Hong Kong (Sar) Hotel Ltd v Wing Key Construction Co Ltd

CourtHigh Court (Hong Kong)
Judgment Date16 May 2016
Judgement NumberHCCT3/2010
SubjectConstruction and Arbitration Proceedings
HCCT3A/2010 HONG KONG (SAR) HOTEL LTD v. WING KEY CONSTRUCTION CO LTD

HCCT 3/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 3 OF 2010

____________

BETWEEN
HONG KONG (SAR) HOTEL LIMITED Plaintiff
and
WING KEY CONSTRUCTION COMPANY LIMITED Defendant

____________

HCCT 57/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 57 OF 2009

____________

BETWEEN

HONG KONG (SAR) HOTEL LIMITED Plaintiff
and
WING KEY CONSTRUCTION COMPANY LIMITED Defendant

____________

(Consolidated by order of the Honourable Mr Justice Saunders
dated the 8th day of February 2010)

Before: Hon L Chan J in Court
Dates of Hearing: 30 - 31 July, 1 - 3, 6 - 10 August 2012 and 8 -9, 12 - 13, 15 - 16 and 19 August 2013
Date of Judgment: 16 May 2016

______________

J U D G M E N T

______________

1. This is a trial de novo of the two actions. The defendant used to be the plaintiff’s main contractor to build a hotel at the plaintiff’s site at Nos 12-22, Davis Street. The plaintiff issued HCCT 57/2009 (“the 1st Action”) for an injunction to prevent the defendant from entering or remaining at the site after it had purportedly determined the building contract pursuant to its clause 25(1)(c) on 5 October 2009. The plaintiff issued HCCT 3/2010 (“the 2nd Action”) against the defendant for payment of money due under clause 25(3)(d) of the contract.

2. The defendant defends the two actions. It also has a counterclaim in the 2nd Action against the plaintiff for damages for wrongful termination of the contract by the purported determination under clause 25(1)(c) which amounted to a repudiation of contract that had been accepted by the defendant.

THE DETERMINATION OF THE BUILDING CONTRACT

3. The plaintiff awarded the contract to the defendant on 11 April 2008. The contract sum was HK$48 million. The contract period was 435 calendar days from the date of possession of the site. The parties agreed that the commencement date of the contract was 25 April 2008 and the completion date should have been 3 July 2009.

4. The plaintiff pleaded in §9 of the Amended Statement of Claim that the defendant was granted 7 days extension of time by the architect on 19 May 2009. That pushed the completion date to 10 July, but the defendant still could not complete the contract by the later date. The architect then issued a certificate of non-completion on 10 July 2009.

5. On 5 October 2009, the plaintiff as the employer issued a notice pursuant to clause 25(1)(c) of the contract to the defendant as the main contractor thereby purportedly determined the contract. The defendant disputed the plaintiff’s entitlement to issue the notice determine the contract. The plaintiff then started the first action to require the defendant to vacate from the site and the defendant did so on or about 17 October 2009.

6. The relevant parts of clause 25(1)(c) provide:

25. Determination by Employer

(1) If the Main Contractor shall make default in any one or more of the following respects, that is to say:-

(c) If he refuses or persistently neglects to comply with a written notice from the Architect requiring him to remove defective work or improper materials or goods and by such refusal or neglect the Works are materially affected, or

then the Architect may give to him a notice by registered post or recorded delivery specifying the default, and if the Main Contractor either shall continue such default for fourteen days after receipt of such notice or shall at any time thereafter repeat such default (whether previously repeated or not), then the Employer without prejudice to any other rights or remedies, may within ten days after such continuance or repetition by notice by registered post or recorded delivery forthwith determine the employment of the Main Contractor under this Contract, provided that such notice shall not be given unreasonably or vexatiously.” (emphasis supplied)

The conditions in clause 25(1)(c)

7. Mr Chan, counsel for the plaintiff submitted in his opening that the plaintiff has to satisfy four conditions so as to determine the contract under clause 25(1)(c). The conditions are:

(1) If the defendant is in default by refusing or persistently neglecting to comply with the architect’s written notice requiring the defendant to remove defective work or improper materials or goods and by such refusal or neglect the Works are materially affected (“Condition 1”).

(2) The architect gives the defendant a notice by registered post or recorded delivery specifying the default (“Condition 2”).

(3) If the defendant shall continue such default for 14 days after receipt of such notice or shall at any time thereafter repeat such default (whether previously repeated or not), then the plaintiff may within 10 days after such continuance or repetition by notice by registered post or recorded delivery forthwith determine the defendant’s employment (“Condition 3”).

(4) The plaintiff’s notice shall not be given unreasonably or vexatiously (“Condition 4”).

The plaintiff’s case on the satisfaction of the four conditions

8. The plaintiff’s evidence on the determination is mainly given by architect, Mr Felix Lok and his assistant the project architect Mr Lo Chun Wai Dicky (“D Lo”).

9. The Buildings Department (“the BD”) made an inspection of the site on 25 June 2009. The architect then issued a letter dated 26 June to the defendant identifying 11 irregularities in the safety works discovered in the inspection. It required the defendant to rectify the same within 10 days (B 137-138).

10. The BD also issued a letter dated 29 June to the architect with copy to the defendant referring to the safety irregularities discovered in that inspection. The irregularities mentioned were:

(i) Construction materials/debris in the bamboo scaffold, at building edges and lack of proper working platforms, particularly at construction floor;

(ii) Discontinuous catch-fans, inadequate provision of catch-fans at lowest level of bamboo scaffold.

The BD required the irregularities to be put right within 7 days (B 135-136).

11. The BD issued a further letter dated 2 July (“BD’s short complaint”) to the architect with copy to the defendant (B 162). It referred to a complaint against the defendant for having carried out the mixing of cement/concrete at the public street area and discharging construction slurry to public drains. BD’s short complaint is the subject of Architect’s Instruction or AI M-205 and dated 13 August 2009. M-205 required the defendant to comply with BD’s short complaint by 19 August and report on the same on 20 August (B 190).

12. The BD conducted another site inspection on 21 July. It then issued another letter to the architect with copy to the defendant and dated 31 July 2009 (“BD’s long complaint”) (B 160). This letter referred to ten irregularities at the site. It is the subject matter of AI M-204 also dated 13 August 2009. It required the defendant to rectify the irregularities by 19 August and report on the same on 20 August (B 187).

13. The irregularities mentioned in BD’s long and short complaints that are relevant to the determination of the contract are:

(1)Discontinuous catch fans.

(2)Lack of proper working platforms of bamboo scaffolding. For example, no kicking plates.

(3)Building materials/tools/debris/loose planks accumulated on bamboo scaffolding.

(4)Building materials placed on Kwan Yick Street outside the Site.

(5)Discharge of construction slurry to public drains.

(6)Water ponding on 3/F.

14. The plaintiff takes AIs M-204 and M-205 and the BD’s long and short complaints enclosed therein respectively as written notices from the architect under clause 25(1)(c) that required the defendant to remove defective work. It is the plaintiff’s case that the defendant’s failure to comply with M-204 and M-205 resulted in the satisfaction of Condition 1.

15. The architect then conducted a site inspection on 28 August. A video was taken in the course of the inspection. The inspection revealed that the defendant had not rectified the irregularities above-mentioned. That resulted in another letter from the architect dated 15 September 2009 issued expressly under clause 25(1)(c) requiring the defendant to make good the defects. The letter also warned the defendant that if the defects should remain for 14 days, the plaintiff would determine the contract pursuant to clause 25(1)(c). The letter was sent to the defendant by registered mail, fax and e-mail. It is the plaintiff’s case that the despatch of this letter satisfied Condition 2.

16. The architect conducted a further inspection on 29 September. A video recording was also taken of the inspection. This inspection revealed that the rectification works were still incomplete. The architect reported the result of the inspection to the plaintiff by letter on the same day. The architect in particular pointed out that the irregularities of:

(1) discontinuous catch fans; and

(2) lack of proper working platforms of bamboo scaffolding; for example, no kicking plates

posed a serious risk to the safety of the workers and the general public. The architect also recommended to the plaintiff to determine the contract with the defendant (B 165).

17. The plaintiff says that by this stage, Condition 3 was satisfied and it could determine the contract within 10 days of 29 September.

18. The plaintiff further says that even if the defendant should have received the 15 September letter only on 16 September, there was evidence showing that the above-mentioned...

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