CHUN WO BUILDING CONSTRUCTION LTD v. METTA RESOURCES LTD

HCCT 29/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 29 OF 2013

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J U D G M E N T

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1.  Tsz Shan Monastery (“TSM”) is a large Buddhist temple located in Tung Tsz, Tai Po District.  This action arose out of the construction of TSM.  The plaintiff (“Chun Wo”) was the main contractor of the TSM project (“Project”) and the defendant (“Metta”) was the employer. 

The contract and the parties involved

2.  The land on which TSM stands is owned by Heung Hoi Ching Kok Lin Association 2003 Ltd (“Heung Hoi”).  It is a charitable body.  Metta was appointed by Heung Hoi as developer of the Project in 2007.  The construction, development and operation of TSM were supported by the Li Ka-shing Foundation[1]. Metta is merely a corporate vehicle.  There is no clear evidence as to who set up that company.  However, Mr Davy Chung, an executive director of Cheung Kong Property Holdings Ltd (“CKPH”), is a director of Metta. 

3.  The Main Contract (“MC”) was awarded to Chun Wo on 6 December 2010 at the price of nearly HK$423M, which included a prime cost sum of about HK$75M for the timber cladding works of a nominated sub-contractor, Sundart Timber Products Co Ltd (“Sundart”).  The MC was based on the Hong Kong Standard Form of Building Contracts.  The contract documents were made up of 4 volumes, and a set of drawings. 

4.  Hsin Yieh Architects & Engineering Ltd (“HYA”) was appointed as the Employer’s Representative under the MC.  In addition, HYA was both the Architect and Quantity Surveyor under the MC.  Ove Arup & Partners Hong Kong Ltd (“OAP”) was engaged by Metta as the structural, geotechnical and civil engineering consultant, and separately as the electrical and mechanical consultant for the Project. 

5.  Cheung Kong Property Development Ltd (“CKPDL”) was appointed as the Project Manager of the Project by Metta on 17 January 2011.  In addition to CKPDL, 2 other entities of the Cheung Kong Group of companies (“CKG”) were involved in the Project.  MD Vista Ltd (“MDV”) was the in-house architectural practice within the CKG.  It worked with HYA and other consultants on the design works for the Project.  Building Contract & Costs Department (“BC&C”) was a department of Cheung Kong (Holdings) Ltd (“CKH”) (it became CKPH on 3 June 2015) responsible for providing input in connection with the tender documents, payment certification, valuation of variation works, final account settlement and other contractual matters relating to the Project. 

6.  It should be noted at the outset that at all material times Metta had no staff of its own, and it is undisputed that it was acting via the Cheung Kong (“CK”) entities mentioned above for the purposes of the Project.

7.  The electrical and mechanical (“E&M”) works for the Project were carried out by Chun Wo E&M Engineering Ltd (“CWEM”), Chun Wo’s sub-contractor and a company related to it.

The Project

8.  There is a Master Layout Plan of the TSM site (“Site”), which is attached to Metta’s Opening Submissions as Annex I.  This Plan provides an aerial view of the Site and is attached to this Judgment as Annex I.  The Site has an area of 46,700 sq m. 

9.  The Site was delineated into 3 portions: Area 1A, Area 1B, Area 2.  The MC works (“Works”) comprised, broadly, the construction of :

(1) In Area 1A (the main area of the Site):

(i) A 2-storey podium including car parking areas, E&M plant rooms, washrooms, covered walkway, disabled users lifts, staircases, canteen and other functional areas (referred to as Main Court 1);

(ii) Temples and their associated structures broadly on top of Main Court 1, which included:

(a) Great Buddha’s Hall;

(b) Guan Yin Temple;

(c) Tian Wang Temple or Tian Wang Dian (Mid Court Gate);

(d) Sutra Library or Temple (Meditation Hall);

(e) Bell & Drum Towers (Entrance Towers);

(f) Shan Mun or Shan Men (Entrance Gate).

(2) In Area 1 B (western extension of the Site):

(i) A two-storey Dormitory Block 1;

(ii) A two-storey Dormitory Block 2;

(iii) A two-storey Dormitory Block 3.

(3) In Area 2 (eastern extension of the Site):

(i) Completing the finishing work at the base of a 70 metre high Guan Yin statue (the statue itself was erected by a separate contractor);

(ii) The plaza for worshipping the Guan Yin statue (Main Court 2).

10.  The Works were divided into 2 sections.  The general descriptions of the two sections were as follows :

(1) MS-1: Obtainment of Occupation Permit (“OP”) for Areas 1A and 1B;

(2) MS-2: Substantial completion of all Works, including the works for Areas 1 and 2.

11.  It should be mentioned that the courts, covered walkways, temples and other features at TSM were extensively paved with different kinds of stone.  Stone work defects was a subject on which much of the time in this trial was spent.

12.  In order to understand the disputes over the Project, I shall provide an overview of the course of the Works as follows.

Section MS-1

13.  Chun Wo commenced its site works on 7 March 2011 when Area 1A was handed over to it.  On 7 April 2011, Area 1B was handed over to Chun Wo.  Pursuant to the terms of the MC (Specification Preliminaries (“SP”) 11.03), sectional completion for MS-1 should be achieved on 29 April 2012. 

14.  On 27 April 2011, Chun Wo submitted its Master Programme Revision 0n.  The OP for MS-1 Area (completion of Works for MS-1) was issued on 29 August 2012.

Delay in completion of Section MS-1

15.  The following statutory applications were made for :

(1)  Water Supplies Department inspection on 27 April 2012;

(2)  Fire Services Department inspection on 23 May 2012;

(3)  OP inspections by Buildings Department initially on 11 June 2012 and re-applied for on 3 August 2012.

16.  In relation to the delay in completion of MS-1, Chun Wo had issued Extension of Time (“EOT”) Claim Nos 1 to 20.

17.  On 2 May 2012, HYA issued a Certificate of Non-completion for MS-1 certifying that it ought to have been completed on 29 April 2012 and that pursuant to Special Conditions of Contract (“SCC”) clause 22 of the MC Metta was entitled to deduct liquidated and ascertained damages (“LD”) from sums otherwise due to Chun Wo.

18.  The Certificate of Non-completion has not been withdrawn or revised by HYA.  Metta claims, in relation to MS-1, LD in the sum of HK$12,200,000.

Consecration Ceremony

19.  This was an important event for TSM, and a watershed in the Project.  A Consecration Ceremony (“Consecration”) was held at TSM on 4 November 2012.  It was attended by Mr Li Ka-shing (“Mr Li”). Chun Wo says that it went to great lengths in expediting much of the Works so as to allow the ceremony to be held.  It is common ground that such accelerated work was outside the requirement of the MC (although Metta contends that much of the Works were badly behind schedule).  However, after the event, Chun Wo was informed that Mr Li was unhappy with its works, in particular, the stone works[2].  From then on, the relationship between Chun Wo and Metta was on the downslope. 

20.  For purpose of the Consecration, on 3 November 2012, Chun Wo handed over Dormitory 2, Dormitory 3, the Management Office and the Caretaker’s Office to Metta.

21.  Dormitories 2 and 3 were intended to accommodate, respectively, male monks and female monks.  A number of monks moved in after the Consecration.

Section MS-2

22.  The parties disagree on the hand over date for MS-2.  Chun Wo says that it was only given possession of MS-2 on 4 February 2013, whereas Metta relies on ERI[3]-MC-805 issued on 2 January 2013 which confirmed that the date of possession of Area 2 was 9 January 2013 and that the date of completion was therefore 8 May 2013.

23.  However, Metta’s witnesses, in particular Ms Grace Shen (“Ms Shen”), did not take issue with Chun Wo’s case. Therefore, I shall accept that MS-2 was handed over to Chun Wo on 4 February 2013. 

Delay in relation to Section MS-2

24.  In relation to MS-2, Chun Wo submitted EOT Claim Nos 21 to 27.

25.  On 6 March 2013, Chun Wo issued a programme showing that the Works of MS-2 would be completed by the end of May 2013.

26.  On 10 June 2013, HYA awarded Chun Wo an extension of time of 51 days in respect of Chun Wo’s EOT Claim No 22.

27.  HYA issued a Certificate of Non-completion for MS-2 on 19 November 2013 certifying that Chun Wo had not completed MS-2 by 28 June 2013, and stating that LD for that section were at the rate of HK$50,000 per day.

Non-payment of IPC[4]No 28 and 29

28.  HYA issued IPC No 28 on 3 May 2013, which certified the payment due to Chun Wo at HK$14,532,000 and recognized Metta’s entitlement to withhold HK$22,999,000 as retention.

29.  HYA issued IPC No 29 on 23 May 2013, which certified the payment due to Chun Wo at HK$12,781,000 and recognized Metta’s entitlement to withhold HK$22,999,000 as retention.

30.  It is not disputed that these IPCs were not paid when due. 

Issuance of ERI-MC-897 on 2 July 2013 and IPC No 30

31.  ERI-MC-897 was issued on 2 July 2013.  Those instructions to Chun Wo stated that “all remaining Works under your scope are omitted with immediate effect”.  The parties are in dispute as to the precise scope of the omission.  This is 1 of the key issues in this case. 

32.  On the same day, HYA certified that the Works for MS-2, which included substantial completion of all Works, were practically completed on 2 July 2013.

33.  Also on 2 July 2013, HYA issued IPC No 30 certifying that there was a negative amount of HK$10,197,200 due to Chun Wo. The contract sum to date reflected in IPC No 30 was HK$555,953,989.31.  A deduction for “Reserve for Rectification of Non-compliance Works under ERI-MC-880, 884, 888” in the amount of HK$14,851,200 was made in IPC No 30.

34.  In addition, IPC No 30 also recorded that Metta was holding retention in the maximum amount of HK$22,999,000, which comprised of (1) HK$17,399,000 attributable to Chun Wo’s own work and (2) HK$5,600,000 attributable to Sundart.

35.  On 15 July 2013, Chun Wo handed back the security posts of the Site to Metta.

36.  On 31 July 2013, HYA issued to Chun Wo a set of “Record of Defects”.

37.  On 7 August 2013, HYA issued to Chun Wo another set of “Records of Defects” and “instructed [Chun Wo] to rectify the non-conformance and remove the defective work ... within 7 calendar days ...”.

Last payment

38.  On 25 July 2013, Chun Wo was paid HK$4,915,800, comprising the balance due on IPC No 28 to 30 (HK$17,115,800) less LD for Section MS-1 (HK$12,200,000).

CK and the Project

39.  The Project was described as one of “merit” in a letter from Ms Alice Dai of HYA (“Ms Dai”)[5].  This is perhaps self-evident.  TSM is a unique feature of Hong Kong.  It is located in a beautiful area facing the sea and with mountains behind.  It aims to promote the understanding of Buddhist teachings and wisdom. 

40.  There is a good deal of sensitivity on Metta’s part about the alleged involvement of Mr Li in the Project.  That is understandable.  Whether Mr Li was involved in the Project has little bearing in the resolution of this action.  It is no more than background information which Chun Wo, in my view, had overplayed. 

41.  However, on the evidence before the court, there is little doubt that the Project was one in which Mr Li had taken an interest. For instance, Dormitory 1 at TSM was built to suit his requirements[6].  Further, Mr Li’s interest in the Project may explain certain actions on the part of Metta as described below. 

42.  Another feature of the Project which should be noted is that Metta had no staff of its own.  What was required to be done on the part of Metta in this Project was all performed by CK entities.  In particular, CKPDL took a leading role.  Ms Shen, who was the Chief Manager of the Construction Management Division of CKH and became a member of CKH’s Executive Committee in March 2013[7], was apparently the “Commander-In-Chief” of the Project.  The heavy involvement of CK in the Project is not open to dispute. 

The dispute

43.  The issues in this litigation are unexceptional in the context of a construction dispute.  It may be said that what lies at the heart of most construction cases is a fairly simple contract claim, and the complication rests in the amount of details in the claims and counterclaims. This case is one of the most complicated in that sense.  It should be added that the omission of the remaining Works by ERI-MC-897 had introduced a fairly unique complication in this case.

44.  In this case, Chun Wo’s claims are for (1) payment for work done (including variations) and materials on and off site; (2) extension of time and (3) loss and expense or, alternatively, damages arising from delay and recovery of sums deducted as LD.  On the other hand, Metta has counterclaims for defects, contra charges and LD.   

The approach to resolving this litigation

45.  There is a vast amount of details in this case, which have made this a very difficult trial, both for the legal teams (there are 4 counsel on each side) and the court.  The trial bundles consist of over 120 box files.  The indices for the trial bundles consist of 3 box files.  It is necessary to have an index of the indices (one has been provided) to navigate those 3 box files, without which it is almost impossible to track down a document. 

46.  To provide a cameo of the complications in this case, there are 531 variation claims in issue (reduced from 933 originally claimed); 1,661 line items in Metta’s schedule of defects (“App 10B”[8]); and 11 expert witnesses (1 of whom was a single joint expert) covering no less than 6 disciplines.  Metta’s closing submissions alone consist of 827 pages accompanied by an overfilled box file of appendices (there is also a 75 page reply submissions with further annexes from Metta).  It was said by Mr Scott SC, appearing for Metta with Ms Cruden, Mr Chow and Mr Chan, that this is one of the most complex actions brought before the court in terms of, inter alia, the amount of documentation and the multitude of issues. 

47.  On top of this, the parties are at loggerheads and extremely litigious[9]. It suffices to say that they have managed to agree on not even one of the extensive factual or expert issues, despite the directions of the court to endeavour to do so.  Regrettably, this probably reflects the fact that the litigants, or at least one of them, were/was allowed to dictate the course of this litigation notwithstanding the involvement of their/its lawyers.  The way in which some of Metta’s expert evidence was put together (see below) bears out this observation. 

48.  This case has been contested with scant regard to costs or proportionality.  It appears that the pleadings, the evidence and the arguments in this case were prepared without any thought of reducing the complexity of the case.  Perhaps a tactic to swamp the opponent was adopted.  Consequently, the task of resolving this case has been made unnecessarily arduous[10].  Even the simple task of using the Scott Schedules on the variation claims involves unnecessary waste of the court’s time, because the parties have refused to cooperate and produced their own Schedules with different arrangements so that the reader will have to go through the 2 sets of papers in order to track down any 1 of the over 500 variation claims. 

49.  The court is not dictated by the unreasonableness of the litigants.  I do not believe it is necessary or helpful to adjudicate on every single dispute between the parties.  Most, if not all, of the 11 expert witnesses in this case had not been able to deal with every dispute within their scope of responsibility.  Some of the disputes are of little or no relevance.  In my view, once the main disputes are determined, a reasonably accurate picture will emerge as to what went wrong with the Project.  The court will then have to be guided by the expert evidence in resolving the multitude of technical issues, eg, whether there was culpable delay in the completion of Works and the quantum of various claims. 

50.  When it comes to dealing with some of the defect issues and quantum issues, the court will have to adopt a reasonably broad brush approach.  That was the approach taken by the experts.

Main disputes

51.  I believe that the important factual and legal issues in this case are as follows :

(1)  Was Metta continuously changing the designs for the Project?

(2)  The quality and progress of Chun Wo’s works.

(3)  Did HYA abdicate its responsibilities in the Project?

(4)  The scope of work omitted under ERI-MC-897.

(5)  Did Metta want Chun Wo to return to Site to carry out rectification works and did Chun Wo have any real intention to do so?

(6)  The notice requirements under the MC relevant to Chun Wo’s variation and EOT claims.

The MC

52.  The MC was based upon the Hong Kong Standard Form of Building Contracts.  For the purpose of this Judgment, the relevant clauses are set out in the body of this document and Annex II hereto[11].

Credibility of factual witnesses

53.  In this case, Chun Wo had called 11 factual witnesses.  Out of a total of 25 factual witnesses, 16 were called by Metta. Nine of them were not required for cross-examination, subject to any argument on the weight of their evidence (7 of these witnesses were from Savills and their evidence was to introduce photographs taken on behalf of Metta during site inspections). 

54.  I start with 4 general observations.

55.  Firstly, there is a vast amount of documentary evidence available.  Much of the evidence of the factual witnesses was based on the documents.  However, this court has to bear in mind that sophisticated employers and contractors like the parties here are quite capable of making contemporaneous documents which serve their purpose and contain a slant in their favour.  One of Chun Wo’s witnesses, Mr Holden Lee, had spoken frankly about writing letters to sub-contractors in harsh terms in order to give them a warning and to make sure that they perform well.  He said that it was a very common practice, implying that the terms of the letters might not be consistent with the reality[12]. 

56.  Another Chun Wo witness, Mr Kevin Ng, used the phrase “one China, two stories” to describe the fact that in this case the parties were making their own records, setting out their version of events and the 2 sets of records did not agree with each other. 

57.  As an illustration, MC Progress Meeting No 10 (held on 10 March 2011) was the first such meeting held after possession of Area 1A was given to Chun Wo.  The minutes were prepared by CKPDL.  Under item 6.2, Chun Wo was recorded to have confirmed that there was no outstanding item from the consultant team affecting its work progress.  This is to be contrasted with Chun Wo’s Contractor’s Report for Meeting No 10 which stated that: (i) there were a lot of design amendments effected via comments on Chun Wo’s shop drawings and RFIs[13], but ERIs for the same were not yet issued; (ii) there were other ERIs required but not issued; and (iii) ERI-MC-33 (received on 4 March 2011) affected the preparation of other works.

58.  Further, for obvious reason I shall be more careful in assessing the documents generated after the relationship between the parties began to deteriorate towards the end of 2012, subsequent to the Consecration on 4 November 2012. 

59.  I shall place more weight on documentary evidence which is inherently reliable, eg, contemporaneous photographs of a good quality. 

60.  Secondly, CKG was (and is) one of the biggest property developers in Hong Kong.  The evidence suggests that CK did not shy from wielding its clout to extract the best performance from contractors[14].  Chun Wo was (and is) a substantial and well-established building contractor.  It had worked on many of CKG’s property developments starting from about 1997.  At the time of the Project, Chun Wo was also working on a number of other CK projects.  Common sense suggests that in these circumstances (including Mr Li’s interest in the Project) it is unlikely for Chun Wo not to have tried to do its best for the Project. 

61.  Thirdly, common sense dictates[15] that it is unusual for an employer to terminate the service of the main contractor before the completion of work.  Such action is likely to lead to expensive litigation, and it is difficult as well as more expensive to engage another contractor to complete the job.

62.  Fourthly, the court should bear in mind the nature of construction work for a substantial project like TSM.  Until the Works were completed, inevitably there would be defects and inadequacies in quality. Even after completion, there would be a defect liability period (“DLP”) during which remedial works would be carried out.  Indeed, Chun Wo does not say in this case that its works were free from defects. 

63.  I turn to consider the credibility of the witnesses in the order in which they were called to give evidence.  Where I find against a witness on his credibility, I shall state my reasons succinctly.  At the risk of stating the obvious, where a witness is found to be credible, it does not follow that the court will accept his evidence in its entirety and vice versa. 

Chun Wo’s factual witnesses

64.  At the material times, Mr Stephen Lee was the Commercial Director of the Chun Wo Group (“CWG”) to which Chun Wo belonged.  Prior to the breakdown of relationship between parties in May 2013, his involvement in the Project was largely confined to keeping an eye on the “big picture”.  He became personally involved in the Project thereafter.

65.  Mr Stephen Lee’s evidence stood up to detailed cross-examination.  Such evidence is consistent with the contemporaneous documents.  I find no exaggeration or unfairness in his evidence, and I see no reason to doubt his credibility. 

66.  Mr Holden Lee was the Assistant Project Manager of the Project during the period from April 2011 to May 2012.  He no longer works for Chun Wo.  He impressed me as an honest witness.  His evidence was measured and fair, reflecting his best endeavours to recall events which took place some time ago.  I can detect no material inconsistency between his evidence and the documents. 

67.  Mr Edward Fong was the Senior Project Manager and the most senior of Chun Wo’s representatives on Site between about October 2011 (he formally took over from his predecessor, Mr Erik Lee, in December 2011) and end of April 2013.  It was his last job in the construction industry.  After Mr Fong left Chun Wo, he started a business of his own.  His evidence is fairly consistent with the documents.  There were 2 unsatisfactory areas in his evidence: (i) he wrongly attributed to Mr Jimmy Leung (one of Metta’s witnesses) as the author of certain written instructions in respect of MAT[16]-15C (it is an important document on the waterproofing system at TSM and will be dealt with below); and (ii) when he was cross-examined on the emails from Dr Barry Lee (the inventor of the anti-efflorescence agent used in the Project) at PC206/159 and 164.

68.  The upshot is that I shall assess Mr Fong’s evidence with additional care, and I look for documentary support in respect of controversial issues.  However, he was a witness with no apparent interest in this litigation. 

69.  Mr Fong was cross-examined at length.  Although I believe that he was too defensive on the criticisms made of Chun Wo’s work (a common feature in the evidence of many of Chun Wo’s witnesses), on the whole he impressed me as an intelligent witness with a phenomenal recollection about the Project, and he was careful about his evidence.  On balance, I take the view that he is a credible and reliable witness. 

70.  Mr Andy Lau’s company, Top Famous Construction Engineering Ltd (“Top Famous”), was Chun Wo’s replacement stone work sub-contractor during the period from December 2012 to July 2013. He is not a sophisticated person, but he tried his best to understand the questions asked of him and to answer them to the best of his recollection.  I have no reason to doubt his evidence, except that in relation to the quality of some of Top Famous’ stone works as shown in photographs.  I was surprised by his denial that the works were defective.  On the other hand, it has to be said that if Top Famous’ previous works were seriously defective, it is difficult to understand why CKPDL (acting via Ms Shen and Ms Wong Lai Ming) had explored with Mr Lau the possibility of employing his company directly to complete the stone works for the Project. 

71.  Mr Edward Yeung re-joined Chun Wo as Director of Construction in November 2011, reporting to Mr Derrick Pang.  He became more involved with the Project from October 2012.  However, such involvement remained at management level (he was looking after 30 to 40 construction projects of the CWG at the same time).  His evidence is largely consistent with the documents, and I see no reason to disbelieve the same.

72.  Mr Derrick Pang was the Deputy Chairman and Executive Director of Chun Wo Development Holdings Ltd of which Chun Wo was a subsidiary.  It appears that he was the most senior person in the CWG with responsibility over the Project.  He is a well-educated and intelligent person.  He was put under considerable pressure in cross-examination with challenges made on his credibility.  I was impressed by Mr Pang’s spontaneity in his answers.  I find no exaggeration or unfairness in his evidence.  The only point where I have difficulty with his evidence is whether there were quality issues raised by Metta in respect of Chun Wo’s works which led to the meeting between, inter alia, him and Ms Shen on 8 November 2012 shortly after the Consecration.  Mr Pang said that he thought that the purpose of the meeting was to compliment them for acceleration of the works to allow the Consecration to be held.  However, Mr Pang had always accepted that there were defects in the works which required rectification.  I do not see any real reason to doubt his evidence. 

73.  Mr Kevin Ng has a degree in civil and structuring engineering, and has been working in the construction industry since 1980.  Amongst his experience, he had worked in a renovation project for a Buddhist monastery in Singapore.  He joined Chun Wo in October 2012 as its Building Director.  Shortly after the Consecration, Mr Ng was instructed by Mr Pang and Mr Yeung to follow-up on the Project.  He visited the Site at least twice a week.  In particular, he would accompany Ms Shen to do the weekly site walk on Thursdays. 

74.  Mr Ng was cross-examined for 1 whole day on a number of major disputes, including the Flammet and other types of stone used in the Project and the emergency vehicular access (“EVA”) at Area 1B. He had a good recollection of the facts, no doubt having spent time to refresh his memory with the documents.  He was firm and spontaneous in his answers, despite being repeatedly challenged.  I am of the view that his evidence held up under cross-examination, and he impressed me as a knowledgeable and reliable witness. 

75.  Mr Ivan Leung joined Chun Wo in September 2011 and was immediately assigned as the Project Co-ordinator of the Project. He worked at the Site until December 2012.  He left Chun Wo in August 2015.  Mr Leung’s evidence was not really challenged, and I accept him as a truthful witness.

76.  Mr Vincent Lau is a structural engineer and has been working in the construction industry since 2000.  He joined Chun Wo in 2004.  He was the Senior Site Engineer of the Project from 1 June 2011. His evidence is very extensive.  His 2 witness statements consist of 120 pages with which there are appendices of over 1,000 pages.  Mr Lau accepted that he had been assisted in the compilation of his witness statements.  I do not believe that this is unusual given the nature of this case.  He struck me as a knowledgeable witness, no doubt having refreshed his memory from the documents before giving evidence.  He was careful in his answers.  It has not been demonstrated that his evidence is unreliable, and I accept Mr Lau as a credible witness. 

77.  Mr Matthew Lau is an E&M Engineer. He joined CWEM in 2000.  In March 2011, he was assigned to work as the Senior Project Manager for the Project, with the responsibility to manage and supervise the E&M installations.  Like the other Chun Wo witnesses, he was well-prepared.  I detected no material inconsistency between his evidence and the documents.  I accept him as a credible witness.  

78.  The last factual witness for Chun Wo was Mr S P Mak.  He is a Quantity Surveyor (“QS”) working in the construction industry since 1996.  He only joined Chun Wo in June 2012 (about 2 months before the practical completion (“PC”) of Section MS-1) as a Quantity Surveying Manager, and was immediately put in charge of its QS team for the Project.  He was the main witness from Chun Wo dealing with the VO[17] claims. 

79.  Mr Mak’s evidence on the VOs is contained in Appendix A to his first witness statement, which is made up of 2 box files.  Whilst Mr Mak had a reasonably good recollection of the details covered by his very extensive evidence, it is right to say that some of his quantum works were based on information provided by his colleagues.  Further, there is merit in Metta’s criticism that some of his evidence is “plainly opinion evidence of questionable origin”[18].  It is reasonably plain that Appendix A was prepared with a good deal of assistance of Chun Wo’s legal team.  At times in the course of cross-examination, Mr Mak was rather defensive.  I am not prepared to accept Mr Mak’s evidence at face value.  I shall consider his evidence with extra care and I shall place reliance on the documentary evidence where available.

Metta’s factual witnesses

80.  All of Metta’s witnesses came from the CK entities. Its first witness was Ms Wong Lai Ming.  She is an Architect.  She was (and is) a Senior Deputy Property Manager in the Development Department of CKH/CKPH. She joined that company in 2005 and was promoted to her present position in July 2011.  Ms Wong was assigned to work for CKPDL from the beginning of her employment.  From 2008, she was assigned to provide technical support for the Project.  As the Project proceeded, she became involved in the contract administration, supervision and monitoring of the Works.  It is apparent that she was the right hand person of Ms Shen, and has an intimate knowledge of the Project due to her extensive involvement.  

81.  Ms Wong was cross-examined at considerable length.  I regret to say that she was not a good witness.  It was demonstrated with the benefit of the documents that Ms Wong was unfair in respect of some of the criticisms made of Chun Wo in her witness statements[19].  She was unable to provide a satisfactory answer in respect of nearly all the important issues on which she was cross-examined[20].  Further, I am of the view that Ms Wong was not candid with the court on some of her evidence[21].

82.  For those reasons, I paid particular attention to her evidence.  I have little doubt that she had tailored her evidence to suit Metta’s case when she was put under the pressure of cross-examination.  As an example, I reject her evidence that HYA might have carried out any assessment of the EOT claims without involving the management of CKPDL[22].  Such assertion is contradicted by the documentary and circumstantial evidence.

83.  Mr ­Alan Lo is a Chartered Engineer and a Chartered Builder.  He joined the CKG in 2005 and is the Deputy Manager in the Construction Management Department of CKH/CKPH.  From 2008, he was assigned to work for the Project under CKPDL.  His main role was to monitor the site conditions, including the progress of the Works, site safety and the quality of the Works. 

84.  Mr Lo was a poor witness.  Evidently, he did not make much effort to refresh his memory from the documents before he gave evidence.  He was evasive when asked whether HYA was involved in the decisions to issue NCFs[23] (there was a large volume of NCFs issued in the Project).  His evidence on the alleged deficiency in the progress of the Works was based on a simple comparison between the Master Programme and the site situation.  No account was taken of the numerous variation orders given to Chun Wo.  Further, Mr Lo was clearly embarrassed by the cross-examination on various adverse comments he had made in his witness statements about the alleged poor performance of Chun Wo.  Such comments are unfair because relevant contemporaneous documents were either not considered or overlooked.  I do not believe that these inadequacies in his evidence can be simply explained by fading memory or carelessness.  I do not believe that Mr Lo is a reliable witness. 

85.  Mr Charles Mak is a Senior Executive Manager in the Construction Management Department of CKH/CKPH.  He has been assigned to work for CKPDL throughout his employment with CKH/CKPH.  He is a man of 34 years of experience in the construction industry.  He worked on the Project from January 2011 to the end of May 2012 as a Senior Construction Manager.

86.  Mr Mak had a good recollection in respect of some of the matters on which he was cross-examined.  However, he was a difficult witness in terms of focusing on the questions and keeping his answers simple and within the confines of relevance, despite having been advised by the court on more than 1 occasion to do so.  Such difficulty does not necessarily reflect on the credibility of a witness, although it makes the task of assessing Mr Mak’s evidence more difficult. 

87.  However, as the cross-examination progressed, it became apparent that Mr Mak was determined not to make any concession in his answers even when, eg, it was clear that his criticism about Chun Wo’s work at the dormitory area was unfair due to the changes made to the drainage.  Such an attitude does not inspire confidence in the reliability of his evidence. Further, Mr Mak’s insistence that Chun Wo was responsible for the delay caused by the colour selection by Metta in respect of the dormitory windows is against the documents and quite unjustified.  I do not find him to be a credible witness. 

88.  Mr Kevin Cheung is a Quantity Surveyor and the Deputy Contracts Manager of BC&C.  He has been seconded to CKPDL since October 2008.  He handled the quantity surveying matters relating to the Project[24].   

89.  Mr Cheung was also a very difficult witness.  He was combative and could not stop himself from arguing with the cross-examiner, despite having been repeatedly advised by the court not to do so.  I regret to say that his credibility was destroyed by his insistence that HYA did carry out certain work in confirming his assessments and recommendations on the Interim Payment Applications of Chun Wo.  He was later confronted with an email from HYA to the contrary, and had to admit that HYA performed no quantity surveying function, which he knew all along. 

90.  I should add that Mr Cheung was at pains to say, on a number of occasions, that he was discharging his quantity surveying function for the Project in an independent manner.  This is difficult to accept given the evidence that there was much disagreement between him and Mr S P Mak of Chun Wo, and he was clearly arguing the case of Metta in the assessment process.  An illustration of the conflict of interest can be found in his evidence on VO No 13 (mock-up rooms)[25].   Given his qualification and experience, I do not believe that Mr Cheung was simply misguided in maintaining that he was acting impartially. 

91.  Further, Mr Cheung was evasive and changed his evidence under cross-examination, eg, on VO No 117[26].  I do not accept him as a credible witness.

92.  Ms Belinda Cheung was (and is) a Manager in the E&M Department under the employ of CKH/CKPH.  Throughout her employment, she has been assigned to work for CKPDL.  She is a Chartered Engineer and has over 28 years of experience in E&M engineering.  She was involved in the Project from June 2011, assisting Ms Shen to monitor all the E&M works of the Project. 

93.  Ms Cheung had a good recollection of the details when she was cross-examined on her evidence.  However, it was demonstrated that Ms Cheung’s criticisms of Chun Wo’s performance[27]were inconsequential and unjustified.  It is difficult to avoid the impression that her stance was one taken by a perfectionist with inadequate regard to the realities of a construction project.  Further, her evidence concerning the necessity to replace the existing software for the CCTV system without attempting to ask Chun Wo for the software key is quite unreasonable[28].  Consequently, I shall treat Ms Cheung’s evidence with care, and look for corroboration in respect of any of her material allegations. 

94.  Mr Lee Tat Cheong is a Deputy Manager in the Construction Management Department of CKH/CKPH.  He has been assigned to work for CKPDL since October 1997.  He has been in the construction industry since 1975.  Mr Lee joined the Site Inspection Team on 8 November 2012 with his colleague Mr Kwok Chi Hung to strengthen that team.  Mr Lee was responsible for monitoring the Works, and he would conduct site walks during office hours for that purpose. 

95.  Mr Lee was cross-examined about some of the NCFs with which he was involved.  He was unable to give a satisfactory answer on why he had failed to record on the NCFs the complaints of non-conformance with approved samples.  He also wavered on whether the NCFs required all stone claddings to be removed or just the removal of the defective pieces of stone. Given the quality of Mr Lee’s evidence, I will treat it in the same manner as that of Ms Cheung (see para 93 above).

96.  Mr Yiu Chiu Sum is an Architect working in the Development Department of CKH/CKPH.  Throughout his employment, he has been assigned to work for MDV.  His evidence concerns part of the Records of Defects dated 16 July 2013. 

97.  I have no reason to doubt Mr Yiu’s credibility. However, the issue of defects must be evaluated with the benefit of the expert evidence.

98.  Mr Joe Ho is a Works Officer in the Construction Management Department of CKH/CKPH.  Since June 2004, he has been assigned to work for CKPDL.  He has been in the construction industry since 1994.  Mr Ho was involved in the Project from about September 2011 to June 2012 by joining the Site Supervision Team.

99.  Mr Ho’s evidence concerns various NCFs.  It was demonstrated in cross-examination that Mr Ho’s methodology in defects identification did not allow any reasonable tolerance which might be acceptable for construction work or any variation with drawings caused by site conditions.  Like Mr Lee, he had failed to record in the NCFs any alleged deviations from colour samples.  I have to say that Mr Ho was not a convincing witness because he seemed rather unsure when he was taxed in cross-examination. However, I shall have to evaluate the allegations of defects with the benefit of the expert evidence.

100.  Mr Kwok Chi Hung is an Inspector-of-works III in the Construction Management Department of CKH/CKPH.  Since April 2008, he has been assigned to work for CKPDL.  He joined the construction industry in 1979.  Mr Kwok joined the Site Supervision Team at the same time as Mr Lee (8 November 2012).  His involvement ceased on 18 February 2013.

101.  Like his colleagues, Mr Kwok had failed to record any complaints in the NCFs about alleged deviations from colour samples. Mr Kwok was not an impressive witness at all. When he was given the coloured photos for purpose of identifying his complaints with the wall claddings, he was unable to do so with 1 exception.  For that exception, I was unable to see the water stain pointed out by him.  Also, it was conceded by Mr Kwok in cross-examination that he should not have given the evidence contained in para 2.4 of his 2^nd witness statement[29] because he had already left the Site at the material time.  I shall treat his evidence with care, like that of Ms Cheung.

102.  Mr Jack Ng is a Structural Engineer in the Development Department of CKH/CKPH.  Throughout his employment, he has been assigned to work for CKPDL.  He was involved in the Project from October 2007 as an in-house Structural Engineer responsible for coordinating with OAP. 

103.  Mr Ng was a confident witness with good recollection on the matters on which he was cross-examined.  He was firm in his answers.  On the other hand, he was not a very forthcoming witness, such that it was not always easy to understand his evidence.  However, the challenge to his evidence was confined to the vehicular barrier for the EVA.  On the whole, I see no reason to doubt Mr Ng’s credibility.  The issue over the vehicular barrier is confined to quantum[30], which will have to be considered with the benefit of the expert evidence. 

104.  Mr Yu Wai Wah is a Works Officer in the Construction Management Department under the employ of CKH/CKPH.  Throughout his employment which started in November 2007, he has been assigned to work for CKPDL.  Mr Yu joined the construction industry in November 1997.

105.  According to the evidence of Mr Lee Tat Cheong, Mr Yu was 1 of the members of the Site Supervision Team.  Mr Yu worked on the Project from August 2012 to the middle of 2013.  He was mainly responsible for the interior decoration of the Podium, which included all the Temples.  Mr Yu was a quiet speaker who gave evidence in a straightforward manner.  Whilst I have reservation as to the stringent standard which he had applied in respect of some the alleged defective works, I have no reason to doubt his credibility. 

106.  Mr Jimmy Leung is an Architect.  He was employed by MDV from sometime in 2009 until April 2012[31] to work on the Project.  I was impressed by Mr Leung as a witness. He is clever, straightforward and fair in his answers.  Further, he gave evidence under a subpoena and may be regarded as an impartial witness (see further analysis below). 

107.  The important part of Mr Leung’s evidence concerns his disagreement with Mr Edward Fong on whether he gave instructions to Chun Wo in respect of the waterproofing system employed for the Main Court, First Court and Guan Yin Platform (MAT-15C), including the use of “CBN” as an anti-efflorescence agent for the stone work.  I shall deal with that issue below.  

108.  Mr River Wong is an Architect and a Deputy Project Manager in the Development Department of CKH/CKPH.  Since March 2011, he has been assigned to work for MDV.  He was involved in the Project from March 2011 to February 2014 with responsibility over stone and steel works. 

109.  Mr Wong was not a good witness.  He was evasive when asked about HYA’s participation in the Project, but in respect of almost any other questions he was eager to volunteer long and often irrelevant information to fortify Metta’s case or to damage that of Chun Wo.  On more than one occasion, he had to be reminded by the court to focus on the question and to answer it directly.  As the cross-examination proceeded, it became plain that Mr Wong was a cunning witness.  I have little doubt that he made up a story[32] to try to hide the fact that he (and his colleagues) had the opportunity to inspect at least some of the stone works when they were done.  I do not rely on his evidence unless it is supported by reliable documentary evidence or evidence of another credible witness. 

110.  Mr Tsui Sun Wa is a qualified Construction Manager and is employed as a Deputy Manager in the Construction Management Department of CKPH.  Throughout his employment, he has been assigned to work for CKPDL.  He was involved in the Project from 1 March 2013.  Initially, he was tasked to oversee the waterproofing works in particular.  From May 2013 onwards, he also followed up on the timber cladding works.

111.  Mr Tsui’s evidence was not seriously challenged.  He was straightforward in providing his considered answers.  His demeanour was convincing.  I was impressed by Mr Tsui as a witness.

112.  Ms Grace Shen (see para 42 above for an introduction of this witness).  I was not at all impressed by Ms Shen as a witness.  She denied vehemently that Mr Li had any personal interest in the Project, eg, denying that Dormitory 1 was built with his accommodation in mind.  Such evidence does not sit well with (a) the circumstantial evidence, eg, Mr Li’s involvement with the Consecration; (b) Ms Wong Lai Ming’s evidence that Mr Li had expressed dissatisfaction with the stone works[33]; and (c) Chun Wo’s evidence on this matter[34].  Although I do not believe that there is a sinister motive behind this lack of candour (Ms Shen might think it necessary for whatever reason to shield Mr Li from the present dispute), this did not instil confidence in Ms Shen’s evidence.

113.  When Ms Shen was put under pressure in cross-examination, she reacted by giving long and waffling answers to, I believe, evade the question and/or hide her embarrassment.  It was plainly demonstrated that she had not been candid about ordering the demolition of all the stone works after the Consecration (see NCF Nos 453, 459, 460, 461 and 493) and that her viva voce evidence contradicted her witness statement in respect of the roundels.  Like Mr River Wong’s evidence, I would not rely on Ms Shen’s evidence unless it is supported by reliable documentary evidence or evidence of another credible witness.

Expert witnesses

114.  Before dealing with the main issues, I shall identify the expert witnesses.  There were 11 such witnesses in total.  One of them, Mr Wilkinson, was a joint expert who gave evidence on E&M defects. 

115.  Chun Wo’s 5 experts witnesses, in the order in which they were called, were :

(1)  Mr Allington, who gave evidence on EOT/delay;

(2)  Dr Lam, who gave evidence on structural and waterproofing issues;

(3)  Mr Hartog, who gave evidence on architectural matters;

(4)  Mr Mann, who is a Quantity Surveyor and gave evidence on various building defects;

(5)  Mr Charlton, who gave evidence on quantum.

116.  Metta’s 5 expert witnesses were :

(1)  Mr Wardale on delay;

(2)  Dr Chan on structural and waterproofing;

(3)  Dr Anderson on stone;

(4)  Mr Cock on architectural;

(5)  Mr O’Neill on quantum.

117.  The evidence of the expert witnesses will be dealt with when the delay, defects and quantum issues are addressed.

Design changes

118.  The evidence is overwhelming that there were numerous material design changes instructed by Metta in the course of the Works. 

119.  The evidence of Mr Holden Lee[35] in respect of the design changes of the dormitory windows, including schedule, elevation and colour painting, serves as a good illustration.  These are the subject matters of Chun Wo’s EOT Claim No 1.  The window frames were to be cast into the precast façade units which would make up the Dormitories.  Hence the delay in the production of the former would affect the latter. 

120.  Shortly after the handover to Chun Wo of Area 1B where the Dormitories were to be located, Metta began to issue ERIs (6 in total) affecting the design of the windows.  The documents show that Metta was changing the visual appearance of the dormitory windows and doors no less than 11 times.  The colour selection process took some 5 months and involved 7 rounds of colour sample submissions.  The manner in which Metta kept changing its mind with the colour selection is extraordinary.  Such behaviour is perhaps more common with the decoration of one’s home rather than a substantial building project. 

121.  However, I do not see the design changes issue as a critical one.  If Metta was entitled to issue ERIs to change its requirements (there is no suggestion that it was not), then the real issues are Chun Wo’s entitlement to EOT and possibly additional payment.  Whether the design changes in question translate to EOT entitlement is a complicated issue, and one which the court will have to rely heavily on the assistance of the programming experts to resolve. 

122.  I start with a few general observations before dealing with Chun Wo performance in the Project.

Metta’s control over the Project

123.  It is not really controversial that Metta had a tight control over the Project.  Ms Belinda Cheung agreed with the suggestion in her evidence[36].  Mr Jimmy Leung agreed that Metta had a close control over the Project[37].

124.  In addition, there is the undisputed evidence about the presence of a Site Inspection Team and the weekly site walk by various senior management people, including Ms Shen. 

Site Supervision Team

125.  There is no dispute that CKPDL had its own Site Supervision Team on Site at all material times.  Shortly before the Consecration, there were at least 4 members in that Team[38]– Mr Shing Shu Wah (responsible for the E&M works), Mr Alan Lo, Mr Tse Chi Hang and Mr Yu Wai Wah.  The Team was augmented by Mr Lee Tat Cheong and Mr Kwok Chi Hung shortly after the Consecration to become 6 members. 

126.  However, it must be accepted that the Site covered a very large area and it can be imagined that with the presence of equipment and workers from various trades carrying out different works at the same time, it would not be an easy task to keep track of everything that was taking place at the Site.  Indeed, there is strong evidence of inadequacies in Chun Wo’s works, which exposes the fragility in the suggestion that the Works were closely monitored by the Site Supervision Team. 

Chun Wo’s performance

127.  The fact that some of Chun Wo’s works were unsatisfactory in terms of quality cannot be seriously disputed.  Its own expert, Mr Hartog, agreed that much of the stone works and waterproofing works were substandard.  Such evidence is well-supported by photographs and coring samples (see below).  Mr Cock’s (Metta’s expert) evidence that there were much building work defects is again backed up with photographic evidence.  Whilst it may be said that individually many of these were snagging items, I find it hard to disagree with Mr Cock’s evidence that they cannot be regarded as snagging items due to the quantity of such defects. 

128.  The progress of Chun Wo’s works is also the subject matter of heavy criticism by Metta.  The completion of Section MS-1 was, prima facie, delayed by 4 months.  It is very much Chun Wo’s burden to justify the delay.  It will be seen below that, in light of the inadequacies of the expert evidence, this court can only uphold 1 of its EOT claims in respect of MS-1, in addition to the 51 days extension for MS-2.

129.  However, I have little doubt that some of the quality issues of Chun Wo’s works, especially the waterproofing and stone works, were related to the fact that such works were considerably compacted to meet the requirement of the Consecration.  The evidence is that Chun Wo had to work round the clock to meet the deadline.  It is perhaps to be expected that quality would suffer in such circumstances.  Further, more likely than not, the moving in of monks after the Consecration had hindered part of Chun Wo’s works. 

130.  It should also be said that one cannot simply rely on Metta’s allegations on the extent of the defective works.  The lack of any real input from HYA on these matters (see below) means that the NCFs (the foundation of Metta’s defect claims) cannot be taken at face value. 

131.  For these reasons, I do not believe that the very harsh criticisms made by Metta about Chun Wo’s competence are justified. 

132.  Importantly, like the design changes issue, the parties’ rights and liabilities are governed by the MC.  Inadequacies of Chun Wo’s performance may give rise to compensation to Metta.  The focus here should be in the defects and delay, and if established, the proper relief. 

Metta’s non-payment of IPCs and Chun Wo’s alleged go-slow tactic

133.  Before I turn to the alleged abdication of responsibility by HYA, I should say a few words about the allegations in respect of Metta’s non-payment of IPCs and Chun Wo’s go-slow tactic.  It is necessary to do so because Metta has made very serious accusations of impropriety by Chun Wo. 

134.  To begin with, there was no legitimate reason for Metta’s failure to pay any IPC when it was due.  Ms Shen admitted in cross-examined that withholding payment was 1 of the tactics used with contractors who are “not performing”[39]. 

135.  Secondly, I have no reason to doubt Metta’s evidence that there was a significant drop of manpower deployed on Site by Chun Wo in May and June 2013, which had adversely affect the progress of the Works. On the other hand, that should be considered in the context that Metta was dragging its feet with the payments and under certifying the payments for the VOs (see the assessment of the VO claims below).  More probable than not, Chun Wo was also employing a tactic to try to pressurise Metta on the payments. 

136.  Thirdly, whilst these tactics do not meet with the approval of the court, they are not new in the construction trade.  In my view, Metta’s criticisms of Chun Wo are unnecessarily harsh, and it is a case of the pot calling the kettle black.

HYA’s abdication of responsibilities

137.  It is Chun Wo’s case that HYA had abdicated their obligation to act fairly and independently between Metta and Chun Wo, in particular in relation to EOT assessments and valuation of Chun Wo’s works and claims.  I have to say that the evidence, like those concerning design changes and Chun Wo’s performance, points clearly to 1 conclusion – HYA had indeed abdicated their responsibilities in the Project. 

138.  It became clear during the evidence that HYA had performed very few functions off their own initiative, but were largely told by Metta’s representatives (particularly Ms Shen and Ms Wong Lai Ming, as well as Mr Kevin Cheung in relation to valuation) how to carry out the functions they were meant to be performing independently.  For instance, the ERIs issued by HYA invariably followed the PEVIs[40] issued by Metta’s representatives.  HYA made no decision of its own in relation to interim payments (including deductions in respect of defects) and even, on a number of occasions, had their letters written for them[41].  HYA’s functions were effectively carried out by Metta’s representatives[42].

139.  It is plain from Ms Wong Lai Ming’s cross-examination in particular[43] and the documents she was taken to that Metta’s representatives were interfering with HYA’s functions in granting EOT, deciding whether Certificate of Non-Conformance should be issued and other matters which should have been HYA’s responsibilities.  HYA almost entirely followed the dictates of Metta’s representatives.  The evidence concerning the intended award by HYA of EOT of 51 days for Section MS-2 is compelling.  After the draft letter of award was sent to Ms Wong asking for “observation”[44], no award was made.  Ms Wong had no credible explanation on that matter[45].

140.  The situation is quite alarming.  HYA was the Quantity Surveyor under the MC but they in truth assumed no such role.  The following was stated in an email from Ms Dai to Mr Kevin Cheung :

“... Whilst it is written in the Contract that the functions ascribed to the Quantity Surveyor are to be exercised by us, we do not assume any QS responsibilities in actual fact. We do not have the level of expertise required & it is not within our scope of work. ...”

141.  I should point out for the benefit of HYA that there is 1 piece of evidence concerning a disagreement between HYA and Metta, which may suggest that the former was exercising an independent judgment.  It arose from Metta’s suggestion that the hand over date for Area 2 be extended. However, that disagreement should be understood in the context that Ms Dai was asked to revise her existing decision.

142.  In his submissions, Mr Scott said that HYA is a distinguished firm of Hong Kong Architects, implying that the court should not lightly make an adverse finding against what they had done or failed to do. Against that, it should be pointed out that HYA is aware of this litigation[46].  There is no explanation why there is no evidence from them in this trial.  The court does not shrink from making the correct finding.  The evidence on this issue is compelling.

Estoppel

143.  There is a subsidiary argument of Metta which can be dealt with swiftly.  It is contended that Chun Wo is estopped, as a matter of law, from taking issue with the involvement of and the respective roles taken by HYA, CKPDL and MDV.  It is also said that Chun Wo had waived any complaint in these matters. 

144.  Firstly, the pleading on this issue is nebulous[47].  Secondly, given the finding that HYA had abdicated their responsibilities (contrary to the denial by Metta’s witnesses), I am unable to see the factual basis for any estoppel.  Thirdly, it is untenable to suggest that Chun Wo had in any way agreed to HYA’s abdication of responsibilities. 

Consequences of HYA’s abdication of responsibilities

Breach of implied terms by Metta

145.  Chun Wo relies on implied terms of co-operation, non-hindrance and non-prevention and that Metta would not interfere with HYA’s exercise of the functions they had to carry out independently (including certifier’s function) and ensure that those functions were properly performed[48].

146.  Chun Wo relies on the following authorities in support :

(1)  Jardine v Shimizu (1992) 63 BLR 96, headnotes at p 98 and pp107 and 115-118;

(2)  Chitty on Contracts, 32 edn, Vol 1, §§14-014 and 14-015;

(3)  A McInnis: Hong Kong Construction Law, Div 7 [229]-[274.1] and Div 9 [260].

147.  Chun Wo also relies on the proposition that an Architect under a construction contract wears 2 hats. As opposed to those duties where he is purely acting as the employer’s agent, he must carry out, eg, the duties of assessment and certification independently, impartially, fairly and honestly: see Keating on Building Contracts, 9 edn, §§5.40 and 5.42.

148.  It is Chun Wo’s case that HYA had failed to so act in the Project.  So far as HYA’s certificates are concerned, the court is empowered to decide the parties’ rights and obligations irrespective of whether HYA had issued a certificate in any given circumstances: Keating, §§17-012.

149.  In light of the finding that HYA had abdicated their responsibilities under the interference of Metta and the applicable law, it must follow that Metta is in breach of the above implied terms.

Compliance with contractual requirements

150.  HYA’s abdication of responsibilities also bears on Metta’s arguments that Chun Wo had failed to comply with formality (in writing on prescribed form) and notice provisions under the MC in respect of its VO claims, and notice provisions in respect of its EOT claims[49].

VO claims

151.  On formality, Metta relies on SCC-2a and 2[50] as follows :

“The Employer’s Representative may issue instructions that he is empowered to issue under the Conditions at any time up to the issue of the Final Certificate. All instruction issued by the Employer’s Representative shall be in writing and in the prescribed form shown in Appendix ‘D’ to these Special Conditions. The Employer’s Representative shall designate person(s) as the Authorized Signatory for the purpose of issuance of instructions. Notwithstanding of anything expressed or implied elsewhere in this Contract, instructions will be valid only if they bear the signature of the Authorized Signatory.”

“All instructions issued by the Architect (Employer’s Representative) shall be in writing. Any instruction issued orally shall have no effect. The Main Contractor shall be at his own risk in complying with any verbal instruction prior to receiving the Architect’s (Employer’s Representative’s) written confirmation.”

152.  Metta contends that these provisions constitute a condition precedent which Chun Wo had failed to meet. 

153.  However, variation claims were governed by SCC-11 (see Annex II).  I agree with Chun Wo that under those provisions HYA might issue instructions requiring a variation and they might sanction in writing any variation made by Chun Wo without instruction from them.  There is nothing further which may justify a condition precedent argument[51].  The authorities cited by Metta, eg, Russell v Sada Bandeira (1862) 143 ER 59 at 78-79 & 81 and Taverner & Co Ltd v Glamorgan CC (1941) 57 TLR 243 at 244-247 are distinguishable.

154.  Further, by reason of Metta’s interference and HYA’s abdication of responsibilities, the contractual machinery in this case had, in my view, broken down (see Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd [1998] EWHC Technology 362 (22 April 1998), §§124-136 and Frederick Leyland & Co Ltd v Campania Panamena Europea Nevegacion, Limitida (1943) 76 Lloyd’s Rep 113 at 127).  For instance, the ERIs issued by HYA were all preceded by Metta’s PEVIs.  In the circumstances, I do not see any reason to preclude the adjudication by a competent tribunal of the issues between the parties to the MC.  Metta cannot rely on its own wrong to capitalise on the absence of written instruction by HYA to deny Chun Wo’s entitlement: Keating, §6-090.

155.  I have also been referred by Chun Wo to the case of Brodie v Cardiff Corporation [1919] AC 337, where the House of Lords held that a contractor was entitled to recover for extra works notwithstanding the failure to obtain a written order, when one was required under the contract and it was specifically stated that no claim or demand should be made against the employer unless a written order had been obtained.  The difficulties a contractor faced in such circumstances in refusing to execute works was mentioned: Lord Atkinson at pp 355-359.  See also Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 WLR 3850, §23 and Keating, §§4-048 to 4-051.

156.  The authorities referred to in the preceding paragraph suggest that the court is reluctant to find that a contractor is not to be paid for the works it has carried out, especially at the instructions of the employer. 

157.  However, with respect, I am content to rest my decision on (i) there is no condition precedent as contended by Metta, and (ii) the contractual machinery had broken down and there is no reason to preclude the adjudication by the court in these matters (see para 154 above). 

158.  In respect of Metta’s argument based on the failure of Chun Wo to submit its claims within 3 months after PC of the Works (63 VO claims fall within this argument[52]), it is based on General Conditions of Contract (“GCC”)-30(5)(b) as follows :

“Not later than three months after Practical Completion of the whole of the Works the Main Contractor shall send to the Architect all necessary documents for the purpose of adjustment of the Contract Sum. Any lapse of time longer than the said period shall be deemed to be an unreasonably distant time for the above stated purpose and any adjustment of the Contract Sum provided for in these Conditions in respect of which the Main Contractor have not submitted the necessary documents shall be subject solely to the Architect’s assessment ... and the Main Contractor shall be deemed to have waived his right of substantiating such adjustment and agreed to any corresponding adjustment as reasonably assessed by the Architect.”

[emphasis added]

159.  It is self-evident from the terms of GCC-30(5)(b) that there was no exclusion of a claim made 3 months after PC.  They provided that late claims were to be solely assessed by HYA.  I believe that the above analysis on Metta’s interference and HYA’s abdication of responsibilities is equally applicable here.  I reject this argument.

EOT claims

160.  Metta relies on the EOT provision, SCC-23, in support of its argument on notice requirement.  Under SCC-23(a), Chun Wo was obliged to give a written notice of delay to HYA within 28 days of the commencement of the event which led to delay.  SCC-23(e) provided as follows :

“In determining any extension of time to which [Chun Wo] may be entitled, [HYA] shall not be obliged to take into account any listed event unless [Chun Wo] shall have notified [HYA] in the manner specified in this Clause. Further and in the alternative, [Chun Wo] shall be deemed to have waived his right to claim any extension of time should he fail to submit the above written notice and application to [HYA] within 28 days and 2 months respectively of the commencement of the listed event. Notification only of a future intention to submit a claim under this heading will not be accepted as compliance with the requirements of this Clause.”

161.  Metta relies on the following principles and authorities on condition precedent :

(a)  Whether a provision is a condition precedent clause or not is to be construed in the same manner as any other contract terms.  No specific wordings are required.  See WW Gear Construction Ltd v McGee Group Ltd 131 ConLR 63, §§13 to 20;

(b)  The use of the term “condition precedent” in the notice provision is not necessary: Astrazeneca UK Ltd v Albemarie Intl Corp [2011] EWHC 1574 (Comm);

(c)  The House of Lords in Bremer v Vanden [1978] 2 Lloyd’s Rep 109, pp 113 and 128 adopted the following general approach to the construction of notice clause as condition precedent to the contractor’s entitlement under the contract provision:

(i)     the precise time-limit for the submission of notice has to be expressly set out in the provision, and

(ii)    loss of right for non-compliance with the notice requirement has to be expressly stated in the provision;

(d)  It was held in Steria Ltd v Sigma Wireless Communication Ltd [2008] BLR 79, §§90-91 that the use of the term “provided that ...” suffices and it is not necessary to expressly state in the notice provision that “ ... unless written notice is given within ... will not be entitled to an extension of time.”  The use of the term “provided that” in the notice provision was also held in WW Gear Construction Ltd v McGee Group Ltd 131 ConLR 63, §18 to be a strong indicator that it was intended to be a condition precedent;

(e)   It is to be noted that in WW Gear Construction Ltd, the Court further held that the requirement for submission “... as soon as and in any event not later than two months after it has become, or should reasonably have become, apparent ... and such application shall be ... fully documented and costed in detail” was not an unduly onerous provision;

(f)    It was recognised by the court in Multiplex Construction (UK) Ltd v Honeywell Control Systems Ltd 111 ConLR 78, §103 that contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose:

“I am bound to say that I see considerable force in Professor Wallace’s criticisms of the Gaymark Investments case. I also see considerable force in the reasoning of the Australia courts in the Turner Corp case and in Peninsula Balmain case and in the reasoning of the Inner House in the City Inn case. Whatever may be the law of the North Territory of Australia, I have considerable doubt that the Gaymark Investments case represents the law of England. Contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent. If the Gaymark Investments case is good law, then a contractor could disregard with impunity any provision making proper notice a condition precedent. At his option the contractor could set time at large.”

162.  In light of the terms of SCC-23(e), and bearing in mind the above authorities, I agree with Metta that there was a condition precedent issue in respect of Chun Wo’s EOT claims. However, for 2 reasons, it is unnecessary to examine at the details of this argument concerning the 18 remaining EOT claims (reduced from 27 originally claimed).

163.  Firstly, given Metta’s interference and HYA’s abdication of responsibilities as analysed above, I cannot see how or why Metta can take advantage of the SCC-23 notice requirements. 

164.  Secondly, for reasons elaborated below, only EOT Claim No 13 can be upheld and I see no non-compliance with SCC-23 with that claim[53].  In the premises, I also reject this argument. 

ERI-MC-897

165.  The issue here concerns the scope of works omitted by this ERI, the determination of which has important bearing on some of the other issues.  Chun Wo says that all the outstanding works under the MC, including its obligations to make good defects, were omitted.  Metta contends that the omission did not exclude the obligations to rectify defective works. 

166.  On 2 July 2013, ERI-MC-897 entitled “Deletion of Remaining Works” was issued to Chun Wo in these terms :

“The Employer has decided and you are hereby instructed that all remaining Works under your scope are omitted with immediate effect .... Due to the deletion of all remaining Works, Practical Completion is deemed to have been achieved on July 2, 2013 and a certificate to that effect will be issued. The Defects Liability Period will commence immediately thereafter. In view of the Practical Completion of the Works, please proceed to vacate the Site.”

167.  ERI-MC-897 also stated that it superseded previous ERIs by a tick in the box in part G thereof.

168.  On the same day, 2 further documents were issued by HYA to Chun Wo.  Firstly, HYA issued a Certificate of Practical Completion for Section MS-2.  Secondly, IPC No 30 was issued certifying a negative valuation of HK$10,197,200.  The reason for the negative sum was that a deduction of HK$14,851,200 was made as “Reservation for Rectification of Non-compliance Works under ERI-MC-880, 884 and 888”.

169.  ERI-MC-884 was issued on 5 June 2013.  A list of the relevant NCFs was attached, and Chun Wo was given 7 days and 45 days for the submission of programme and completion of work.  It was stated in the ERI that some of the rectification works had been outstanding for over 1 year.

170.  ERI-MC-888 was also issued on 5 June 2013 (and reissued on 11 June 2013).  It concerned the rectification of the grand stairs at the Main Court.  The NCF in question (NC-CM(MC)-501) was dated 27 December 2012.  Some contemporaneous photographs were attached to the NCF.  Under the ERI, Chun Wo was required to submit a method statement and programme in 7 days and to order replacement stones and commence work in 14 days.

171.  ERI-MC-880 was issued on 10 June 2013.  It covered non-conformances of a number of E&M items.  A list of the NCFs, issued from 19 February to 4 June 2013, was attached.  Chun Wo was required under the ERI to submit a programme for completing the works within 7 days and to complete them within 45 days. 

172.  Upon receipt of ERI-MC-897, Chun Wo immediately wrote to request clarification from HYA.  In particular, Chun Wo enquired as to the scope of the works to be omitted :

“... there are issues in relation to alleged ‘defects’ and ‘defective works’ under other ERIs. Before a clear classification of the nature of those works under other ERIs, we are in no position to have a clear and complete knowledge of ERI-MC-897. ... In order to avoid any ambiguities, we would be grateful if you provide an itemized list with detailed scope description of the omission works referred to under ERI-MC-897.”

173.  Chun Wo’s letter went on to say that until the scope of the works deleted had been clarified PC could not be deemed to have been achieved.

174.  HYA replied on the next day stating that ERI-MC-897 was clear and did not require any clarification in order to be implemented.  It was pointed out that the ERI clearly stated that “all remaining Works under [Chun Wo’s] scope” had been omitted.  Chun Wo was asked to proceed to vacate the Site.   

175.  By letter of 8 July 2013, Chun Wo wrote to Metta requesting it to consider withdrawing ERI-MC-897 and reiterated its commitment to complete the remaining works.  Chun Wo pointed out that by reason of the EOT granted in respect of EOT Claim No 22, the completion date for MS-2 had been extended to 28 June 2013, and that the critical delay was caused by the supply of Flammet stone (the stone to replace those originally laid, which had been rejected following the Consecration).  This letter further stated :

“ERI-MC-897 reminded us that the Defects Liability Period had ‘commenced’ immediately. But, the ‘replacement contractors’ to be introduced by the Employer would inevitably very much disturb the physical state of Chun Wo’s works as of 2013-07-02. One could legitimately ask: is Chun Wo under an open-ended obligation to ‘rectify’ whatever state of affairs which would be left behind by such ‘replacement contractor’?”

176.  However, ERI-MC-897 was not withdrawn by HYA or Metta.  On 10 July 2013, Metta demanded Chun Wo’s departure from Site and insisted on the validity of MRI-MC-897.  In this letter, Metta stated, inter alia, “Following [PC] a Defects List will be issued and Chun Wo will be permitted to return to Site for the purpose of carrying out the defects rectification”[54]. 

177.  Chun Wo replied on the next day[55] and stated in paras 6.3 as follows :

“In terms of the ‘defects rectification’ of works completed up to 2013-07-02 (including the ERIs) – on the one hand, Metta is demanding Chun Wo to remove everything from the site, thereby disabling/preventing Chun Wo from carrying out defects rectifications; on the other, Metta is still holding Chun Wo liable for rectifying the same defects.”

178.  The parties were unable to reach any consensus.  Subsequently, Chun Wo started to demobilise and return control of the Site to Metta on 15 July 2013 by handing back the security posts to it.

179.  On 16 July 2013, HYA issued two sets of Record of Defects under SCC-15 for Chun Wo’s action.

180.  For completeness, Metta relies upon certain discussions between the parties at a meeting on 25 June 2013 (prior to the issuance of ERI-MC-897) for the proposition that the ERI was never intended to omit the obligation to rectify defects.  In Chun Wo’s letter dated 9 July 2013[56], responding to para 5.5 of the minutes of that meeting[57], it was stated :

“5.5

CKPDL counter-proposed that the remaining works be deleted from CW’s contract and would assess work done to date and contract to be certified practically complete.  CW will only be required to rectify defects noted, and any claims that cannot be resolved can be settled in court without hard feeling.  CW rejected the proposal.”

181.  To resolve this issue, I start with the relevant contractual provisions.  Firstly, it is common ground that ERI-MC-897 was issued pursuant to SP-2.03 :

“The Main Contractor is to pay attention that the Employer’s Representative shall have the option to omit any part(s) of the Works from the Contract or to have the said works to be constructed by others. In such case, the Contract Sum shall be reduced accordingly. No claim from the Contractor for loss of profit and any cost incurred due to such omission shall be entertained.”

182.  SCC-15 provided for PC and Defects Liability, Sub-paragraphs (a) to (d) and (h) were as follows :

“(a) When in the opinion of the Architect the Works are practically completed, he shall forthwith issue a certificate to that effect and Practical Completion of the Works shall be deemed for all the purposes of this Contract to have taken place on the day named in such certificate.

(b) Notwithstanding anything contained elsewhere in this Contract, Practical Completion of the Works shall not be taken to have occurred until a stage of construction has been reached at which the buildings comprised in the Works are, apart from merely trivial deficiencies in all ways relevant to the Contract, ready for occupation and use for their intended purposes and, are free from known omissions and deficiencies and provided always that the Building Authority has issued an Occupation Permit (or Temporary Occupation Permit as applicable) in respect of such buildings.

(c) Any defects, shrinkages or other faults which shall appear within the Defects Liability Period stated in the Appendix to the General Conditions of Contract and which are due to materials or workmanship not in accordance with this Contract or to typhoon(s) occurring before Practical Completion of the Works, shall be specified by the Architect in a Schedule of Defects which he shall deliver to the Main Contractor not later than fourteen days after the expiration of the said Defects Liability Period. The Main Contractor shall, within the time or times specified by the Architect in the said schedule or if no time frame has been specified by the Architect shall be 7 calendar days from the receipt by the Main Contractor of the said schedule, complete the same to the satisfaction of the Architect and entirely at his own cost.

(d) Notwithstanding sub-clause (c) of this Special Condition the Architect may whenever he considers it necessary so to do, issue instructions requiring any defects, shrinkage or other fault which shall appear within the Defects Liability Period named in the Appendix to the General Conditions of Contract and which is due to materials or workmanship not in accordance with this Contract or to typhoon(s) occurring before Practical Completion of the Works to be made good. The Main Contractor shall, within the time or times specified by the Architect in the said instructions or if no time frame has been specified by the Architect shall be 7 calendar days from the receipt by the Main Contractor of the said instructions, complete the same to the satisfaction of the Architect and entirely at his own cost. Provided that no such instructions shall be issued after delivery of a Schedule of Defects or after fourteen days from the expiration of the said Defects Liability Period.

...

(h) For the purpose of this Special Condition, the terms ‘defects’ or ‘defective works’ shall include, inter alia, defective and substandard works, materials, goods or workmanship which are not in accordance with this Contract which may appear from time to time before or after, practical completion of the Works.”

183.  The parties are in agreement that the principles of law applied to the construction of contract are applicable here to ascertain the meaning of the ERI in question.  In particular, this court was referred by Metta to Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 279 at 296D-I.

184.  Metta accepted that the subjective intention of the parties is irrelevant for the present purpose.

185.  I agree with Chun Wo that the language of ERI-MC-897 is clear.  All remaining works within Chun Wo’s scope were omitted.  Prima facie, such works must include rectification works for known defects, which Chun Wo was obliged to carry out under the MC.

186.  Under SCC-15(b), PC of the Works could not be certified until a stage of construction had been reached at which the buildings comprised in the Works were, apart from trivial deficiencies, in all ways relevant to the MC ready for occupation and use for their intended purposes and free from known omissions and deficiencies.  It should follow therefore that, as at 2 July 2013, there was (notionally) no known defects within Chun Wo’s scope other than trivial ones.

187.  I should add 2 points here.  Firstly, it is reasonably clear from the totality of SCC-15 (see Annex II) that only trivial defects should be outstanding when the certificate for PC was issued.  The extended definition of “defects” in SCC-15(h) was intended to be a safety net, and did not materially change the intention of those provisions.

188.  Secondly, I find little assistance from IPC No 30.  The reservation made for outstanding rectification works was consistent with the omission of the duty to carry out such work.  Under SP-2.03, there would be a reduction of contract sum. 

189.  It is regrettable that Metta and HYA were too arrogant to provide a simple clarification for that ERI. 

190.  Metta relies heavily on the reference to DLP in ERI-MC-897 to make out its argument (see para 165 above).  This is indeed the high watermark of Metta’s argument.  

191.  On one view, the commencement of DLP must follow the issuance of PC, and therefore I should not be reading too much into that reference. 

192.  To analyse Metta’s argument, one must first identify the categories of works which had not been completed on 2 July 2013.  Broadly, there were works which had not been completed; there were known defects in respect of works completed; and there was the obligation to make good defects discovered during DLP.

193.  I am unable to see why the reference to DLP meant that rectification of known defects was excluded from ERI-MC-897.  This would be quite inconsistent with the issuance of the PC certificate. 

194.  Further, the court must bear in mind the fact that Chun Wo was required to leave the Site without delay.  Under the MC, Chun Wo was entitled to rectify the known defects in order to complete the Works before it left the Site.  To suggest that Chun Wo was to leave Site and return to carry out substantial rectification works (no doubt at considerably higher cost to it) is unreasonable.  The court ought not to arrive at an unreasonable construction of a document in the absence of sufficient reason.  There is no such reason. 

195.  Metta tried to rely upon Mr Cock’s evidence in respect of typical practice in dealing with snagging items to neutralise the point that Chun Wo was asked to leave the Site before it could complete the rectification works (paras 591 to 594 of Metta’s Closing Submissions and K3/23-26, §§99-100).  I do not find such evidence of assistance to Metta. There is a world of difference between snagging items and major rectification works.   

196.  In the premises, I uphold Chun Wo’s case on ERI-MC-897 that Chun Wo’s obligations to rectify defects had been omitted. Consequently, Metta’s counterclaim for defects is rejected.

197.  For completeness, it should be noted that Metta does not have an alternative case that ERI-MC-897 only excluded known defects (as of 2 July 2013) but not the rectification obligations for defects discovered during DLP.  In any case, there is no proper evidence to distinguish what defects fell within that narrower scope. 

Did Metta want Chun Wo to return to Site to carry out rectification works and did Chun Wo have any real intention to do so?

198.  The issue here arose from Metta’s reliance on SCC-15(g) in support of its claim for the costs of remedial works carried out by other contractors (in excess of HK$156m).  Chun Wo says that it should have been afforded the opportunity to carry out the remedial works.  It would have cost them very little to do so – limited to administrative costs (HK$1.8m) due to the fact that all the Works were sub-contracted out and the sub-contractors would have to carry out the works at no cost to Chun Wo.  Hence, Metta had failed to mitigate its loss. 

199.  In light of the above conclusion on the omission of rectification obligations by virtue of ERI-MC-897, there is little relevance left in these matters. 

200.  I shall therefore, out of deference to the arguments made on both side, succinctly state my view on the evidence.  These are highly difficult issues to determine because the parties have each generated their own documentary support.  However, I believe that the balance of the evidence is that Metta did not in truth want to have Chun Wo return to the Site to carry out any rectification works.  At the same time, I do not believe that there was any real desire on Chun Wo’s part to do so.

201.  In respect of the former, the salient evidence is as follows :

(a)  In about the end of February 2013, Metta had at least actively considered having Chun Wo removed and had the remainder of the Works completed by other contractors;

(b)  by a Letter of Acceptance dated 18 July 2013, Simbel Holding Ltd (“Simbel”) had been engaged under a “Great Buddha Hall Floor Paving Works Direct Contract” pursuant to which Verde Pacao was to be laid at the Great Buddha Hall instead of the Flammet; 

(c)  such work (already given to Simbel) formed part of the works which HYA alleged by their letters dated 5, 7 and 19 August 2013 that Chun Wo should carry out.  The last of those letters is relied upon by Metta as notice by HYA under SCC-15(g).

202.  As regards Chun Wo’s lack of real intention to carry out any rectification works after it left the Site, one can see from the photographs in Chun Wo’s evidence that the resources deployed for the alleged attempts to carry out rectification works were quite limited.

Cross-examination of witnesses

203.  This conveniently brings me to the next point, which is of a general nature.  Chun Wo contends that Metta has not cross-examined on some of the issues, eg, Chun Wo’s attempts to carry out rectification works, and is bound by such evidence. 

204.  In my view, the nature of this case dictates that the cross-examiner must exercise a judgment on what to cross-examine and the depth of his cross-examination.  Otherwise, this trial would have required not 36 days, but more than 360 days. 

205.  I have to say that Chun Wo has managed to make better use of its time so that, as far as I can see, all important issues in dispute have at least been explored once with one of Metta’s witnesses.  On the other hand, this is a matter of degree.  There were simply too much to be covered.  For instance, not every one of the disputed VO claims (there are hundreds of them) has been explored with Metta’s witnesses. 

206.  Common sense must prevail.  Where there is sufficient material, including documentary evidence, to enable the court to adjudicate on an issue, I see no reason in this case to be technical about whether a witness has or has not been challenged. 

EOT and Delay

207.  These are the 2 sides of the same coin.  The contractual completion dates for MS-1 and MS-2 were respectively 29 April 2012 and 3 June 2013[58].  There is no issue that the actual completion date for MS-1 was the 29 August 2012 when the OP was obtained.  As for MS-2, a Certificate of PC was issued by HYA on 2 July 2013.

208.  Assessment of delay to the completion of a major construction project is a very complicated exercise[59], involving a consideration of all the critical works which were being carried out at the time so that the impact of a particular piece of work which was in delay can be properly assessed.  Invariably, the court will be assisted by expert evidence on delay assessment.  In this case, the court has the evidence of Mr Allington for Chun Wo and Mr Wardale for Metta.

209.  Both experts said that there is no major difference between the methodologies adopted by them, although they are not identical.  I consider the evidence of the experts in turn.

210.  With respect, it is not at all easy, if possible, to understand and/or derive assistance from Mr Allington’s evidence. It appears that he had a fundamental difficulty with the agreed issues on which he was asked to express his opinion: see Day 22/86:12 to 91:23 and 129:10-12. In short, Mr Allington had found the requirement that he should consider “everything” unmanageable, and consequently he had been instructed to take a broadbrush approach.  I shall return to this matter at the end of this judgment where I shall say a few words about my experience with this case and what can be learned from it for the purpose of future conduct of construction litigation.

211.  However, the fact of the matter is that there is no or no clear indication from Mr Allington whether the various EOT claims are justified, and if so, the appropriate assessment on the length of EOT.  Mr Clayton SC, appearing for Chun Wo with Mr Wong, Ms Shek and Ms Ngai, suggested[60] that the appropriate way to understand Mr Allington’s evidence is that he agreed with all of the EOT claims.  I cannot accept that proposition.  If that were the case, I see no reason why Mr Allington did not say so in his reports (see the summary of his view on the EOT claims at H1/195-197), and why he had so much difficulty with answering the questions from the court on the merits of EOT Claim No 1[61]. 

212.  In re-examination, Mr Clayton managed to obtain some sort of agreement from Mr Allington that EOT Claim No 1 was justified.  The witness said that he “wouldn’t disagree with [EOT Claim No 1] at all”[62].  In light of the above observations on Mr Allington’s evidence, I am unable to place any weight on that agreement.

213.  The upshot is that apart from saying that every EOT claim (which is being pursued) involved critical delay, and that such delay had to be assessed against all the other delaying events, this court is not assisted on how each of the EOT claims is to be properly evaluated, eg, in terms of whether the delay could have been or to some extent mitigated (there was an obligation on the part of Chun Wo to do so pursuant to SCC-23(d)).  The court received no help on the number of days to be awarded to any justified EOT claims either. 

214.  In its Closing Submissions in Reply, Chun Wo has abandoned its case on “time at large”. 

215.  In light of the state of Chun Wo’s evidence on EOT, it is unnecessary to dwell at length on Mr Wardale’s evidence.  There are 2 points of relevance arising from Mr Wardale’s evidence. 

216.  Firstly, Mr Wardale was instructed to adopt the methodology to be used in his delay assessment[63].  In other words, he was not given a free hand in the exercise. Such methodology was the subject matter of much criticism by Chun Wo.  This does not sit well with Mr Wardale’s duties as an impartial witness whose task is to assist the court.  It also reflects poorly on Metta. 

217.  Secondly, in cross-examination Mr Wardale accepted that, if there was an entitlement in respect of the EOT Claim No 13, an EOT of 25 days should have been granted.  Hence, the dispute is on liability[64]. 

218.  EOT Claim No 13 concerned the toe wall along the EVA in a slope area, which clashed with the location of preserved trees.  On 16 March 2012, Chun Wo issued RFI/0845-2012 alerting Metta that the new proposal of a toe wall alignment (ERI-500) clashed with the existing preserved trees and requested instructions by 19 March 2012.  HYA replied to Chun Wo’s RFI/0845-2012 on 17 April 2012.

219.  Respectively on 21 March 2012 and 21 April 2012, NOD[65]-0038 and NOD-0043 were filed by Chun Wo.  The claim was designated EOT Claim No 13 in Chun Wo’s letter dated 7 May 2012.  Chun Wo had not been notified of any assessment of this claim by HYA. 

220.  Metta contends that it would have been apparent to Chun Wo from the original EVA alignment shown in ERI-001 that some of the existing trees as surveyed and reported in Chun Wo’s survey submission SUB-0050[66] dated 20 April 2011 would be affected.  Chun Wo should have notified HYA of the conflict with the original design.  In which case, the conflict would have been resolved in good time without any delay to the Works.

221.  The issue here is whether Chun Wo should have notified HYA of the suggested conflict in the original design.  Mr Edward Fong did not think that there was such a conflict in the original design, but only in the varied design under ERI-500.  It is apparent from Mr Wardale’s evidence that the conflict was not readily apparent.  However, even if there were trees shown on the tree survey which would have required removal to allow the original design to be constructed, Mr Wardale accepted that Chun Wo could not be held responsible if there was no obligation imposed on it under the MC to identify and report any discrepancy in design.  Rather, Metta’s representatives should have produced a workable design for Chun Wo. 

222.  I am not satisfied that there was any provision under the MC which imposed such obligation on Chun Wo.  The Letter of Acceptance (para 12) and SCC-1 identified in Metta’s Closing Submissions imposed no such obligation.  Consequently, Chun Wo is entitled to an EOT for MS-1 of 25 days based on Mr Wardale’s evidence. 

223.  This is the only EOT justified on the evidence for MS-1.  I feel that this may not be the just result given the very extensive design changes in the course of the Works.  However, the court can only act on the evidence put before it.

224.  The net result is that Metta’s LD entitlement for MS-1 must be reduced from 122 days to 97 days.  The revised sum becomes HK$9.7m. There is also a consequential claim by Chun Wo for loss and expense (or prolongation) pursuant to EOT Claim No 13.

225.  As regards MS-2, there is no reason to disturb the award of 51 days by HYA for EOT Claim No 22.  This means that the completion date for MS-2 should be 24 July 2013 instead of 3 June 2013[67].  Chun Wo is therefore asking to be compensated for loss and expense for 42 days from 4 June 2013 to 15 July 2013 when it handed back the control of the Site to Metta. 

Loss and expense

226.  It is convenient to deal with this topic here to close out the issues on EOT. 

227.  There are a few alternative legal bases for this claim[68].  I do not believe that this claim can be fended off by Metta on the ground of notice requirement under the MC because there is a claim for damages for breach of implied term of non-hindrance and prevention for which there is no such requirement.  I do not agree with Metta that Chun Wo has not pleaded a claim for breach of contract. 

228.  There is no good answer to this claim, and the issue is one of quantum.

229.  There is no dispute between the quantum experts that the assessment of this claim should be based on a daily site cost multiplied by the number of days of delay.  Their difference lies in the amount of such cost.  Mr Charlton’s assessment of the daily rate is HK$50,140.35 and that of Mr O’Neill is HK$41,281.88.  There is a helpful table of the differences between the experts on their assessment at H1A/22.   

230.  First and foremost, it should be noted that quantum assessment is not a precise science.  The difference between the experts is not huge.  I generally prefer the evidence of Mr Charlton.  I have detected no material fragility in his evidence.  He had demonstrated a fairly good command of the details in this case and was fair in his assessments.

231.  On the other hand, it was shown in cross-examination that Mr O’Neill was probably acting under the influence of Metta because his primary valuation assessments were entirely based on the position Metta adopted in this litigation.  Such assessments were jettisoned in the course of his evidence[69].  Another example is that in assessing the VO claims Mr O’Neill had discounted the claim for overheads and profit (“OH&P”) by CWEM, but not for any other sub-contractors.  His justification was that there would have been shared resources between the 2 entities.  There was no proper basis for that proposition[70], which is in fact contrary to the evidence[71].

232.  In the premises, I adopt the assessment of Mr Charlton.  I assess Chun Wo’s loss and expense claim as follows :

(a)  For MS-1, 25 days x HK$50,140.35 = HK$1,253,508.75

(b)  For MS-2, 42 days x HK$50,140.35 = HK$2,105,894.70

Total = HK$3,359,403.45

Materials on and off site

233.  On 17 July 2013, a list of the materials on site was given by Chun Wo to Metta’s site team, and the same was sent to Metta on 22 July 2013.  A price list of both materials on and off site was subsequently sent to Metta on 30 July 2013.  Chun Wo now claims for the materials on site handed over to Metta as well as those materials that had been ordered but not yet delivered to site at the time.

234.  In respect of the materials on site, there is no dispute that there were some materials handed over to Metta when Chun Wo vacated the Site and they will have to be paid for.  Both the quantum experts had valued those materials based on Metta’s list.  In addition, Mr Charlton had valued the Flammet stone brought to Site.  That explains the main difference between the experts.   

235.  On valuation, whilst Mr Charlton had accepted Chun Wo’s rates for a number of items, where such rates were inadequate, he had determined his own rates.  On the other hand, Mr O’Neill merely accepted Metta’s overall pleaded figure (no rates were provided) for the materials on site. 

236.  In respect of the Flammet stone, there is evidence from Chun Wo that there was a partial delivery of the first order of additional Flammet in May 2013 and this was delivered to Site.  On the rate, the Flammet material valued by Mr Charlton was of a different size than the stone under the contract (50% larger in area).  I believe that the rate used by Mr Charlton, instead of the one used by Mr O’Neill based on the contract rates, is justified.

237.  There is controversy over a 10% uplift on the valuation of the materials by Mr Charlton.  I accept Mr Charlton’s analysis that Chun Wo did not bring these materials on Site for no reward.  The other side of the same coin is that Metta was not entitled to have these materials brought to Site for free.  Had the MC not been terminated, the materials would have been used and profits would have been made from the works which incorporated such materials[72]. 

238.  I therefore accept Mr Charlton’s valuation of the materials on site at HK$9,680,000.

239.  As regards the materials off site, Chun Wo’s evidence is that they were stored with the stone suppliers.  They were valued by Mr Charlton at HK$3,772,168.22.  Mr O’Neill did not provide any valuation for the same.

240.  Mr Scott pointed out that according to Mr Charlton’s Supplemental Report at J16/49, line item 7, it appears that Mr Charlton was unable to value the materials off site.  That appears to be a mistake because the valuation of such materials was covered in his Report at J1/61, §9.6 and Attachment 8 at J10/87-89.

241.  Metta went to inspect the materials off site on 2 occasions in 2014, but complained that there was no opportunity to open the crates.  It is evident from the relevant correspondence that the parties were not co-operating, let alone trying to be helpful or constructive with a view to weeding out unnecessary dispute.  It may be said that Chun Wo could have been more helpful in facilitating the inspections.  At the same time, it is difficult to accept that there was any insurmountable difficulty for Metta in the inspection exercise.

242.  On balance, I also accept this part of Chun Wo’s claim.

243.  In total, Chun Wo is entitled to HK$13,452,168.22 under this head. 

VO Claims

244.  A number of these claims have been agreed.  They are set out in Attachment 3.1 of Chun Wo’s Closing Submissions with a total value of HK$28,878,616.15.  In respect of 7 of these claims, there remains an issue of design input, which is going to be dealt with separately as a global claim.

245.  There are additional concessions made by Metta in its Closing Submissions. The VO claims coloured orange in Annex 9 (“Annex 9”) of those Submissions are agreed. 

246.  The disputed VO claims include abortive works, re-do works, design input and co-ordination.  They have been set out in a Scott Schedule in Attachments 3.2 to 3.5 of Chun Wo’s Closing Submissions (it should be noted that the orange items in Annex 9 have not been extracted from the Scott Schedule) :

(a)  In Attachment 3.2 are VOs where there is agreement on quantum between the quantum experts, ie, the issue is one of liability.  There are 82 of these claims and the total agreed sum for these VOs is HK$6,289,351.51 as stated in the document;

(b)  Attachment 3.3 consists of the VOs which the quantum experts had included in item B in Appendix F to their 2^nd Joint Report (HIA/12) – there being a difference between them of less than HK$100,000 in respect of the individual claim.  There are actually 5 where the difference is more than HK$100,000 but in nearly all instances it is much less.  There are 349 of these (Chun Wo says that there is no liability issue on 118 of them) and the total valuation by Mr Charlton for the same is HK$56,474,869.74, with the difference between the experts at HK$4,397,396.63.  Chun Wo has attempted to solicit an agreement by Metta to split the difference on the valuation but without success;

(c)  Attachment 3.4 contains VOs where liability is not in dispute (according to Chun Wo), but quantum is.  There are 71 such VOs with Mr Charlton’s assessment of their value at HK$87,799,785,11;

(d)  In Attachment 3.5 are VOs where both quantum and liability are disputed with a difference between the quantum experts for each VO greater than HK$100,000.  There are 25 of these and Mr Charlton’s valuation for them is HK$19,067,903.03.

247.  To resolve the VO claims, I shall firstly deal with a liability issue (the EVA) as well as the points of principle identified by the quantum experts in their 2^nd Joint Report.  Each of the disputed items will then be considered with the benefit of Attachments 3.2 to 3.5 (“Attachments”) and Annex 8 (“Annex 8”) of Metta’s Closing Submissions.  Apart from setting out the respective case on the VO claims, much of the key evidence has been identified in these documents.  It should be noted that Metta says that the “Remarks” column in the Attachments do not fairly represent the issues between the parties.  The rulings of the court are recorded under the “Judge’s Use” column of the Attachments, a copy of which forms part of this Judgment as Annex III.

248.  For the purpose of the ruling :

(a)  “A/M” means agreed by Metta, ie, the orange items in Annex 9 (see para 243 above);

(b)  “Allowed” means the VO Claim is allowed at Mr Charlton’s valuation (design input will be dealt with in Chun Wo’s global claim);

(c)  “PONAA” means that the VO Claim is allowed at Mr O’Neill’s Alternative Assessment;

(d)  Where a sum is stated, it means that the VO Claim is allowed at that sum;

(e)  “Annex 8” is defined in para 247 above;

(f)  “Judgment” means this judgment.

The EVA

249.  This is a re-do item. There is an EVA which runs all the way to the end of the dormitory area.  It was laid with Tio stone and the original design provided for a 50mm gap between the stone filled with pebbles on planting soil.  The intention was that the Tio stone would be separated with a 50mm grass joint to create a rustic style.

250.  The stone were extensively cracked after completion of work.  Chun Wo then proposed to re-lay the EVA with the Tio stone in interlocking joints, ie, no gaps between the stone.  The proposal was accepted and the work was carried out.  There was no further damage to the stone.  However, Metta had refused to pay for the re-do of the EVA, maintaining that the stone under the original design were damaged because of unprotected exposure to construction traffic for which Chun Wo was responsible.

251.  The issue here turns on whether the 50mm grass joint under the original design was appropriate for the purpose of the EVA.  In particular, the design had to withstand the load a fire engine which could weigh up to 30 metric tons.  The court has the conflicting evidence of Dr Lam and Dr Chan in this regard. 

252.  I regret to say that it was very surprising that the 2 experts were unable to agree on even elementary physics like the distribution of the weight of a fire engine on its 6 tyres.  I have to say that Dr Lam appeared to be the more impartial of the 2 experts, whereas Dr Chan was repeatedly arguing the case of Metta until it was made clear to him that it was inappropriate for him to do so. 

253.  I find the explanation of Dr Lam that the pebbles in the grass joint had no load bearing capacity more convincing to Dr Chan’s contrary view.  More importantly, the plain fact is that there was no further damage to the stone after the re-laying with interlocking joints (there is evidence that the re-laid EVA was used by construction traffic). 

254.  In the premises, I uphold this claim of Chun Wo. 

Quantum issues

Applicable principles of law

255.  It is reasonably trite that where it is proved that an innocent party has suffered substantial loss, the court may adopt a broad brush approach in the assessment of such loss where the nature of the loss or the adequacy of evidence has presented difficulties in the assessment exercise.  There is a good summary of the law in the judgment of Master Yuen in HCA 7251/1995, 29 January 2003, §§16-20.  See also McGregor on Damages, 19^th edn, §10-002 and Keating on Construction Contracts, 9^th Edn, §9-012.  This is the approach I adopt in this case.

The expert evidence

256.  I have indicated in paras 230 and 231 above that I prefer the evidence of Mr Charlton as more reliable.  I should add that in the course of evaluating the VO Claims, it was apparent that Mr O’Neill’s valuation is generally too conservative. 

CWEM’s 15% OH&P[73]

257.  I have touched upon this issue in para 231 above.  Mr O’Neill had not allowed any recovery for CWEM’s OH&P when it contracted out its works.  As a matter of principle, it is a fundamental entitlement that each contractor is entitled to its mark-up. I see no difference in that CWEM belonged to the same group as Chun Wo.

258.  Mr O’Neill accepted and had allowed the same entitlement for Chun Wo’s other sub-contractors.  I have addressed one of Mr O’Neill’s reasons for the disallowance in para 231 above. 

259.  There was a 2^nd reason advanced by Mr O’Neill’s in cross-examination, namely, there was a HK$6m agreed reduction to the MC sum on account of Chun Wo being able to employ CWEM reflecting (according to Mr O’Neill) their sharing of resources, and consequently CWEM’s OH&P should be deducted.  With respect, this reason is, like the other one, speculative.  The HK$6m reduction has not been properly ventilated in evidence.  As Mr Charlton explained in cross-examination, the discount might have been given because employing CWEM would result in a profit for two entities within the Chun Wo Group[74]. 

260.  In respect of the level of OH&P for CWEM, I accept that 15% is reasonable: see Mr Charlton’s 1^st report at §§5.50.5 to 5.50.8[75].

Using quotations or payment records or SOR[76] rates for stone work variations[77]

261.  The issue arose where there was, according to Chun Wo, no applicable rate in the SOR because stone size and thickness were changed in the VOs.  It is not disputed that such changes would give rise to a revised cost for the stone. 

262.  Mr O’Neill’s evidence is that Chun Wo had priced the stone of different sizes (both as to area and thickness) at the same rate in the SOR by averaging the price of the differently sized stone.  Therefore, the same methodology should apply for valuing the differently sized stone used under VOs.

263.  However, it was demonstrated in cross-examination that there are difficulties with Mr O’Neill’s approach :

(a)  Firstly, the stone in respect of which it was said that rates had been averaged for different sizes was not necessarily the same stone used in VOs.  I have considerable reservation whether it is appropriate to make comparisons between different stone.

(b)  For example, China Dark Black is a largely consistent stone, whereas Flammet is not.  Hence, the price differential for extracting considerably larger slabs of Flammet is in all likelihood materially greater. 

(c)  Further, the price difference for Flammet stone of different sizes can be seen from the purchase order which Mr Charlton had considered as part of his analysis for VO No 184 (J3/127-128).  The cost of a piece of Flammet of 600 x 600 x 20 mm was HK$2,318 per m², whilst that for 600 x 900 x 20 mm was HK$3,610 per m².

264.  In the premises, I prefer Mr Charlton’s evidence on this issue.

Using quotations or payment records rather than Metta’s claimed ‘market rates’ for the stone work variations[78]

265.  The issue here is whether the claimed “market rates” obtained by Mr Kevin Cheung of BC&C should be used for assessing stone work variations or the quotations or payment records of Chun Wo’s sub-contractors who actually carried out the works should be used.  It is common ground that a fair valuation under GCC-11(4)(b) is to be applied (neither party is suggesting the use of the SOR).  I agree with Chun Wo, at least as a normal starting point, that a fair valuation is normally costs plus margin.  It is consistent with common sense.  

266.  There is inadequate documentary support for Mr Cheung’s “market rates”.  It is not clear what information was provided to the suppliers which led to the quotations obtained by him.  Although Mr O’Neill’s evidence is that he saw the quotations on which the “market rates” were based, those documents did not shed any light on the information provided to the suppliers.

267.  Mr Cheung was cross-examined on this issue[79].  It was clear from his evidence that none of the strictures applied to the stone for the Project (range samples, pre-laying, etc) was explained to the suppliers before any quotation was obtained.  I see no reason to place any weight on the “market rates”.

268.  Mr O’Neill had simply adopted the “market rates” without any research of his own[80].  Again, I prefer Mr Charlton’s evidence.  As an example of Mr Charlton’s analysis, Mr Clayton had dealt with VO No 66 at J3/77-78 and explored it with Mr O’Neill.  Metta criticised the analysis[81] because it was based on a quotation from Shiu Wah Engineering Co Ltd.  However, it appears that Shiu Wah was paid (J3/77, Opinion §(2)) and there is no reason to believe that Chun Wo had chosen an unreasonably expensive sub-contractor. 

The rate for stainless steel work[82]

269.  Mr Charlton’s analysis on this issue can be found in para 5.51 of his 1st report.  He determined a rate based on the SOR and other material, which he considered reasonable.  On the other hand, Mr O’Neill had merely adopted a rate from Metta which was said to be agreed by the parties.  It was clear from his cross-examination that he had not analysed or formed an opinion on the rate.

270.  I agree with Chun Wo that the relevant documents[83] show that there was no agreement on the stainless steel rate.  In the premises, I shall adopt Mr Charlton’s rate.

Fluctuations[84]

271.  Mr Charlton dealt with this issue at §§5.36-5.48 of his first report.  He was extensively cross-examined on the issue[85].  I find his evidence persuasive and I agree with it.  It should be mentioned that Mr O’Neill did not rule out the entitlement on account of fluctuation.  He excluded the relevant claims on lack of substantiation[86]. 

272.  However, this entitlement can only apply where the delay was not attributable to Chun Wo.  There are 3 VO claims in issue, Nos 284, 408 and 462.  VO Claim No 284 has been conceded by Chun Wo[87].  For the other 2 VO claims, the difference in valuation arising from fluctuation is less than HK$1,000 (see Attachment 3.5, pp 5 and 7). 

273.  In respect of VO Claim No 408, it appears from Mr Charlton’s report (J9/59) that it was part of the works for MS-2.  It is not entirely clear why the works in question, carried out pursuant to an ERI issued in April 2013, is said to be done outside the contractual completion date (3 June 2013) and therefore entitled to an uplift due to fluctuation.  I reject this element of the claim. 

274.  As regards VO Claim No 462, the same lack of clarity applies and the relevant element of the claim is also rejected.

Small value items

275.  Amongst the VO Claims, there are many “small value” items where the amount claimed is less than HK$100,000.  These items were valued by Mr O’Neill.  On the other hand, Mr Charlton had only reviewed Chun Wo’s valuation generally without any detailed valuation. For a great number of these items, Mr Charlton merely split the difference between the parties: J1/27-28, §§5.11 and 5.12 and Attachment 5.2 at J9/203-222.

276.  Mr Charlton explained why he adopted such a course as follows (J1/28, §5.12) :

“To enter into a detailed examination and try to form an independent opinion on each and every VO would be unrealistic and disproportionately costly and I have taken the most sensible professional approach I can in the circumstances, in many cases splitting the difference between the parties’ valuations where they each present a plausible valuation.”

277.  I fully understand Mr Charlton’s approach. However, for my ruling on the VO Claims involving the small value items, I generally prefer the evidence of Mr O’Neill. 

Splitting the difference between parties’ valuations

278.  In ruling on the VO Claims, there are many instances where I find merits in the quantification of both sides.  It is not possible to resolve the difference without very specific and in depth exploration of the relevant expert evidence.  In the premises, the just course is to split the difference between the two valuations.  Mr Clayton has referred this court to a precedent where such an exercise was carried out by the court: Chan Shun Kei v Hong Kong Construction (HK) Ltd, HCCT 2/2011, unrep, 7 April 2014.                

Design co-ordination and input

279.  There were 72 items of work[88] in which there was, allegedly, an element of design co-operation and input.  In short, Chun Wo says that the instructions given to it by Metta/HYA were often inadequate so that much design input was required from it before those instructions could be executed.  The quantum of that claim has been drastically reduced from the pleaded HK$19.6m to Mr Charlton’s assessment of HK$4.5m.  The reason is the inadequacy of evidence in support of this claim.  The assessment is a global one based on 3.5% of the value of the works in question.  Mr Charlton had fairly characterised this assessment as a “guestimate”. 

280.  Mr O’Neill is unconvinced about the merits of this claim (he made no valuation of it).  However, under cross-examination he accepted that where Chun Wo had carried out variation works which encompassed a design element, it was entitled to be paid for the design input[89].  I am not persuaded by Mr O’Neill’s evidence that, according to his calculation exercise, all the design input had been paid as part of the OH&P for the VO claims.  I believe that there are merits in Mr Clayton criticism of conflation on Mr O’Neill’s part.  Conceptually, I see no reason why the additional design work should be absorbed in the usual OH&P.  It is an additional service which ought to be paid for (see Mr Charlton’s report at para 6.19 [J1/49]). 

281.  In the premises, this claim is upheld.  However, given the unsatisfactory nature of the evidence and the difficulties in quantification, I shall reduce it to HK$3m.

Diminution of Contract Sum

282.  Pursuant to the terms of SP-2.03[90], there should be a diminution of the contract sum under the MC as a consequence of ERI-MC-897.  There are 2 elements to the diminution: the works omitted and the reduction due to the defects in works[91].

Works omitted

283.  This is the easy part because the scope of dispute is limited.  There are 2 lists of the omitted works – 1 from HYA and 1 produced by Metta.  There is no issue that the works therein listed were omitted.  There are certain additional items identified in Metta’s documents and by Mr O’Neill[92].  These do not form part of Metta’s pleaded case and must be rejected. 

284.  For Metta’s listings, Mr Charlton’s valuation (HK$5,183,330.63) is actually higher than that of Mr O’Neill.  I can see no legitimate complaint if I adopt the former.

285.  For HYA listings, the difference between the valuations is just over HK$5.5m.  Mr O’Neill was cross-examined on his valuation of item 2.3 in Area 2 as per HYA’s List[93].  The documents put to him demonstrated that items A27 to A33 of VO 179 should not have been in his assessment[94].  This alone accounts for a difference of HK$3,876,330 between him and Mr Charlton in their assessment of HYA Listings.  Hence, the difference between the experts on the valuation of the omitted works under the HYA Listings becomes HK$1,623,889.16.

286.  There are merits in Metta’s submission that Mr Charlton was unable to value some of the omitted works.  On the other hand, I am reluctant to simply accept Mr O’Neill’s valuation as it has been demonstrated that his works are not entirely reliable. 

287.  Doing the best I can, I assess the omitted works at HK$14,683,330.63 (HK$5,183,330.63 for Metta Listings and HK$9,500,000[95] for HYA Listings).

Defects

288.  I come to the most difficult part of this case. There are 1,661 line items of defects set out in App 10B.  It is a 31-page document in A3 size and very small print.  It is meant to be a table setting out the particulars of the alleged defects in the Works.  Regrettably, it is not a document which can be understood.  Mr Scott was unable to explain it to the court.  Mr Clayton had tried to understand it without success. 

289.  In simple terms, one cannot simply read across the App 10B table (as one would expect) to learn about, eg, the allegations in respect of line item 7.  The defect complaints were based on NCFs issued to Chun Wo and the ERIs issued to remedial contractors, but one cannot see from App 10B which ERI was related which NCF.  If there was a logic in the way in which the information was put together in the table, neither counsel nor this court has managed to decipher such logic.  It is an unhelpful document.

290.  Amongst the expert witnesses, the only person who had demonstrated an understanding of App 10B was Mr Cock.  However, his achievement was the result of spending “many, many months” dealing with it[96].  This is not only unfair (see, eg, Mr Charlton’s difficulties with App 10B at J1/72-73, §§10.27.4 to 10.27.10), it inhibits a proper understanding of Metta’s case on defects. 

291.  Due to the rejection of Metta’s interpretation of ERI-MC-897, the alleged defects are only relevant on the appropriate diminution of contract sum.  This is Question 5(1) for the quantum experts :

“Diminution in the value of the relevant work item by reference to the rates provided for in the [MC], by reason of the defects and/or non-conformances in the work, taking into account the instruction ERI-MC-897 dated 2 July 2013.”

292.  There are 2 assessments from each expert[97], 1 based on the opinion of Chun Wo’s technical experts (on the defects) and the other based on the opinion of Metta’s technical experts.  Mr Charlton’s assessments are respectively HK$27,944,925.49 and HK$56,600,314.61 (there is a helpful summary of Mr Charlton’s assessments at J17/2-3), whereas Mr O’Neill’s are HK$28,694,664.14 and HK$58,015,900.  The figures are not far apart.

293.  I believe that Mr Charlton’s methodology is the appropriate one to adopt.  Mr Charlton approached Question 5(1) on the basis that the diminution was intended to represent the omission of work carried out by reference to rates in the MC.  It was to be contrasted with valuing defects in construction work.  He assumed that if indeed there was a part of the work which was defective, even if Chun Wo could avoid the liability for repairing those defects, they should not be paid for carrying it out in the first instance, hence the omission of the contract value (or diminution in value) of such work[98]. 

294.  On the other hand, Mr O’Neill approached the same question rather differently.  He said in evidence[99] :

“My approach to establishing what the diminution in the contract rate is differs from Mr Charlton. What I’ve done is I’ve looked at the defects rectification that was actually carried out, the cost that was actually incurred in doing that works, and then tried to calculate what the value of that same scope is in the contract. In comparison, what Mr Charlton has done is he’s looked at the – he’s done a different exercise, he’s looked at the rates and prices in the contract, and tried to omit from the contract those same items.”

295.  Mr O’Neill’s approach involved a complicated exercise.  Firstly, based on the costs incurred by the rectification contractors, Mr O’Neill split such costs into 2 aspects – “demolition non-contract costs” and “rectification replacement costs” as he called them.  Only the second aspect ($X) was attributed to the diminution in value, but then $X would have to be subjected to a “premium reduction” to try to reconcile it with the SOR rates. 

296.  There are 2 reasons for preferring Mr Charlton’s methodology.  Firstly, I find Mr Charlton’s methodology more consistent with the notion of reduction of contract sum provided in SP-2.03.   

297.  Secondly (and more importantly), there are a number of flaws in the “premium” rates used by Mr O’Neill (Appendix P4 of his Report at K15/241) in the premium reduction exercise, eg, the premium rates were only deduced from the costs of 3 out of 5 remedial contractors.  I agree with Chun Wo that it is not appropriate to use the data obtained from 1 contract to analyse a different contract.  Those flaws were explored in some depth in cross-examination[100]. 

298.  However, as pointed out above the different methodologies did not produce very different results.

299.  Focusing on Mr Charlton’s figures, the divergence of opinion between the 2 camps in respect of the defects produced a difference of nearly HK$30m.  In order to resolve that difference, the court will have to look into those defects.

300.  This brings to a head the difficulties caused by the way in which Metta had formulated and advanced its case on defects.  I can do no better than referring to Mr Charlton’s 1^st Report, §§10.35 to 10.38 (omitting the documents he examined and set out between §§10.35 and 10.36), where he described the enormous difficulty he had in understanding the alleged defects and their extent, and explained why he had to make a general assumption about defects :

“10.35 In order to answer Question 5(1), I must know at the very least whether each of the NCs are in fact for defects, and I must also be provided with evidence in order to establish the quantum of such defective work. Of course I can make an assumption that all of the NCs are for defects (under Appendix 4 of the AD&C there were some 800 No NCs altogether, and 10,131 alleged defects. Appendix 4 has now been amended showing many changes, both deletions and additions), but the task would be truly enormous. Most of the NCs are evidenced by photographs and it would be impossible in the majority of cases to attempt to extract quantities from those photographs, even if they were legible and comprehensible which in many cases they are not. Examples are too numerous to quote, and I consider it to be common sense that this exercise cannot be done before knowing both the defect identified and its scope so that at least the quantity of work to be omitted can be determined. Nevertheless by way of illustration only and further to the example quoted above at 10.27.6, I looked at NC-CM(MC)-671 which appears alongside ERI-MFC-044 (but I appreciate does not necessarily relate to it).

10.36  It will be seen that there are photographs of alleged water seepage at the Record Photo. However it is quite impossible to say what the cause is (apart from water), what caused the leakage or what the repair would need to be, the severity of the problem cannot be determined, the photographs provided by soft copy to me are not legible, there are two pages of illegibly small plans (last 2 pages) with a note stated that the defect is arrowed XX Location has been recorded by previous NC.

10.37  I have seldom been confronted with such an intractable situation and at this stage can make nothing of this or indeed the others which are too numerous to contemplate. I lack the basic information on which to proceed at least in any way useful to the Court.

10.38  I am able to offer a solution in part by making the assumptions that the work carried out by the rectification contractors was justified and by then looking at how that work corresponded with the work specified and priced in the contract.  I can then determine the value of such work based upon the schedule of rates.  For example it can be seen that Simbel demolished and replaced the stone paving to the main court.  I can therefore assume that such work was indeed rectification work for defects and allow for same by determining what was specified and priced at SOR for the paving to the Main Court. ...”

301.  On the other hand, it would not be just to dismiss Metta’s case on defects on technical grounds.  There is an abundance of evidence of defects in the Works, not least in the evidence of Chun Wo’s own experts.

302.  However, the only way to deal with the defect issues is to adopt a reasonably broad brush approach (it is readily apparent that this was the approach adopted by the experts on defects), and I shall do so.  I shall address the main issues on the defects and then come to a view on what defects should be attributed to Chun Wo. 

303.  I will make use of Mr Charlton’s summary at J17/2-3 for the purpose of setting out the appropriate deductions to account for the defects in the Works.  A copy of that document, with an added column of “Judge’s Assessment”, is attached hereto as Annex IV.  I should mention that Mr Clayton’s team has produced a helpful schedule in Attachments 4.1 to 4.9 of Chun Wo’s Closing Submissions (“Attachments 4.1 to 4.9”) to address the issues in respect of the 9 categories of defects pleaded in App 10B. 

Waterproofing

304.  This is one of the most important disputes.  The issues are highly technical.  I will have to consider (i) the alleged structural causes of water ingress; (ii) poor workmanship; (iii) MAT-015C and the use of “Seccorral 2K” as the waterproofing membrane; (iv) the insufficient drainage and paving slope; and (v) staining of stone due to efflorescence, which was related to poor drainage and MAT-015C.

305.  Under the MC, Chun Wo had design responsibility for the waterproofing works, but it is Chun Wo’s case that Metta had dictated the design (MAT-015C) and hence it was relieved from its obligation.  This explains the extensive scope of the dispute. 

306.  It is convenient to deal with the structural and workmanship issues together because Dr Lam, Chun Wo’s structural engineering expert, had covered both areas in his evidence.

Structural and workmanship issues

307.  It is not controversial that water leakages were observed in connection with the Works as early as April 2012, and many NCFs were issued in respect of the same.  The leakage problems were concerned with the Main Court, First Court and Guan Yin Statue Platform.  For ease of reference, Mr Scott’s team had produced a floor plan (Annex 3, tab 2 of Metta’s Opening) to show the locations of the waterproofing defect based on information collated from relevant sources.  Such defects had not been rectified by the time Chun Wo left the Site.  Subsequently, remedial contractors (Simbel and Ever Union) were engaged by Metta to carry out the rectification works. 

308.  Metta’s expert on waterproofing issues, Dr Chan, found that no or inadequate waterproofing membrane was applied to the Main Court and surrounding areas.  In particular, he found that the waterproofing membrane was generally between less than 0.25 mm and 0.5 mm thick and that part of the Main Court was not covered by any waterproofing membrane.  Mr Hartog, for Chun Wo, agreed with Dr Chan that the waterproofing membrane thickness was typically less than 2 mm, ie, contrary to the MC requirement.

309.  However, Dr Lam took the view that the water leakage was caused by design fault, namely, the presence of weep holes at the retention wall (near the sump tank), the lack of expansion joints and/or crack bridging ability in the waterproofing membrane.  Dr Chan was of the view that the water leakage was caused by inadequacy and in places the complete absence of waterproofing membrane as well as other workmanship issues for which Chun Wo was responsible. 

310.  It is extremely difficult for the court to determine these technical analyses advanced by highly qualified specialists. Dr Lam was an impressive witness.  He was obviously knowledgeable, firm and unshaken in his evidence.  However, none of his analyses was put to any test. Further, there is a basic conceptual problem with his analyses and on which Dr Lam was asked to comment, namely, given (a) there was extensive leakage[101]; (b) the waterproofing had failed to perform as intended; and (c) there were various deficiencies with the waterproofing works (agreed by the experts on both sides), it should follow that rectification work was called for, and the real argument was the extent of such work.  Dr Lam agreed[102]. 

311.  Further, the evidence before the court is that the core samples produced by Metta under the supervision of Dr Anderson and Dr Chan verified the inadequacy or absence of waterproofing membrane, which reflected poorly on the workmanship.  Dr Lam endeavoured to deal with the core samples by suggesting that (a) the coring might have destroyed the membrane and (b) it was unlikely for the membrane to have been applied unevenly.  However, I do not believe that Dr Lam’s opinion can outweigh the hard evidence of the core samples, which were produced under the supervision of experts. 

312.  It was put to Dr Chan in cross-examination that there was evidence of the application of membrane in various areas, and that water tests were carried out successfully.  It is true that Dr Chan was unable to advance a convincing explanation for the inconsistency between the core test results and such evidence.  On the other hand, there is also evidence that the membrane was not properly protected, which supports one of Dr Chan’s explanations for the inconsistency.  Taking all relevant matters into consideration, I am left with little doubt that the best evidence of the deficiency of the waterproofing system is the core test results. 

313.  For completeness, I have not overlooked Dr Lam’s evidence that water seepage was observed by him during his site visit despite the completion of the remedial works (thus constituting, it was said, some support for the structural or design fault suggestion).  However, it was clarified in evidence that the seepage observed by him was limited to 1 or 2 locations and the works had been covered up.  The point therefore does not advance Chun Wo’s case. 

314.  Mr Hartog also noted that even after the remedial works, the water logging continued in the Main Court in November 2015[103].  The problem was widespread and in general terms persisted in at least 40% of the entire court yard[104].  However, I remain unconvinced that such general observation can take Chun Wo’s case much further.  There is no evidence, eg, about the quality of the remedial works.  What was observed might be attributable to inadequacies in the same. 

315.  On balance, I am not satisfied that the water leakage was caused by structural problems and I have little doubt that Chun Wo’s workmanship on the waterproofing left much to be desired. 

MAT-015C and Seccorral 2K

316.  Metta’s case is that the waterproofing system was a design and built item under the MC so that any deficiency therewith rested within Chun Wo’s responsibility.  However, Chun Wo says that such design (MAT-015C) was taken out of its hands by Metta.

317.  It was agreed between the experts that the original waterproofing system stated in Technical Specification (“TS”), Section G involved placing a waterproofing membrane and anti-carbonation/ efflorescence agent together at the top of the system, ie, directly under a tile adhesive and pavers.  This design was subsequently changed (via MAT-015C) and these components were separated: the membrane being placed upon or close to the reinforced concrete roof slab and the anti-efflorescence agent (“CBN”) placed at the top of the sand-cement bedding below the pavers. It is common ground that CBN did not provide moisture proofing.  Consequently, water that penetrated the joints between the stone could then flow into and through successive porous layers and voids in the stone resulting in efflorescence.  Further, there was no provision for that water to drain efficiently to outlets and be removed from these layers[105].

318.  First and foremost, MAT-015C was a submission for waterproofing and associated anti-efflorescence material for laying stone at external areas with attached construction details and scope of application[106].  Whilst it was part of the waterproofing system, I do not accept that it constituted the entirety of that system.  I see no evidence suggesting that it was meant to do so.   

319.  Mr Hartog agreed that the waterproofing works for the First Court and Main Court on top of the podium level were governed by TS, Section G[107].  TS/G-1.1 to 1.3 provided as follows :

Clause 1.1

“All waterproofing works is to be carried out by an approved specialist who should also be qualified as an approved applicator by the manufacturer of the waterproofing material with not less than 5 years of proven experience of the relevant works.”

Clause 1.2

“Carry out the waterproofing work with adequate supervision and are throughout so as to ensure the membranes, waterproofing system etc provided are completely watertight. Be responsible for waterproofing any openings, pipe sleeves, conduits, and fixings etc which pass through the membranes.”

Clause 1.3

“Any details of waterproofing in the contract drawings are intended to indicate the general design intent. The Main Contractor or Other Contractor is required to review all details & submit designs for each and every situation in accordance with the clause of Specification Section A, “General”, “Design of Specialized Permanent Works”.

320.  It is plain that the contractual obligation on Chun Wo in respect of the waterproofing works was a heavy one – “completely watertight”.  Such works had to be guaranteed for 15 years after PC, pursuant to TS/G-4.4.

321.  In the premises, taking Chun Wo’s case at the highest, it cannot be accepted that Chun Wo had discharged its responsibility over the waterproofing system by merely following MAT-015C.  Surely, in the absence of any suggestion from Metta that the construction details within MAT-015C set out all that was necessary for the waterproofing works, Chun Wo had to exercise a judgment to determine if that was so.  It is clear from the agreed expert evidence that the waterproofing works were inadequate because, inter alia, no drainage was provided.  I am unable to see why Chun Wo can blame Metta for the absence of drainage (see below).  

322.  I turn to the factual dispute whether MAT-015C, including the use of anti-efflorescence agent CBN, was prescribed by Metta, in particular Mr Jimmy Leung of MDV. 

323.  Although I was impressed by Mr Leung as a witness, and he gave evidence to the effect that he had a good collection about CBN because of his interest in it, I believe that either his recollection was faulty (the events took place 5½ years ago) or he had not been truthful on this part of his evidence.  More likely than not, the details set out in MAT-015C, including the use of CBN, was suggested by him.

324.  The reason is that, according to Mr Leung, the use of CBN was considered in other CK projects at that time.  It was a subject of interest amongst the Construction Managers in the CKG, and a topic of casual conversation(s) between them.  This fits with Mr Fong’s evidence that CBN was used in another CK project which he was working on, and CK wanted to use this material in this Project. Further, Mr Leung said that after the discussions amongst the CK Construction Managers, CBN was discussed with Chun Wo[108].  

325.  One has to remember that this matter is only 1 of hundreds, if not thousands, of details in the Project.  It is unrealistic to expect anyone to recall such details after a number of years, especially for someone like Mr Leung who had left MDV and was not involved with this litigation.  Further, there were in all likelihood other people involved to various degrees in the design and approval of the waterproofing system.  On Chun Wo’s side, Ms Kid Shieh was probably the person who produced the construction details attached to MAT-015C. 

326.  I believe that the contemporaneous record is more consistent with Chun Wo’s case.  MAT-015C contained under the Remarks column :

“* As per the meeting of Edward and Jimmy from Chun Wo and MDV respectively held on 31/10/11, it is confirmed that ‘CBN’ anti-efflorescence agent will be used instead anti-efflorescence adhesive while ‘PCI Secooral 2K’ waterproofing membrane shall be remained unchange.”

327.  In the approval for that submission, Mr Leung had made some comments on 2 of the sketches attached to MAT-15C[109].

328.  As regards the impartiality or otherwise of Mr Leung, in my view the court should not lose sight of the fact that he must have known that the waterproofing system is an issue in this case[110], and it is far from inconceivable for a professional person to want to distance himself from any suggestion of fault on his part.  I agree with Chun Wo’s submission that Mr Leung had every reason to distance himself from MAT-15C.  The court should not be over-reliant on the demeanour of a witness.  There are obvious fragilities with that as a reliable basis for factual finding.

329.  As analysed above, the balance of the evidence is that the instructions contained in MAT-015C came from Metta. 

330.  For completeness, Mr Fong’s evidence together with a raft of other documents had been subjected to minute examination and lengthy treatment in Metta’s written Closing Submissions (pp 261 to 285).  With respect, I do not believe that Mr Fong’s mistake about the identity of the author of the sketches attached to MAT-015C is as bad as portrayed, given the passage of time and Mr Leung’s admitted involvement in the matter.  I do not find the analysis or speculation on the other documents to be of assistance. 

331.  Regarding Seccoral 2K, there is a disagreement amongst the experts whether it was an appropriate material to be used as the waterproofing membrane.  The use of that material (“or approved equivalent”) was provided in the MC.  Hence, supported by Mr Hartog and Dr Lam, Chun Wo says that the inappropriate waterproofing membrane, for which it was not responsible, contributed to the water leakage problems.

332.  Putting aside the question whether Chun Wo was absolved from responsibility over the use of Seccoral 2K.  The Seccoral 2K brochure produced by Mr Hartog (Exhibit P17) was only available in September 2012, whereas submission of MAT-015C detailing the use of Seccoral 2K as the waterproofing membrane was made in November 2011 based on an earlier version of the brochure (April 2003 edition).  Taken into account also Dr Chan’s evidence that Seccoral was widely used in Hong Kong as a waterproofing membrane, I am not satisfied that the use of this product as part of the waterproofing system was inappropriate. 

Drainage and slope

333.  There is no disagreement that the concrete roof slabs onto which the waterproofing membrane was applied did not slope sufficiently to drain water from the membrane surface.  The issue is where the responsibility lies.  Chun Wo says that the relocation of the membrane from directly under the stone paving to the surface of the concrete slab did not allow the achievement of a 1:80 fall gradient as shown on approved drawings. 

334.  I believe that, in all probabilities, the point about adequate slope was overlooked.  However, as analysed above, it would not be right to regard MAT-015C as providing a complete waterproofing system.  Chun Wo had the responsibility to render its works completely watertight.  This deficiency must fall upon its shoulders.

335.  The experts agreed that the drainage of the original works under the MC was inadequate[111]. 

336.  Mr Hartog’s opinion was that the omission from the outset of sub-surface drainage under paving at the Main Court and elsewhere was a fundamental error in Metta’s design[112].  In the course of discussing the efflorescence issue, which was related to the presence of water, Dr Anderson agreed that the drainage was a “significant issue that has to be addressed”[113].  In addition, he opined that even if the workmanship of the waterproofing layers were good, the potential problem of “lime bloom” (resulting in efflorescence) would still persist[114].

337.  Again, the issue is who was responsible for the lack of drainage.  I agree with Chun Wo that there was no specific provision in the MC which imposed such responsibility on it.  On the other hand, given its obligation to design, build and guarantee a watertight system and the obvious (according to Mr Hartog) inadequacy in the absence of drainage, I see no escape of responsibility on Chun Wo’s part.

Other arguments

338.  I shall deal with efflorescence when I address the stone defects below.  Before coming to a conclusion on the waterproofing defects, I deal with 3 general arguments advanced by Chun Wo in respect of many of the defects.

339.  Firstly, it is contended that Metta has made global claims in respect of defects and where it has failed to establish any part of such claims, they should be dismissed in their entirety due to the lack of ring-fencing of the individual elements which made up the claims.  I have said enough about the difficulties with Metta’s defect claims.  On the other hand, I do not believe that those claims can properly be regarded as global claims: see Keating on Construction Contracts, §9-041.  To my mind, if Metta can establish that the works carried out by Chun Wo were defective, it would not be just to deny it appropriate relief, and the court will have to do its best to assess the reduction of contract sum due to the defects. 

340.  Secondly, Chun Wo alleges that much of the rectification works were in fact design changes.  With the exception of the replacement of the Flammet stone (see below), I find little substance in the allegation.  As Mr Charlton had agreed, provided that Metta did not seek to pass onto Chun Wo the cost of any improvement in design, there is nothing objectionable in Metta seeking to adopt a better design when it was necessary to re-do Chun Wo’s work as a result of defects.

341.  Thirdly, Chun Wo maintains that many of the NCFs had in fact been closed out.  The burden of proof here must be on Chun Wo.  I do not find the evidence relied upon by Chun Wo to be satisfactory.  In particular, it has been shown that one of the key allegations is unfounded, namely, that Metta had refused to sign off the completion of rectification works by Chun Wo. 

342.  To conclude, although Chun Wo cannot be blamed in respect of MAT-015C, I see no escape from the conclusion that it is liable for the waterproofing defects due to various deficiencies in its works. Looking at it from another angle, the waterproofing had to be re-done due to the defects over which Chun Wo was responsible.   

Stone work

343.  The issues here are extremely complicated. There were 8 types of stone used in different areas in the Project.  Multiple defects were alleged to exist in the stone works: damaged stone (including stain, efflorescence, water mark, crack, scratch and damaged edge or corner); unacceptable stone material (including abrupt colour change between adjacent stone, inconsistent stone grain, texture or finish and deviation from approved sample); poor workmanship (including step joint, wrong level or water ponding, missing or poor grouting, wrong details and unauthorised repair); and missing stone panels.  Most of the NFCs contained more than one alleged defect. 

344.  However, there is substantial agreement in the expert evidence in this area.  Helpfully, the agreed expert evidence has been set out in Attachment 4.1 which relates to stone works.  In short, there is substantial agreement in the expert evidence on the widespread non-conformances in Chun Wo’s stone works.  Indeed, the poor quality of the works can be readily discerned from the photographs attached to many of the NCFs.  Due to the extensive nature of the defects, it was also agreed that the wholesale replacement of the stone was justified in respect of Flammet stone and Various Grey stone. 

345.  I need only deal with 3 main issues under this head: efflorescence, Flammet stone works and application of sealer.

Efflorescence

346.  This issue is associated with the waterproofing.  In simple terms, efflorescence is caused by the deposit of soluble salt in the stone.  As Mr Hartog explained in his evidence, the source of the soluble salt was the Portland cement[115] in the screed under the stone.  In the presence of water, the calcium oxide (constituting about 60% of dry cement) would dissolve.  The dissolved calcium oxide (calcium hydroxide) would come up and find its way into the stone if the stone had sufficient porosity or absorbency, or it would rise up through the gaps in the joints or through the joints themselves. Eventually, the dissolved calcium oxide would react and become calcium carbonate.  Once absorbed into the stone, the substance would appear as white encrustation or film on the stone[116]. 

347.  Dr Anderson and Mr Hartog agreed in their Joint Report, §§3 to 8 and 20 that :

(1)  CBN anti-efflorescent agent could never have worked or prevented lime encrustation and staining of the stonework.  Whilst the CBN was, in a product description attached to MAT-015C, stated to have some “moisture proofing” property, both experts agreed that it could never have worked in this capacity nor prevented moisture penetration downwards, water percolation upwards and resulting in efflorescence on and staining of stone paving;

(2)  The screed provided an ample source of soluble salt (from Portland cement), which caused staining of the stone.  There was no waterproofing layer above the porous screed and no effective measure to drain water with dissolved cement salts from within the screed and other layers above the waterproofing membrane;

(3)  Large volume (reservoirs) of water occurred from time to time below the paving in the original works carried out by Chun Wo;

(4)  The drainage system in the original works was inadequate;

(5)  Deep multi-layered strata including cementitious screed and mass concrete infill existed below the pavers in some areas of the Site, specifically in the Main Court and First Court, and these contributed to water retention and the development of water reservoirs;

(6)  The original waterproofing system stated in TS/G involved placing a waterproofing membrane and an anti-carbonation agent together at the top of the system, ie, directly under a tile adhesive and paver.  This design was subsequently changed and these components were separated – the waterproof membrane being placed upon or close to the RC[117] substrate (roof slab) and the CBN being placed at the top of the sand-cement bedding below the paver.  Since the CBN did not provide moisture proofing, water that penetrated joints could then flow into and through successive porous layers and voids.  There was no provision for that water to drain efficiently to outlets and be removed from these layers;

(7)  TS/F-4.10(c) (dry mortar method) was a traditional method used in Hong Kong for laying pavers but it is now outdated and departs from current good international practice.

348.  In the light of the agreed expert evidence, it may seem harsh to hold Chun Wo responsible for the efflorescence defects.  However, the lack of proper drainage (including the inadequate slope) for which Chun Wo is responsible cannot be overlooked.  It contributed to the formation of stain, and more importantly the waterproofing system had to be re-done, which necessarily involved breaking at least some of the stone.

349.  Mr Kevin Ng had given evidence to the effect that some of the stone could be saved in the event of re-laying.  I therefore would, on a rough and ready basis, make a reduction to reflect the point.  Such reduction will be applied to Wavie White and Olive Green.  As observed by Dr Anderson, staining of Flammet, Wavie White and Olive Green was the most widespread and “visibly obvious” defect encountered on the Site[118].

Flammet stone works

350.  Flammet stone was mainly used in the temple interiors.  There is no dispute that there was widespread picture frame staining (staining of the perimeters of the stone).  However, Chun Wo has advanced a number of valid reasons to explain why it should not be responsible for the Flammet stone defects :

(1)  Metta insisted on a joint width of only 1mm, which the experts agreed to be too narrow[119];

(2)  Chun Wo was instructed to lay the stone in a jumble pattern[120] to “create symbolic meaning of ‘sea’”[121], which was the design intent;

(3)  Mr Hartog opined that Flammet could not achieve Metta’s design intent of “tranquil pond or seamless ocean”[122].  Coupled with the fact that Flammet was subsequently replaced by Metta with China Dark Black and Verde Pacao[123], I believe that Metta had changed its mind about the desirability of Flammet;

(4)  No waterproofing was required by Metta inside the temples: reply to MAT-0015C dated 24 November 2011 and ERI-MC-395 dated 26 January 2012;

(5)  There was no water barrier (upturns) around the temples, the absence of which could have contributed to the staining of the Flammet[124].  It has not been demonstrated that Chun Wo was required under the MC to construct such upturns.

351.  However, there is an abundance of evidence on the unsatisfactory quality of the Flammet stone.  It would not be right to ignore that fact.  Again, doing the best I can in the circumstances, I would make a rough and ready, but conservative, assessment to reflect the fact that some of the Flammet stone did not meet the contractual quality.

Application of sealer

352.  There is a blanket assertion by Dr Anderson that all the stone was non-compliant due to the absence of proof that sealer had been applied on them.  The evidence on this issue is unsatisfactory.  Further, there is evidence from Mr Hartog that the application of sealer would not have prevented the formation of efflorescence.  I reject this contention. 

Stamped Concrete

353.  I move onto other major issues on defects.  Dr Lam and Dr Chan disagreed on whether the stamped concrete works were non-conformant and, if so, who should be responsible.  Dr Lam was of the view that the cracks and other defects found in the stamped concrete were caused primarily by pre-mature loading during the Consecration, subsequent incident(s) of traffic loading and the use of screed instead of concrete.  Dr Chan’s opinion was that the works in question were non-conformant and caused by Chun Wo’s failure to comply with the requirements under the MC (including workmanship requirements and design obligations).

354.  Like the waterproofing works, there is ample evidence that the stamped concrete was found to be defective.  Dr Lam advanced 2 reasons to explain the defects, namely, pre-mature loading and wrong choice of material.  In respect of the latter, Chun Wo’s case is that the use of floor screed[125] for stamped concrete was in accordance with the approval of HYA (the approval process ended with ERI-MC-580 dated 8 May 2012 (Exhibit P15))[126]. 

355.  However, after that ERI, 2 submissions were made by Chun Wo in respect of the stamped concrete.  The first, MAT-1155A dated 20 August 2012, was disapproved on 24 August 2012 with comments from HYA to be incorporated for further submission.  On 26 September 2012, MAT-1155B was submitted.  It was received by CKPLD on 28 September 2012.  The submission was approved and, on the face of the document, sent to Chun Wo on “5/10”.  It was distributed to, inter alia, the site office.  A copy of both submissions together with some attachments was produced as Exhibit D20.  One of the attachments was a method statement, and it appears from that document that the stamped concrete was to be constructed from concrete of D30/10 grade, which was described by Dr Chan as structural concrete and a strong material. 

356.  It must be accepted that if, as suggested by MAT-1155B, the stamped concrete was to be made of concrete, then the relevant work carried out by Chun Wo must be non-compliant.  Mr Clayton said that Chun Wo never received the approval of MAT-1155B.  It is right to say that, regrettably, this point was not explored in evidence.  However, Mr Clayton has very fairly accepted that for a case of this complexity such inadequacy is only to be expected. 

357.  I believe that there is sufficient evidence before the court to make a finding on this point.  It is accepted that MAT-1155B originated from Chun Wo.  The work in question was only carried out in late October 2012.  Even assuming that Chun Wo did not received the approval, one would expect that it would ask for a reply before starting the work.  On balance of probabilities, I believe that the approval was sent to Chun Wo.  At the very least, it was sent to the site office.  More likely than not, that approval (and MAT-1155B) was overlooked because Chun Wo was working under tremendous pressure to meet the deadline for the Consecration. 

358.  Dr Lam agreed with para 6.3.3 of Dr Chan’s report[127] that the separation between the stamped concrete and the floor slab evidenced poor workmanship.  I believe that this concession on poor workmanship fortifies the point that Chun Wo was working under huge pressure. 

359.  As regards Dr Lam’s other reason (pre-mature loading), there is contemporaneous record which evidence Chun Wo’s complaint in this regard.  However, given the wrong choice of material, poor workmanship and the absence of evidence to suggest that had the correct material been used the pre-mature loading would still have damaged the stamped concrete, I do not believe that Chun Wo’s responsibility in this matter can be absolved.

360.  I therefore find in favour of Metta in respect of these defects.

Fitting out works

361.  There are over 300 line items involved.  The expert evidence suggests that most of them were in fact “snagging items” which were to be expected upon completion of the Works. 

362.  However, according to Mr Cock, there were far too many of these items such that, collectively, they could not be said to be snagging items because the scale of the rectification works would have hindered the use of TSM.  On the other hand, the pre-mature termination of the MC in this case presented a unique situation. 

363.  It should be mentioned that Mr Cock was instructed that “Chun Wo would be in breach of the [MC] whenever their work failed to comply with the contractual requirements, even if these were minor defects ...”.  It is apparent that the instruction was given to mitigate the point about snagging items.  Such interference with the expert evidence was not only inappropriate, it is unhelpful to Metta’s case.  To his credit, Mr Cock opined that if his instruction did not apply, then he would consider many of the items he considered falling into the category of snagging item, which would be rectified as part of the usual project close out process[128].

364.  I should also mention that I have reservation about relying on Mr Mann’s evidence.  There are merits in Metta’s criticisms that his approach was rather superficial and his evidence lacked analysis.

365.  Mr Charlton opined that it was not realistic to attempt to value the snagging items because, eg, a brush stroke or two might be required to make good such an item, or a missing screw was required to be installed[129].

366.  I agree with Mr Charlton.  On the other hand, it would not be just to ignore the snagging items given the scale of the issue.  I shall again have to make a rough and ready assessment to cover both items 12 (fitting out work) and 14 (external and miscellaneous works) of Annex IV. 

Tio stone installation

367.  This claim concerns the modified design which was eventually constructed by Chun Wo.  Based on Mr Cock’s evidence, I am satisfied that there were some defects in the installation, and I shall make a rough and ready assessment of the same. 

Cement Sand Screeding

368.  Defective cement sand screeding underneath some of the stone works were discovered during the DLP when the remedial contractors were removing the stone flooring panels, eg, chipped and hollow floor screeding was found at the Great Buddha’s Hall.

369.  Mr Hartog and Dr Anderson agreed that the screeding immediately underlying the stone work was of poor quality, not mixed properly and variable in terms of cement and moisture content[130], but their opinions differ in terms of the extent of the defect.

370.  These defect claims were also backed by chemical tests commissioned by Metta on calcium oxide content to estimate the composition of cement send screed.  Dr Lam challenged the test results.  In short, he said that the test employed was not one generally regarded as reliable for the purpose.  On the other hand, Dr Lam had not carry out any test himself to show that the test results were in fact unreliable. 

371.  I am not swayed by Dr Lam’s analysis, and notwithstanding the criticisms made in cross-examination of Dr Anderson’s works on the tests, I uphold this part of Metta’s case.  However, I shall make a broad brush adjustment on Mr Charlton’s assessment based on the evidence of Metta’s technical experts because I believe that the defect was less extensive than that claimed. 

E&M defects

372.  There is a single joint expert, Mr Wilkinson, on this area of dispute.  In short, he was asked to express his opinion on the alleged defective E&M works pleaded in App 10B (454 items altogether), the remedial works and whether any of the remedial works were design changes. 

373.  In Mr Wilkinson’s detailed and helpful reports, the works were divided into 5 categories, namely (in simple terms), defective works (Category 1); unfinished works (Category 2); remedial works which fell outside Chun Wo’s scope of work under the MC (Category 3); Metta’s claims not justified by the evidence (Category 4); and substandard remedial works (relevant to only items 1260 and 1261) (Category 5).  A small number of works fell into more than 1 categories.  Mr Wilkinson had also provided his input to the quantum experts to assist them in their assessments on the E&M claims.

374.  I find Mr Wilkinson’s evidence, as contained in his reports, well-reasoned and properly supported.  The challenge by the parties to his evidence was limited.  Some of the issues raised in cross-examination were questions of law.  Mr Wilkinson was an impressive witness.  He was well-prepared, knowledgeable, fair, clear and firm in his evidence.  I have no hesitation in accepting his evidence.  I turn to consider the few issues raised by the parties in respect of his evidence.

375.  Firstly, there are several items[131] where Mr Charlton had disagreed with Mr Wilkinson’s view because he took the view that the NCFs pleaded by Metta were unrelated to the defects alleged or the works carried out in the ERIs to remedial contractors.  

376.  The issue whether Metta had adequately pleaded the defects is not entirely clear cut because, eg, where the pleaded defects did not entirely match with the details of the remedial works, it may be said that it is a matter of evidence.  Further, there is substance in Metta’s contention that Mr Wilkinson was the better qualified expert to determine if a piece of remedial work was or was not related to a defect.  On the other hand, Mr Wilkinson accepted in cross-examination that there were a lot of works not recorded in NCFs[132].  Consequently, I shall make a rough and ready adjustment to account for this point in favour of Chun Wo (reducing the assessed diminution by HK$100,000). 

377.  Secondly, I disallow Metta’s line item 1604 claim[133] for software replacement.  In cross-examination, Mr Wilkinson characterised such claim as “nonsense”[134].

378.  Thirdly, I agree with Chun Wo that Metta should not be entitled to the diminution of value in respect of the use of “OM1” cables (line item 1592)[135] because using OM1 was not non-conformant.  The change to OM3 cables was an enhancement.

Diminution of contract sum due to defects

379.  My assessment as per Annex IV is HK$31,843,653.29.

Metta’s contra-charge for site clearance and carting away

380.  Metta says that when Chun Wo vacated the Site, it was in a state of disarray with many materials, containers, bamboo scaffolding, platforms and rubbish left behind.

381.  Metta wrote to Chun Wo on 30 October 2013 asking for the removal the unwanted materials[136].  However, Chun Wo claimed that the materials had been handed over to Metta and it was prepared to take back the materials on Site only if Metta paid for the removal costs[137].  Subsequently, Metta engaged a contractor to remove these materials during the period from 22 to 29 April 2014[138] and had them stored at Yuen Long.  However, I see no evidence in support of the alleged costs of transportation and the chain link fence for storage of HK$573,400[139].

382.  There is no dispute that Chun Wo was obligated to removed unwanted material.  I am satisfied from the contemporaneous photographs and documents[140] that Chun Wo was in breach of that obligation. 

383.  The only evidence on quantum has been identified in para 1465 of Metta’s Closing Submissions.  There are 6 items.  I am not satisfied that the first item (882) is a proper claim under this head and it is rejected.  The remaining 5 items come to a total of HK$138,641.69.  That is the sum I award under this head.

384.  I should say that this claim was specifically raised by the court with Mr Scott in the course of his final submissions[141].  Further, it was made clear by the court on Day 35 that for this massively complex case, the burden is on the parties to lay out their case clearly and with specificities to assist the court in the resolution of this dispute, and failure to do so would result in the rejection of their claims[142].  

Contra-charge for unpaid water and electricity charges

385.  This claim by Metta seems to have been overlooked in the Closing Submissions of both sides.  Mr S P Mak had agreed to an apportionment in respect of Chun Wo’s share of these charges in the sum of HK$231,183[143], and I shall make this award accordingly.

Conclusions

386.  I shall make use of Attachment 5 of Chun Wo’s Closing Submissions to set out the assessments I have arrived at.  A modified version of that document is attached hereto as Annex V.

387.  The figure for Variations (item 2) in Annex V is left blank because there are far too many variation claims and it is preferable for the parties to agree the total sum as per Annex III (plus HK$28,878,616.15 for Attachment 3.1[144]), as well as the total sum for Annex V.  In all likelihood, there would be a net sum due to Chun Wo for which it is entitled to judgment.    

388.  Metta is also entitled to judgment on its counterclaim in respect of LD (HK$9,700,000) and two contra-charges (HK$369,824.69).

389.  Quite sensibly, Mr Clayton is not asking for any of the many declaratory relief sought in Chun Wo’s Amended Statement of Claim.

390.  The parties have agreed that the issues of interest and costs should be addressed once the court has determined the claims and counterclaims.  I direct that the parties are to endeavour to agree those issues, as well as the outstanding figures for Annexes III and V within 14 days from the date of this judgment, failing which there shall be a hearing to deal with those matters with an estimate of 2 hours. 

391.  In the event that the parties are able to reach agreement on the issues referred to in the preceding paragraph, Chun Wo may submit a draft judgment for the approval of the court.  Otherwise, the terms of the judgment will have to be dealt with at the hearing. 

Construction litigation

392.  This case has served to highlight the enormous difficulty presented by the way in which construction litigation is being conducted, especially with entrenched litigants and a large volume of disputes.  Construction litigation is unnecessarily complex and prohibitively expensive.  This must change.  To do so, one should go back to the basics.

393.  I start with the pleadings.  The pleadings in this case consist of 10 box files.  The Amended Statement of Claim and Defence to Counterclaim is an 82-page document, accompanied by 9 Appendices.  The Amended Defence and Re-Amended Counterclaim is 65-page long and came with 8 Appendices.  The Amended Reply and Defence to Counterclaim consists of 100 pages and another 8 Appendices.  The Rejoinder and Reply to Defence to Counterclaim together with the Further and Better Particulars generated 4 box files of papers. 

394.  It must be self-evident that the amount of papers generated by the pleadings have made them anything but useful.  This is reflected by the very limited number of occasions when they were referred to in the course of this trial.  These documents simply do not fulfil the function of pleadings.  It is an indictment of the system and those who created such documents that voluminous pleadings have become the norm in construction litigation. 

395.  If the basic rules of pleading were adhered to, eg, only material facts are to be pleaded, not many pages of the pleadings in this case would have survived.  These pleadings were extremely expensive to produce.  A quick glance at the bill of costs produced by Metta for its security for costs application heard on 16 March 2016[145] suggests that the costs incurred by it for the pleadings alone are in the realm of millions of dollars. 

396.  Pleadings are meant to be a simple road map of the disputes between the parties: see Liu Hsiao Cheng v Wong Shu Wai & Ors, HCA 1278/13, unrep, 21 August 2015, §§48-56. Voluminous pleadings create a serious obstacle for the court, which is always working under time constraints, in understanding the issues in the case, and inhibit it from managing the case in an effective manner. 

397.  There is no good reason to render the pleadings impenetrable by including minute details, evidence and arguments.  The basic rules must be followed and enforced by the court. 

398.  The details contained in the pleadings in this case are astounding.  For instance, Metta’s defect claims are contained in App 10B – a 31-page document of very small print on A3 size papers containing 1,661 line items.  The document has been shown to be incomprehensible.  That aside, one has to ask whether there was any good reason to expend an enormous amount of resources and costs to produce such a document in the first place.  It was inevitable that expert evidence would be adduced on the defect claims, and much of the pleadings on the same would later be overtaken by the expert evidence.

399.  All the alleged defects in this case were set out in NCFs which had been served on Chun Wo.  For purposes of pleading its case, Metta could have referred to the relevant NCFs and list them out in an appendix. 

400.  There should have been no cause for complaint by Chun Wo with this approach, assuming that it was minded to conduct this litigation with proportionality and economy of costs in mind.  Once the expert report(s) on the claims became available, it would become clear which claims would be disputed and which not. 

401.  To give another example, there are 27 EOT claims made by Chun Wo, 20 in respect of MS-1 and 7 for MS-2.  55 pages of details concerning these claims were set out in Appendix D to the Amended Statement of Claim and Defence to Counterclaim.  Metta responded to Appendix D by way of Appendices 3 and 3A of the Amended Defence and Re-Amended Counterclaim, some 234 pages of details in all.  It would have taken days for any tribunal to properly digest such materials.  Some of EOT claims were subsequently abandoned in light of the expert evidence. 

402.  For purposes of pleading its case on EOT, I do not believe that it was necessary or helpful for Chun Wo to do more than referring to the EOT applications.  That would adequately inform Metta of its claims with the mutual expectation that they would in due course be refined, and probably reduced, once the expert(s) had investigated the claims.  

403.  I believe that such an approach can, and should, be adopted generally in construction litigation, with the knowledge that the details of the case will later be set out in the expert report(s).  This approach would be conducive to keeping the pleadings within reasonable length so that they can serve their function properly.    

404.  The enormity of the pleadings in this case has exposed another critical problem – they hindered the proper investigation by the experts.  The evidence of Mr Allington serves to highlight the problem.  The programming issues agreed by the parties[146] dictated that Mr Allington must consider the relevant pleadings, which embraced every conceivable dispute (not to mention arguments), before coming to a view on the impact of various events on the completion of the Works.  It proved to be a near impossible task.  In his evidence, Mr Allington agreed[147], as did Mr Wardale[148], that the proper approach is for the experts to look, by applying their training and experience, at the facts of the case and to identify the relevant events.  They would then be in a position to assess the delay claims against those events. 

405.  What happened in this case is that the tail was wagging the dog.  The experts were burdened with volumes of materials drafted by lawyers and had to conduct their works in accordance with the same.  The upshot was that the enormous amount of costs incurred in drafting these materials actually served to further complicate the litigation and multiply the costs.  Most importantly, such materials are unhelpful for purposes of achieving a just resolution of the issues. 

406.  Unhelpful pleadings must be nipped in the bud. They hinder the case management by the court (apart from other problems). Litigants who put forward unhelpful pleading can expect, at least, to be asked to justify the costs incurred even if they succeed in their actions (see Lui Hsiao Cheng, §49).  One of the lessons learned from this case is that the court will have to consider, of its own motion, striking out pleadings which fail to comply with the rules[149]. 

407.  The second lesson to be learned from this case concerns the expert evidence.  There was an unusually large number of expert witnesses in this case[150]. Their evidence took up a significant portion of the trial.  The number of such witnesses would have halved if single joint expert were instructed on every discipline. This would result in shorter trial, which normally means earlier hearing date and swifter resolution, and considerable costs reduction.  See also the observations made by the Court of Appeal in Good Faith Properties Ltd v Cibean Development Co Ltd [2014] 5 HKLRD 534, §51. 

408.  There were challenges made in this case on the impartiality of some of the expert witnesses.  It has been shown that, despite the enhancement of the rules on impartiality of expert witnesses introduced under CJR[151], a determined litigant would not shy away from attempting to influence the evidence of such a witness.  The instruction of single joint experts would render such challenge redundant.  Impartial expert evidence is essential for arriving at a just decision. 

409.  Experience in this case shows that, with a single joint expert, the parties were able to focus on the handful of real issues, and the cross-examinations were conducted efficiently and expeditiously. 

410.  With respect, I suggest that instructing single joint expert should become the norm.  Parties will have to justify why such an expert should not be preferred over separately instructed experts.