SUNBOND ENGINEERING LTD v. KONWALL CONSTRUCTION & ENGINEERING CO LTD

HCCT 15/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO. 15 OF 2003

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J U D G M E N T

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I. Background

1. This dispute concerns the piling works at Phase 2 ("Phase 2") of a residential development ("the development") at Yuen Long Town Lot 500, Tai Tong Road, Yuen Long, New Territories ("the Site"). Phase 2 involved Blocks 8, 9, 10 and 11 of the development. By a Main Contract ("the Main Contract") dated 25 May 2001 Waygent Investment Ltd. and Onfine Development Limited Joint Venture ("the Employer") awarded the substructure works at the Site to the Defendant ("Konwall"). The Architect for the project was Messrs D Heung & Associates ("the Architect"), the Structural Engineer ("the Engineer") was C M Wong & Associates Ltd. and the Quantity Surveyor was Davis Langdon & Seah Hong Kong Ltd. The Main Contract provided for Konwall to obtain possession of the Site on 25 April 2000 and for the relevant works to be completed on 10 December 2000.

2. The piling works at the Site required H-piles to be driven to foundation level. Some H-piles were to make use of pre-bored holes. Konwall subcontracted the pile driving works at the Site to the Plaintiff ("Sunbond") in the circumstances described below. Pre-boring works were sub-contracted to B & G Engineering Ltd. ("B & G") and Ngai Shun Construction Ltd. ("Ngai Shun"). B & G started its pre-boring works on 9 May 2000. But it later abandoned its pre-boring works and the pre-boring works left undone by B & G were let to Sunbond under a later sub-contract with Konwall as set out below. This case primarily concerns the pile driving work undertaken by Sunbond.

3. The Site is typical of Schedule Area No. 2 in Yuen Long. It consists of soft soil with a marble bedrock. The marble area may contain cavities. In terms of difficulty of pile driving at the Site, the experts called by Sunbond and Konwall, Mr George Tsui ("Mr Tsui") and Dr Victor Li ("Dr Li") respectively, agree that it is "not a particularly difficult site in marble area". Nonetheless, although both parties to this action had among their staff individuals with 10 years' experience in pile driving, apart from work on Phase 1 of the development, neither company had any other practical experience in pile driving in marble areas.

4. It is convenient at the outset to summarise the procedure involved in pile driving. I shall assume in my description that, as was the case here, a main contractor has sub-contracted the pile driving.

(1) Trial piles are driven at the commencement of a project development. The trials enable the project engineer to verify his assumptions. The trials also allow a pile driving sub-contractor to show the main contractor and project engineer the method which the sub-contractor proposes to use to drive piles. The sub-contractor may take advantage of the trial to hone his intended method in light of site conditions encountered in the course of driving the test pile. On the part of a project engineer and main contractor, the trial provides an opportunity to assess the sub-contractor's competence and workmanship. The procedure for driving a trial pile and that for driving an ordinary pile are similar.

(2) The main contractor sets out the area where piling is to take place. The piling rig is then taken to that area.

(3) A diesel hammer, normally on low gear, is usually employed in the first instance to drive down the pile. A drop hammer can also be used. After the first segment of about 12 m has been driven in, the main contractor's representative checks the verticality of the pile. If that is acceptable, another segment of 12 m is welded to that already driven into the ground. There is a check to see whether the welding is acceptable. The welding having been approved, the second segment is driven in.

(4) The process of piling continues, segment by segment, as outlined in the previous step. At some point bituminous paint is applied to the pile. The purpose of the paint is to retard the rusting of the pile. The design specification for a project will conventionally require that the pile be coated with bituminous paint from ground level to a certain depth below principal datum.

(5) When the pile driving reaches a stage where the rate of penetration is low relative to the number of hammer blows applied, a final set test will be taken. This is done in the presence of the sub-contractor, the main contractor and the project engineer. A graph paper is stuck onto the pile. A diesel or drop hammer is then applied as specified in final set tables worked out by the project engineer. In the present case the final set tables (following the normal practice in Hong Kong) were prepared on the basis of the Hiley formula. The Hiley formula was developed in the mid-1920s and relates the ultimate bearing capacity of driven piles to the final set (that is, penetration per blow). 10 hammer blows are conventionally applied to the pile in the final set test.

(6) The result of the final set test is compared with the applicable final set table to see whether the observed outcome is within the permissible design parameters. If the result is within the table, a second test or re-strike is taken after the lapse of a certain period of time to verify that the outcome is not a false one. If the result is outside the table, the engineer must decide whether the final set table needs to be adjusted or whether the pile should be abandoned. Where the rebound value observed on a final set test is outside the value specified in a final set table, there is said to be "excessive rebound".

(7) In the present case, a number of final set records state that piles were abandoned for displaying "sponginess". Mr Tsui was not familiar with such term and was unclear as to its meaning. Dr Li's evidence was that in the piling industry the term and its Chinese equivalent (“走彈弓”) denoted a slowness (possibly accompanied by a swaying movement) in the rate at which a pile would spring back or rebound upwards after being hit by a hammer. Dr Li suggests (and Mr Tsui disputes) that "sponginess" is indicative (albeit not conclusively) of damage to the pile tip.

5. By a revised quotation ("the Tender") dated 22 May 2000 Sunbond proposed to do H-piling work at the site for a total sum of $2,229,680. The Tender quoted on the basis of (among other items) deployment of 2 piling rigs and the driving of 9,778 m of 305 x 305 x 180 kgs/m H-piles. The following were terms of the Tender:-

"3.	The quantity of work done is subject to re-measurement of actual work done on site, In case that the pile cannot be driven to required level or the pile is abandoned due to whatsoever any reason, we shall be paid for the installation cost (e.g. the driving cost, welding cost, etc) of the pile. Addition pile/ piles added in resulting from the abandoned pile shall be measured. The rates for first 60 abandoned piles are same as the rates listed in our quotation. Starting from the 61st abandoned pile, the driving rate shall be HK$70/m while the other rates remain unchanged.
....
7.	Main Contractor shall provide the following at no cost:
	6.1	Supply and delivery of necessary steel H-pile material in 12 m length subject to actual pile length.
	6.2	All necessary steel material for pile shoes, splicing plates.
	6.3	Setting out and all kind of monitoring work.
	6.4	Traffic diversion.
	...
	6.8	Site clearance.
...
7.	Our quotation excludes preparation of piling record other than blow count record and final set record.
8.	Our quotation includes splicing weld joint, pile shoe but not include exposing, cutting off pile head and capping plate.
9.	Our quotation does not allow breaking through artificial and/or natural obstruction by means of any method.
10.	Our quotation does not allow any confirmatory SI [site investigation] before or after piling works.
....
13.	Our tender assumed that the piles located at a levelled site area which is accessible by the piling plant and suitable for establishing loading test platform. Main Contractor shall be responsible for establishment of temporary working platform if necessary.
14.	Our tender does not allow for ground treatment after pre-boring but daywork rate of plant and labour is provided for your estimation. Idling cost shall be paid to Sunbond by Konwall if the ground condition is not suitable for working of piling plants.
15.	Our tender does not allow for the provision of TCP [Technically Competent Persons].
16.	Construction Period:- 100 days from the driving test date of trial pile (not including preliminary pile, loading test, PDA test, interruption by pre-boring works, time implication due to abandoned pile, amendment of drawings and waiting time of consent).
17.	Invoice will be applied monthly and payment shall be received by us within 30 days from the date of our invoice.
18.	Liquidated Damage shall be HK$20,000/day.
19.	The off-set and verticality of pile are checked by Konwall after the driving of the 1st portion (first 12 m). If the offset exceeds 75 mm or the tolerance from vertical of first portion exceeds 1 degree, the pile will be extracted and re-driven by Sunbond. Sunbond will not be responsibility for the time and cost implication due to the off-set or the tolerance from vertical of piles.
...."

6. By a letter ("the May 2000 letter") dated 30 May 2000 Konwall accepted the Tender (including its terms) subject to the following conditions (among others):-

"	1.	Type of Sub-Contract.
		This is a fixed rate remeasurement subcontract.
	2.	Conditions & Special Conditions of Sub-Contract
		Conditions and Special Conditions of this Contract shall be the conditions contained in this letter and the conditions contained in Sunbond's quotation.
	3.	Specifications and Drawings, Building Ordinance and Regulations
		All sub-contract works shall be carried out and completed in accordance with the Specifications and Drawings of the Main-Contract (1 set of working drawings, dwg no 2P-01 to 2P-14 (all in rev A) is enclosed) and in complying with the Building Ordinance and Regulations.
	4.	Measurement of Quantities of Works and Unit Rates
		Unless otherwise agreed, all quantity of works and unit rates shall be measured and assessed in accordance with the accepted quotation.
	5.	Date of Commencement and Time for Completion
		The date of commencement of this sub-contract shall be on 22/5/2000 and the time for completion as agreed shall be 100 calendar days.
	6.	Liquidated Damages for Delay of Completion of Sub-Contract
		$20,000 for delays of the works.
	7.	Provision of Sufficient Plants and Labourers on Site
		The subcontractor shall provide with plants and labourers not less than the numbers as indicated in the attached quotation. In the case that delays may occur, the sub-contractor shall provide additional plants & labourers immediately otherwise the Main Contractor will obtain the additional resources from other sub-contractors at the Sub-Contractor's expenses.
	....
	11.	Claims for Idling and Extension of Time
		The sub-contractor full aware that other construction works such as preboring, hoarding, utilities diversions, surface drainages and pile caps may also be carried out by other sub-contractors concurrently with the H-piling work. Should the piling work be interrupted by others, the sub-contractor shall be entitled to submit claims for EOT and idling cost.
	12.	Payment Terms
		Payment shall be made within one month after submission of invoice. Half of the 10% retention money shall be released upon satisfactory completion of loading test and the remaining shall be released within 180 days upon the completion of loading test.
	13.	Working Hour
		Under EPD's restrictions, the piling hour of the site must be strictly adhered as follow:-
		12:15 to 13:15 )
		17:00 to 19:00 ) daily except Sunday/ Public Holidays"

Pursuant to cl. 5 of the May 2000 letter, Konwall claims that the commencement date for Sunbond's piling works was 22 May 2000. I shall refer below to the agreement contained in and evidenced by the May 2000 letter and the Tender as "the 1st Sub-Contract".

7. On 23 May 2000 Mr Chu Kong Wai ("Chu") (Konwall's Site Agent) instructed Sunbond that H-piles (other than trial piles) should not be started until further notice. On the same day the final set test for trial pile 8P70 took place. That test failed. The Final Set Driving Record for the pile notes that excessive rebound and "sponginess" were observed. A trial pile 8P71 was proposed as a replacement for the abandoned 8P70. The failure of 8P70 led Konwall to claim an extension of time ("EOT") from the Employer in respect of delay between 18 and 23 May 2000.

8. On 1 June 2000 Konwall wrote to B & G complaining of its slow progress in the pre-boring works and requesting that B & G submit a construction programme to show how it intended to catch up.

9. On 12 June 2000 the Engineer reported to the Building Authority the failure of trial pile 8P71 to achieve final set. According to the Final Set Driving Record for that pile excessive rebound and "sponginess" were observed. The Engineer proposed an adjacent pile 8P56 as a replacement trial pile. In consequence of the failure of 8P71, Konwall claimed an EOT from the Employer to cover delay from 31 May to 13 June 2000.

10. On 15 June 2000 Chu told Sunbond to stop the driving and welding of H-piles pending further instruction, because of an amendment to the pile shoe used. This interruption is also mentioned in a letter dated 16 June 2000 from the Engineer to the Architect. Referring to a further strengthening of pile shoes, the Engineer stated:-

"We would propose two number of piles with strengthened pile shoes to be driven in the area adjacent to the abandoned piles to check the accuracy of the revised pile shoes. As effective from 17th June, 2000, the foundation contractor could proceed with the driving and pre-boring work as before except first driving of the remaining driven piles until the completion of the above mentioned two piles.

The location of the strengthened piles would pass to the contractor on 19th June, 2000 for commencement of the driven piling works."

The Engineer sent a copy of the amended pile shoe details (identified during the hearing before me as "Type C") to the Architect on 17 June 2000. As a result of Konwall's instruction, no pile driving work by Sunbond in fact took place on 15, 16, 17, 19, 20, 26 and 27 June 2000¹.

11. By a Quotation No.Q026 dated 20 June 2000 Sunbond proposed a rate for welding Type C pile shoes. Konwall accepted this quotation on 2 July 2000.

12. Pile shoes were revised and modified on 21 June 2000 in accordance with Architect's Instruction ST(2)-06. In respect of the modification of pile shoes Konwall claimed an EOT from the Employer for delay from 21 June to 14 August 2000.

13. By letter dated 21 June 2000 Konwall again warned B & G that progress on pre-boring work was slow. Konwall instructed B & G to increase its pre-boring plant to 6 sets within 4 days.

14. On 26 June 2000 the Engineer reported the failure of trial pile 8P56 to the Building Authority. Pile 8P45 was proposed as a replacement. The Final Set Driving Record for pile 8P56 notes that excessive rebound and "sponginess" were observed during the final set test. Konwall claimed an EOT from the Employer for delay on 23 June 2000 due to the abortive test.

15. By a Quotation No.Q027 Sunbond proposed rates for "Pile Driving Test and Trial Pile for Estimating Pile Depth Profile". These rates were accepted by Konwall.

16. On 28 June 2000 trial pile 8P45 had a successful final set test.

17. On 13 July the Buildings Department consented to the commencement of foundation works at Phase 2 in accordance with the Engineer's revised pile shoes. On the same day there was no piling work by Sunbond between 12:15 and 13:15 pm due to the breakdown of its rig.

18. On 17 July 2000 the Engineer suggested to the Architect by fax that test pile 9T11 be relocated to overcome constraints arising from site operation. On the same day the Engineer wrote to the Architect to indicate 30 pile locations where a further revised pile shoe (known as "Type D") would be used. Sunbond made a Quotation No.Q028 for the welding of Type D pile shoes on 18 July 2000 and Konwall accepted this quote on 11 August 2000. Around this time, Chu instructed Sunbond that the Type D piles referred to in the Engineer's fax of 17 July should "be driven before the commencement of others". It was agreed between Konwall and Sunbond that the driving cost for such piles would be based on Quotation No.Q027.

19. On 22 July 2000 the Engineer told Konwall that due to the breakdown of Sunbond's rig there had been no piling carried out on 13 July² between 12:15 and 13:15, on 19 July at all, and on 21 July between 12:45 and 13:15 and 17:45 and 19:00. Konwall relayed this complaint to Sunbond on 28 July 2000.

20. By fax dated 1 August 2000 the Engineer pointed out to Konwall that no piling works had been carried out on 24 July between 12:15 and 13:15, on 25 July between 17:45 and 19:00, on 26 July between 12:25 and 13:15 and between 17:15 and 19:00, on 27 July between 12:15 and 13:15 and between 17:00 and 19:00, on 28 July between 12:25 and 13:15 and between 17:00 and 19:00, on 29 July between 12:45 and 13:15 and between 17:25 and 19:00, and on 31 July between 17:55 and 19:00. Konwall forwarded the complaint to Sunbond on 7 August 2000.

21. By letter dated 2 August 2000 the Engineer instructed the Architect that for the D-E wing of Block 8 in Phase 2, all abandoned driven piles would be replaced by pre-bored H-piles. A revised design would be issued shortly.

22. On 5 August 2000 Konwall again warned B & G about slow progress. Konwall asked B & G to increase the number of drilling rigs in use.

23. On 10 August 2000 Sunbond replied to the Engineer's complaint that no piling work had taken place at certain hours between 24 and 29 July. Sunbond stated:-

"We would like to clarify that there was no piling works carried out within the periods stated in the site instruction because the available driving works on the said days was completed."

24. On 14 August 2000 the Engineer called off the trial pile operation. At a progress meeting on 17 August 2000 Konwall reported that driving of piles with revised pile shoes had been suspended and all remaining driven H-piles would be provided with a strengthened pile cap (it seems of the Type D variety) as instructed by the Engineer. Pitching of such piles would be resumed immediately. It was also noted at the meeting that the pre-boring works were in the critical path of the development.

25. On 18 August 2000 Konwall faxed Sunbond as follows:-

"We write to inform you that one more piling rig shall be delivered to the site by end of August.

The whole of Block 8 shall be handed to you for H piling work on 21/8/00.

Piling work at Block 10 shall be resumed on 4/9/00."

Up to the time of this fax Sunbond had been employing only 1 piling rig at the Site. Acting upon Konwall's fax, Sunbond brought in another rig on 24 August 2000.

26. On 23 August 2000 Konwall faxed Sunbond as follows:-

"This serves to inform you that starting 19/8/00, all H piling activities shall be evaluated based on the subcontract rates. Hence, please submit the day work records endorsed by our Site agent Mr K W Chu for period 15/6/00 to 18/8/00 to this office for processing."

This instruction was intended to compensate Sunbond for the fact that prior to 19 August 2000 there had idling of Sunbond's staff and equipment due to there being insufficient available work. The subcontract rates remunerated Sunbond on the basis of meters of H-pile driven over time. If Sunbond were only paid in accordance with contract (as opposed to daywork) rates, it would not have been compensated for available but idle personnel and plant.

27. On 14 September 2000 the Engineer informed Konwall that widening cracks had been observed in a village house near Block 11. Konwall was requested to suggest safety measures to safeguard the integrity of the adjacent village houses.

28. On 19 September 2000 Sunbond reported to Konwall that, during the period between 24 August and 16 September 2000, there had been idling (among other respects) of 9.5 plant-days in respect of its piling rig. This was due to the fact that pre-boring rigs were "still working at Block 9, Block 10 and Block 11" and so "the driving works of H-pile at the said areas are obstructed".

29. On 20 September 2000 the Buildings Department carried out vibration monitoring by driving the pile nearest to the village house complaining about widening cracks. The maximum vibration level was recorded as only 2 mm per second, a figure which was below allowable limits.

30. On 29 September pre-boring work at Block 11 was suspended due to soil assessment. On the same day Konwall wrote to the Engineer denying responsibility for the cracks seen in the village house. However, Konwall agreed to carry out emergency measures to safeguard the house. On 19 October 2000 the Architect ordered the suspension of pre-boring work in Block 11, pending resolution of the problem of cracks in village housing.

31. Records show that in September 2000, Sunbond's piling rig was idling due to lack of work for a total of 15 plant-days. The record for October 2000 indicates that Sunbond's piling rig was idling for 35.5 plant days. According to the same record there was no piling in Blocks 10 and 11 between 9 and 19 October due to the need to clear mud and back-fill.

32. By fax dated 11 November 2000 Konwall told Sunbond that starting from 13 November, the piling works at Phase 2 would be paid on a daywork basis.

33. On 10 and 11 January 2001 piling works at the Site were suspended at the request of the Buildings Department. Later between 23 and 28 January 2001 work stopped for the Chinese New Year holidays.

34. On 3 February 2001 the Engineer instructed Konwall that piling work at Block 11 could resume. On 15 February 2001 Konwall applied to the Employer for an EOT in respect of delay from 15 September 2000 to 3 February 2001. The application described the circumstances giving rise to the application thus:-

"Cease of work order served to Blk 11

Cease of work order was issued by RE [the Engineer] on 15/9/2000. All piling activities including preboring were ordered to stop since then. It was verbally instructed by the RE on 3/2/2001 that the piling works at Blk 11 may be resumed.

The normal progress of works at Blk 11 has been materially and adversely affected by the cease of work orders. We shared the same opinions as the RSE and the BD that the ground settlement and cracks of walls of no.660 Tai Ki Ling Tsuen village house have nothing to do with our piling activity at Blk 11."

A later EOT application by Konwall dated 6 August 2001 suggest that pre-boring and piling work at Block 11 was further delayed to 28 February 2001. By a fax dated 5 March 2001 to Konwall, the Engineer noted that pre-boring works at Block 11 in fact resumed on 1 March 2001.

35. On 18 January 2001 Sunbond had made a quotation for pre-boring work at the Site. A revised quotation was submitted on 14 March 2001. Konwall confirmed acceptance of the revised quotation on the same day. I shall refer to this pre-boring work agreement as "the 2nd Sub-Contract". By this time B & G had abandoned the Site and the intention was for Sunbond to take over B & G's unfinished work. Konwall sent the pre-boring schedule for Block 11 to Sunbond on 15 March 2001 and asked Sunbond to commence pre-boring work within 2 to 3 days.

36. On 11 April 2000 Konwall instructed Sunbond to mobilise an additional pre-boring rig on site at a rate of $100,000 per round trip.

37. By letter dated 24 April 2001 to the Architect, Konwall pointed out that, bore holes 10ABH4, 10ABH7 and 10ABH9 having been classified as "unfavourable" by the Engineer, 4 other nearby holes (10P46, 10P47, 10P55 and 10P57) were abandoned. These were among the deepest piles in Block 10 (at 61 m pre-bored length). Installation of replacement piles (at 72 m pre-bored length) was thus "not an easy task". An additional pre-boring rig was mobilised on site on 22 January 2001 and the pre-boring for the replacement piles was completed on 7 April 2001. As a result, Konwall commented:-

"It is obvious that both the normal progress of the preboring and driving operations for H piles in block 10 had been adversely and materially affected by the replacement prebored driven pile, namely 10P46A, 10P55A & 10P57A as mentioned...."

Accordingly, Konwall claimed an EOT.

38. On 12 June 2001 the last pre-bore hole 11P2A was completed.

39. On 27 June 2001 the Architect issued the following certificate in respect of the Main Contract:-

"We certify that in our opinion the captioned works [Phase 2] ought reasonably so to have been completed on 10 December 2000. In accordance with Clause 22(1) of the Conditions of Contract, the Employer may deduct a sum calculated at the Liquidated and Ascertained Damages of $60,000/day for the period during which the Works shall so remain or have remained incomplete from any monies due or to become due to you [Konwall] under this Contract."

40. The actual date of completion of the 1st Sub-Contract was 7 July 2001. However, on 10 May 2001 Konwall had already instructed Sunbond to arrange for demobilisation of 1 piling rig. Further, Konwall stopped leasing Sunbond's diesel hammer D62 on 20 June 2001. All daywork and plant leasing at the Site in respect of the pile driving contract ceased on 10 July 2001.

41. Practical completion of the Main Contract works took place on 3 August 2001.

42. On 13 September 2001 Sunbond sent its final payment application to Konwall. Sunbond calculated that for Phase 2 as a whole there was a Gross Accumulated Amount due from Konwall of $7,562,418.50. Of that amount, $5,683,566.00 had previously been certified. If one deducted 10% retention ($756,241.85), this meant that $1,122,610.85 was payable on the application.

43. On 4 December 2001 Sunbond wrote to Konwall for "the 1st release of retention in the sum of HK$651,120.93".

44. By letter dated 8 December 2001 Konwall argued that the Final Sub-Contract Sum should only be $7,211,883.50. Further, that amount did "not include any liquidate and ascertained damages which may or may not be applied under the conditions of sub-contract". In its reply on 17 December 2001 Sunbond insisted on the sum mentioned in its final payment application.

45. The parties met on 29 January 2002 (Mr Y L Chiu (Sunbond's director), Mr Rudolph Ng Chun Lap ("Ng") (Sunbond's Project Manager), Chu and Mr Nelson Woo ("Woo") (Konwall's Senior Project Manager) to discuss their differences over the final contract sum. No final agreement was reached.

46. By letter dated 22 May 2002 Messrs Ho & Ip (Sunbond's solicitors) wrote a letter before action claiming the amount of $1,878,852.50 ($7,562,418.50 - $5,683,566.00) from Konwall. Sunbond claims that same amount by this action.

47. Mr Houghton (appearing for Konwall) does not dispute the correctness of the $1,878,852.50 as an unpaid invoice amount due to Sunbond. But Mr Houghton says that Konwall is entitled to set-off against such amount the material and labour cost incurred by Konwall as a result of alleged negligence by Sunbond in the driving of piles and liquidated damages for Sunbond's delay in completing the Phase 2 pile driving works. Konwall also counterclaims for any balance due in its favour.

48. In respect of Sunbond's negligence in pile driving, Mr Houghton relies on the following statistics:-

(1) 297 piles were successfully driven in Phase 2, namely, 188 pre-bored piles and 109 driven piles.

(2) But 154 piles had to be abandoned, namely, 45 pre-bored piles and 109 driven piles.

(3) Of the 45 pre-bored piles abandoned, 31 are recorded as having been abandoned due solely to excessive rebound movement and "sponginess".

(4) Of the 109 driven piles, 86 are recorded as having been abandoned due solely to excessive rebound movement and "sponginess".

Relying on Dr Li's expert evidence, Mr Houghton argues that the high rate of abandoned piles are symptomatic of negligence in Sunbond's workmanship.

49. As for delay, Mr Houghton argues that there was culpable delay attributable to Sunbond for 2 main reasons. The first source of delay was the abandonment of piles and the driving of replacement piles. The second cause of delay was slow progress due to the employment of only 1 piling rig (instead of the 2 specified in the 1st Sub-Contract) prior to 24 August 2000.

50. There are thus 2 principal issues:-

(1) Was Sunbond in breach of contract in the manner in which it executed pile driving work (such that a substantial number of piles had to be abandoned) and (if so) is Konwall entitled to damages as a result?

(2) Was Sunbond in culpable delay in the carrying out of work assigned to it such that it failed to complete within a reasonable time and (if so) is Konwall entitled to liquidated damages?

It should be noted that no issue arises out of the 2nd Sub-Contract in the sense that Konwall does not allege a breach thereof.

51. I heard evidence from Ng, Mr Chow Shun Kong (Sunbond's General Manager) and Mr Tsui on behalf of Sunbond and Woo, Chu, Mr Eric Kwok Yu Won ("Kwok") (Konwall's director) and Dr Li on behalf of Konwall. In addition, Mr Houghton tendered a second expert Mr Steve Au-yeung ("Mr Au-yeung"), a quantity surveyor and construction cost consultant, in relation to quantum.

52. In a previous interlocutory hearing I had disallowed Sunbond's late application to adduce expert evidence from Mr Chang Woon Kay ("Mr Chang"), a quantity surveyor. I thought that Mr Chang's expert report exhibited to Sunbond's application essentially constituted submission, whereby Mr Chang put himself into the position of a judge and argued as to whether the parties' rival contentions on the facts were or were not made out on the evidence. Mr Chang's comments did not strike me as an exercise in expertise, as opposed to a personal commentary on the evidence.

53. On Day 1 of the trial I pointed out to Mr Houghton that Mr Au-yeung's report seemed to me to suffer from the same problem as that Mr Chang's report. Mr Au-yeung's statement largely consisted of matters of submission based on Mr Au-yeung's personal assessment of the credibility or otherwise of factual witness statements and the documents before the Court. I did not think that Mr Au-yeung's discussion constituted an exercise of expertise. In light of my comments, Mr Chiu (appearing for Sunbond) did not think it necessary to cross-examine Mr Au-yeung, while reserving the right to comment on those matters in Mr Au-yeung's report which amounted to submission. That seemed to me an approach which made good sense.

ii. Discussion

A. Issue 1: Was Sunbond negligent as to any abandoned piles?

54. Mr Houghton argues that Sunbond was under an obligation to follow "good building practice in Hong Kong". He reaches this result by reference to condition 3 of the May 2000 letter. That (Mr Houghton says) incorporates Clauses 4.09, 6.13 and Section B(B) of the Main Contract specification.

55. The Main Contract includes (among other documents) the following: Articles of Agreement, a Schedule of Conditions of Building Contract (Standard Form of Building Contract) for use in Hong Kong (Second Edition 1976 (May 1979 Revision)), Special Conditions of Contract, a Piling Specification, an Addendum No.1 ("the Addendum") headed "Section A -- Preliminaries" and drawings.

56. Part 1 of the Addendum consists of definitions. Clause 1.01(j) of that part defines "Specification" as "[t]he Preliminaries and Technical Specification attached hereto and any further specifications furnished to the Main Contractor as the Works proceed."

57. Main Contract cl.4.09 is contained in Part 4 of the Addendum which is entitled "LABOUR, MATERIALS AND WORKMANSHIP". The clause provides:-

"Quality of Materials and Workmanship

The whole of the materials, goods and workmanship, shall be consistent with good building practice in Hong Kong."

Main Contract cl.6.13 is found in Part 6 of the Addendum which is entitled "GENERAL OBLIGATIONS". That clause provides:-

"Safe Custody of Materials

The Main Contractor will be responsible for the safe custody of any materials delivered tp the site. He will be required to reinstate at his own expense any such materials that may be lost or stolen.

He will also be required to reinstate at his own expense any material or article damaged by careless handling or storage or inferior workmanship by his workmen either in the original fixing or in the subsequent taking down and refixing thereof."

58. The incorporation of Main Contract cls.4.09 and 6.13 accordingly imports (Mr Houghton submits) an obligation on the part of Sunbond to follow "good building practice in Hong Kong" when driving piles and to compensate Konwall for piles damaged through careless driving.

59. Mr Houghton acknowledges that cl.3 of the Tender stipulates that "In case that ... the pile is abandoned due to whatsoever reason, [Sunbond] shall be paid for the installation costs ... of the pile..." But he suggests that the latter provision should be construed as entitling Sunbond to payment in respect of piles which have not had to be abandoned through a failure to follow good building practice. If Dr Li is right and the "sponginess" observed in a large number of abandoned piles implies that Sunbond drove piles negligently, Sunbond (Mr Houghton concludes) cannot have followed good building practice and should compensate Konwall for piles abandoned by reason of careless driving. Konwall could not have agreed that Sunbond was entitled to be paid for every pile driven however slipshod or careless.

60. To bolster his argument Mr Houghton refers to the factual matrix. He points out that under the Main Contract Konwall was facing liquidated damages of $60,000 per day of delay. In that context, it would be absurd (Mr Houghton submits) for Konwall to have agreed with Sunbond to bear the risk of delay due to negligent driving by Sunbond and the need to install replacement piles.

61. On incorporation of all or part of the terms of a Main Contract into a Sub-Contract, Hudson's Building and Engineering Contracts (11th ed.), II, §13-099 to 13-103 states:-

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

(a) Incorporation of main contract terms

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

....

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

62. In light of the above passage from Hudson's, I agree with Mr Chiu's submission that condition 3 of the May 2000 letter only incorporates the technical specification (such as the Piling Specification) and drawings forming part of the Main Contract. In the absence of much clearer wording, condition 3 does not import contractual obligations of a general nature (such as cls.4.09 and 6.13 in Section A of the Addendum to the Main Contract) into the 1st Sub-Contract.

63. In support of the foregoing view, I note that cl.1.01(j) of Section A of the Addendum to the Main Contract itself appears to distinguish between "Preliminaries" (presumably including those terms in Section A of the Addendum such as cls.4.09 and 6.13) and the "Technical Specification" of the Main Contract. The May 2000 letter should be construed against Konwall (whose document it is). Accordingly, if by the reference in cl.3 thereof to "Specifications" it is ambiguous whether general or technical provisions or both are meant, the reading less favourable to Konwall's interest should be adopted.

64. I also reject Mr Houghton's submission on the construction of cl.3 of the Tender. Chitty on Contracts (29th ed.), I, §14-011 states:-

"Words wide enough to cover negligence.³ To satisfy the first test, there must be a clear and unmistakable reference to negligence or to a synonym for it. In the absence of any such reference, it is necessary to proceed to the second test. Words such as 'at sole risk,' 'at customer's sole risk,' 'at owner's risk' and 'at their own risk' will normally cover negligence, as will words which clearly indicate an intention to exclude all liability without exception, for example, 'no liability whatever' or 'under no circumstances,' or all liability save that specified in the clause. If the defendant merely disclaims liability for 'any loss,' he may be directing attention to the kinds of losses, and not to their cause or origin; so liability for negligence will not necessarily be excluded. But if he says 'however arising' or 'any cause whatever,' these words can cover losses by negligence. Thus the words 'howsoever caused,' 'from whatever other cause arising,' 'howsoever arising,' 'arising from any cause whatsoever,' 'relieves from all responsibility for any injury, delay, loss or damage, however caused' have been held to be effective. Likewise a clause which excluded liability for any damage 'which may arise from or be in any way connected with any act or omission of any person ... employed by [the defendant]' has been held to be wide enough to cover negligence on the part of the defendant's servants. However, the intention of the parties must be collected from the entire wording of the clause, and in construing the clause other parts of the contract which throw light on the meaning to be given to it are not to be ignored. So, for instance, even such comprehensive words as 'any liability ... whatsoever' 'howsoever caused' 'any loss howsoever arising' and 'at chatterers' risk' may be limited by their context and thus not extend to the negligence of the defendant which it is sought to exclude. On the other hand, where a clause in a charterparty expressly accepted liability for negligence only in certain specified respects, it was held that it necessarily followed that it excluded negligence in all other respects."

65. Condition 2 of the May 2000 letter incorporates the terms of the Tender including cl.3. That latter provision unambiguously places the risk of a pile being abandoned for "whatsoever any reason" on Konwall. Therefore, whether or not the pile was abandoned as a result of negligent driving on Sunbond's part, Konwall must bear the cost and consequences of the same. Tender cl.3 amounts to a clause exempting Sunbond from liability for abandonment of piles due to any reason including Sunbond's negligence.

66. I do not see that anything in the context of Tender cl.3, including the factual matrix, which obviates against the foregoing reading of the plain language of the term. Indeed, I do not think that the factual matrix can include Konwall's liability to pay liquidated damages of $60,000 per day to the Employer. The Main Contract sum payable by the Employer to Konwall and the amount of liquidated damages payable by Konwall to the Employer have been blotted out of the copy of the Main Contract included in the trial bundle. There is no evidence that Sunbond would have been specifically aware of either amount at the time of negotiating or concluding the 1st Sub-Contract. Where a fact is known by only one party at the time of contracting, it is hard to see why it should be taken into account when objectively assessing what both parties must have had intended when entering into an agreement.

67. It follows from the foregoing analysis that, even if Sunbond had been negligent in driving piles and thereby caused many of them to be abandoned, the loss and delay arising must be borne by Konwall.

68. I do not think that there is anything absurd in this result. For all one knows, the parties reflected the allocation of risk stipulated by Tender cl.3 in the price. The price might have been lower than that which would normally have been charged had the incidence of risk been otherwise. No substantial evidence having been adduced by Konwall as to whether the risk of piles being abandoned through negligent driving was or was not factored into the agreed price, the Court cannot conclude as a matter of first impression that there is anything absurd about the imposition of all the risk of abandoned piles on Konwall.

69. What evidence was available in fact suggests that the allocation of risk on Konwall was consciously accepted by Konwall. It will be noted, for instance, that Tender cl.3 posits a sliding scale in respect of payment for replacement piles. The clause expressly provides that "[s]tarting from the 61st abandoned pile, the driving rate shall be HK$70/m..." instead of the quoted $95/m. Thus, while there was incentive on Konwall to minimise the number of abandoned piles, why was it necessary to stipulate a sliding scale if all piles negligently driven were simply to be for Sunbond's account as Konwall now claims? In fact, Tender cl.3 is not the only provision which allocates the risk for potentially bad driving by Sunbond on Konwall. See, for example, the last sentence of Tender cl.19.

70. Even if it were assumed that piles abandoned through negligence on Sunbond's part must be accounted for by Sunbond, I am not satisfied on the evidence that negligence has been established.

71. Konwall's case on actual negligence is at heart a statistical argument. Dr Li's evidence is that, if "controlled tamping" is used in the driving of H-piles, "the damage rate of driven H-piles can usually be controlled to 10 to 20%" even in a marble area. Dr Li concludes:-

"In summary, the high percentage of piles caused by excessive rebound movement [in the present case] is unusual. As demonstrated by the case studies presented in paragraph 2.6 above, the rate of damage can be controlled to a small level if care is taken in installing the driven piles. There is a strong indication that [Sunbond] had not carried out the pile driving in a controlled manner or that excessive hard driving had been carried out to achieve early final set, causing an unreasonably high percentage of abandoned piles for he project."

72. Dr Li says that "[c]ontrolled tamping is commonly practised and recognised by contractors as a useful means to prevent premature damage of the pile tip before final set". By "controlled tamping" Dr Li explained that he meant essentially using a smaller hammer, using a lower gear on a diesel hammer, using a smaller drop height with a drop hammer, and driving more slowly. Even when one reached bedrock, one should still patiently attempt to control the hammer weight if possible, so as slowly to tap the pile in place before resorting to hard driving. Judgment is involved. If one started to engage in hard driving (that is, using a bigger hammer) too early, one could damage the pile prematurely.

73. Dr Li acknowledged that controlled tamping needed more time to carry out and was more expensive. Typically, it might involve another hour or 2 of driving per pile. He suggested that it might make good sense to have one piling rig dedicated to hard driving and another for controlled tamping. In that way, the hard driving rig could take over work on those piles which had been driven by the controlled tamping rig, while the controlled tamping rig went on to drive other piles. A piling contractor (Dr Li said) may need to experiment initially at site in order to get a feel as to how slowly, at what hammer weight and what gear, and up to which depths he ought to proceed with any pile.

74. In summary the argument upon which Konwall relies to establish Sunbond's negligence may be stated as follows:-

(1) "Controlled tamping" is good piling practice. It is a method of preventing damage to pile tips.

(2) "Sponginess" is evidence of pile tip damage.

(3) If "controlled tamping" were used, one would expect to see less pile tip damage and fewer piles rejected on account of "sponginess" and excessive rebound.

(4) Many piles were rejected in Phase 2 for "sponginess" and excessive rebound. This is more than the 10 to 20% or even less that would normally have been observed if "controlled tamping" were used.

(5) It follows that Sunbond could not have engaged in "controlled tamping". Instead Sunbond must have over-driven many piles and caused their tips to become damaged. This explains why much "sponginess" was observed.

(6) If Sunbond did not use "controlled tamping", that means it did not follow good, commonly accepted practice in the piling industry.

(7) Therefore, Sunbond must have been negligent.

The crux of Konwall's case is the high percentage of piles which were rejected on final set on account of "sponginess". That high percentage must mean (Konwall claims) that on the balance of probability Sunbond had been careless in its driving.

75. I have several difficulties with Konwall's reasoning.

76. First, I agree with Mr Chiu that "controlled tamping" as defined by Dr Li remains a nebulous concept. What is meant by use of "a smaller hammer" or "a smaller drop height"? How "small" should "smaller" be? What is a sufficiently "low gear"? What does it mean to proceed "slowly"? In relation to what rate should "slowness" be measured? The qualitative words highlighted are too vague. They do not enable the Court objectively and precisely to conclude that in respect of pile x Sunbond was negligent because it carelessly used hammer y instead of hammer z and gear m instead of gear n and proceeded at a rate of p instead of q meters per minute. There is insufficient guidance in the description of "controlled tamping" for the Court empirically to assess the rights and wrongs of Sunbond's pile driving.

77. Second, for all one knows, Sunbond used a low gear and a small hammer weight and proceeded slowly, but the pile tip was nonetheless damaged and "sponginess" observed as a result. It is easy to say (with the benefit of hindsight) that one should have proceeded more slowly or should have used an even smaller hammer or an even lower gear at a particular point or points in the piling operation. That does not mean one was negligent in the first place.

78. Dr Li accepts that there must inevitably be an element of judgment in the way in which a piling contractor proceeds. In that judgment, there would be scope for different contractors reasonably to differ on (say) how small a hammer ought to be used or how low a gear ought to be engaged in pitching a pile and how long to continue driving with a particular hammer at a specific gear. I do not think it is right to conclude without more that, just because pile tip damage occurs by reason of a judgment made as to the method of driving to be used, it was wrong, negligent or unreasonable for the contractor to make such judgment initially.

79. Third, Dr Li refers to his experience in sites identified in his report as A, B, C and D. Sites A, B and C are in the Northwest New Territories, while Site D is in the Northeast New Territories. Dr Li also had experience with a fifth site not mentioned in his report. Using "controlled tamping" he managed to drive piles in those sites (which are marble areas) with either no or only 1 abandoned pile at a given site. That is all very well. But Dr Li was unable to give specific details about the respective sites or provide information such as the weight of hammer used, the gears engaged of any diesel hammer used at which points during piling, and the piling time taken in relation to each project. This was because the owners who had engaged Dr Li's services for the sites were not prepared for him to disclose those key details. Given that there are numerous marble sites in the New Territories (especially Yuen Long and Ma On Shan), it is difficult to evaluate the relevance of Dr Li's experiences in just 4 or 5 sites without further information. If one talks in terms of statistical relevance, I find it difficult to generalise from Dr Li's experience at 4 or 5 sites (about which little is known to the Court) so as to draw conclusions about what was (or ought to have been done) in the present case.

80. For the above reasons, I seriously doubt that it is legitimate to infer here from the high number of abandoned piles alone that Sunbond were negligent. The high number of abandoned piles might possibly corroborate a case, demonstrated by other evidence, that Sunbond was negligent. But I am not prepared to conclude, just because of the high number of "spongy" piles, that Sunbond must have driven the same negligently. I do not think that Konwall is excused from a burden of specifying in respect of each abandoned pile criticised precisely how Sunbond was negligent in relation to each pile complained of (for example, by using hammer y instead of hammer z and gear m instead of gear n at time t and proceeding at a rate of p instead of only q meters per minute). I do not think that there is a statistical short-cut. Proving its complaints in relation to individual abandoned piles with more precision may be tedious, but the task cannot be circumvented. This is all the more so given that the risk of abandoned piles has generally been imposed on Konwall by Tender cl.3.

81. Woo argues in his witness statement that Sunbond should be held liable for 117 piles which on the records were abandoned solely n account of displaying excessive rebound and "sponginess". Again for the reason I have given, even if "sponginess" can usually (albeit not invariably) be assumed to evidence pile tip damage, I am unable to conclude that pile tip damage automatically means that Sunbond was negligent. "Controlled tamping" does not guarantee that there will be no pile tip damage. Nor to my mind does it follow, from a statistical observation that in other marble sites one might typically expect no more than 10-20% of piles being abandoned, that Sunbond must have been negligent in driving 117 piles in the present case on the balance of probability.

82. Before leaving Issue 1, I comment briefly on Mr Chiu's submission that, if there was negligence in the way in which Sunbond drove H-piles, Konwall acquiesced in the same. Mr Chiu submitted that Konwall's representatives (either Chu or his deputies Mr Tiu Hong Chung ("Tiu") or Mr Siu Lam Kan ("Siu")) were present at all material times during Sunbond's piling operations. If there was anything wrong in the way Sunbond was proceeding, Chu, Siu or Tiu (Mr Chiu says) should have complained about the matter. They did not. Accordingly, Konwall must be taken to have accepted Sunbond's methodology. I do not think that Chu's oral evidence supports a case that one of Chu, Tiu or Siu was present at all material times monitoring Sunbond's piling. The thrust of Chu's evidence was that either he or at least one of his deputies observed Sunbond's piling operations from time to time.

83. Even if one of Chu, Tiu or Siu were present as Mr Chiu submits, that could not have absolved Sunbond from performing any contractual obligation to drive the piles carefully. The fact that Chu, Tiu or Siu said nothing cannot be taken to be acquiescence, particularly where Sunbond held itself out as a piling specialist. Thus, if I am wrong in my construction of Tender cl.3 and Mr Houghton is right in the importation of cls.4.09 and 6.13 of the Addendum, I do not think that the mere presence of Chu, Tiu or Siu coupled with their silence can amount to a waiver of any contractual rights which Konwall would have in relation to the method of Sunbond's performance.

84. I would answer Issue 1 against Konwall. Sunbond was not in breach of contract in relation to the abandoned piles and Konwall is not entitled to damages in respect of any abandoned piles.

B. Issue 2: Was Sunbond guilty of delay?

85. Konwall attributes delay on the par of Sunbond to 2 broad grounds.

86. The first ground relates to the need to use replacement piles. In light of my view on Issue 1 that the risk of piles having to be abandoned fell on Konwall and given my conclusion that Konwall has failed to establish a case of negligence on Sunbond's part in relation to abandoned piles, delay arising from the driving of replacement piles cannot be blamed on Sunbond.

87. The second ground arises out of Sunbond's deployment of only 1 piling rig until 24 August 2000. Two piling rigs (Mr Houghton says) would have meant that Sunbond would have made faster progress.

88. But Mr Houghton's assertion would not necessarily be the case where Konwall failed to make available sufficient work to occupy 2 rigs from time to time. In Section I of this Judgment I have indicated significant periods both before and after 24 August 2000 when Sunbond's plant was idle due to lack of available work. The records of idling time compiled by Sunbond were confirmed by Chu. I am therefore unable to conclude that the employment of only 1 piling rig before 24 August 2000 meant that Sunbond was progressing too slowly before that date. Such case on Konwall's part is not made out on the evidence.

89. I add that in my view it is telling that, by its 18 August 2000 fax requesting Sunbond to deploy a second piling rig, Konwall specifically instructed that the same "shall be delivered to site by end of August". If (as Kwok and Woo claimed in oral evidence) they were truly concerned that Sunbond only was using 1 rig at the time, why did they not order Sunbond to bring a second rig straightaway? Konwall had no qualms about instructing B & G to bring in more plant to cover slow progress as soon as possible or within (say) 4 days. The different treatment in respect of Sunbond suggests to me that the problem was that Konwall simply could not make available enough work to keep Sunbond's plant and staff occupied in the initial stages of the Phase 2 project.

90. There was some evidence before me on whether Sunbond could deploy plant in blocks where pre-boring rigs were also in use. Mr Houghton submitted that a block was a large area (about 35 x 35 sq m). On the other hand a pre-boring rig would only occupy some 15 x 15 sq m of space. Further, at any time there would be no more than between 3 to 5 pre-boring rigs deployed at the Site as a whole. It was suggested that there was a lot of room for Sunbond's plant to manoeuvre even where a pre-boring rig was in use. However, I am not satisfied on the evidence as to the degree to which it was logistically possible to move Sunbond's rig back and forth in areas where a pre-boring rig was in place.

91. The documents which I have referred to in Section I of this Judgment indicate that not all areas of Phase 2 were available to Sunbond from the beginning. For example, the 18 August 2000 fax refers to "[t]he whole of Block 8 shall be handed ... for piling work on 21/8/00". I am therefore not persuaded that it was feasible for Sunbond to do more work than it was actually doing prior to the introduction of its second rig on 24 August 2000. If the situation were otherwise, why would Konwall be certifying idling of Sunbond's plant in the period before 24 August 2000? It seems likely that the introduction of a second piling rig only at a later stage was of benefit to Konwall as it would not have to pay for the lease of the same until there was enough work to justify a second rig.

92. I therefore find against Konwall with regard to delay arising from non-deployment of a second drilling rig until 24 August 2000.

93. Even on the basis that no delay is attributable to Sunbond by reason of abandoned piles or the deployment of only 1 rig at an early stage, Mr Houghton's Closing Submissions postulate the existence of delay.

94. Mr Houghton calculates a reasonable time from 22 May 2000 in accordance with the project commencement date stipulated in the May 2000 letter. He then assumes that, in the absence of extenuating circumstances, the piling work at the Site under the 1st Sub-Contract ought to have been completed within 100 days. To that 100 days, Mr Houghton adds 61 days to cover the period from 15 June to 14 August 2000 when suspensions and disruptions took place as a result of trial piles having to be abandoned and pile shoes having to be revised. Mr Houghton adds another 104 days (15 September to 16 October 2000, 20 October to 17 November 2000 and 20 December 2000 to 31 January 2001) due to suspension delays from having to deal with cracks in the neighbouring village house. This so far allows Sunbond 265 days.

95. Mr Houghton then calculates that some 100 days of delay were taken up by having to drive replacement piles (24 piles days for piles which Mr Houghton accepts cannot be attributed to Sunbond's fault and 76 days for piles which Konwall alleges were due to Sunbond's negligence). On the assumption that delay from the replacement piles must be borne (contrary to Mr Houghton's submission) by Konwall and on the assumption that adjustment by half has to be made to reflect Sunbond's failure to deploy 2 rigs, Mr Houghton credits Sunbond with a further 50 days. This brings Sunbond's reasonable time to 315 days (265 + 50 days).

96. In light of my conclusions, I would correct Mr Houghton's calculation and credit Sunbond with 143 (instead of 50) days in connection with the driving of abandoned piles (265 + 143 days) as suggested by Mr Chiu. If I understand Mr Chiu's submission correctly, his 143 days is based on the time actually taken in driving abandoned piles. That would raise Sunbond's reasonable time to 403 days.

97. Mr Houghton reckons that the Phase 2 piling works spanned over 412 days. Deducting 403 days from 412 days leaves 9 days. It seems to me that Mr Chiu is right in submitting that such figure has to be further reduced by a significant proportion of the 23 days before 15 June 2000 when trial piles were being driven and significant pile driving could not be commenced. I accept that some pile driving did take place during that period, but I note Chu's instruction as early as 23 May 2000 not to drive H-piles pending the outcome of the trial piles. In any event, it seems that the 9 days balance would easily be covered by the loss of time prior to 15 June 2000.

98. It may also be that account should be taken of logistical delays encountered in the project not due to Sunbond's fault. Thus, for example, where work was not made available to Sunbond by Konwall, Sunbond's plant was idlet. The fact that no work was done on a given day, would not reduce the amount of piling work that would still have to be done. Sunbond should therefore compensated by additional time to perform the piling work which could not be done during the idling period. It seems to me that, if (in addition to the time allowed as discussed above) Sunbond's idling time as accepted by Chu is taken as a rough measure of the time which would have to be allowed to Sunbond as a result of logistical delay not due to Sunbond's fault, the actual delay experienced in Phase 2 is more than amply explained.

99. Mr Houghton urged me to look at the case in a robust or rough and ready manner in deciding whether there has or has not been culpable delay. Adopting that approach as a check on the "accounting" exercise in which I have just engaged, it appears to me that there is no substantiated basis for ascribing delay to Sunbond. I do not accept the main reasons for delay ascribed to Sunbond as submitted by Mr Houghton. Those main reasons having been dismissed and looking at events in the round, I do not see in what way Sunbond can be said to have taken more than a reasonable time to complete the Phase 2 piling project. I am reinforced in my conclusion by the fact that in no document issued during the project does Konwall complain to Sunbond about the high rate of abandoned piles and any delay caused by Sunbond as a result. If Sunbond had been perceived by Konwall as being at fault, one would have expected to see many letters of complaint.

100. I would answer Issue 2 in the negative. Sunbond was not guilty of delay.

101. I note that Mr Houghton accepted that time was at large as a result of the various suspensions of work which took place. That means liquidated damages are inapplicable and it is incumbent on Konwall to establish the loss and damage which it has suffered as a result of any proven delay on Sunbond's part. Mr Houghton proposed to use the liquidated damages of $20,000 per day as a proxy measure for Konwall's actual damage arising from each day of delay ascribed to Sunbond. I simply observe here that I doubt that would have been the correct approach. In the absence of evidence as to how the $20,000 liquidated damages was calculated, I would (had I found any delay by Sunbond) have had difficulty in concluding that the measure of Konwall's actual loss was $20,000 times any period of proven delay.

III. Conclusion

102. Konwall's Defence and Counterclaim are dismissed. There will be judgment for Sunbond in the amount of $1,878,852.50. Interest will run on that amount from the date of the writ (15 July 2002) to date of judgment at 1% over Hong Kong prime rate. Thereafter, interest will run on the judgment debt at the judgment rate until payment. There will be an Order Nisi that Konwall is to pay Sunbond's costs of the action, such costs to be taxed if not agreed.

1 18 June 2000 was a Sunday.

2 The Engineer's 22 July letter specified "14 July". This was later corrected to "13 July" in the Engineer's fax dated 1 August 2000 mentioned below.

3 The passage refers to the tests suggested by Lord Morton in Canada Steamship Lines Ltd. v. The King [1952] AC 192, 208 for ascertaining whether a party has exempted or limited his liability for negligence by a contractual clause. Lord Morton said (in part): "(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called 'the proferens') from the consequences of the negligence of his own servants, effect must be given to that provision ... (2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises at this point, it must be resolved against the proferens..."