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HCCT 100/2003
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO. 100 OF 2003
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| BETWEEN |
| HYUNDAI ENGINEERING AND CONSTRUCTION COMPANY LIMITED |
Plaintiff |
| AND |
| VIGOUR LIMITED |
Defendant |
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Coram: Hon Reyes J in Court
Date of Hearing: 19 March 2004
Date of Judgment: 14 April 2004
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J U D G M E N T
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I. Background
1. By 3 building contracts the Defendant ("Vigour") as Employer engaged the Plaintiff ("Hyundai") as Main Contractor for construction work in connection with the "KCRC 5Ha Site Topside Development -- Hotel & Office Project" ("the Project"). The parties also entered into supplementary agreements. The building contracts and supplementary agreements between the parties were respectively known as Contracts A, B and SA and the Supplementary Agreements for Contracts A and B and Retail Area RAC (collectively, "the Contracts"). Under the Contracts substantial liquidated damages were payable for delay in completion. The Project was carried out under the supervision of Ronald Lu & Partners as Architect and Davis Langdon & Seah Hong Kong Limited as Quantity Surveyor.
2. The Contracts stipulated a mechanism for resolving disputes between the parties. In particular, Clause 86 ("Clause 86") of the Contracts provided:-
"(1) If any dispute or difference of any kind whatsoever shall arise between the Employer and the Contractor in connection with or arising out of the Contract or the carrying out of the works including any dispute as to any decision, instruction, order, direction, certificate of the Architect or certificate of valuation by the Surveyor 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 an settled by the Architect who shall state his decision in writing and give notice of the same to the Employer and the Contractor. Unless the Contract shall have already been terminated or abandoned the Contractor shall in every case continue to proceed with the Works with all due diligence and he shall give effect forthwith to every such decision of the Architect unless and until the same shall be revised in the mediation or arbitration as hereinafter provided. Such decision shall be final and binding upon the Contractor and the Employer unless either of them shall require that the matter be referred to mediation or arbitration as hereinafter provided. If the Architect shall fail to give such decision for a period of 28 days after being requested to do so or if either the Employer or the Contractor be dissatisfied with any such decision of the Architect then either the Employer or the Contractor may within 28 days after receiving notice of such decision, or within 28 days after the expiration of the said decision period of 28 days, as the case may be, request that the matter shall be referred to arbitration under the provisions of the Arbitration Ordinance or any re-enactment or amendment thereto.
(2) The arbitration shall be commenced by either party giving to the other party notice stating the subject matter and details of the dispute and the qualification which, in the opinion of the party giving the notice, should be possessed by the arbitrator.
(3) The notice requiring arbitration may include a request for conciliation. If such request is made and is acceded to by the other party then the Employer and the Contractor (as the case may be) shall endeavour to agree on a conciliator and shall submit the matter in dispute to him. The conciliator shall discuss the matter with the parties and endeavour to resolve it by their agreement. All discussions in conciliation shall be without prejudice, and shall not be referred to in any later proceedings. Failing agreement the conciliator may by written decision himself determine the matter. The conciliator's determination shall be binding on both parties unless within ten (10) Business Days either party notifies the other in writing that it rejects the conciliator's determination.
(4) If:
(a) conciliation has not been requested, or if requested has not been agreed upon within ten (10) Business Days of the request, or
(b) the parties have agreed upon conciliation but have been unable within ten (10) Business Days of such agreement to agree upon a conciliator, or
(c) no agreement has been reached in conciliation and no determination has been issued by the conciliator within one (1) month of the request for conciliation, or within such further time as the parties may agree, or
(d) either party has within the prescribed time rejected the conciliator's determination,
then the matter in dispute shall be referred to arbitration.
(5) The arbitrator appointed shall have full power to open up, review and revise any decision (other than a decision under Clause 46(3) not to vary the Works and a decision under Clause 53(5)(b) regarding the issuance of the Certificate of Completion for any substantial part of the Works), instruction, order, direction, certificate of the Architect or certificate of valuation by the Surveyor and neither party shall be limited in the proceedings before such arbitrator to the evidence or arguments put before the Architect for the purpose of obtaining his decision above referred to.
Provided that:-
(a) the giving of a Certificate of Completion in accordance with Clause 53 shall not be a condition precedent to the taking of any step in such reference;
(b) no decision given by the Architect in accordance with th foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrator on any matter whatsoever relevant to the dispute or difference so referred to the arbitrator as aforesaid.
(6) In the case of any dispute or difference as to the exercise of the Architect's powers under Clause 81(1) the reference to the arbitrators may proceed notwithstanding that the Works shall not then be or be alleged to be complete."
3. There was delay in completing the Project and a dispute arose between Hyundai and Vigour over whether the Architect had correctly assessed the Plaintiff's entitlement to extensions of time. Hyundai thought that greater extensions should have been granted, Vigour that the Architect had been too generous. Hyundai believed that Vigour owed Hyundai over $900 million, while Vigour believed that Hyundai owed Vigour some $200 million in liquidated damages. In respect of its claim against Hyundai, Vigour was entitled to call on a performance bond ("the Bond") for Contract B in the sum of $60 million. But such right had to be exercised by 31 March 2003.
4. Mr Kim Sun-Kyu ("Mr Kim"), Hyundai's Managing Director, was keen to resolve the differences between Hyundai and Vigour by negotiations if possible. Discussions in February 2003 among Mr S L Chung ("Mr Chung") (Senior Project Manager), Mr William Ng ("Mr Ng") (General Manager, Contracts) on behalf of Hyundai and Mr Anthony Kwan ("Mr Kwan") (Chief Manager, Building Cost and Contract Department) and Ms Grace Shen ("Ms Shen") (Senior Project Manager) on behalf of Vigour having made no progress, on 5 March 2003 Mr Kim wrote to Mr Victor Li ("Mr Li") (Managing Director and Deputy Chairman of the Cheung Kong Group ("the Group") to which Vigour belonged). In his letter Mr Kim pointed out that, despite major differences between Hyundai and the Group, a Final Account had recently been agreed between them in the Hok Un Phase II Redevelopment, "due to the attitude of a more fair and reasonable approach being adopted by both parties, and probably more important, on the basis of reciprocal commercial good faith". Mr Kim proposed that he meet with Mr Li in a similar spirit of cooperation in order amicably to resolve the parties' differences in relation to the Project.
5. By letter dated 8 March 2003 Mr Li suggested that "the appropriate time for us to meet and discuss the matter may be right after my staff have completed their review on all the documents tabled to date". Mr Li stressed that the Group "has always been fair and reasonable in all our dealings, so please rest assured that we will be the same with you on this matter, and look forward to meeting with you in the near future".
6. Although Vigour had accepted his suggestion for negotiations, Mr Kim was aware of the deadline imposed by Article 86 on the reference of any dispute to arbitration. Accordingly, by 2 letters dated 12 March 2003 Hyundai invited Vigour to agree to the extension of the time allowed by Clause 86 for referring a dispute concerning 2 decisions of the Architect made on 18 and 26 February 2003 respectively.
7. Vigour having refused the request for extensions, Hyundai issued Notices of Arbitration ("the March Notices") in relation to Contracts A and B on 18 and 25 March 2003 respectively. It later issued a Notice of Arbitration ("the November Notice") in relation to Contract SA on 18 November 2003. Vigour took the position in March 2003 that the March Notices were time-barred under Clause 86 since the Architect had already ruled on identical matters previously and no appeal had been lodged against those earlier rulings.
8. Mr Kim regarded the March Notices as merely protective steps. Hyundai wrote to Vigour and the Group on 18 and 25 March 2003 respectively to emphasise that the March Notices were merely intended to preserve Hyundai's rights under Clause 86. In its 25 March 2003 letter to Group (marked for the attention of Mr Li), Mr Kim stated:-
"In view of the Practical Completion of the Service Apartments, the imminent expiry of...
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