ATTORNEY GENERAL v. WANG CHONG CONSTRUCTION CO. LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS Nos. 70 & 542 OF 1990

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BETWEEN

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J U D G M E N T

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1. By Contract No. 66 of 1973 ("the Contract") dated the 26th November 1973 between the Government and the Wang Chong Construction Company Limited ("Wang Chong"), the latter agreed to construct Blocks 2, 3, 4 and 5 of the Lek Yuen Estate, at Shatin.

2. Construction was certified as having been completed on the 30th November 1976.

3. On 23rd June 1977 on expiration of the 6 months maintenance period the maintenance certificate was issued, and 2 years later, about the 15th May 1979 the final payment certificate settled.

4. Meanwhile the Housing Authority had been established as a statutory corporation and it is contended by Wang Chong, but disputed by the Government, that the ownership of the 4 blocks was vested in the Authority in 1982 and 1983. At any rate in 1985, the Housing Authority carried out its first and in August 1988 its second structural investigation of the 4 blocks, particularly of the concrete. The results of the first survey indicated a deficiency in the strength and in the amount of cement in the concrete, and those of the second corroborated the results of the first.

5. As a result the matter was referred to the Attorney General, and on 13th October 1988 one of his officers, Mr. Somerville, wrote to Wang Chong informing it that the Government believed it had sustained loss because of Wang Chong's failure to comply with the Contract, and that he had instructions to institute proceedings prior to 30th November 1988, the date on which the Government considered its claim would become time barred.

6. On the 23rd November 1988 by an exchange of letters between Mr. Somerville and Mr. Shaw of Baker and Mckenzie, Wang Chong's solicitors, it was agreed that limitation would be waived ("the Limitation Waiver Agreement").

7. On the 22nd of February 1989, Mr. Somerville wrote to the Chief Architect, Division 3 of the Architectural Services Department on the basis that he was at the time of that letter, the "Architect" within the meaning of the Contract, detailing the background and requesting him to determine under Clause 117 of the Contract:

(a)     whether Wang Chong had failed in the performance of its contractual obligations,

(b)     whether he considered Wang Chong should be liable to compensate Government for its losses and

(c)     whether Wang Chong should be liable to compensate Government in the sum of $23,180,000.00 being the sum in a valuation report he annexed.

8. On the 25th February 1988, 3 days later, the Chief Architect, Mr. Kwan, replied with his determination that:

(a)     Wang Chong had failed in the performance of its obligations;

(b)     Wang Chong was liable to compensate Government for its losses; and

(c)     the valuation of losses annexed was "incapable of a full determination" by him and that accordingly he made no determination of it.

9. On the 27th February, Mr. Somerville wrote to Wang Chong outlining Mr. Kwan's determination, stating that Government wished to refer the dispute to arbitration for quantum of damages to be determined, and requesting Wang Chong to concur in the appointment of an arbitrator. On the same day Government also issued a writ endorsed with a claim for damages for breach of the Contract.

10. On the 28th February, the next day, Mr. Shaw wrote to Mr. Somerville stating that the issue of the writ without 7 days' notice was a repudiation of the Limitation Waiver Agreement, which repudiation Wang Chong accepted.

11. On the 5th January 1990, the Attorney General took out an originating summons seeking -

(1) a declaration that the Limitation waiver Agreement remained binding and enforceable against Wang Chong and

(2) the appointment of an arbitrator.

12. On the 21st February 1990, Wang Chong in turn took out an originating summons seeking the following declarations -

"1.     (i)      A declaration that the maintenance certificate issued on or about 23 June, 1977 by the architect under Public Works Department Contract no. 66 of 1973 ("the certificate") constituted conclusive evidence that the quality of materials and workmanship used by the applicant was as required by the Contract.

    (ii)     A declaration that following the issue of the certificate and the settling of the final payment certificate, the architect was rendered functus officio and was therefore unable to issue any further certificates or decisions under the contract, in particular, any certificates or decisions under clauses 115 or 117.

2.     A declaration that Mr P. L. Kwan is not and never has been, the architect under the contract.

3.     A declaration that the purported decisions contained in the letter dated 25 February, 1989 from Mr P. L. Kwan (chief architect/3) to Mr Kenneth Somerville (senior crown counsel) did not fall within clause 117 of the contract, since they related to excepted matters, as defined in clause 115.

4.     (i)      A declaration that the letter dated 25 February, 1989 from Mr P. L. Kwan to Mr Kenneth Somerville was not issued pursuant to clause 115 of the contract; alternatively, that the respondent is estopped from relying on that letter as a decision given under clause 115.

    (ii) A declaration that in the absence of any decision under clause 115 of the contract, the respondent is not entitled to recover against the applicant in respect of any allegation that the quality of the materials or workmanship was less than that required by the contract.

5.     A declaration that the letter dated 25 February, 1989 from Mr P. L. Kwan to Mr Kenneth Somerville:

    (i)      does not constitute or contain any valid decision of the architect, whether given under clause 115 or clause 117 of the contract; and/or

    (ii)      was not served upon the applicant and/or respondent as required by clause 115 and/or clause 117 and/or clause 118.

6.     (i)      A declaration that upon the true construction of the agreement contained in the exchange of letters between the applicant and the respondent dated 23 November, 1988 ("the agreement"), alternatively by implication therein, neither party was at liberty to commence proceedings, save after giving 7 days' advance notice to the other party.

    (ii)     A declaration that the agreement does not apply to the action (1989 No. A 1063) commenced by the respondent by a writ issued on 27 February, 1989 or to the arbitration commenced (or purportedly commenced) by Mr Kenneth Somerville's letter to the applicant dated 27 February, 1989.

    (iii)      A declaration that (a) by Mr Kenneth Somerville's letter to Baker & McKenzie dated 23 February, 1989 and/or (b) by commencing the said action and/or the said arbitration without giving 7 days' advance notice thereof, the respondent repudiated the agreement and that the applicant is released from any obligations thereunder."

13. On the 15th September, the Attorney General took out a summons for the stay pursuant to section 6 of the Arbitration Ordinance of paragraphs 1(i), 4(ii) and 6(i), (ii) and (iii) of Wang Chong's summons on the ground that it had been agreed in the agreement of the 26th November, 1973, that they would be referred to arbitration.

14. With that short chronology and outline, I turn to those parts of the 3 summonses that have been pursued before me, and the submissions made by Mr. Rupert Jackson Q.C. for Wang Chong and Mr. Michael Thomas Q.C. for the Attorney General.

15. For Wang Chong 3 "principal arguments" were advanced:

I.     that there is no valid Architect's decision, therefore the Government is not entitled to pursue its claim either by arbitration or otherwise;

II.     that the Government's claim is doomed to failure and therefore the proposed arbitration would serve no useful purpose; and

III.     if the Government is entitled to pursue its claim, then Wang Chong is entitled to put forward a limitation defence.

16. In his first principal agrument, Mr. Jackson puts forward 7 grounds upon which he relies, emphasising that they are each independent so that he is entitled to succeed upon the basis of any single one of them. Nonetheless he has urged me to rule upon all of them.

Architect functus officio

17. First, that the Architect is functus officio. Clause 2(4) of the Contract provides that:-

"(4)     The powers and authorities vested in the Architect and the duties of the Architect's Representative exercisable under the Contract shall continue and be in force until the granting by the Architect of the maintenance certificate referred to in clause 103 or the settling of the final payment certificate, whichever is the later."

18. Clause 117(1), under which Mr. Somerville invited Mr. Kwan to give his decision, and the latter purported to do so, is in the following terms:

    "117.(1)      If any dispute or difference shall arise (save only as to excepted matters as defined in clause 115) between Government or the Architect and the Contractor in connection with or arising out of the Contract or the carrying out of the Works, whether during the progress of the Works or after their completion and whether before or after the termination, abandonment or breach of the Contract, it shall be referred to and settled by the Architect who shall state his decision in writing and shall give notice of the same to Government and to the Contractor."

19. As I have indicated in the chronology of events, the maintenance certificate was issued on the 23rd June 1977, and the final payment certificate was settled about the 15th May 1979. Mr. Jackson submits that by February 1989, the Architect had no power under the Contract to make any decision, having become functus officio under clause 2(4) and that Mr. Kwan's letter of 25th February 1989 cannot constitute a valid Architect's decision.

20. The issue thus arising is the survival of the arbitration clause, which matter, as Mr. Thomas submits, was considered in Heyman v. Darwins, Limited (1942) AC 356. The point is succinctly dealt with in the following passage at p. 374 of Lord Macmillan's judgment, significantly reproduced at p. 111 of the 2nd Ed. of Mustill & Boyd's Commercial Arbitration:

'...an arbitration clause in a contract...is quite distinct from the other clauses. The other clauses set out the obligations which the parties undertake towards each other...but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution... What is commonly called repudiation or total breach of a contract...does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligation which he has by the contract undertaken to the repudiating party. The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract'.

21. I am not able to find anything in the Contract that would displace or is inconsistent with Lord Macmillan's dictum. I have considered the question of whether paragraph (1) of clause 117 could be considered to be an ordinary power of the Architect that is severable from the arbitration provisions and that would accordingly not survive with them. But in my view paragraph (1) is clearly an essential part of the arbitration process provided, and if it did not survive, disputes or differences that arise after the maintenance certificate is issued and the certificate of payment settled, would be denied the agreed mode of settlement. Consistent with that view is the employment in paragraph (1) of language by means of which reference to arbitration is usually provided for, the absence of such language in paragraph (3), and also in my view the general scheme of this part of the Contract.

22. In my judgment therefore the Architect was not functus officio the settlement of a dispute or difference under clause 117(1).

Mr. Kwan not the "Architect"

23. Second that Mr. Kwan is not the "Architect" under the Contract. "Architect" is defined in clause 1 in the following way:

""Architect" means the person named in the Articles of Agreement as Architect or such other person as may be authorized from time to time by the Director and notified in writing to the Contractor to act as Architect for the purpose of the Contract and the person so named or authorized may be described either by name or as the holder for the time being of a public office".

24. The person named as the Architect in the Contract is "The Chief Architect (division three) of the Architectural Office Public works Dept." At the time the works were carried out, the holder of that office was a Mr. J. Lei, who is now the Director of the Architectural Services Department ("ASD"). Since then the Public Works Department has been reorganised so that there is now no Architectural Office in the Public Works Department but a separate Architectural Services Department. It is common ground that no person has been authorized by the Director and notified to the Contractor.

25. Mr. Thomas contests that submission firstly upon construction of the Contract itself, and second on the provisions of the Interpretation and General Clauses Ordinance (Cap. 1). Mr. Thomas submits that the Contract should be construed in a common sense, not overly technical manner and in the light of the parties' intention and purpose. Upon that basis Mr. Thomas submits that the holder of the new office is the person named in the Contract by office, the Department referred to in the context of each being surplusage, and that accordingly no notice had to be given.

26. It is clear from a "Hong Kong Government Telephone Directory issued July 1990" produced and referred to by Mr. Jackson without objection, that there are literally many dozens of architects in the Public Service; they are said to number over 154. It can be seen from the directory that there are no less than 6 Chief Architects, each heading one of the 6 divisions in the Architectural Services Department; 6 Chief Architects in the Housing Department and a few in the Territory Development Department. But only one of them, Mr. Kwan, is a "Chief Architect division 3" although there is a Chief Architect 3 in section 3, not division 3, in the Housing Department. Furthermore, Mr. Jackson pointed out that division 3 includes reference to architects concerned with the Airport, though I do not accept that is necessarily an indication of that division not being concerned with public housing. In that regard Mr. Kwan in his affidavit states quite positively that the Architectural Office of the PWD, as a result of reorganization, was restructured to the Architectural Office of the Building Development Department and then to the present Architectural Services Department; and that in November 1988 the Deputy Director of the Architectural Services Department sent him the 1988 investigation report into the Lek Yuen Estate as the matters raised in it might have to be referred to him "as the inheritor of the post of the Chief Architect/3 i.e. the nominated Architect" for the Contract. There is obviously some suggestion in that regard that someone, possibly the Deputy Director of the Architectural Services Department considered Mr. Kwan to be the inheritor of the post of "Chief Architect/3". However, I am not able to accept that the reference to the Architectural Office of the PWD is surplusage in the designation of the office nominated. Moreover, having regard to the very important powers and functions vested by the Contract in the "Architect", clearly it is correspondingly important that the Architect's identity is at all times known to the parties. Furthermore, the definition in clause (1) provided a means to the Director which he could easily have used to authorise the holder of a new office on the reorganization of the old Architectural Office.

27. Upon the construction of the Contract in the context of its circumstances, I am therefore not able to conclude that the latter office is indeed the same office as that originally named in the Contract.

28. Mr. Thomas also relies upon section 54 of the Interpretation and General Clauses Ordinance (Cap.1):

"References to public officer.

54.     In any Ordinance, instrument, warrant or process of any kind, any reference to a public officer, or to a person holding a public office by a term designating his office, shall include a reference to any person for the time being lawfully discharging the functions of that office, or of any part of such functions, and any person appointed to act in or perform the duties of such office, or any part of such duties, for the time being."

29. As Mr. Thomas pointed out, s. 54 appears in Part VIII under the heading "Public Officers and Public Contracts".

30. The question that arises is whether "instrument" includes "Contract". Mr. Thomas relies upon the opening words of para. 1301 of the 4th Ed. of Halsbury Laws:

"1301.     Definition of a deed. A deed is an instrument which complies with the following requirement, for the proposition that "instrument" is a very wide expression, wider than "Contract" and includes the latter."

31. He relies also upon paras 1436 and 1437 which appeared under the heading 'Instruments under hand only':

"1436.     Definition. An instrument under hand only is a document in writing which either creates or affects legal or equitable rights or liabilities, and which is authenticated by the signature of the author, but not sealed by him. Such documents are used in a great variety of transactions, including contracts .... The expression is not limited to documents of a formal character, and it extended to any duly signed document which is intended by the author to be the means of producing a result recognised in law.

1437.     Meaning of instrument. The word"instrument" as applied to a writing may have a still wider scope, and may include documents which affect the pecuniary position of parties although they do not create rights or liabilities recognised in law; but usually it applies to a document under which some right or liability, whether legal or equitable, exists ... "instrument" includes every written document, and thus includes an agreement in writing not under seal securing periodical payments."

32. However it is the meaning of "instrument" in Part VIII of Cap. 1, in particular in section 54, that is in point. Prima facie, in its context in section 54 it suggests to me some sort of promulgation or process, a meaning that is entirely consistent with the definition of "instrument" in section 3 of Cap. 1:

"Instrument" includes any publication in the Gazette having legal effect.

33. It seems to me that the legislature would be more concerned about references to public officers and holders of public offices in that context of statutory instruments than in contracts. Furthermore, it is to be noted that contracts are dealt with in a group of sections i.e. sections 59, 60 and 61, at the end of Part VIII and that in each of these reference is made to "any contract or other document". And "document" is defined in section 3 in terms that seem to me to be wider than "instrument" and to refer to both the material or physical means of representing or conveying an instrument and also the instrument itself. Had section 54 been intended to reach beyond what appears to be its primary area of concern i.e. statutory instruments and official process, it seems reasonable to expect that it would have been couched in express terms or terms in which that would have been made clear and inescapable.

34. Finally even if the "Chief Architect (division three) Architectural Office Public Works Department" were a corporation sole as submitted by Mr. Thomas in reliance upon para. 1209 of Volume 9 of the 4th Ed. of Halsbury Laws, I do not see how that would avail the Government for the question would remain as to whether it was the same corporation sole.

35. I am driven, therefore, to the conclusion that it has not been established that the office of Chief Architect division 3, Architectural Services Department is the same office as that of "Chief Architect (division 3), Architectural Office Public works Department" or, to put it in another way, that Mr. Kwan was the Architect.

Effect of Maintenance Certificate

36. Mr. Jackson's third ground is that the maintenance certificate is conclusive. The more directly relevant clauses of the Contract are as follows:

37. The Architect issued the maintenance certificate on 23 June 1977 in respect of the whole of the works. Mr. Jackson submits that pursuant to clause 102 the certificate constituted first, approval of the whole of the works and, second, an admission of due performance of the Contract by Wang Chong. Furthermore that the certificate is conclusive and binding upon the Government and that accordingly it is not open to Government to contend in litigation, arbitration or in any dispute referred to the Architect for decision under clause 117(1) and (2), that the quality of the materials or workmanship used by Wang Chong was not in accordance with the requirements of the Contract.

38. Mr. Thomas for his part disputes that submission contending that nowhere does the Contract say that the maintenance certificate is conclusive or final and binding; that on the contrary clause 105 specifically enables Wang Chong's unperformed obligation to be proceeded with.

39. It is quite correct that nowhere is the certificate of maintenance said to be "conclusive" or "final and binding", although the latter expression is used for example in clause 115(1) in relation to the architect's decision on the excepted matters. But as the Privy Council observed in Ata U1 Hag v. City Council of Nairobi [1962] 23 BLR 76; 92 upon which Mr. Jackson places reliance, that circumstance taken by itself is not decisive. Their Lordships went on to say at p.95 "... that the whole scheme of the contract involved that a certificate under 7(iv) was final subject only to the provisions in regard to the maintenance period and the rights given to the Council in respect of defects either of material or of workmanship which might appear during the maintenance period." Of course, as their Lordships added at the bottom of that page, the decision must depend upon the construction of its own particular contractual documents and though a consideration of the opinions of courts on other words in other contracts in other cases is of assistance the adjudication in that case involved thereafter a return to a study of the contract under review.

40. Turning to the Contract, it is clear that the maintenance certificate is the final certificate. Equally clear is the implication, to put it no higher, in clause 102 that the maintenance certificate is deemed to constitute approval of the works and that it is to be taken as an admission of the due performance of the Contract, notwithstanding that the clause is expressed in the negative. In the latter regard, it is true as stressed by Mr. Thomas, that the maintenance certificate does not itself claim to be conclusive. But it is framed in terms that are clearly appropriate to clauses 102 and 103, upon which it primarily derives its effect.

41. The implication that the certificate of maintenance is conclusive seems to me also to arise in clause 103. Likewise it would seem that the notification of claims by the contractor before the giving of the maintenance certificate provided for in clause 104 is required because of the conclusive effect of the maintenance certificate. Further, when one comes to clause 105, upon the excepting scope of which Mr. Thomas seeks to rely, it is significant that the clause commences with an implicit recognition of the effect of the maintenance certificate in the express preservation of unperformed obligations. The difficulty of construing the language in which the exception in clause 105 is framed i.e. "any obligation incurred under the provisions of the contract prior to the issue of the maintenance certificate which remains unperformed at the time such certificate is issued" which was the subject of strong submissions, does not seem to me to be of assistance in addressing the question of whether the maintenance certificate is conclusive. Nor does the question of whether the obligations contended for by the Government i.e. the obligations to provide the 1,800 tons of cement that were short by reason of the deficiency of cement in the concrete, and the obligation to pay damages for that breach, are unperformed obligations within the wording of clause 105. In any case in that regard, I think there is a clear difference between an obligation in the contract itself i.e. imposed by the contract, and an obligation incurred under the provisions of the contract. Thus the obligation to provide the 1,800 tons of cement seems to me clearly an obligation imposed by the contract. On the other hand, a liability of the contractor to indemnify the Government in respect of injury to the contractor's workmen or in respect of the infringement of patent or design rights under the indemnity provisions of clauses 27 or 34 of the Contract, would, I think, be a liability incurred under the provisions of the contract, and would be apt to fall within the language of the exception in clause 105. However, I do not think liability to pay damages for the failure to provide the 1,800 tons of concrete falls within the wording of the exception, since that would be a liability incurred under the provisions of law and not under those of the contract; more to the point, it would be substantially and essentially a question as to the quality of materials and workmanship. However that may be, the basic conclusive nature of the maintenance certificate remains unaffected. Numerous, if not most, breaches of obligations in the contract must give rise to some liability by virtue of the law, and it seems to me that it could not have been intended to so massively undermine the conclusive effect of the maintenance certificate in that way. Had that been intended, as Mr. Jackson submitted, reference is more likely to have been to breach of the contract.

42. Accordingly having regard to clauses 102 to 105 in the context of the whole Contract and the relevant scheme of the Contract, I think the conclusion is clear that the maintenance certificate constituted approval of the works and an admission of due performance of the Contract in terms of clause 102. Those are not the terms in which Wang Chong has sought a declaration in paragraph 1(i) of its summons, which are taken from clause 115(1)(b). But if the maintenance certificate is conclusive in terms of clause 102, if follows, in my view, that it must be conclusive in the terms sought i.e. that it constituted conclusive evidence that the quality of materials and workmanship used by Wang Chong was as required by the Contract, that Government was not entitled to seek the Architect's decision in respect of the matters referred to him by Mr. Somerville in his letter of 22 February 1989, and likewise that Mr. Kwan was not entitled to decide that Wang Chong was in breach of contract.

Excepted Matters

43. Fourth, that clause 117 does not extend to the excepted matters dealt with in clause 115. The relevant clauses are clauses 115, 116 and 117:

   SETTLEMENT OF DISPUTES

44. In substance, this ground is that the dispute relates to the quality of the material supplied i.e. the concret, that it is therefore an excepted matter, and that as such it is excluded from the ambit of clause 117 and could not therefore had been referred to the Architect under the latter provision. Mr. Jackson submits that if it is not a complaint relating to the quality of the materials i.e. the concrete, then it must be a complaint relating to workmanship, namely the process of mixing cement, aggregate sand and water to produce the concrete. On either view, he says, the Government complaint relates to an excepted matter within clause 115(1)(b).

45. Mr. Thomas' primary submission in reply is that the Plaintiff's claim is for compensation, that is a breach of contract and it could never be within clause 115. If I understood him rightly he acknowledges that something of clause 115 would apply to every claim, but he says that it is the substantial nature of the claim that must be looked at. Here the substantial nature of the claim is compensation. He points to the appearance of clause 117 under the heading "Settlement of Disputes" whereas clause 115 appears under "Frustration". It seems quite clear to me that the substantial nature of the dispute is concerned with materials and workmanship. It is those matters that give rise to the claim for compensation. If merely the claim for compensation took the matter out of the ambit of clause 115 into that of clause 117 then every question as to the quality of materials and workmanship would, if there were any dispute about it, be likely to be brought into the scope of clause 117 and the former rendered nugatory.

46. Next Mr. Thomas explored the nature of clauses 115 and 117. They do not, he submits, involve watertight compartments. Some of clause 115 would apply to every claim, and in either case, in the first place the Architect would determine the point. Mr. Thomas submits it is absurd therefore that all the matters in clause 115 should be referred to the Architect and become subject to final and binding decision, whereas those under clause 117 could be referred to arbitration. Why, he asked, should merely the labelling of a claim as one under clause 115 preclude the Government from arbitration. He submits that clause 115 provides a summary procedure that must be subject to review. The difficulties Lui J. had in Ying Kwong Construction Company v. Attorney General (HCMP 510 of 1981, unreported), in categorising matters as excepted matters subject to clause 115 and not in the other category subject to clause 117, Mr. Thomas says, illustrates the absurdity of the dichotomy. It may well be thought that a review of decisions under clause 115 would be desirable, having particular regard to the potential range of the matters within the scope of clause 115 and flowing particularly from questions as to the quality of materials and workmanship under paragraph (b), however it is possible to point to considerations to the contrary, as Mr. Jackson has done. Be that as it made, and however desirable some means to review decisions under clause 115 may be, plainly it is not what clause 115 provides. On the contrary, the two clauses deal with the matter in language that is clear and express them to be mutually exclusive, with stated consequences equally distinct. That matters might be held to fall within one and yet contain to a minor, secondary or ancillary degree, term it what one will, elements of the other, cannot vitiate the clear language of the two provisions. It is not necessary for me to go further than that in this case nor to accept Mr. Thomas's invitation to dissent from the views of Liu J. in the Ying Kwong Construction Company case, not that I say I am inclined to do so.

47. Mr. Jackson also submits that Government having elected to proceed under Clause 117 is now estopped from relying on Clause 115. He refers to The Uhenbels (1986) 2 L1. Rep. 294 at 296; 297, as illustrating the operation of estoppel and the irrevocability of election. There can be no doubt that the Government unequivocally and in the clearest of terms elected for and represented its reliance upon clause 117, to the point that Mr. Kwan, gave his "determination in accordance with Article 117(1) of the Contract". There is no reason to suppose that the Government's election, which was communicated by Mr. Somerville, was not made with full knowledge of the facts. And as is clear from The Uhenbels at p. 297, if Government was aware of the facts that gave rise to the different remedies or recourse under clauses 115 and 117, the law will hold it to its choice even though it was unaware that would be the legal consequence. As to reliance by Wang Chong upon that election to its detriment, Wang Chong's solicitors, I accept, would have advised Wang Chong to make submissions to Mr. Kwan, and to extend the Limitation Waiver Agreement so that they would have time to make submissions and to have them considered by Mr. Kwan, and that such advice would have been accepted. In my judgment therefore, Government is estopped from seeking now to rely on Clause 115.

48. For the foregoing reasons, it was not open under Clause 117 to the Government to refer the matters in question to the Architect, nor open to Mr. Kwan as Architect to determine them.

That Mr. Kwan has not in fact made any independent decision

49. Fifth, Mr. Jackson submits that Mr. Kwan did not have the personal knowledge, did not make the necessary investigations and did not have the time to make the independent decision required.

50. The relevant facts are these. The "Architect" who had supervised the works carried out was Mr. J. Lei. Mr. Kwan was not involved. It must be accepted that he did not supervise or even witness the original execution of the concrete structural work and that he did not have any first hand knowledge of the circumstances of Wang Chong's alleged breaches of contract.

51. Mr. Jackson submits that it would accordingly be difficult for Mr. Kwan to reach his own independent decision as to whether the complaints made in Mr. Somerville's letter of 22nd February 1989 were well founded, particularly as the findings of the 1985 and 1988 investigations are in conflict with the original cube test results obtained in the course of the works. Mr. Kwan would, therefore, have had to make enquiries of the contractor, Mr. Lei and others involved, he would need expert assistance to interpret the data and the technical report, he would have to make his own enquiries. All that would take considerable time. Yet he was allowed only three days by Mr. Somerville to avoid the limitation time bar.

52. Mr. Jackson submits that in law to give a valid decision under the Contract, the Architect must give his own personal decision on the matter (Perini v. Commonwealth of Australia (1969) 12 BLR 82 at 102).

53. Mr. Thomas, in response, points out that Mr. Kwan received the 1988 report in November 1988 and had ample time to study it, which he must have done as it was such a topical matter. He adds that Mr. Kwan himself says in his affidavit that he "studied it in detail and formed the view that it contained evidence of serious under provision of cement in the concrete". He also consulted structural engineers in his Department. He states that the decision was his own. He did not contact Wang Chong because he believed that Wang Chong's management team in February 1989 was very different from that in 1974 to 1976, the Lek Yuen Estate construction period, and that the former would not be able to give him any useful information. Mr. Thomas also relied upon Clause 116, which attributes to the Architect possession of the facts necessary for him to form his own decision.

54. Having carefully considered the submissions and the evidence, I have come to the conclusion, not without some unease, that Mr. Kwan's contentions must be accepted i.e. that the decision was his own and that he studied the report in detail. It is implicit in his conclusions that he was satisfied he had sufficient time and evidence to come to a satisfactory decision. I accordingly reject this fifth ground advanced by Mr. Jackson.

Lack of particularity

55. Sixth, Mr. Jackson attacks the lack of particularity in Mr. Kwan's "decision" which was stated in his letter of 25th February 1989 to Mr. Somerville and copied to Wang Chong in the following way:

"....I have studied the Technical Report, prepared in December, 1988 by the Hong Kong Housing Authority, and the Report by Messrs. Harris & Sutherland. No submission or reports have been received from the Contractor or his Solicitors. I accept the findings and conclusions contained in both the Hong Kong housing Authority and the Harris & Sutherland Reports. Accordingly, my determination in accordance with the Article 117(1) of the contract is as follows:-

(a)     The Contractor has failed in the performance of his contractual obligations under the Contract.

(b)     The Contractor is liable to compensate the Government for its losses and resulting therefrom.

(c)     The valuation of the losses caused to Government, for which the Contractor is, pursuant to determinations (a) and (b) above, liable to compensate the Government, for which you claim a sum of HK$23,180,000 as detailed in the valuation report annexed to your letter, are incapable of a full determination by me. Accordingly, I make no determination in respect thereof."

56. Mr. Jackson submits the decision should have been stated with sufficient clarity as to enable it to be implemented and that it falls short of a minimum degree of precision. He made it clear that he was not seeking reasons.

57. No authority in support of any such requirement as Mr. Jackson contends for was cited or produced, and nothing has been drawn to my attention in Clauses 115, 116, 117 or elsewhere in the Contract that suggests such a requirement. The decision was not that of a court or a lawyer. I have no hesitation in rejecting the contention that on the ground of lack of clarity or precision, the determination cannot be accepted as a decision for the purposes of Clause 117.

Decision not properly served

58. Seventh, it can be seen that Clause 117(1) requires that the Architect "shall state his decision in writing and shall give notice of the same to Government and to the Contractor".

59. Mr. Jackson submits that Mr. Kwan did not comply with this requirement either in respect of the Government or of the Contractor, and that upon the authority of Central Provident Fund Board v. Ho Bock Kee (1981) 17 BLR 21, the decision is invalid.

60. Clause 118 provides that:-

(a)     personally, or

(b)     by post addressed to the Contractor's last known place of business or, in the event of the Contractor being

(i)     a firm, to the last known place of residence of the owner or the partners thereof, or

(ii)     a limited liability company, to the registered office in Hong Kong of such company; or

(c)     by leaving a copy at the Contractor's last known place of business or, in the event of the Contractor being

(i)     a firm, at the last known place of residence of the owner or the partners thereof; or

(ii)     a limited liability company, at the registered office in Hong Kong of such company, or

(d)     by posting a copy in a conspicuous position upon the Site.

    (2)      Any notice to be given to the Architect under the terms of the Contract shall be served by sending the same by post to or leaving the same at the office of the Architect.

61. Mr. Jackson complains that Mr. Kwan's letter was not sent to Wang Chong's registered office, but addressed to and delivered to the Attorney General instead.

62. However, the evidence is that the 25th February 1989, on which Mr. Kwan wrote the letter conveying his decision, was a Saturday. There was a shortage of messengers in his office. So he asked Mr. Somerville whose office was in the same building to arrange for the delivery to Wang Chong of a copy of his letter which he supplied.

63. I see no merit in any of the technical points taken in Mr. Jackson's submission that the service was not effected in terms of Clause 118(1)(c). In my judgment, service was so effected by a messenger taking the copy to Wang Chong's office, the receipt of which is not disputed.

64. And as to service on the Director, I did not understand the point to be pressed. In any case, the relevant provisions are obviously intended primarily for the protection of the party to be served (although there can be other considerations, these have not really arisen in this case). There is no suggestion from the Director that he did not receive it in a manner that complied with Clause 118.

65. In the result, I am unable to accept that the decision was not properly served.

General Application of Contra Proferentem Rule

66. In conclusion, Mr. Jackson submits that Clauses 115 and 117 constitute a complete code for dealing with disputes between the Government and the Contractor. Any ambiguity or uncertainty in the conditions should therefore be resolved in favour of Wang Chong. Because Government put forward the conditions, the contra proferentem rule applies.

67. But as the very authorities (i.e. Mitsui Construction Co. v. A.G. (1984) 26 BLR 123, and Chitty on Contracts, 26 Ed. paragraphs 836-837; cited by Mr. Jackson made clear, the rule applies in cases of ambiguity. I do not think there is any ambiguity in clauses 115 and 117, at any rate in the respect concerned.

68. In the result, my conclusions that Mr. Kwan was not the "Architect" for the purposes of the Contract, that the maintenance certificate was conclusive in the sense discussed, and that the dispute related to "excepted matters" under clause 115 which are excepted from clause 117(1), dispose of the matter since it follows from them that there is no valid Architect's decision to go to arbitration. However, I accept that it may be of advantage to address some of the remaining submissions, and I proceed to them.

II Government's Claim Doomed to Failure

69. Proceeding to Wang Chong's second principal argument, it is submitted by Mr. Jackson that it is clear from the affidavit evidence that the Government has not and will never suffered any loss as a result of Wang Chong's alleged breach of contract.

70. This submission rests upon the following 3 contentions:

(1)     That the Government have transferred the ownership of the 4 blocks to the Housing Authority and therefore will not sustain any damage from the diminished life of the 4 blocks.

(2)     That it is Government policy to replace early low cost public housing estates including the Lek Yuen Estate; accordingly that long before the diminished life of the 4 blocks expires, they will inevitably have been replaced and that therefore the Government will never sustain any damage.

(3)     That accordingly there is no claim to be referred to arbitration.

71. The Government's case in the present context is founded upon the conclusion in the 1988 investigation report that the 4 blocks will last only until 2008 instead of the additional 8 years to 2016 if concrete of the required specification had been used.

72. For the first two propositions Wang Chong relies primarily upon an article by Mr. J. Lei in the Building Journal (a trade journal published in Hong Kong), extracts from Government publications and an ASD Brochure with a foreword by Mr. Lei in his present capacity of Director of the ASD. The relevant effect of their contents is that the PWD part of a 1973 ten year programme that did not materialise, consisting of some 605,000 units were finally completed and handed over to the Housing Authority in 1982-83; that the Executive Council in 1987 endorsed a new Government policy to upgrade the older low grade housing estates which envisaged redevelopment, inter alia, of all Mark I-VI and former Government low cost nousing estates, and that the ASD is responsible for the maintenance and management of public buildings with the exception of public housing.

73. That evidence fell far short of establishing that the ownership of the 4 blocks was vested in the Housing Authority particularly in the face of the Government's denial that that was so, notwithstanding Government's failure to refute Wang Chong's evidence described, which had been served upon the Government some considerable time before. For the latter reason I declined to allow the Government to introduce rebuttal evidence in the course of the trial. Mr. Thomas very fairly conceded that the Housing Authority have the management and control of public housing estates, but it by no means follows from that concession that the Government will not sustain any loss from the diminished life of the 4 blocks. Furthermore, although the evidence does tend to show that there have been plans for the demolition and replacement of low cost housing estates which have received the endorsement of the Executive Council, and that the 4 blocks probably fall within the scope of that policy, the evidence, and the conclusions to be drawn from it, involve speculation as to what may happen in the fairly distant future and are not of a sort that can be accepted with any confidence, particularly for the purpose of establishing that it is indisputable that the 4 blocks will be demolished before 2008 in pursuance of Government policy.

74. And as to the third proposition, Mr. Jackson relies primarily upon the judgment of the English Court of Appeal in Mayer Newman & Co. Ltd. v. Al Ferro Commodities Corporation. (4th April 1990, unreported). However it is clear from the judgment of Bingham L.J. (at p. 17 of the transcript) that he assumed without deciding the point that the defendants were right to submit that the court may or should only exercise jurisdiction when the applicant shows a genuine disputable issue on the substantive merits. I am not able to adopt the opposite views of Saville J. in Hayter v. Nelson (referred to at. p. 12 of the transcript) notwithstanding his powerful reasons which clearly attracted Bingham L.J., because as the latter pointed out, there is a body of authority for the contrary view.

75. For all these reasons I reject Wang Chong's submission that the Government's claim is doomed to failure on the grounds advanced and also that I should therefore refuse to refer the matter to arbitration.

III Wang Chong's entitlement to pursue a limitation defence

76. I turn then to Wang Chong's third principal argument that if the Government is entitled to pursue its claim, then Wang Chong is entitled to put forward a limitation defence. The argument is advanced in support of Wang Chong's originating summons for declarations that the Limitation Waiver Agreement does not avail the Government.

77. Upon Mr. Thomas's indication in the course of the hearing that the Government might in terms of section 26(b) of the Limitation Ordinance (Cap. 347) plead that its right of action was concealed by Fraud, Mr. Jackson very properly conceded that in such eventuality the declaration sought would not dispose of the limitation point. In that regard I must record that I was not asked to address any question of fraud and that I should not be taken to have done so.

78. Furthermore, reverting to the matter of limitation, the conclusion I have reached on 3 of Mr. Jackson 7 grounds in support of his first principal argument, that there is no valid Architect's decision, means that I do not have to address his submissions that the declarations sought in respect of the limitation point, are desirable in the context of subsequent arbitration. Also, I do not think the declarations would be appropriate in the alternative context of proceedings on the Government's writ, in which a court dealing with the claim for substantive relief would be in a better position to address the question of limitation, at any rate in regard to the factual aspects e.g. of renunciation, of the manner in which the terms of the Limitation Waiver Agreement were settled, and of which the recollection of the individual solicitors concerned may be unclear and appear to diverge.

79. Finally there is the discretionary nature of declaratory relief and the caution with which it is to be given (see paras 15/16/2 & 15/16/3 of the Supreme Court Practice 1991).

80. For all these reasons I have reached the conclusion that I ought not to accede the applications for declarations relating to limitation.

81. As to the appointment of an abitrator, which also was sought by the Government in its first summons of the 5th January 1990, it follows from my acceptance of the 3 of Mr. Jackson 7 grounds that no appointment need, or indeed, should be made.

82. As to Government's second summons of 15th September 1990 seeking a stay of specified parts of Wang Chong's summons, perhaps it should have been addressed first. However it was convenient to proceed in the order adopted by counsel, which in the event has provided the answer. That follows from the well established principle that no abitrator can determine his own jurisdiction, in pursuance of which Government sought to stay only those parts of Wang Chong's summons that it specified. Having reached the conclusion that Mr. Kwan was not the Architect under the contract, that his purported decisions of 25th February 1989 did not fall within clause 117 and that they related to excepted matters under clause 115, a stay of those parts specified becomes pointless, and in my view it would be an abuse of the discretion under section 6 to order such a stay. In the result it is unnecessary to address the 5 grounds upon which Mr. Jackson opposed the Government's application for stay. I will however say, quite shortly to avoid extending this judgment which is already overlong, that it seems to me that paragraphs 1(i) & 4(ii), which the Government seeks to stay go to the abitrator's jurisdiction and should therefore not be stayed upon the principle I have already mentioned. Second I accept Wang Chong's contention that the Government agreed by a consent order made by Barnett J. on 18th March 1990 that Wang Chong's Originating Summons (i.e. the whole of the summons) be heard by the Judge in Chambers on 24th September significantly with an estimated time of 4 days. Third, by appearing and consenting to that order, the Government has taken a step in the proceedings thereby rendering itself ineligible for a stay under the express terms of section 6 of the Abitration Ordinance.

83. Accordingly the Government's summons of the 5th January 1990 seeking first, a declaration that the Limitation Waiver Agreement is binding and enforceable and, second, the appointment of an arbitrator, and its summons of the 15th September 1990 seeking a stay are dismissed. As to Wang Chong's summons of 21st February 1990, I make such of the declarations or parts thereof that accord with my conclusions. Should there be any difficulty in drawing up these, there will be liberty to apply. I will now hear counsel upon costs and any consequential matters.