LEIGHTON CONTRACTORS (ASIA) LTD v. STELUX HOLDINGS LTD

HCCT 29/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 29 OF 2004

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BETWEEN

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J U D G M E N T

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I.       Introduction

1.  Stelux was the Employer and Leighton the Main Contractor on a building construction project.  Disputes between them were referred to arbitration.  Leighton now seeks leave to appeal against the Interim Award ("the Award") dated 24 March 2004 of Ms. Gladys Li SC ("the Arbitrator").  Alternatively, Leighton asks that the Award be set aside and the Arbitrator removed for technical misconduct.

2.  Leighton contends that the Arbitrator erred in 3 respects:-

(1)     She misapplied Main Contract cl.23 in holding that Leighton would only be entitled to an extension of time (EOT) if a relevant event actually delayed completion of construction work.

(2)     She failed to consider whether certain activities were "likely to cause delay" to the completion of work, whether or not those activities caused actual delay.

(3)     Without giving the parties a chance to make submissions, she:-

(a)    rejected the views of both parties' experts for assessing delay; and,

(b)   substituted her own view as to how delay should be assessed.

3.  The principles governing the grant of leave to appeal are well-known.  I recently summarised them in Hong Kong Institute of Education v. Aoki HCCT 109/2003, 12 March 2004 (at §12).  If a dispute is a one-off matter, I must discern an obvious error in an award.  Where a dispute arises out of a standard clause or a matter of general public importance, I must look to see whether there has been a serious error.

II.      Discussion

A.      Arbitrator's  view that activities must cause actual delay

4.  The Main Contract was based on the Standard Form of Building Contract, Private Edition -- Without Quantities, 1986 1st RICS Edition.  Entitlement to EOTs was governed by cl.23.

5.  Clause 23 provides:-

"(1)    Upon it becoming reasonably apparent that the progress of the Works is delayed, or is likely to be delayed, the Main Contractor shall forthwith give written notice to the Architect of the material circumstances including the cause or causes of the delay.  The Main Contractor shall ... give particulars of the expected effects of the delay, or potential delay, and shall estimate the extent, if any, of the expected delay to the completion of the Works beyond the Date for Completion....

(2)     If, in the opinion of the Architect, upon receipt of any notice, particulars and estimate given by the Main Contractor under sub-clause (1) of this Condition, the completion of the Works is likely to be or has been delayed beyond the Date for Completion ...,

...

(f)    by reason of the Main Contractor not having received in due time necessary instructions, drawings, details or levels from the Architect for which he specifically applied in writing on a date which having regard to the date for Completion stated in the appendix to these Conditions or to any extension of time then fixed under this clause ...  was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same,...

...

then the Architect shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the Works."

6.  There is no dispute that cl.23 is a standard form clause.

7.  Leighton's main case was that certain events caused actual and not merely theoretical delay.  Leighton posited 4 causes of critical delay and several causes of concurrent delay.  The Arbitrator found that none of the acts or omissions alleged by Leighton caused actual delay.

8.  In particular, Leighton alleged that Stelux caused critical delay by releasing tender information for MVAC and electrical sub-contract works late.  The Arbitrator found that the information was indeed provided later than it should have been according to the original programme.  But she held that such lateness could not have delayed the completion of works. 

9.  The information was required for the award of the superstructure MVAC and electrical sub-contracts.  On the date when it originally ought to have been provided, Leighton was still involved in substructure works.  Even by the time that the information had been provided and the MVAC and electrical subcontracts awarded, Leighton was only just ready to start (and had not yet commenced) construction of the basement slab.

10.  It accordingly seems to me that the Arbitrator reasonably concluded that the late information could not have caused actual delay.

11.  However, Mr. Westbrook SC (for Leighton) refers to Appendix B §28 of the Re-Amended Points of Claim ("RAPOC").  That pleads:-

"Alternatively, the delay by the Architect in providing the tender information for the Electrical Sub-Contract Works and the MVAC Sub-Contract Works is a matter for which Leighton is entitled to an extension of time pursuant to GCC Clause 23(2)(f), Leighton having specifically applied for such information in due time as particularised in paragraph 19 above.  Leighton is entitled to claim and does claim and extension of time of 168 calendar days, or such other time as the Arbitrator may determine, in respect of the late provision of information pursuant to GCC Clause 23(2)(f)."

12.  Mr. Westbrook argues that cl.23 does not limit a contractor to EOTs only where relevant events have delayed completion.  Looking prospectively by standing in the Architect's shoes at "time slices" over the project's history, if the Arbitrator thought that an event was "likely to cause delay", she should have granted Leighton an EOT.  The EOT should be allowed even where, with hindsight, it is clear that the event did not in fact delay completion.

13.  I do not believe that the Arbitrator was seriously wrong in her construction of cl.23 and her application of the clause to the facts.  On the contrary, I believe that her conclusion on Leighton's non-entitlement to EOT was probably right.

14.  Clause 23(2)(f) refers to Leighton "not having received in due time necessary instructions" and to Leighton requesting instructions on a date reasonably close to when "necessary .. to receive" information.  Whether information is provided in "due time" or is "necessary" when requested, can only be determined by reference to the state of the works at the time when information is requested or provided.

15.  If Leighton was still working on the substructure when it requested tender information from Stelux, the information could not then have been necessary.  Due to Leighton's own substantial delay, there was ample time for the information to be provided much later, even after the original programme date.  On the facts found by the Arbitrator, the tender information can neither have been "necessary" when requested by Leighton nor out of "due time" when provided by Stelux.

16.  Further, the criterion in cl.23(2) that "the completion of the Works is likely to be ... delayed" requires some finding of a causal link between Stelux' late submission of information and potential delay to the completion date of the works.  It is not enough for Leighton to show that information was provided late.  Leighton must also show that, on the date (say) when the information ought originally to have been provided, delay to completion was "likely".

17.  But the Arbitrator found that substructure works were so delayed that it obviously did not matter if tender information was given later than first envisaged.  She said:-

"Where Leighton relies on Clause 23(2)(f), the issue is not what caused the instruction to be 'late' and what might have delayed the Architect in issuing the necessary instruction but simply whether the necessary information is late, having regard to the time when the Contractor actually required it...."  [Emphasis supplied.] 

In the actual circumstances of the case, looking prospectively from the time of Stelux' initial failure to provide information, Stelux's failing could not be causative of delay.  The late information could not cause actual delay, having regard to the state of the works at the time when the information ought to have been furnished originally.

18.  In light of those considerations, it is hard to see how cl.23(2)(f) could apply on the facts as found by the Arbitrator.  The construction contended by Mr. Westbrook on "likely delay" just does not arise. 

19.  The Arbitrator reasoned thus:-

"Although Clause 23(2) empowers the Architect to grant an extension of time if in his opinion the completion of the work is likely to be or has been delayed beyond the Date of Completion by one or more of the events specified in (a) to (k) of Clause 23(2), there seems to me to be no further scope for considering whether completion of the works is likely to be delayed beyond the Date for Completion by any of the events which Leighton has pleaded as entitling it to an extension of time."

She was undoubtedly aware of the words "likely to be ... delayed" in cl.23.  She simply thought that consideration of the meaning of those words did not arise, given "the events which Leighton has pleaded as entitling it to an extension of time" and given her findings on those pleaded events.

20.  I am thus unable to find obvious or serious error in the Arbitrator's reading of cl.23 and its application to the facts.

B.      Arbitrator's failure to consider likely delay

21.  This ground of appeal is the reverse side of the criticism just discussed.

22.  As already mentioned, the Arbitrator touched on Leighton's alternative case.  She rejected the possibility that delay to completion was likely to be caused by the failure to provide tender information.  That was not possible on the facts as found by her.  On the other hand, as to Leighton's main pleaded case on actual delays having resulted, it was not relevant for her to consider whether delay was likely to be caused.

23.  I do not find any serious error in the Arbitrator's approach in this respect.

C.      Rejection of experts' approach to delay

24.  The time slice method examines progress at different stages of a project.  At each stage the analysis looks forward in time and asks whether relevant events are likely to cause delay in the future.  The method endeavours to assess entitlement to EOTs without recourse to hindsight.

25.  Mr. Westbrook complains that the Arbitrator wholly rejected the time slice methodology employed by the parties for assessing delay.  The parties (Mr. Westbrook says) not only accepted that the method was apposite, but also spent considerable resources on their experts' presentations.  The Society of Construction Law Delay and Disruption Protocol describes the time slice method as the "most thorough method of analysis, although it is generally the most time-consuming and costly when performed".   How then (Mr. Westbrook asks) could the Arbitrator have dismissed the method as being of merely "limited assistance"?

26.  Mr. Westbrook contends that the Arbitrator's rejection of the agreed method constituted a radical and surprising departure from both sides' argument.  The Arbitrator should at least have allowed the parties the chance to be heard orally before dismissing time slice analysis.  By not giving the parties an opportunity to make submissions on the matter, the Arbitrator was guilty of technical misconduct.

27.  I disagree with Mr. Westbrook.

28.  The Arbitrator found against Leighton on actual delay.  She further held that, given Leighton's pleaded case and the facts as found by her, she did not have to concern herself with "likely delay" under cl.23.  In those circumstances, it is not surprising that the Arbitrator found time slice methodology of little help.  Stressing prospective delay regardless of actual delay, time slice methodology would have been of limited relevance on Leighton's pleadings of delay and the Arbitrator's findings of fact.

29.  In any event, it is wrong to say that the Arbitrator wholly ignored time slice methodology. 

30.  The analysis pressed by Mr. Menyhart (Leighton's expert) focused on the prospect of delay resulting from an event at a given time, regardless of whether in retrospect the event had actually caused delay.  The Arbitrator rejected Mr. Menyhart's analysis entirely.

31.  In contrast, the Arbitrator found the evidence of Mr. Foan (Stelux' expert) more helpful.  He also  used "time slice" methodology.  But his approach was different in focus.  The Arbitrator observed that Mr. Foan:-

"does not consider off-site delays until they affect 'on-site' activities and then only to the extent that they do.  In my view, such an approach is entirely consistent with Clause 23(2) whereas Mr. Menyhart's is not and it [Mr. Foan's approach] is correct."

32.  It is true that the Arbitrator found obscurities in Mr. Foan's evidence.  Further, in light of her findings on Leighton's pleaded case, the Arbitrator believed that the time slice section of Mr. Foan's report was of limited assistance.  The simple point is that the Arbitrator did not reject the method wholesale.  To the extent that she thought relevant to the dispute before her, she preferred Mr. Foan's evidence to that of Mr. Menyhart.

33.  I do not see how the Arbitrator's approach can be faulted. 

34.  That the parties had adduced "time slice" evidence and had incurred great expense in so doing, cannot bind the Arbitrator's construction of cl.23 or her application of the clause to the facts.

35.  The Arbitrator heard both sides' expert and made up her mind on how much weight to place on their reports.  She was not bound to tell the parties, after having heard the experts, that she thought that time slice analysis was of little value.  Least of all was she under an obligation to summon the parties for further submissions as to why she should find time slice analysis to be more helpful than she thought.

III.     Conclusion

36.  Leave to appeal is refused.  In my judgment the Arbitrator was neither seriously wrong nor guilty of technical misconduct.

37.  There will be an order nisi that Stelux is to have the costs of Leighton's leave application, such costs to be taxed if not agreed.