination, the contract is at an end or dead, or displaced; clauses cannot survive, or simply go. I have come to think that some of these difficulties can be avoided; in particular the use of "rescission," even if distinguished from rescission ab initio, as an equivalent for discharge, though justifiable in some contexts (see Johnson v. Agnew [1980] AC 367) may lead to confusion in others. To plead for complete uniformity may be to cry for the moon. But what can and ought to be avoided is to make use of these confusions in order to produce a concealed and unreasoned legal innovation: to pass, for example, from saying that a party, victim of a breach of contract, is entitled to refuse further performance, to saying that he may treat the contract as at an end, or as rescinded, and to draw from this proposition, which is not analytical but one of the policy, that all or (arbitrarily) some of the clauses of the contract lose, automatically, their force, regardless of intention.

If this process is discontinued the way is free to use such words as "discharge" or "termination" consistently with principles as stated by modern authority which Harbutt's case [1970] 1 QB 447 disregards. I venture with apology to relate the classic passages. In Heyman v. Darwins Ltd [1942] AC 356, 399 Lord Porter said:

"To say that the contract is rescinded or has come to an end or has ceased to exist may in individual cases convey the truth with sufficient accuracy, but the fuller expression that the injured party is thereby absolved from future performance of his obligation under the contract is a more exact description of the position. Strictly speaking, to say that on acceptance of the renunciation of a contract the contract is rescinded is incorrect. In such a case the injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded."

And similarly Lord Macmillan at p.273: see also Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch D 339, 361, per Bowen LJ. In Lep Air Services Ltd v. Rolloswin Investments Ltd [1973] AC 331, 350, my noble and learned friend, Lord Diplock, drew a distinction (relevant for that case) between primary obligations under a contract, which on "rescission" generally come to an end, and secondary obligations which may then arise. Among the latter he includes an obligation to pay compensation, i.e., damages. And he states in terms that this latter obligation "is just as much an obligation arising from the contract as are the primary obligations that it replaces.""

233. The next case in point is the Court of Appeal decision in Lusty v. Finsbury Securities Ltd, (1991) 58 BLR 66. The defendants employed the plaintiff as an architect in connection with building an office block at a fee which would be 5% of the eventual total building costs. The plaintiff was paid an interim fee of £10,000. Later the defendants decided to revise the scheme. The plaintiff agreed to submit new drawings and informed the project managers that the costs would be about £2,000. The revised drawings were submitted and approved by the authorities, but the defendants never built the office block. The Court of Appeal held that the extra work related to the revised drawings were within the scope of the original contract, however, as the defendants brought their contract to an end, the plaintiff was entitled to a quantum meruit of the value of the work that he had actually performed for which he had not been paid.

234. It should be noted that in this case, the plaintiff's fee could not be ascertained until the building costs have been incurred and the whole contract completed. It would appear that a quantum meruit is a reasonable and sensible assessment of the damages.

235. The next case in point which is heavily relied upon by Mr Graham is Renard Constructions (ME) Pty Ltd v. Minister for Public Works (1992) 33 Con LR 72 which is a decision of the New South Wales Court of Appeal. In that case, the defendant Minister unreasonably took over the contract and excluded the plaintiff contractor from the site. The arbitrator held that the plaintiff was entitled to recover on a quantum meruit, even though the award when aggregated with payments already made under the contract while it was on foot exceeded the amount payable to the plaintiff under the contract. The New South Wales Court of Appeal held that the plaintiff was entitled to recover on a quantum meruit and there was no principle that the contractually agreed figure represented a 'ceiling' which the quantum meruit could not exceed.

236. Meaghre JA drew support for the above proposition of the law from the decision of the New Zealand Court of Appeal in Slowey v. Lodder (1901) 20 NZLR 321, which was upheld by the Privy Council. He held at page 128:

"The second point is that the amount of the arbitrator's award (particularly when aggregated with payments already made under the contract whilst it was on foot) exceeds the amount payable to the contractor under the contract, which latter amount must provide a 'ceiling' on any quantum meruit claim. This point should also, in my view, be rejected. In the first place, it is contrary to what authority exists on the question. The Court of Appeal in New Zealand in Slowey v. Lodder (1901) 20 NZLR 321 held that an innocent party who terminates a contract by acceptance of the defaulting party's repudiation may sue on a quantum meruit for the value of work done before repudiation, and that the fact that a judgment on this basis exceeds the amount which would have been payable under the contract is irrelevant. That decision was affirmed on appeal to the Privy Council (see in Slowey v. Lodder [1904] AC 442). In the United States, there is abundant authority to the same effect: see, for example, Boomer v. Muir (1933) 24 P(2d) 570, US v. Zara Contracting Co (1944) 146 F 2d 606, Re Montgomery's Estate (1936) 246 Appellant Div 495, and Williston on Contracts (3rd edn) vol12, s 1485. Certainly those United States authorities are tainted by the view that acceptance of a repudiation effects a rescission ab initio, a view regarded in Australia as heretical since McDonald v. Dennys Lascelles Ltd (1933) 48 CLR 457 and now recognised as such by the House of Lords in Johnson v. Agnew [1980] AC 367, [1979] All ER 883; but this reasoning on this point still remains unimpaired. .....

The cases to which I refer have been received with somewhat lukewarm enthusiasm by certain academic writers (see Goff & Jones The Law of Restitution (2nd edn, 1978), pp 379-380, Greig and Davis The Law of Contract (1st edn, 1987), pp 1286-1287) on the apparent ground that they are 'anomalous'. But to my mind this criticism of them is superficial. They are right in principle as well as justified by authority. The law is clear enough that an innocent party who terminates a contract by acceptance of the defaulting party's repudiation may sue on a quantum meruit for the value of the work done before repudiation, and the fact that the judgment on this basis exceeds the amount that would have been payable under the contract is irrelevant."

237. Having gone through the authorities in these two centuries, what is the law as to the effect of repudiation? I think the law is and as it always has been the same as stated by Lord Chancellor Cranworth in Ranger v. Great Western Railway Company and as clarified by Lord Wilberforce in Photo Production Limited v. Securicor Transport Ltd. It was, in my view, properly applied by Edwards J in Lodder v. Slowey. It then went through a diversion, if not a metamorphosis, in New Zealand when the Lord Chancellor's dicta were severely circumscribed by the New Zealand Court of Appeal. The effect of that was amplified when the point was not argued in the Privy Council. The diversion was picked up by the New South Wales Court of Appeal in Renard Constructions (ME) Pty Ltd v. Minister For Public Works. What I call a diversion of the English common law may now have become part of the common law of Australia and New Zealand as a result of the Privy Council decision in Lodder v. Slowey. Mr Graham, whom I know as a distinguished counsel from that part of the world, is now trying to import it into our common law.

238. Apart from Lodder v. Slowey, there are some English authorities supporting a claim on a quantum meruit, see for example, De Bernady v. Harding, Prickett v. Badger, Appleby v. Myers and Lusty v. Finsbury Securities Ltd. These cases have often been cited in support of a quantum meruit claim. On the face, they may be inconsistent with the dicta of Lord Wilberforce in Photo Production Ltd v. Securicor Transport Ltd. So far as they are inconsistent with the decision of the House of Lords, they must have been impliedly overruled or reached per incuriam.

239. However, a closer look at the quantum meruit claims in those cases show that the plaintiffs there really had no other means of assessing damages under the original contract and that quantum meruit was the fairest or possibly the only reasonable way to measure what the innocent party suffered as a result of the defendant's repudiation. In De Bernady v. Harding, the plaintiff was to be remunerated on a percentage of the tickets sold; he sold none. It was probably impossible to assess how many he could have sold. In Prickett v. Badger, the plaintiff agent was not entitled to sue in contract because of the defendant's right to rescind the agency. If it were not for a promise implied by law, he would not be entitled to anything for his work and labour. In Appleby v. Myers, on a true construction of the contract, the plaintiff was not entitled to anything unless the whole work was completed. In Lusty v. Finsbury Securities Ltd, as I have already pointed out, it was impossible to work out the contract rate as the office block was never built.

240. In my view, the words "quantum meruit" or "the option to claim under a quantum meruit" have been confusingly used, just like the words "repudiation", "rescission", "at an end", "discharge" or "dead"," termination" etc as pointed out by Lord Wilberforce. As applied in the four cases I refer to above, they mean no more than a reasonable and sensible way of assessing such damages when it was impossible to place the innocent parties in the same position as if the contracts had been performed. It is not as if the innocent parties had or could have one assessment under the terms of the contract and another by way of work done or cost of labour and materials to choose from. Viewed in this light, these cases are not inconsistent with the later dicta of Lord Wilberforce or the earlier dicta of Lord Chancellor Cranworth.

241. As for why I prefer the obiter dicta of Lord Wilberforce and Lord Chancellor Cranworth to that of the Privy Council decision in Lodder v. Slowey, the reason is simple. They represent the position of the English common law before and after Lodder v. Slowey. But I shall go further to say why Lodder v. Slowey should not be imported into our law in the HKSAR.

242. Firstly, I have cited in full the dicta of Lord Chancellor Cranworth and Lord Wilberforce. There is hardly anything I could add to or clarify. I would be giving those distinguished judges disrespect, if I were to attempt to improve or amplify on those dicta. They contain a critical and sensible analysis of the relations between the parties post repudiation which have taken into consideration the contractual relations and reality between the parties while the contract was on foot. The distinction drawn by Lord Diplock in Lep Air Services Ltd v. Rolloswin Investments Ltd between primary obligations under a contract, which on "rescission" generally comes to an end, and secondary obligations which may then arise accords with the position of the English law for over two centuries.

243. There is some force in the dictum of Williams J of the New Zealand Court of Appeal that once the contract is rescinded or abandoned, the guilty party who had the fruits of the innocent party's materials and labour must pay for them under a new contract implied by law. In my view and with respect to Williams J, firstly he has fallen into the confusion caused by the word "rescission" as recognised by Lord Wilberforce. Secondly, the new contract that the law implies should not be implied in vacuo. This new contract, or secondary obligation as Lord Diplock called it, should be implied in the context of the surrounding circumstances, including the provision of the former contract which has been rescinded. I prefer the secondary obligation implied by Lord Diplock which pays regards to the previous contractual relations of the parties and the view of Lord Porter in Heyman v. Darwins Ltd that upon repudiation, the contract is not rescinded for all intents and purposes. To treat the contract as disappearing in a puff of smoke upon repudiation is an over simplistic view which pays no regard to the reality of the situation. It is, in the words of Lord Wilberforce, an unreasoned legal innovation created out of confusion.

244. Next is the argument that it is wrong to allow the guilty party who repudiated the contract to have the protection of the contract in assessing damages. This argument fails to recognise that the right and obligation had arisen at a time when the contract was on foot and ignores in total the terms of the contract. Accordingly the parties' right and liability should be settled on the basis of the contract. Quantum meruit is based on the law of restitution and unjust enrichment. If a party, who entered into a contract on certain terms which is then wrongfully repudiated by the other party, should be allowed to ignore those terms and claim compensation for more than what he would have been entitled to under those terms, he is also being unjustly enriched.

245. Williams J considered the notes to Cutter v. Powell in Smith's Leading Cases authoritative. To that I only need to point to Lord Wilberforce's warning in Johnson v. Agnew at 395, against the dangers of "placing reliance on textbook authority for an analysis of judicial decision." In fact there are also contrary views among the academics as recognised by Meagher JA in Renard Constructions (ME) Pty Ltd cited above. For example, Keating on Building Contracts (6th ed) has this to say at pp 226-227:

"It is thought that the Contractor does not have an option, as an alternative to the claim outlined above, for damages based on contract rates, of ignoring the contract and claiming a reasonable price for work and labour done on a quantum meruit. There is authority to the effect that he does have such an option, and this is not uncommonly in the past that this has been taken to be the law. It is now thought, however, that the alternative claim cannot stand in the fact of the logic of the House of Lords' authorities referred to above. If it were the law, it could result in a substantial injustice if a Contractor who is losing money heavily on a contract became entitled to payment for past work on a more favourable basis than the Contract provided and when his loss was not caused by the Employer's breach."

The last point raised by Keating further strengthens the care needed when implying the obligation to pay upon repudiation of the contract. The basis of quantum meruit is restitution and prevention against unfair enrichment. If a party's loss is in fact caused by having entered into an impoverished contract, he should not be allowed to claim on a quantum meruit which results in giving that party an unfair enrichment.

246. While Lodder v. Slowey has become part of the law of Australia and New Zealand, I do not think it is consistent with the legal principle as enunciated by Lord Chancellor Cranworth and Lord Wilberforce. I do not think it should be followed nor should Renard Construction (ME) Pty Ltd v. Minister For Public Works which was based on Lodder v. Slowey. I therefore conclude that if Mansion had a claim, it should be assessed at contract rate.

Assessing Mansion's claim on a quantum meruit:

247. Having heard the quantum experts, I shall also for completeness assess Mansion's claim on a quantum meruit. The two experts differ by $582,972 in respect of materials and equipment delivered to site under all the three subordinate contracts. Mr Charlton was unable to agree to the higher figure assessed by Mr Kwok because of the absence of material delivery forms or delivery order or delivery notes in respect of some of the invoices. The difference is less than 5.50%. In view of the large quantity of materials involved, Mansion's failure to locate some of the supporting documents is understandable. For similar reason as I accept Tridant's figure for cost of materials in assessing Tridant's claim, I accept Mr Kwok's assessment of $10,592,161 as the value of materials and equipments delivered to site and to Mansion's warehouse.

248. The two experts differed in their assessment of sundry expenses. These include expenses on accommodation, entertainment, Guanzhou office, Hong Kong office, staff quarters, telephone charges, transportation charges and wages for local workers. The difference over the last item is most significant. According to Mr Kwok, the problem here is one of time and translation. The payment is documented but in Chinese. Mr Kwok assured me that if there were more time, Mr Charlton would be in a position to agree to his assessment. Except for this item, the total amount of sundry expenses as assessed by the two experts is very close. Mr Charlton was also not satisfied that the amount of entertainment expenses of $374,730 were all justifiable expenses. These expenses are documented. Indulgence in entertainment is a commercial reality, particularly with doing business in China. In any event their difference is not significant. I accept the amount of sundry expenses as assessed by Mr Kwok, i.e. $2,565,882.

249. The two experts initially differed as to the payment Mansion made to their sub-contractors. Again Mansion's problem was with documentation. According to Mr Kwok, during their latest discussion Mr Charlton subsequently agreed to the amount of $8,895,815 as assessed by Mr Kwok. They were also in agreement on the cost of materials transferred to site, the amount of payment to Mansion's sub-contractor upon cancellation of their contract and on the value of cash purchases. These amounts are $1,080,163 and $226,880 and $695,482 respectively.

250. The two experts also agreed on Mansion's costs for the temporary works on the basis of the certification by the Employer's quantity surveyors, Davis Langdon & Seah China Ltd (hereinafter called "DLS"). The amount is $1,006,229. Initially I thought I could not quarrel with that and should consider myself bound by their agreement. However, the experts agreed on the basis of three payment certificates in the amount of $1,680,000 certified by DLS up to 3 August 1995 only. There were other works installed between then and 10 October 1995 which were not included in those certificates. I consider it is open to me to re-assess the cost of those works. There were two further payment certificates submitted by Mansion on 29 August and 11 October in the amount of $208,398.67 and 356,326.20 respectively. On a similar pro-rata basis, the costs in respect of these two certificates would be $338,213.72. Alternatively, the cost in respect of these two certificates could be assessed working backwards using the formulae agreed between the two experts of 11.66% profit and 7% overhead. This yields a figure of $472,667.24. I consider the pro-rata approach which is in line with the experts' assessment of the three earlier certificates more appropriate in respect of this particular sub-contract. On this calculation, Mansion's total cost in respect of the five payment certificates would be $1,344,443. This is probably a closer reflection of the cost of work performed by Mansion Fire up to 10 October 1995.

251. Mansion's cost incurred in the two subordinate contracts would be their total costs less the $1,344,443 incurred in the temporary works contract. This is $22,711,940. Adding 7% site overhead and then 11.66% profit and less the deposit of $3,800,000 paid, Mansion's entitlement on a quantum meruit is $23,335,363: see Schedule 5.

ISSUE 12: MANSION HOLDINGS' CLAIM AT CONTRACT RATE:

252. In view of my finding in respect of Issue 8, Mansion is not entitled to any payment for their work done as the value of their works was more than absorbed by the damages they are liable for. In my finding on Issue 11, I have held that if Mansion were entitled to a claim against Tridant, it should be a claim in damages for breach of contract and not on a quantum meruit. I shall now, as invited by this Issue, make my assessment of Mansion's claim for damages.

253. As a matter of general principle, Mansion is entitled to recover such amount of damages as would put them in, as nearly as possible, the same position as if the sub-contracts were performed. These sub-contracts were unprofitable contracts. This is disputed by Mr Kwok. However, according to the Summary For Quotation prepared by Mansion's own project manager, Mr Simon Ng, Mansion would make a gross profit of $8,340,690 from the FS sub-contract, but a loss of $10,860,163 in respect of the PD sub-contract. When deducting further the overhead cost of 7% and finance costs of say 10%, Mansion would suffer a loss under both sub-contracts. Thus the damages Mansion could recover would be nominal or at best what their work is worth according to contract rate. Compensating Mansion for the value of their work at contract rate is more favourable to Mansion as it relieved Mansion of further loss if the sub-contracts were fully performed.

254. In assessing Mansion's entitlement at contract rate, I work basically from Mr Kwok's figures. Except for the cost of cancellation of Mansion's sub-contract, Mr Charlton did not agree to any of Mr Kwok's assessments. Mr Kwok assessed Mansion's works in accordance with DLS's certification of $8.38 million, which is $117,000 above that of Mr Charlton's. I accept Mr Kwok's assessment. I also accept Mansion's claim for variation work and fixing of damaged works to the mock up floor in the amount of $40,828 and $27,830 respectively. It appears at that stage of the works, there were variation works performed made due to the lack of combined services drawings for which Tridant should be responsible. It is more likely than not that those expenses had been properly incurred and for which Mansion should be paid.

255. Mr Kwok considered that there were materials worth $3,969,450 which had been delivered on site but were not reflected in DLS's certified quantities. Based on DLS's certification and Mr K P Sin's report that the unfixed materials at site were worth $5.71 million, I think Mr Kwok could not be far wrong.

256. Mr Kwok also assessed the value of materials kept in Mansion's warehouse for the works under the two subordinate contracts was $1,491,426. Some of those materials have been used by Mansion in relation to some other works while some had been sold as scrape. For those materials which Mansion managed to incorporate into some other works, they have realized the full value of the materials. Most of the materials were off the shelf items and pipes. I am quite unable to accept that Mansion had to sell a substantial quantity of them as scrape. Mansion are in the business of making fire services and plumbing installations. They would have good demand for these off the shelf items on a regular basis. I assume that Mansion have realized or would be able to realize about 80% worth of the materials. Hence I allow 20% as Mansion's loss in respect of materials kept in their warehouse earmarked for the two subordinate contracts.

257. I allow $40,615 being unrecovered workmen's compensation insurance premium paid by Mansion apportioned up to 10 October 1995.

258. I disallow Mansion's claim for cost of night work because under Condition A-14, they should have made allowance for overtime in order to suit the Main Contractor's programme of works for the whole project.

259. The total of all these amounts less the deposit Mansion received represents Mansion's claim at contract rate. I assess this amount to be $9,184,195. Schedule 6 shows my assessment as compared to those of Mr Charlton's and Mr Kwok's.

ISSUE 13: DAMAGES FOR MANSION FIRE:

260. Mansion Fire claimed $2,244,724.87 based on five payment applications. Tridant filed a counterclaim for $20,163 which they incurred in purchasing two mild steel tanks and supplying and installing a control panel and cables which cost $17,600, $2,175 and $388 respectively. Mr Kwok's expert opinion is that the tanks were additional items not covered by the sub-contract. I think Mr Kwok is right. As for the other items, it appears from the evidence that the control panel and cables were necessary to enable the temporary FS system to operate properly. I therefore allow Mansion's claim in the amount of $2,242,161.87 after deducting Tridant's counterclaim for the control panel and cables.

261. Mr Charlton suggested that Mansion Fire are liable to indemnify Tridant of the tax they paid in respect of the temporary works contract. According to Item D of Mansion Fire's quotation, Mansion Fire had clearly excluded liability for paying tax and customs duties in respect of materials imported under the temporary works contract. This claim could not be allowed.

ISSUES 14 & 15: COSTS AND INTEREST:

262. At counsel's request, I shall adjourn for argument on costs and interest.

CONCLUSION:

263. In respect of High Court Action No. Con 3 of 1996, I enter judgment in favour of Tridant against Mansion Holdings in the sum of $15,798,893. I also grant an indemnity that Mansion shall indemnify Tridant against all claims, costs and expenses incurred and loss and damages suffered and/or to be incurred and suffered by reason of Mansion's repudiation of the FS and PD subordinate contracts. The counterclaims of Mansion Holdings are dismissed and declarations sought by Mansion Holdings are refused.

264. In respect of High Court Action No. Con 66 of 1996, I enter judgment in favour of Mansion Fire against Tridant in the sum of $2,242,161.87 in respect of the temporary works contract and dismiss all other claims and declarations sought by Mansion Fire.

265. Lastly, I wish to record my thanks to counsel for their very thorough research and useful written submissions with handy appendices. Their pragmatic approach have also helped to claw back some of the time lost in the aborted hearing. Their very capable arguments have made the hearing stimulating but my fact finding task much more difficult. My gratitude is also extended to those instructing them for the tidy way the bundles have been arranged, their effort in reducing the number of core bundles and the speedy way in which documents could be retrieved during the course of the hearing.

Schedule 1

TRIDANT'S LABOUR COST INCURRED IN COMPLETING
THE PLUMBING AND DRAINAGE SUB-ORDINATE CONTRACT

Schedule 2

TRIDANT'S COST INCURRED IN COMPLETING
THE PLUMBING AND DRAINAGE SUBORDINATE CONTRACT

*A sum of $1,156,896 for extra supervision caused by having separate sub-contractors for FS and PD works not included.

Schedule 3

TRIDANT'S COST INCURRED IN COMPLETING
THE FIRE SERVICES SUBORDINATE CONTRACT

*A sum of $1,156,896 for extra supervision caused by having separate sub-contractors for FS and PD works not included.

Schedule 4

MANSION HOLDINGS' CLAIM AGAINST TRIDANT
ON A QUANTUM MERUIT BASED ON COST OF WORKS & MATERIALS
PLUS PROFIT AND OVERHEAD

In respect of
Plumbing & Drainage / Fire Services (excluding Temporary Works)

# Originally $25,325,792, but revised for calculation error.

Schedule 5

MANSION HOLDINGS' CLAIM FOR FIRE SERVICES AND
PLUMBING & DRAINAGE WORKS
BASED ON CONTRACT RATE AND DLS CERTIFICATION