SAM WOO BORE PILE FOUNDATION LTD v. CHINA OVERSEAS FOUNDATION ENGINEERING LTD

Date of Hearing: 21 February 2006

Date of Judgment: 21 February 2006

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J U D G M E N T

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I.       Introduction

1.  With one exception, the parties have settled all outstanding differences.  That exception is the amount payable to the Plaintiff sub-contractor (Sam Woo) by the Defendant contractor (COFEL) for “extra over for toeing-in of piles” under item 4 of Bills of Quantities (BQs) 5 and 10.  By “extra over for toeing-in of piles” is here meant the amount due for any excess in pile lengths over 1.50 m due to the requirement that piles be founded on bedrock.

2.  The parties have differing constructions of the relevant item of the two BQs. 

3.  If COFEL is right, Sam Woo was entitled to be paid no more than $2,304,000.  COFEL has already paid that sum to Sam Woo.

4.  On Sam Woo’s reading of item 4 of BQs 5 and 10, $7,940,717 remains due from COFEL in connection with the toeing-in of piles.  Sam Woo says that it should be allowed to defend this claim.  It also wishes to re-amend its Statement of Claim to clarify why it believes more than $7.9 million remains due from COFEL.

5.  COFEL denies liability to pay anything more for toeing in.  COFEL contends that, on the contrary, Sam Woo has no basis for its $7.9 million claim and that should be struck out accordingly.  COFEL further says that Sam Woo’s proposed re-amendments are bad.  COFEL submits that the re-amendments either constitute new allegations being raised outside the 6 year limitation or depend on the $7.9 million claim being valid.

II.      Discussion

A.      Construction of BQs 5 and 10

6.  Item 4 of BQs 5 and 10 are similar.  In BQ 5 item 4 reads:-

“Description	Quantity	Unit	Rate $	Amount $
Extra over 1500 mm diameter vertical pile shaft for toeing- in to bedrock 1.50 m in depth (min.)”	48	nr	36,000	1,728,000.00

BQ 10 item 4 differs only in that it provides for the installation of 16 (as opposed to 48) piles for a total of $576,000 (that is, 16 x $36,000).

7.  Special condition cl.1(j) of the sub-contract between Sam Woo and COFEL states (in English translation):-

“All the quantities set out in the tender are approximate figures.  The quantities of the finally completed works shall be actually re-measured from the drawings to calculate the price for the works in accordance with the unit rates set out in the tender.  Regarding the method of measurement and the items included in the unit rates, save expressly stated otherwise, the calculation shall be in accordance with the method fixed by the provisions of the Hong Kong Government Standard Method of Measurement for Civil Engineering Works (1992 Edition) and its revised edition attached to the Original Contract.  All the unit prices for the works are fixed and they shall not be affected by any fluctuation in prices and wages.”

8.  Mr. Peter Clayton SC (appearing for COFEL) submits that, item 4 of BQs 5 and 10 requires that piles are to penetrate into bedrock for a minimum of 1.50 m.  Mr. Clayton points to the words “1.50 m in depth (min)” in item 4 as making this plain.

9.  It may be that greater depths of pile will be required.  This (Mr. Clayton observes) is apparent from notes 6 to 8 of sub-contract drawings Nos. 273/S/5711 and 273/S/5811 (the drawings) for the relevant piles.  Those notes state that founding levels will be finalised by the Engineer after drilling proof boreholes and that piles will be socketed into rock (of grade II or III or better) in accordance with the “Details of Pile Base” shown on the drawings.  Although they would at least be 1.5 m into bedrock, ultimate founding levels under the sub-contract (Mr. Clayton reasons) were to be finally determined by the Engineer on the basis of actual ground conditions.

10.  Item 4 of BQs 5 and 10 (Mr. Clayton suggests) placed the risk on Sam Woo of piles having to penetrate into bedrock for more (possibly significantly more) than 1.5 m.  All that Sam Woo was entitled to receive by item 4 of BQs 5 and 10 in respect of “extra over for toeing in” was a fixed amount of $36,000 per pile regardless of the extent to which any relevant pile exceeded the minimum toeing in length of 1.5 m.

11.  Mr. Danny Choi (appearing for Sam Woo) counters that by cl.1(j) the length of toeing in was to be re-measured on completion.  Payment would thereafter be made at the agreed rate in BQs 5 and 10 in accordance with Standard Method of Measurement (1992 Edition) (SMM).

12.  SMM provides in Section V §9.14(IX) that, subject to General Principles 3 and 4 of the SMM, separate items are to be provided in BQs for each 0.5 m in depth of extra-over in the toeing-in of cast-in-situ concrete piles.

13.  SMM General Principles state:-

“3.     Each item description is to be consistent with and be compounded from one or more of the descriptive features listed in the itemisation groups in the various sections of Part V, as many of these groups or features being used as may be necessary to identify the work required, but not more than one feature from any one group may be represented in any one item description.  Where the Method of Measurement does not identify the work required, it shall be amended as appropriate (see Part III, paragraph 10).

4.      Unless expressly stated otherwise in the Contract, the Bills of Quantities are to contain all those items compounded in accordance with the foregoing paragraph 3 required to comprise the Works (apart from Provisional Sums and Prime Cost Items which may be required).”

14.  Mr. Choi says that, the effect of cl.1(j) and SMM §9.14 is that the extent of toeing-in was to be re-measured on completion and payment would then be made for any excess over 1.50 m in accordance with SMM §9.14.  This means (Mr. Choi submits) that a proportionate amount would be charged for toeing-in lengths over 1.50 m.

15.  In support of his construction of BQs 5 and 10, Mr. Choi argues that Mr. Clayton’s reading defies common or commercial sense. 

16.  Sam Woo did not have access to boring or site investigation records at the time of tendering.  In preparing its BQs, it would therefore (Mr. Choi contends) have been unable to calculate the socket lengths of each pile. 

17.  The effect of Mr. Clayton’s case is that Sam Woo would indeed have to bear the risk of toeing-in lengths being in excess of 1.5 m.  As it turned out, the excess in many piles amounted to more than 5 m and on occasion came to as much as 11 m.  It would be inconceivable (Mr. Choi contends) that Sam Woo was prepared to bear the considerable costs involved in boring to those lengths.

18.  Further, COFEL made an interim payment of $978,720 based on a claim for “extra over” along the lines contended by Sam Woo.  COFEL later recovered $618,720 from its next payment, claiming that the earlier amount paid had been a mistake.  Mr. Choi submits that in actuality the earlier payment demonstrates COFEL’s understanding that BQs 5 and 10 were subject to re-measurement in accordance with SMM §9.14.

19.  I am not persuaded by Mr. Choi’s submission on the construction of BQs 5 and 10.  In my judgment, Mr. Clayton is right.

20.  Special condition cl.1(j) provides that quantities are to be re-measured to calculate the price for works in accordance with the unit rates set out in the BQs as tendered by Sam Woo.  The quantities stipulated in BQs 5 and 10 are numbers (“nr”) of piles.  There was no change in the total number of piles driven: 48 in connection with BQ 5 and 16 with BQ 10.  Applying the unit rate of $16,000 per pile stated in BQs 5 and 10, one then arrives at COFEL’s figure as the amount due to Sam Woo for extra over in toeing-in lengths.

21.  SMM §9.14 does not enter into the picture.  By cl.1(j) SMM applies “save expressly stated otherwise”.  BQs 5 and 10 which were prepared on the basis of a unit rate per pile (not length of pile) is in effect an express statement that SMM §9.14 (which concerns an amount payable per unit length) is not intended to apply.

22.  I do not think that there is anything absurd or contrary to common sense in the result advanced by Mr. Clayton. 

23.  How a sub-contractor allocates his risks, costs and profit among the various items of a BQ is a matter for him.  It is perfectly plausible for a contractor to decide to charge a fixed amount per pile to cater for the possibility of excess toeing in lengths. 

24.  The risk of a considerable excess might then be factored into the fixed amount quoted in the BQ.  Where the sub-contractor has inadequate information about ground conditions on site, he may decide to charge a greater fixed amount per pile.  But he might also opt not do so.  He may, for example, think that it would be more appropriate to charge only a modest amount per pile and instead to cater for the risk that such costing might entail by charging more for other items in a BQ.  It would not be for the Court to look behind the agreed consideration and examine the adequacy or reasonableness of the fixed amount charged by the contractor per pile.

25.  It may be that COFEL at first paid Sam Woo for excess toeing-in lengths along the lines now argued by Sam Woo.  However, the Court does not construe a contract on the basis of subsequent conduct.  The Court instead looks at the ordinary and natural meaning of the words of an agreement in their factual matrix.  Here it seems to me that such meaning must be as COFEL submits and Sam Woo’s reading is unsustainable.

26.  The result is that Sam Woo’s claim for payment in respect of excess toeing in lengths is bound to fail.  That claim is reflected in §§3 (last 3 lines), 41(ii) and 42(ii) and prayer 2(b) of Sam Woo’s Amended Statement of Claim.  The latter pleas should be struck out.

B.      Re-amendment of Sam Woo’s claim

27.  Sam Woo commenced these proceedings in 1996.  The 6 year limitation period having long since lapsed, Sam Woo cannot re-amend to introduce a cause of action which is not supported by the material facts pleaded in its Amended Statement of Claim.

28.  Sam Woo wishes to introduce new §§12 thru 16 to its pleading.

29.  Paragraphs 12, 13 and 15 will allege that at some unspecified time during the sub-contract works the Engineer changed the design shown in the drawings “to achieve a pile socket length over and above 1.50 m”.  Sam Woo claims that such change was a “variation” which entitled Sam Woo to additional payment for revised toeing in lengths.  In the alternative, Sam Woo pleads that it is entitled to “a reasonable sum for toeing in to bedrock at a depth over and above 1.50 m”.

30.  In my judgment there are 3 difficulties with Sam Woo’s proposed §§12, 13 and 15.

31.  First, they are unparticularised.

32.  For example, precisely when and how (orally, in writing or by conduct) is it alleged that the Engineer altered the design in the drawings? 

33.  The drawings themselves note that final levels are to be determined by the Engineer based on proof boreholes.  The mere fact that, by way of finalisation, the Engineer instructed that socket lengths should be of a certain length could not itself then amount to a design change or variation.  The Engineer would simply be fulfilling his role in accordance with the terms of the sub-contract.  If it is being suggested that the Engineer did something more than finalise boreholes so that some variation came into effect, Sam Woo must condescend to particulars of its case.

34.  Second, the proposed paragraphs plead a new cause of action, based on an alleged variation prompted by the Engineer. 

35.  The material facts supporting such cause of action cannot have been the mere finalisation by the Engineer of socket lengths.  Something more is required.  That something more that the Engineer is supposed to have done is, howver, not stated in the existing Amended Statement of Claim or draft Re-Amended Statement of Claim.

36.  Since the limitation period has run out, the absence of material facts in the existing pleading is fatal to the introduction of a new cause of action premised on unparticularised variations brought about by the Engineer.

37.  Third, Sam Woo accepted a payment in of $15,000,000 made by COFEL:-

“in satisfaction of all the causes of action in respect of which [Sam Woo] claims (save and except the cause of action in respect of toeing-in to bedrock claimed in paragraph 42(ii) of the Amended Statement of Claim).”

38.  Sam Woo is therefore estopped from now suing on a cause of action which has not previously been in Amended Statement of Claim §42(ii).  This is because any cause of action which was not already there would have been satisfied by acceptance of COFEL’s payment-in.

39.  Since the supposed variation by the Engineer has not hitherto featured in Amended Statement of Claim §42(ii), it is a cause of caution which must be deemed to have been satisfied by the payment-in.  No claim can now be made on such cause of action, regardless of any time bar question.

40.  Sam Woo also wishes to introduce new claims for finance charges and interest by revised §§14 and 16 to its pleading.

41.  By their nature, these pleas depend on Sam Woo having a cause of action for the payment of an additional principal sum.  Finance charges or interest might then be chargeable for late payment.  But, given my conclusion that Sam Woo has no actionable case to be paid more in respect of toeing-in lengths, the revised paragraphs 14 and 16 must equally fail.

42.  Sam Woo’s proposed re-amendments are thus not permissible. They are either barred at law or bad on a true construction of the sub-contract.

III.     Conclusion

43.  COFEL succeeds in its strike-out application.  Sam Woo’s application to re-amend is dismissed.

Plaintiff's appeal to Court of Appeal dismissed. Please refer to CACV113/2006 dated 24 October 2006