HCCT 39/2001
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO. 39 OF 2001
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BETWEEN
| | THE HONG KONG HOUSING AUTHORITY | Plaintiff |
| | and | |
| | HSIN YIEH ARCHITECTS & ASSOCIATES LIMITED | 1st Defendant |
| | JOSEPH CHOW & PARTNERS LIMITED | 2nd Defendant |
| | B+B CONSTRUCTION COMPANY LIMITED | 3rd Defendant |
| | (IN LIQUIDATION) | |
| | AXA VERSICHERUNG AG | 4th Defendant |
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| Before: | Hon Reyes J in Court |
| Dates of Hearing: | 3-7, 10-14, 17-21, 24-28, 31 January; 24-27, 30-31 May; 18-22 July; 4-5 August 2005 |
| Date of Judgment: | 2 September 2005 |
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J U D G M E N T
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I. Introduction
1. By a Contract dated 7 March 1997 (the B+B Contract) the Authority engaged B+B to design and construct the piling and pile cap foundations for six 41-storey Concord-style blocks and 2 schools at Tin Shui Wai, Area 31, Phase 1 (the Site). The 6 blocks (forming part of the development known as Tin Chung Court) were intended to provide flats for the Government's Home Ownership Scheme (HOS).
2. B+B admits that, in breach of the B+B Contract, overall differential settlement at Block 1 exceeded the specification of 1:300.
3. In addition to the defective tilt at Block 1, the Authority discovered short piling at Blocks 1 and 2. The short piling was also in breach of the B+B Contract.
4. The Authority seeks damages in respect of B+B's breaches. In particular, the Authority seeks compensation under 6 heads of loss:-
| (1) | Claim A: | Financial loss (including lost interest) arising from the Authority's decision to allow purchasers of flats in all 6 blocks to rescind their contracts. |
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| (2) | Claim B: | The cost of stabilisation and restoration works at the Site. |
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| (3) | Claim C: | The cost of variation works consequent upon B+B's breaches, including the cost of reinstating Blocks 1 and 2 following completion of foundation strengthening works there. |
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| (4) | Claim D: | The cost of pile depth investigations at the Site. |
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| (5) | Claim E: | Various direct costs incurred by the Authority. |
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| (6) | Claim F: | In-house staff costs incurred or to be incurred by the Authority in the course of reinstatement works at Blocks 1 and 2. |
5. The Authority's claim under Claims A to F is for over $556.7 million. B+B only accepts liability for about $111.6 million. Thus, despite B+B's admission of fault, the parties are far apart on quantum.
6. B+B resists the balance of the Authority's claim on 2 broad grounds. First, B+B denies that certain heads of claim were caused by its breach. Second, B+B contends that the Authority failed to mitigate loss. Causation and mitigation have consequently been the principal arenas of dispute at trial.
7. The Authority and B+B have agreed 3 lists of issues. These break down the disputes over causation and mitigation into detailed issues and sub-issues. The first list concerns general matters (G Issues); the second involves engineering aspects (E Issues); and the third deals with quantum (QS Issues). The discussions in Sections III, IV and V of this Judgment are structured around the G, E and QS issues identified.
8. Hsin Yieh (HYA) acted as Architect, Structural Engineer and Contract Manager of the substructure and superstructure works at Tin Chung. Joseph Chow & Partners (JMK) was HYA's Geotechnical Engineering Sub-Consultant.
9. On 10 September 2004 the Authority discontinued its claim against JMK. Likewise, on 15 October 2004 B+B discontinued its contribution claim against JMK.
10. On 2 February 2005 the Authority discontinued its claim against HYA. But B+B maintains a contribution claim against HYA. There is accordingly an additional issue as to whether and (if so) to what extent HYA should contribute to B+B towards any judgment in the Authority's favour.
11. B+B is now in liquidation. It might be asked why the Authority has bothered to sue an insolvent entity. The reason is that B+B's liability may be covered by an insurance policy. AXA, the lead insurer under that policy, has been funding B+B's defence.
12. Concerned that it may not recover its legal costs from B+B even if it wins this action, the Authority applied in December 2004 for leave to join AXA as a party and to serve a summons on AXA in Germany. The summons seeks to make AXA liable for costs should the Authority prevail against B+B. I granted leave to join AXA as a party and to serve the cost summons on AXA outside Hong Kong.
13. In January 2005 AXA unsuccessfully sought to set aside both the leave to serve and AXA's joinder. AXA has appealed against my refusal to set aside service. The challenge to joinder has yet to be heard. The setting aside application apart, AXA has not appeared at the trial.
II. Background
14. The main events may roughly be divided into 5 periods:-
| (1) | May 1996 to July 1997, during which foundation piling works were tendered, designed and executed. |
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| (2) | July 1997 to September 1999, during which the superstructure of the 6 blocks and 2 schools was constructed and uneven settlement in Block 1 discovered. |
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| (3) | September 1999 to November 2000, during which the uneven settlement was investigated and a remedial scheme developed. |
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| (4) | October 2000 to November 2002, during which remedial works were tendered and executed; |
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| (5) | November 2002 to the present, during which reinstatement works were tendered and have been in the process of execution. |
A. Period 1: May 1996 to July 1997
15. On 31 May 1996 the Authority invited tenders for foundation works at the Site. B+B submitted its tender on 12 July 1996. Among the documents which B+B furnished in support of its tender was a "Report on Design of Pile Foundation" dated 22 July 1996.
16. The Authority accepted B+B's tender on 3 September 1996. The B+B Contract for the project was a single entire contract for $77 million.
17. The Authority formally engaged HYA as consultant by a Memorandum of Agreement dated 2 August 1996.
18. The Site was handed over to B+B on 12 September 1996.
19. On 18 September 1996 B+B submitted a Foundation Design Report to HYA.
20. B+B commenced driving working piles at the Site on 16 October 1996.
21. On 6 January 1997 the Authority invited tenders for the superstructure works.
22. On about 11 January 1997 piling at Block 2 was completed. Block 1 piling was completed around 29 January 1997. Piling at the other blocks took place between 7 November 1996 and 25 March 1997.
23. On 7 March 1997 Yiu Wing Construction Co. Ltd. submitted its tender (in the sum of $1,025,836,359) for the superstructure works. The Authority accepted Yiu Wing's tender on 23 June 1997.
24. On 23 June B+B 1997 submitted to HYA a draft Registered Structural Engineer's Report. HYA passed the draft RSE Report to JMK for comment. HYA's comments were received on 3 July 1997.
25. On 15 July 1997 HYA certified that the piling works had been substantially completed on 6 July 1997. The maintenance period commenced on 7 July 1997 and expired on 7 January 1998.
26. The Site was handed over to Yiu Wing to start superstructure works on 7 July 1997. The original completion date was 6 July 1999.
27. On 15 July 1997 B+B submitted a final RSE Report to HYA. Copies were also sent to the Authority and JMK.
B. Period 2: July 1997 to September 1999
28. On 13 October 1997 JMK told HYA that the RSE Report (including information on differential settlement) had been checked in detail and was in order. On 22 October 1997 HYA sent the RSE Report to the Authority with a similar assurance.
29. On 20 January 1998 HYA certified B+B's obligations under the B+B Contract as complete.
30. Due to delay in the installation by Yiu Wing of markers, monitoring of differential settlement in Blocks 1 and 2 did not start until 21 April 1998. By that time the 18th and 20th floors of Blocks 1 and 2 respectively had been erected.
31. Between November and December 1998 the Authority put the flats in the 6 Blocks up for pre-sale. Deposits were paid by purchasers in January and February 1999. The Sale and Purchase Agreements stipulated a completion date of 7 March 2000.
32. On 1 June 1999 GEC (the NSC for lift installation) took possession of the lift shafts in Blocks 1 and 2. On 27 July 1999 GEC told Yiu Wing that the lift shaft walls had shifted out of plumb to such an extent that lift installation could not be completed. Yiu Wing mentioned this to HYA on the next day.
33. On 5 August 1999 HYA informed the Authority by letter that, according to settlement monitoring results, in some locations, differential settlement was approaching the specified limit of 1:300.
34. On 19 August 1999 HYA forwarded JMK's "Preliminary Report on Ground Settlement" to the Authority. JMK's report stated that differential settlement in Block 1 was approaching 1:300. But the report suggested that settlement results generally agreed with predictions in the RSE Report.
35. Nonetheless, the Authority was concerned. It asked HYA for a full report.
36. HYA followed up by sending JMK's "Building Settlement Assessment" to the Authority on 27 August 1999. This stated that the estimated angular distortion of the central cap in October 1999 was 1:263. With the addition of live load, that distortion could become 1:228. JMK thought that the excessive settlement was caused by variations in ground conditions which had not been revealed by earlier site investigations.
37. The Authority became more concerned. It arranged a meeting with HYA and JMK on 30 August 1999. It asked HYA to submit proposals for further investigation by 3 September. The Authority also asked HYA to demonstrate in a comprehensive report, backed by calculations and analysis, that the blocks at the Site were structurally safe. HYA was further requested to propose long term remedial and contingency measures.
38. The Authority asked its Chief Structural Engineer, Mr. S. C. Lam, to provide technical assistance. Mr. Lam thought that an independent consultant was necessary in view of the seriousness of the problem. He suggested that C. M. Wong & Associates Ltd. (CMWAL), a structural and geotechnical engineering consulting firm, be appointed for this purpose.
39. In September 1999 JMK issued a further "Building Settlement Assessment" predicting overall tilt in Blocks 1 to 6.
40. On 1 September 1999 B+B confirmed to HYA that the installed pile depths were as shown in the piling record plans.
41. On 6 September 1999 there was a meeting to consider excessive settlement at the Site. The meeting was attended by representatives of the Authority, HYA, JMK, CMWAL and Ove Arup & Partners (OAP). OAP had been engaged by HYA as advisor to review piling records and design and settlement calculations.
42. At the 6 September meeting JMK predicted that long term tilt in Block 1 would be about 1:330. This being a change from what JMK had said on 27 August, the Authority asked that a detailed report on settlement at all 6 blocks be submitted by 7 September 1999. The Authority asked that the structural safety of Blocks 1 and 2 be assessed urgently by 17 September 1999.
43. On 10 September 1999 the Authority confirmed to HYA that CMWAL had been appointed as independent investigation consultant. Mr. C. M. Wong, CMWAL's managing director, would be personally responsible for the conduct of CMWAL's consultancy.
44. On 16 September 1999 the uneven settlement at Tin Chung was widely reported in newspapers. The Authority's Home Ownership Committee set up 2 hotlines to handle queries from worried purchasers. The Authority's Chief Housing Manager (Applications) also wrote to purchasers of Block 1 flats to tell them of the position as then known.
45. On 18 September 1999 HYA submitted a report (prepared with OAP's help) on the safety of Block 1. HYA advised that in certain areas of Block 1, long-term settlement might reach 1:211. Otherwise HYA thought that differential settlement at Block 1 complied with specification. HYA attributed the uneven settlement to unforeseen ground conditions and inadequate pile length.
46. HYA submitted a stabilisation proposal. This involved enlargement and thickening of the pile cap, installation of additional piles and application of a surcharge live load.
47. HYA thought that it was too early to express an opinion on safety, until further investigations on foundation and structure had been completed. Those investigations would include opening up the pile cap, pile length checking and level checking.
48. HYA did not believe that there was any problem with long-term settlement of the other blocks.
C. Period 3: September 1999 to November 2000
49. On 21 September 1999 CMWAL submitted an Executive Summary of its findings. This suggested that overall long-term settlement would be 1:210 for Block 1, 1:281 for Block 2 and 1:323 for Block 4. CMWAL recommended strengthening works for those 3 blocks. More analysis was required for Blocks 3 and 6, although it seemed that the magnitude of settlement in those blocks was lower than in Blocks 1, 2 and 4. There was no apparent problem with Block 5, which seemed structurally adequate.
50. CMWAL identified 2 possible causes for the significant uneven settlement in Block 1.
51. First, the results of 2 boreholes (A31-73 and A31-75) had not been considered by B+B in its settlement calculations. Had the 2 boreholes been taken into account, certain recorded pile depths would not have been acceptable.
52. Second, the recorded lengths of some piles did not satisfy the requisite static formula.
53. As for uneven settlement in Blocks 2, 3, 4 and 6, CMWAL attributed these to unforseen ground conditions and to records not representing actual pile details at the Site.
54. On the morning of 23 September 1999 the Authority's Building Committee met to consider CMWAL's report and the way forward.
55. The Building Committee decided that strengthening works would be carried out as required. The precise scope of such works would have to be determined. CMWAL was to propose what should be done by way of remedial work. But its proposals had to be audited by an independent third party. The purchasers of all pre-sold flats in the 6 blocks would be given the option to rescind their Sale and Purchase Agreements.
56. In the afternoon of the same day, there was a special meeting of the Home Ownership Committee to consider what should be done in consequence of the Building Committee's decision.
57. The Home Ownership Committee determined that the purchasers of pre-sold flats should have 3 options. Those were:-
| (1) | Option A:- |
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| | A buyer would be refunded his deposit with interest. He would have priority in the allocation of a flat at HOS Phase 21B or HOS Phases 20A and 20B. Alternatively, he would be allowed to purchase a flat at Tin Fu Court Stage 2 at the original price of a flat at Tin Chung Court Phase 1 or at the prevailing price of a Tin Fu Court Stage 2 flat, whichever was lower. |
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| (2) | Option B:- |
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| | A buyer would receive interest on his deposit. He would be refunded the difference between the resale and original prices of his flat at Tin Chung Court. He would have a 10 year structural guarantee of his block, with the Authority being responsible for any maintenance due to ground settlement. |
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| (3) | Option C:- |
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| | A buyer would be refunded his deposit with interest. His application for public rental housing would be reinstated or, if applicable, he would be allowed to remain as a tenant in his current public housing. |
58. On 24 September 1999 HYA directed Yiu Wing to suspend all external works to Blocks 1 and 2 as well as all works to the ground floors of those Blocks until further instruction. This was confirmed by Instruction MC-209 dated 28 September 1999.
59. On 30 September 1999 the Authority wrote to all purchasers of units in the 6 blocks explaining the 3 options summarised above. Purchasers were asked to state their preference by 31 October 1999. The deadline was later extended and purchasers were allowed to change their minds.
60. On 15 October 1999 CMWAL submitted to the Authority a summary report ("Independent Assessment Report: Vol.1 of 4") expanding on the findings in his previous Executive Summary. A more detailed investigation report ("Independent Assessment Report: Vol.2 of 4") came in December 1999.
61. At the time, CMWAL was proposing tilt arresting and restoration works at Blocks 1, 2 and 4. He envisaged that such works would involve use of ground anchors and installation of pre-bored H-piles (tension) and bored piles (compressions). There would also be live load simulation testing. HKU endorsed these recommendations in a Technical Audit Report No.1 dated 18 October 1999.
62. On 19 October 1999 the Authority formally appointed Hong Kong University (HKU) as independent auditor of CMWAL's block restoration and strengthening proposals.
63. Two days later CMWAL's strengthening proposals were presented to the Building Committee. The latter approved the recommendations.
64. On 24 November 1999 HYA submitted to the Authority a “Building Settlement Investigation Report”. This included a "Geotechnical Design Review Report for Block 1" by OAP.
65. On 29 November 1999 HYA's services as Contract Manager were terminated with effect from the following day.
66. On 1 December 1999, by Instruction AA-01, the Authority ordered certain demolition work in preparation for foundation strengthening works.
67. In January 2000, pursuant to an Instruction AA-07, Yiu Wing carried out emergency demolition of the ground floor slab and removal of the overburden on the pile cap. CMWAL ordered this because he was worried by an acceleration in the tilt of Block 1 detected from settlement measurements taken between September and November 1999. By 20 November 1999 Block 1's tilt had reached 1:263.
68. On 25 January 2000 CMWAL recommended to HKU that no works were required for Blocks 3 and 6.
69. On 28 January 2000 the Authority invited tenders for the Foundation Strengthening Contract. The return date was 25 February.
70. By the time of this first tender exercise, CMWAL's original thinking on strengthening works had evolved. Instead of pre-bored H-piles and bored piles, Mr. C. M. Wong had come to think that it might be better to use mini-piles. He believed that mini-piles would cause significantly less soil disturbance. The uneven settlement was symptomatic of delicate ground conditions. It was important to use piling methods which would not exacerbate the already stressed soil conditions.
71. On 2 February 2000 CMWAL reported to the Authority that there were anomalies between the pile records sent with the RSE Report and designed pile cut-off levels. For Block 1, the records for 110 of 297 piles were found to be inconsistent. For Block 2, 51 out of 294 piles were discrepant. As a result, in May 2000 Mr. C. M. Wong was asked to look into the accuracy of pile lengths at Blocks 1 and 2.
72. On 23 February 2000 CMWAL revised the strengthening proposals for Block 1. The tender return date was extended to 31 March 2000.
73. On 7 March 2000 Professor Harry Poulos of Coffey Geosciences Pty Ltd. suggested a new method for tilt restoration. Coffey was a Geotechnical Consultant engaged by the Authority to provide technical input on strengthening proposals. Professor Poulos is a world-renowned expert on soil mechanics. His method (called "Removal of Soil Support" (RSS)) was a promising method, albeit one which had never before been implemented anywhere. Coffey agreed to prepare preliminary RSS scheme drawings for a Tender Addendum.
74. HKU had reservations about RSS. HKU was especially concerned about the possible effects of RSS on adjacent blocks, especially given the proximity of a commercial complex.
75. On 8 March 2000 CMWAL recommended that no remedial works were needed at Block 4.
76. On 10 March 2000 CMWAL provided the Authority with an amended specification for the Tender Addendum. CMWAL followed up on 15 March with a Scope of Work and amended List of Tender Drawings for the Tender Addendum.
77. On 16 March 2000 HKU provisionally agreed with CMWAL's view that no remedial works were needed for Blocks 3, 4 and 6. But HKU required a further 2 months of monitoring before it could confirm endorsement.
78. On 24 March 2000 Tender Addendum No.1 was issued.
79. In addition to providing for RSS as the method of tilt restoration for Blocks 1 and 2, Tender Addendum No.1 amended the use of mini-piles for arresting works. It was again proposed to employ pre-bored H-piles. This change was the result of Mr. C. M. Wong having become aware of a new drilling technology known as closed loop reverse circulation drilling (RCD).
80. Mr. C. M. Wong felt that RCD enabled pre-bored H-piles to be installed with minimum surrounding disturbance. Since H-piles were stiffer and less prone to buckling than mini-piles, Mr. C. M. Wong thought that it was advisable to change the specification of mini-piles to one of pre-bored H-piles installed by RCD.
81. On 28 March 2000 the tender date was postponed to 14 April 2000.
82. A Tender Addendum No.2 was issued on 6 April 2000. This was followed by a Tender Addendum No.3 on 12 April 2000. Neither of these addenda altered the fundamental remedial works scheme then being contemplated.
83. Tenders were returned on 14 April 2000. The lowest was for $206,318,000.
84. In June 2000 further consideration of the Foundation Strengthening Works tender was deferred until further notice. The first tender exercise was later cancelled.
85. The first tender was cancelled due to further reflection on the part of Mr. C. M. Wong and the Authority.
86. In about mid-May 2000, having assessed latest settlement data, Mr. C. M. Wong thought that only tilt arresting (as opposed to restoration) works would be needed for Block 2.
87. Further, in late June 2000, a new piling technology became available in Hong Kong. This method installed H-piles by hydraulic jacking, resulting in little or no vibration. It was also less costly than pre-bored H-piles.
88. Mr. C. M. Wong believed that it would be more desirable to use jacked H-piles for tilt arresting works in Blocks 1 and 2. He appreciated that, due to space constraints, even with the new method, it would still be necessary to install some H-piles by RCD. But he did not think that this outweighed the benefits of jacked piles.
89. Mr. C. M. Wong carried out complex structural modelling (SAFE analysis) to develop a scheme of tilt restoration for Block 1 using a combination of pile-cutting and ground anchor stressing. He thought that the method which he developed would be more conservative than RSS. He was concerned that RSS, although justified by sophisticated geotechnical modelling, could conceivably cause a block to settle too quickly upon drilling of the requisite vertical holes.
90. Mr. C. M. Wong discussed his new proposals with Professor Poulos and Binnie Black + Veatch Hong Kong Ltd. (BBV). They agreed with him.
91. On 18 July 2000 HKU finally endorsed CMWAL's recommendation that no further works were required for Blocks 3, 4 and 6. Accordingly, Blocks 3 to 6 could be finished, re-marketed and re-sold ahead of Blocks 1 and 2.
92. On 14 August 2000 CMWAL proposed to the Authority the use of jacked piles and cutting of piles for the strengthening works, instead of RSS.
93. Meanwhile, the investigation of pile lengths was proceeding.
94. In September 2000 piles P44, P45 and P185 were chosen for investigation. The 3 piles were selected because they were readily accessible (being at the perimeter of Block 1) and because Mr. C. M. Wong queried their actual lengths. The piles were excavated to see whether any make-up pieces were evident or whether there were gaps between their cut-off levels and the bottom of the pile cap.
95. Inspection on 5 September 2000 revealed that the 3 piles and the pile cap were connected with no evidence of gaps or make-up pieces. That ought not to have been the case if the pile records were correct. The inspection thus cast doubt on the accuracy of the recorded founding levels reported by B+B and HYA.
96. Mr. C. M. Wong was instructed on 28 September 2000 to investigate the founding depths of selected piles at Blocks 1 and 2. For this investigation, Dr. Robert Kennard of Babtie Asia Ltd. was consulted. Dr. Kennard has given evidence in this case as the Authority's piling and engineering expert.
97. Investigative drilling and CCTV surveys were carried out in respect of 1 preliminary (test) pile and 31 selected working piles. The contractor for the first 17 piles tested was Bachy Soletanche Group Ltd. The remaining 15 piles were tested by Gammon Construction Ltd., which (as will be seen below) was awarded the foundation strengthening works contract.
98. On 20 October 2000 a second tender exercise for the strengthening works took place. Tenders were returned on 24 November 2000.
99. On 20 November 2000 HKU withdrew as independent auditor. It was replaced by BBV.
100. Between November 2000 and November 2001 Bachy and Gammon carried out surveys of selected piles. Their investigations found that 93.7% of the piles tested at Block 1 (15 out of 16 piles) and 86.7% of the piles tested at Block 2 (13 out of 15 piles) were shorter than recorded. Four piles at Block 1 were short by more than 2 m, with 1 pile short by 5.63 m. Four piles at Block 2 were short by more than 5 m, with 3 piles short by over 7 m.
D. Period 4: November 2000 to November 2002
101. Tenders for the strengthening works were returned in November 2000. Gammon was the lowest at $141,430,000. The Building Committee resolved to accept Gammon's tender on 18 January 2001. The Authority formally accepted the tender on 16 February 2001. A contract was executed on 23 April 2001.
102. Blocks 5 and 6 were completed on 6 March 2001, while Blocks 3 and 4 were certified complete on 20 April 2001.
103. In May 2001, in the course of the pile length surveys by Gammon, it was discovered that pile P273 at Block 2 was defective. Although P273 extended to the pile cap, it ran for only about 700 mm below the cap. There appeared to be no section of pile below this 700 mm stub. As a pile, P273 was thus effectively non-existent.
104. This discovery prompted the excavation of some 80 peripheral piles to allow visual inspection of their uppermost portions. Two piles were found to have defective length. P273 was one, P263 of Block 1 was the other.
105. P263 was connected to the pile cap. But the section of P263 so connected was not welded to the lower section of the pile embedded in the ground. There was hence a gap between the upper and lower sections of P263. This meant that P263 was not taking load from the superstructure.
106. The findings of the pile depth investigations at Blocks 1 and 2 did not have significant bearing on the design of the strengthening works. This was because that design was based on actual monitored performance of the foundations, rather than reported pile lengths. The only consequence was that P263 and P273 were deleted from the structural models of Blocks 1 and 2 considered by Mr. C. M. Wong.
107. On 2 May 2001 Gammon started its works. Gammon was supposed to have started on 16 March 2001. But its start was delayed through Yiu Wing's refusal to surrender possession. To deal with the problem, on 27 April 2001 the Authority certified sectional completion by Yiu Wing of Blocks 1 and 2, even though (due to the pending remedial works) Yiu Wing's work on the superstructure of those blocks was not wholly complete.
108. Gammon's original completion date was 10 November 2001 (240 days) for Block 2 and 9 May 2002 (420 days) for Block 1.
109. The design for the strengthening works did not allow for creep. It was not then usual in Hong Kong for creep to be considered when designing piling foundations. Nonetheless, following discussions with Dr. Hugh St. John (a leading authority on creep) and Dr. Kennard, Mr. C. M. Wong thought that there was a need to add jacked piles to the current design to cater for creep.
110. Mr. C. M. Wong re-calculated the likely remaining settlement of the tendered design for Block 1, this time taking account of creep. He had originally concluded that 40 additional piles (34 jacked piles and 6 pre-bored H-piles) at Block 1 were enough. Upon recalculation, he thought that the resultant load on the 40 piles might be too great. If creep were brought into the picture, the factor of safety (FOS) of the 40 piles would be reduced from 1.5 to about 1.38.
111. Mr. C. M. Wong believed that an FOS of 1.38 was too low. He had already previously encountered resistance when persuading the Government to accept an FOS of 1.5 as adequate, rather than the more conventional FOS of 2. He therefore proposed (based on further modelling) that the tendered design should incorporate 26 more piles. Those 26 piles were unlikely to have much effect on Block 1's tilt, but they would relieve the stress on the original 40 piles.
112. In July 2001 the Building Committee approved variations to Gammon's contract, including the driving of 26 additional piles in Block 1 to cater for creep. The periods for Gammon's work at Blocks 1 and 2 were extended. Mr. C. M. Wong estimated the resultant delays to be 153 days for Block 1 and 31 days for Block 2.
113. In October 2001 Blocks 1 and 2 experienced a sudden increase in the rate of tilt. Investigation suggested that the acceleration was due to surcharge from the jacking machine's weight (700 tonnes).
114. CMWAL instructed Gammon to suspend jack piling at Block 1. The jacking machine was eventually moved to a position on the pile cap so that it would not exert pressure on the ground soil. Additional piles were installed to support the jacking machine. Some 5 extra H-piles were also required around Block 1 to counter the increased settlement.
115. On 11 April 2002 Gammon's Block 2 works were substantially completed.
116. On 31 July 2002 the Authority sent an updated draft final account to Yiu Wing.
117. On 5 August 2002 Yiu Wing was wound up by Court order. The Authority lodged a proof of debt with the Official Receiver on 2 September 2002.
118. In August 2002 tilt restoration works on Block 1 commenced.
119. On 13 November 2002 the Secretary for Housing, Planning and Lands decided that the production and sale of HOS flats would cease indefinitely from 2003.
E. Period 5: November 2002 to the present
120. The re-instatement works for Blocks 1 and 2 went for tender on 29 November 2002. The tenders were returned on 4 April 2003 with Yau Lee Construction Co. Ltd. having the lowest tender ($82,564,774.25).
121. On 19 June 2003 the Tender Committee deferred the award of the reinstatement works contract.
122. On 29 June 2003 Gammon completed its remedial works on the foundations of Block 1.
123. On 17 July 2003 the Tender Committee decided to re-tender the reinstatement works in 2 stages.
124. Stage 1 (for the ground floor and external areas of Blocks 1 and 2) went to tender in January 2004. Tenders were to be returned by February 2004.
125. The lowest tender received was that of Unistress building Construction Ltd. ($15,703,521). That was accepted on 22 April 2004.
126. Stage 2 (for the balance of the reinstatement works) has yet to take place.
127. The Authority accepts that it could have started the reinstatement works in July 2003 (shortly after completion of Gammon's works). The Authority also accepts that, had it done so, the reinstatement would have been finished by mid-March 2004. The reasons for deferring execution of the reinstatement works beyond July 2003 and carrying out the same in 2 stages are unconnected with B+B's breach.
III. General Issues
A. General Remarks on the Law
128. Four cases featured prominently in the parties' closing submissions. These were:-
| (1) | The Board of Governors of the Hospital for Sick Children v. McLaughlin & Harvey Plc [1987] 19 Con LR 25 (Judge Newey QC). |
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| (2) | Ruxley Electronics and Construction Ltd. v. Forsyth [1996] AC 344 (HL). |
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| (3) | County Ltd v. Girozentrale Securities [1996] 3 All ER 834 (CA). |
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| (4) | Laing Management (Scotland) Ltd. v. John Doyle Construction Ltd. [2004] BLR 295 (Court of Session (Inner House)). |
129. I comment briefly on the 4 cases in this section.
A.1 Board of Governors
130. In the case, RTJ was found liable as structural engineers for the negligent design of the pile caps of the Governors' hospital. The Governors commissioned substantial remedial work on the advice of Dr. Christie, an independent structural engineer. The question was whether it was reasonable for the Governors to claim for such extensive remedial work.
131. The judge assessed Dr. Christie's abilities as an engineer as follows (at 91):-
“No one has suggested that Dr. Christie did not take sufficient care in connection with the remedial works; the complaint against him is that he took too much. I am sure that a building designed or made good by Dr. Christie would be most unlikely to contain defects and would last a long time, but it would be an expensive building.”
132. The judge then stated the relevant legal principle as follows (at 94):-
“The plaintiff who carries out either repair or reinstatement of his property must act reasonable. He can only recover as damages the costs which the defendant ought reasonably have foreseen that he would incur and the defendant would not have foreseen unreasonable expenditure. Reasonable costs do not, however, mean the minimum amount which, with hindsight, it could be held would have sufficed. When the nature of the repairs is such that the plaintiff can only make them with the assistance of expert advice the defendant should have foreseen that he would take such advice and be influenced by it.”
133. The Governors acted upon Dr. Christie's advice to extricate themselves from a predicament brought about by the defendants' breaches. In so doing, the Governors acted reasonably. Dr. Christie's remedial proposals (the judge said at 106):-
“were within the range of those which an ordinary competent engineer would have adopted.”
There was “no negligence on the part of Dr. Christie to break the chain of causation”. This was the situation even though other restorative measures might have been equally successful at significantly less cost.
134. As in Board of Governors, there is no suggestion here that Mr. C. M. Wong acted negligently as a consulting engineer. There was instead a debate between Mr. Westbrook (appearing for B+B) and Mr. Pennicott (appearing for the Authority) as to whether a consultant could act "unreasonably" and still be "non-negligent". I do not logically see how it can be maintained that, although Mr. C. M. Wong was not negligent, he was unreasonable in the conduct of remedial works.
135. Mr. Westbrook postulates a situation where an engineer proposes a scheme X, then changes his mind and puts forward scheme Y in place of X, and then changes his mind and advances scheme Z in place of Y. Schemes X, Y and Z may be reasonable in themselves. But at some point it becomes unreasonable for an engineer to go on proposing new schemes and perpetually delaying the works. Thus, Mr. Westbrook submits an engineer may be non-negligent in putting forward schemes X, Y and Z, but he may be unreasonable in doing so.
136. I am not persuaded by the argument. I would accept that at some point enough is enough. An engineer would act incompetently and unreasonably by forever putting forward new designs. Where the line is to be drawn depends on the circumstances of the case and the expert evidence.
137. Here the Authority's expert, Dr. Kennard, believes that Mr. C. M. Wong's handling of design work was within the range of acceptable conduct by a competent engineer. On the other hand, B+B's expert, Mr. Keith Morton, does not accuse Mr. C. M. Wong of negligence. Mr. Morton simply thinks that Mr. C. M. Wong took a long time, an unreasonably long time, to design the remedial works.
138. For reasons which I explain below in the General Remarks of my discussion of E issues, I prefer Dr. Kennard's view. But just on Mr. Morton's premise of non-negligence, I do not see how Mr. C. M. Wong can be said to have acted unreasonably.
139. In coming to his conclusion, Judge Newey relied (at 95) on a dictum in Lodge Holes Colliery Co. Ltd. v. Borough of Wednesbury [1908] AC (HL). In Lodge (at 325), Lord Loreburn LC famously said:-
“Now I think a Court of Justice ought to be very slow in countenancing any attempt by a wrong-doer to make captious objections to the methods by which those whom he has injured have sought to repair the injury. When a road is let down or land let down, those entitled to have it repaired find themselves saddled with a business which they did not seek, and for which they are not to blame. Errors of judgment may be committed in this as in other affairs of life. It would be intolerable if persons so instructed could be called to account by the wrong-doer in a minute scrutiny of the expense, as though they were his agents, for any mistake or miscalculation, provided they act honestly and reasonably. In judging whether they have acted reasonably I think a Court should be very indulgent and always bear in mind who is to blame. Accordingly, if the case of the plaintiff's had been that they had acted on the advice of competent advisers in the work of reparation and had chosen the course they were advised was necessary, it would go a very long way with me; it would go the whole way, unless it became clear that some quite unreasonable course had been adopted.”
140. Lord Loreburn's views are echoed in Banco de Portugal v. Waterlow [1932] AC 452 (HL) where Lord MacMillan stated (at 506):-
“Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment, the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the insistence of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but the criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of duty owed to him has acted reasonably in the adoption of remedial measures and he will not be held disentitled to recover the costs of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”
141. In light of these dicta, I find it impossible to see how the Authority, acting upon Mr. C. M. Wong's non-negligent advice, can be characterised as unreasonable in its conduct.
142. Mr. Westbrook suggested that Board of Governors was distinguishable from the present action. This is because (Mr. Westbrook submits), unlike the Governors, the Authority had its own in-house engineers who could assess Mr. C. M. Wong's proposals.
143. But I do not find this distinction convincing. The uneven settlement in this case gave rise to an unprecedented situation where the solution was far from obvious. In that circumstance, a Court must be slow to criticise the Authority for somehow failing to override Mr. C. M. Wong's considered and independent advice.
A.2 Ruxley
144. In Ruxley the plaintiffs built a pool for the defendant which was 18 inches shallower than had been stipulated in the contract. The pool was perfectly suitable for swimming. To rebuild the pool to the correct specification would have cost £21,560. On the other hand the loss of amenity due to a shallower pool was on £2,500. The defendant refused to pay the plaintiffs and claimed £21,560.
145. The House of Lords held that the defendant was only entitled to £2,500. This was because the cost of reinstatement was hugely disproportionate to the diminution in the pool's value. The loss in value was the appropriate and reasonable measure of the defendant's damage.
146. Mr. Westbrook relies on Ruxley in support of his argument that the expenditure by the Authority on restoring the tilt of Block 1 and strengthening Block 2 was out of proportion to the economic benefit obtained. He accordingly submits that much of the Authority's expenditure was unreasonable.
147. Although I bear in mind the principle in Ruxley, it seems to me that it does not apply to the present case. A tilting building, standing on sensitive soil and on a foundation with piles of uncertain length, is a problem of a different order of magnitude from a swimming pool built 18 inches too shallow.
148. In Ruxley any remedial work at all was plainly unreasonable and disproportionate. Common sense ruled out reinstatement from the outset.
149. In contrast, with the Tin Chung project, B+B accepts that at least some remedial work had to be carried out. The issue here is the extent of remedial work. That is a matter of judgment over which engineers might reasonably differ, some favouring a more conservative approach than others. In contrast to Board of Governors, Ruxley is of only limited help on where to draw the line on the question of reasonable extent of remedial work.
150. Ruxley merely reminds us that, when considering whether remedial work is reasonable, the cost of that work in comparison to the loss of amenity value is a relevant factor. But loss of amenity value is by no means the only consideration. In a more complex case such as that of uneven settlement of a high-story building, accepted building standards and safety concerns (for example) must also be brought into the equation.
151. There is a further difficulty in applying Ruxley to the present case. In the latter, the limited loss of amenity value at £2,500 does not appear to have been seriously contested. Here B+B has adduced no valuation evidence. It asserts that the loss of amenity value is small in comparison to the extent of remedial work undertaken. But the Authority does not accept that assertion. I therefore find it difficult to conclude with any confidence that Block 1 at (say) 1:235 would not significantly differ in market value from the same Block 1 at 1:300.
A.3 County and Laing
152. These 2 cases can be taken together.
153. In County the Court of Appeal found that a broker's breach of contract was the "effective cause" of a bank's loss.
154. More specifically on causation, Beldam LJ summarised the Court's reasoning thus (at 848h-j):-
“The fact that parties contemplate circumstances in which loss can occur may be an indication that such circumstances commonly follow breach of a contract of that kind and thus may be helpful in deciding as a fact whether the loss was caused by the breach or merely followed it; but the fact that the parties do not contemplate other circumstances which contribute to the loss, suggesting that such circumstances may not be probably, cannot determine the question whether the loss was a consequence of the breach. The fact that unforeseeable events combine with the breach to cause loss cannot alone be a sufficient reason for a decision that the unforeseeable events have superseded the breach of contract as the cause of the loss. The effects of the breach of contract may continue though other causes combine to produce the final result.”
Accordingly, County provides some guidelines on determining causation when unforeseeable events combine with a defendant's breach to produce loss.
155. But I derive little more help from County. There is no escape from grappling with the factual evidence to arrive at some view on causation. As Hobhouse LJ observes in County (at 858):-
“It is often said that legal causation is a matter of fact and common sense. Causation involves taking account of recognised legal principles but, that having been done, it is a question of fact in each case.”
The guidance in County (along with all other legal principles relating to causation) still needs to be applied to the facts of each situation to determine “effective cause”.
156. Mr. Pennicott suggested that County was authority for the proposition that, so long as a defendant's breach was an "effective" cause of loss (whether or not a dominant cause), it did not matter that the plaintiff's loss was also attributable to other "effective" causes. The defendant (Mr. Pennicott argues) would still be liable for the whole of the plaintiff's loss.
157. On my reading of County, the English Court of Appeal did not go so far. As far as I can see, all that County does is to provide some insight on ascertaining "effective cause" where previously unforeseen events, not attributable to the defendant, mix with the immediate repercussions from the defendant's breach to generate or exacerbate loss.
158. Mr. Westbrook submitted that I should instead approach causation along the lines set out in Laing.
159. There JDC (the works contractor) sued Laing (the management contractor) for a 22 week extension of time and for loss and expense consequent upon delay. JDC's claim was based on a comparison between estimated and actual costs. The claim was a global one, because (as all accepted) it was impossible to link specific periods of delay with particular items of cost.
160. Lord MacLean began by more precisely defining the nature of a global claim (at §10):-
“For a loss and expense claim under a construction contract to succeed, the contractor must aver and prove three matters: first, the existence of one or more events for which the employer is responsible; secondly, the existence of loss and expense suffered by the contractor; and, thirdly, a causal link between the event or events and the loss and expense.... Normally individual causal links must be demonstrated between each of the events for which the employer is responsible and particular items of loss and expense. Frequently, however, the loss and expense results from delay and disruption caused by a number of different events, in such a way that it is impossible to separate out the consequences of each of those events. In that event, the events for which the employer is responsible may interact with one another in such a way as to produce a cumulative effect. If, however, the contractor is able to demonstrate that all of the events on which he relies are in law the responsibility of the employer, it is not necessary for him to demonstrate causal links between individual events and particular heads of loss. In such a case, because all of the causative events are matters for which the employer is responsible, any loss and expense that is caused by those events and no other must necessarily be the responsibility of the employer. That is in essence the nature of a global claim....”
161. Lord Maclean then set out how he believed the Court should approach such claims (at §§14-16):-
“.... It is accordingly clear that if a global claim is to succeed ... the contractor must eliminate from the causes of his loss and expense all matters that are not the responsibility of the employer. This requirement is, however, mitigated by the considerations discussed by the Lord Ordinary at paragraphs [38] and [39] of his opinion. In the first place, it may be possible to identify a causal link between particular events for which the employer is responsible and individual items of loss. On occasion that may be possible where it can be established that a group of events for which the employer is responsible are causally linked with a group of heads of loss, provided that the loss has no other significant cause. In determining what is a significant cause, the 'dominant cause' approach described in the following paragraph is of relevance....
In the second place, the question of causation must be treated by 'the application of common sense to the logical principles of causation'.... In this connection, it is frequently possible to say that an item of loss has been caused by a particular event notwithstanding that other events played a part in its occurrence. In such cases, if an event or events for which the employer is responsible can be described as the dominant cause of an item of loss, that will be sufficient to establish liability, notwithstanding the existence of other causes that are to some degree at least concurrent....
In the third event, even if it cannot be said that events for which the employer is responsible are the dominant cause of the loss, it may be possible to apportion the loss between the causes for which the employer is responsible and other causes. In such a case it is obviously necessary that the event or events for which the employer is responsible should be a material cause of the loss. Provided that condition is met, however, we are of the opinion that apportionment of loss between the different causes is possible in an appropriate case. Such a procedure may be appropriate in a case where the causes of the loss are truly concurrent in the sense that both operate together at the same time to produce a single consequence....”
162. Mr. Westbrook submitted that there may be some conflict between County and Laing. I do not think so.
163. Laing requires a plaintiff to show that the defendant's cause was either a “dominant” or “material” cause of the loss claimed. Where the plaintiff is able to demonstrate the former, then he will be entitled to claim the loss in full. Where the plaintiff can only show the latter, then Laing suggests that apportionment may be appropriate so that the defendant is liable for some proportion (but not all) of the loss claimed.
164. In using the term “effective cause” County seems to be referring to both “dominant” or “material” causes in the Laing sense. County merely says that, just because external events combine with a breach to produce loss, does not preclude the breach from being an “effective” cause.
165. It is the Authority's case that, in Laing terms, B+B's breach in respect of differential settlement was the dominant cause of the loss claimed in this action. As will be seen from the detailed discussion below, I essentially concur with that view.
B. General Liability
G1. Are any or all of the implied terms alleged in paragraph 6 of the Re-Re-Amended Statement of Claim (RRASOC) part of the contract between the Authority and B+B?
166. RRASOC §6 pleads as follows:-
| “ | There were further terms of the [B+B] Contract to be implied as a matter of law and/or business efficacy to the effect that:- |
| | | |
| | (i) | The design of the Works should be carried out with the skill and care to be expected of a reasonably competent specialist designer of pile foundations; |
| | | |
| | (ii) | The settlement analysis based on the actual conditions of piles installed to verify the design of the Works would be carried out with the skill and care to be expected of a reasonably competent specialist designer of pile foundations; and |
| | | |
| | (iii) | If and insofar as the obligations is not an express term (see Clause 19.06(2) of the General Specification set out above) the Works, when completed, would be fit for their intended purpose namely the erection thereon of the superstructure of the six 41-storey blocks which when completed would be capable of being sold to members of the general public.” |
167. The terms are to be implied into the B+B Contract. It is hard to see otherwise. A bystander who officiously suggested that the terms should be incorporated into the B+B Contract, would have been swiftly rebuffed by the parties with the observation that the terms were self-evident.
G2. Was Block 1 still fit for its alleged purpose i.e. sale to the general public for human habitation, despite the differential settlement breaching the 1:300 criterion?
168. There is no dispute that, as built by B+B, Block 1 breached the 1:300 contractual specification. The parties' experts further agree that neither Blocks 1 nor 2 would ever have reached a tilt which posed significant risk to the structural integrity of the buildings.
169. There are different views on how far Block 1 would have tilted overall had no remedial works been carried out. Long-term tilt can only be predicted within a range of values. Although the experts disagree over the reliability of final settlement predictions (anywhere from plus or minus 10% to 20%), all accept that estimating final settlement is not an exact science.
170. In November 1999 Mr. C. M. Wong predicted that Block 1 could reach a tilt of 1:200 after occupation. In evidence, he revised that view to 1:208.
171. In May 2001, when remedial work started at Block 1, it had an estimated tilt of 1:270.
172. Dr. Kennard estimates that, without strengthening, Block 1 might have gone down to 1:170. Dr. Kennard notes the sensitivity of the soil around Block 1 and the uncertainty of the actual pile lengths of that block. By reason of such factors, he believes that it is impossible to predict with any degree of certainty what would have happened had Block 1 been left to itself.
173. Mr. Morton believes that, left to itself, Block 1 could have reached a maximum of 1:246. He agrees that, at an inclination of about 1:250, a tall building may be perceived by the human eye as tilting. But he suggests that this is only possible if the building is lined up against a vertical block.
174. Mr. Morton thinks that Block 1 was "fit for its purpose from a point of view of structural integrity". But he concedes that:-
“the degree of fitness was only marginal and, in the light of the fact that additional loading was still to take place, in my opinion, it was not unreasonable for HKHA to carry out modest remedial works.”
175. In my view, Block 1 was unfit for sale to the general public as habitation for 3 reasons.
176. First, Block 1 was in breach of the 1:300 specification. That is the accepted norm for tall buildings in Hong Kong.
177. Second, there was a real (as opposed to merely fanciful) likelihood that, left alone, Block 1 would have a long-term overall settlement of more than 1:250, possibly reaching 1:170. Unremedied, Block 1 would undoubtedly have a perceptible tilt. That would spoil its aesthetic appearance, especially when seen against the other blocks at the Site. The visible tilt would affect the desirability and marketability of the flats within the building. The individuals who bought pre-sold units in Block 1 did not bargain to live in a leaning tower.
178. Third, I accept Dr. Kennard's evidence on uncertainty. Given sensitive soil conditions and doubtful pile lengths, it would not be possible to give a prospective purchaser of a Block 1 flat any reasonable assurance that the building would not tilt further in the future.
G3. Were the foundation works to Blocks 1 & 2 fit for their alleged purpose, i.e. the erection thereof of a 41 storey block of domestic flats each? In particular were the alleged lift installation problems encountered the result of out of plumb lift shaft walls, caused by building tilt or defective builder's work by Yiu Wing caused by out of plumb concreting in the lift shafts?
179. It follows from G2 that the foundation of Block 1 was unfit for the erection of a 41 storey building.
180. On the information now available on Block 2, the experts agree that, unremedied, measured tilt would not have breached 1:300.
181. In 1999 Mr. C. M. Wong thought that total tilt for Block 2 would be 1:281. But he later revised this opinion to 1:353.
182. Dr. Kennard estimates that, without arresting works, Block 2 would have reached 1:333. But since such figure may be off on either side by (say) 10% to 20%, Dr. Kennard believes that it was prudent to have remedial work at Block 2.
183. Mr. Morton thinks that, left to itself, Block 2 would have attained an overall differential settlement of 1:434. He believes that no strengthening works were necessary. Indeed he argues that the arresting works at Block 2 worsened overall tilt from 1:481 at the start of strengthening works down to 1:389. He concludes that the time and money spent on arresting works for Block 2 was wasted.
184. In my view, the foundations of Block 2 were fit for the erection of a 41-storey building suitable for human habitation. On the balance of probability, I do not think that Block 2 will exceed 1:300 settlement in the long-term. In all likelihood, I think (as Dr. Kennard suggests) that Block 2 will have a final overall tilt of 1:333.
185. However, my conclusion on this issue should not be taken to mean that the arresting works to Block 2 were wasted as Mr. Morton suggests. I consider the reasonableness of the Block 2 remedial works below.
186. As for lift installation at Block 1, Mr. Colin Jesse (B+B's piling and engineering expert) infers from the significant amount of remedial work done to the shafts of Blocks 1 and 4, that problems in Block 1 were just as likely to be the result of builder's defects rather than excessive tilt. This is because Block 4 satisfied the 1:300 specification. Difficulties with the lift shaft in Block 4 could thus only have been due to defective workmanship by Yiu Wing. That would indicate (Mr. Jesse thinks) that Yiu Wing's lift shaft work was of doubtful quality.
187. I disagree. I do not think that one can infer from the fact that Block 4 shafts were defective as built by Yiu Wing, that Block 1 shafts were equally so.
188. I think that the more plausible explanation for Block 1's lift installation difficulties is the breach of the 1:300 criterion.
189. My conclusion is supported by a contemporaneous letter dated 18 September 1999 from HYA to the Authority reporting that:-
“So far, there is no apparent defects detected due to the settlement except for the lift installation....
The lift NSC, Messrs. GEC however reported that the lift at block 1 could not be installed due to insufficient clearance between the structure and the counter weight. An attempt has been made by the Main Contractor to chip off the division wall at the back of the lift shaft to make room for the counterweight. This attempt however has to be aborted when the reinforcement of the wall was exposed and the clearance was still insufficient....”
G4. Did any design/verification calculation errors for which B+B was responsible, either admitted or proved by evidence, materially affect the pile design for any or all of Blocks 1-2?
190. This issue has become academic (as Mr. Westbrook acknowledges in his closing submissions). The fact is that Block 1 breached the contract specification. Further, B+B concedes that the piles to Blocks 1 and 2 were not driven to the depths recorded in the piling records submitted.
G5. If the answer to G4 is yes, did they materially affect the foundations, as built, for either Blocks 1 or 2? In particular ought B+B to have ensured the piles were driven in Blocks 1 and 2 to at least -26 mPD?
191. On the 2nd question in G5, Dr. Kennard relies on a Tomlinson calculation to show that piles needed to installed to a depth of at least –26 mPD to satisfy the tilt limit of 1:300. His calculations assumes that all piles under the caps were installed to the same toe level of -26 mPD.
192. Mr. Jesse notes that Block 2 complied with the overall tilt requirement, despite differences between reported and as-installed pile lengths. He suggests that Block 1's behaviour (tilting towards the adjacent block and away from the deeper piles under its Wing 2) shows that, if only a relatively small number of piles under Wings 3 and 4 had been installed to the actual reported level, Block 1 would also have met the 1:300 requirement.
193. I prefer Dr. Kennard's reasoning. I do not think that one can reason backwards from what actually happened (as Mr. Jesse does). Even if only out of prudence in constructing the foundations of Blocks 1 and 2, B+B ought to have ensured that piles were driven to at least -26 mPD.
G6. Did the piling sequence particularized in Appendix of the RRASOC materially affect the foundation, as built? If so, did the fact that the Authority's agent (HYA) was informed of and stated that it had no objection to the piling sequence amount to a waiver or estoppel by the Authority from relying on strict compliance by B+B with clause 19.39(9) of the General Specification?
194. RRASOC §36 pleads that, as a result of B+B's piling sequence (as shown in RRASOC Appendix 6) for Blocks 1 and 2, it is possible that a false set was achieved due to densification and/or development of excess negative pore pressures. The Authority pleads that B+B ought to have driven piles from the centre outwards, rather than from one side or other inwards.
195. This issue was overtaken by events before trial, in particular B+B's admission of liability for breaching the 1:300 specification in Block 1. There was little discussion of the issue at trial.
196. I accordingly cannot conclude that the piling sequence in Appendix 6 had any effect on the foundations of Blocks 1 or 2.
G7. Did the 2 defective piles, namely 263 in Block 1 and 273 in Block 2, materially affect the Block 1 or 2 foundations, as built?
197. Mr. C. M. Wong's evidence was that the Block 1 and 2 pile depth investigations did not have much bearing on the design of the foundation strengthening works. This is because that design was based on actual performance of the foundations.
198. That does not mean that defective piles (such as P263 or P273) had no effect on the foundations of Blocks 1 and 2. The presence of shorter or non-existent piles would have at least 2 consequences.
199. First, the experts agree that the defective piles would result in an increase in total absolute settlement of Blocks 1 and 2.
200. Second, as far as differential settlement is concerned, there would be uncertainty. The experts say that the shorter piles would not necessarily lead to an increase in tilt. Shorter piles may or may not do so.
201. The investigations did not examine all piles in Blocks 1 and 2. But the high number of defective piles revealed by the investigation casts doubt on the integrity of piles which were not inspected. During the design and execution of the remedial works for Blocks 1 and 2, there would inevitably be queries over the likely future differential settlement of both blocks. That doubt would justify a conservative approach in predicting long-term settlement and assessing whether and (if so) what specific works were needed.
G8. Did B+B personnel make fraudulent or deceitful misrepresentations in the as-built piling records and the Design/Verification Calculations submitted to the Authority, intending that the Authority should act on them and causing loss and damage when the Authority did so act, as alleged in RRASOC §§37-38?
202. Mr. Pennicott had the following exchange with Mr. Jesse about the RSE Report:-
| “ | Q. | Can I suggest to you, Mr. Jesse, that if one takes a truly objective view of these [piling] records and because of their systematically inaccurate nature, the only conclusion that you can sensibly draw is that they were deliberately falsified rather than the product of mere incompetence? |
| | | |
| | A. | I would have to concur that the records were deliberately falsified.” |
203. As accepted by Mr. Jesse, the inaccuracies in the as-built piling records cannot be attributed to mere inadvertence. They must have been deliberately certified by B+B's on-site staff to mislead the Authority into believing that all was well with Block 1 and 2 foundations.
204. When B+B submitted the RSE Report and the as-built piling records to the Authority, it was accepting responsibility for their content. The inference of fraud on the part of B+B's on-site staff is strong. There was certainly a case for B+B to answer on deceit. But B+B called no one to rebut the Authority's allegation of fraud.
205. Accordingly, I must conclude on the balance of probability that, in submitting the false records, B+B’s on-site personnel acted fraudulently with intent to deceive the Authority.
206. Mr. Westbrook has suggested that the Authority's pleading of fraudulent misrepresentation is inadequate. I do not see how. It seems to me that the Authority's case on fraud is clear.
C. HKHA's Financial Claim (Claim A)
| G9. | (1) | Did HKHA act reasonably in offering the purchasers of the flats in any, and if so which, of the six blocks the opportunity to rescind their Sale and Purchase Agreements? |
| | | |
| | (2) | Or, was the decision reached to offer the purchaser Options A and C, premature, ill-considered and unreasonable, as alleged by B+B, for all or any of the 6 Blocks? |
207. I would answer “yes” to G9(1) and “no” to G9(2).
208. When in September 1999 it became apparent that Block 1 would breach the 1:300 specification and it seemed possible that other blocks might do the same, the Authority found itself in a difficult position. The extent to which Block 1 or any other block posed a danger (whether to persons inside or outside the buildings) was unknown. The sensitivity of the foundations and the surrounding ground was uncertain. The Authority needed time for further investigation of the unprecedented situation in which, through B+B's breach, it had found itself.
209. But time was a luxury which the Authority did not have. On 16 September 1999 the problem at the Site was widely publicised in the newspapers. Purchasers of pre-sold flats were understandably worried. In addition, the Authority's reputation and credibility as a responsible housing developer were at stake.
210. That was the context in which the Authority put forward Options A, B and C. The options were intended to reassure buyers that their safety would not be compromised and their investment in a Tin Chung flat would not be jeopardised. The options would also signal that the Authority was a reliable and conscientious provider of quality housing.
211. In the circumstances, I do not think that the Authority acted irresponsibly or prematurely in offering Options A, B and C. What else (one asks rhetorically) could the Authority realistically have done? The options were a reasonable attempt by the Authority to extricate itself from a position in which it would not have been in but for B+B's breach.
212. Telling purchasers in September 1999 to "wait and see" would have aggravated their anxieties. In Hong Kong a flat is a family's major investment. The purchasers of HOS flats are middle income families. They are not rich. The news having broken out, these customers would want to know urgently what was going to happen to their flats. They would want to know where they stood so as to regulate their lives accordingly. I do not accept Mr. Westbrook's submission that, completion being some 6 months away, the Authority had the leisure to delay the options pending further investigation.
213. Why (Mr. Westbrook then queries) offer Options A, B and C in respect of all blocks? Should the options simply have been granted to (say) the purchasers of units in Block 1 and (possibly) Block 2?
214. Given what is now known about the stability of Blocks 3 to 6, the Authority might be thought to have been overly generous. But, in evaluating whether the Authority acted reasonably, one cannot take account of what is now only known through hindsight.
215. Instead, putting oneself in the Authority's position in September 1999, a position in which much was uncertain and much still had to be looked into, but in which decisions had to be made urgently, I do not think that the Authority can be said to have over-reacted.
216. Mr. Westbrook suggests that the Building Committee reached its decision prematurely without due consideration of all possible avenues (not just Options A, B and C). Having read the records of the Building Committee's deliberations and having heard in Court from Mr. Tony Miller (who was present at the Building Committee meeting), I disagree.
G10. If the answer to G9(1) is "yes," would the losses claimed (or any part thereof) have been suffered in any event as alleged by B+B and in particular by reason of delay to the completion of the superstructure works?
217. I would answer “no” to G10.
218. Mr. Westbrook says that, even if the Authority acted reasonably by offering rescission to all purchasers, the Authority would have incurred most or all of the loss under Claim A in any event. Yiu Wing and its electrical sub-contractor Tridant Engineering Co. Ltd. could not have completed their works by the date of completion in March 2000. Thus, purchasers would have been entitled to rescind and would have rescinded their Sale and Purchase Agreements anyway. Accordingly, the loss under Claim A cannot be said to have been caused by B+B's breach.
219. Mr. Westbrook relies on the actual time taken to remedy apparent defects in Yiu Wing's work following discovery of uneven settlement at Block 1.
220. Before December 1999, reports from HYA to HA suggested that Yiu Wing had achieved 99% completion. But, when the Authority took over as Contract Manager in December 1999, unsatisfactory workmanship within the Tin Chung flats came to light. Rectification was slow (Mr Westbrook submits) with completion dates being constantly pushed back. Even by January 2001 rectification had not yet been completed.
221. Mr. Westbrook zeroes in on the electrical works by Tridant. He notes that Mr. Alex Yau, an Architect with the Authority, said in cross-examination that the outstanding electrical works when the Authority took over as Contract Manager were "substantial". The trial documents (Mr. Westbrook says) are "littered" with complaints passing from Yiu Wing or the Authority to Tridant about the quality and progress of Tridant's work.
222. Mr. Westbrook submits that Tridant's electrical work could never have been completed by mid-December 1999. After mid-December 1999, Tridant would have had to change electrical installations at Tin Chung in order to comply with a new Code of Practice (COP). This upgrade work would have taken more time and could not have been achieved by March 2000. Even then Yiu Wing would have to make good all the holes and chases left by Tridant's COP and defects rectification works. That would have pushed Yiu Wing's completion (Mr. Westbrook concludes) to some time in 2001.
223. I do not accept Mr. Westbrook's argument.
224. In my view, Mr. Pennicott (appearing for the Authority) rightly counters that it is logically flawed. Mr. Westbrook's submission assumes that most of what happened after the discovery of uneven settlement would have happened in any event.
225. Yiu Wing deployed high levels of skilled labour at the Site between July and September 1999. That indicates You Wing was determined to meet the then operative completion date of 3 October 1999. Resources were being committed to achieve that goal.
226. Electricians apart, there was a dramatic reduction (some 30%) in skilled labour on-site in October 1999. That was hardly surprising in light of the Authority's decision on 23 September 1999 to permit rescission by purchasers, to suspend part of the works by MC-209, and to investigate the integrity of the blocks at Tin Chung. Yiu Wing would have realised that the pressure was off to meet an October completion deadline. It would inevitably take time before the Site would be ready for occupation or re-sale.
227. There was a further large reduction in on-site skilled labour (electricians included) in November and December 1999. That was likely a consequence of the Building Committee's approval on 21 October 1999 of CMWAL's remedial proposals, including strengthening works for Blocks 1, 2 and 4. As far as completion of blocks was concerned, work between December 1999 and February 2000 would have been hampered by preparations for the strengthening works, including demolition pursuant to AA-01 and removal of service installations (such as transformers) by utility companies.
228. The reduction in labour levels was a direct result of the discovery of uneven settlement in Block 1. Had there been no problem at Block 1, Yiu Wing would likely have maintained at least the same work intensity as in the months before October 1999, if only to avoid the imposition of significant liquidated damages. There is no basis for inferring from what happened on site after October 1999, that Yiu Wing could not have finished its work in any event.
229. To bolster its case, B+B relied on a complex man-day analysis of trade and work activities as recorded in a diary kept by the Clerk of Works (COW). I did not find that analysis helpful. It seemed to be subjective in its basis. The results depended, for example, on the classification by Mr. Michael Allen (B+B's quantum expert) of certain trades or activities as “excusable” and "non-excusable" and on Mr. Allen's assumptions as to the work on which particular tradesmen were engaged on a given day.
230. An example of a difficulty with Mr. Allen's trade and work activity analysis was his treatment of electrical work. He initially classified all electrical work as “non-excusable”, that is, as entirely Yiu Wing's fault and not attributable to B+B. On cross-examination, it was pointed out to Mr. Allen that B+B had conceded liability for electrical work consequent upon certain variations. Thus, at least some of the electricians recorded in the COW diary must have been engaged on “excusable” activity relating to those variations. Mr. Allen amended his analysis overnight to correct his error. But even then I remain unconvinced by the objective (as opposed to subjective) basis of his resulting re-classification of electrical work into “excusable” and "non-excusable".
231. In any event, for the reasons just mentioned with Yiu Wing, one cannot deduce from what happened after the discovery of uneven settlement, that Tridant could not have completed on time in any case.
232. Mr. Pennicott points out that by mid-November 1999 Tridant would have known that transformers were to be removed as a prelude to envisaged strengthening works. Tridant would have known that there would be de-energisation of Blocks 1 to 4. Following de-energisation, CLP would then remove transformers from Blocks 1 to 4 in accordance with CLP practice. As a result, CLP would not be connecting electricity meters to individual flats in the near future.
233. It is true that transformers at Blocks 1 to 4 were not in fact removed until mid-January 2000. But, in practical terms, by mid-November 1999 there would be no pressure on Tridant to complete by mid-December 1999. Blocks 1 to 4 at least were not going to be occupied at anytime in the near future. Not surprisingly, Tridant geared down and so in November 1999 there was a significant drop in electrical man-days at the Site.
234. One cannot infer from all this that, if B+B had performed its contractual obligations, so that there would be no need to remove transformers, Tridant would still have geared down and failed to meet a mid-December 1999 completion date.
235. Mr. Westbrook produced a long schedule of complaint letters from HYA, Yiu Wing and the Authority in relation to defects in Tridant's work.
236. But the schedule consisted in part of letters from September 1997 to December 1999. I doubt that the letters between September 1997 and September 1999 help Mr. Westbrook to demonstrate that as at (say) October or November 1999, there was no prospect of Tridant finishing before mid-December 1999.
237. Between October and December 1999 there are indeed letters to Yiu Wing and Tridant complaining of defects in electrical works. But the last 1999 letter listed by Mr. Westbrook in his schedule is dated 8 December 1999. That is a letter from Mr. Alex Chan of the Authority simply referring to past memos. The work mentioned in the earlier memos may or may not already have been corrected by December 1999. Mr. Chan appears to have intended his letter to serve as a site directive which conveniently listed in one place, all defects (whether or not rectified) identified in a variety of previous memos.
238. On Mr. Westbrook’s schedule, the document next in chronological sequence from Mr. Chan's December 1999 letter is a warning letter from Yiu Wing to Tridant dated 11 September 2000. This is consonant with the gearing down by Tridant mentioned above.
239. Tridant resumed work at the Site in around May 2000. By then it had to change electrical installations to comply with the new COP. As those works in Blocks 3 to 6 were nearing completion, complaints re-started in September and October 2000. But again one cannot conclude from those complaints that Tridant's 1999 work was so defective that it could not have completed on time in the ordinary course of events. It cannot be assumed that the 2000 complaints have any bearing on the situation in 1999.
240. There was an evidential burden on B+B in respect of its positive case that Yiu Wing or Tridant could not have completed on time. B+B could have discharged that burden by calling witnesses from Yiu Wing or Tridant. B+B could have put its case to those witnesses. But B+B did not to do so. It has instead solely relied on surmise from documents in support of its case. Unfortunately, those documents are equivocal at best for the reasons I have given. Consequently, I do not think that B+B has met its burden.
241. In my view, Yiu Wing and Tridant were unable to complete in late 1999 as a direct result of the uneven settlement at Block 1. I find no reason to disbelieve the contemporaneous documentary evidence from HYA, Mott McConnell and Yiu Wing that in September or October 1999, Yiu Wing and Tridant were nearly complete (over 90%) with their works. Thus, but for B+B's breach, Yiu Wing and Tridant ought to have achieved substantial completion.
242. It follows incidentally from this that later works by Tridant to comply with the new COP must be fully attributable to B+B's breach.
G11. If the answer to G10 is "no," are any, and if so which, of the losses claimed at RRASOC §§57(i)-(viii) too remote.
243. RRASOC §§57(i)-(viii) plead that the Authority incurred damage as a result of lost interest, shortfalls in resale values, price refunds, and payment of transaction fees. B+B accepts that the losses claimed are not too remote.
G12. If the answer to G9(2) is "yes," what losses would have flowed from B+B's breaches for each Block, if this decision had not been taken?
244. In light of my answer to G9(2), G12 does not apply.
G13. In relation to those losses claimed that are determined not to be too remote do HKHA's claims, and if so which, fall to be reduced by any of the following matters namely:-
| (1) | the allegation that the package offered to purchasers was more generous than provided for pursuant to the terms of the Sale and Purchase Agreement; |
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| (2) | the allegation that the date from which the losses should be calculated is 26 March 2000 (rather than 7 March 2000); |
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| (3) | the allegation that there are calculation errors in the claims; |
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| (4) | the allegation that the remedial works were more extensive than reasonably required; |
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| (5) | the allegation that the necessary remedial works were unduly delayed by the Authority or its consultants; |
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| (6) | the allegation that some or all of Blocks 2-6 could have been occupied earlier, even if remedial works were ongoing for Blocks 1 and/or 2? |
245. I would answer "no" to sub-issues (1)-(6) of G13.
246. Sub-issue (1). Mr. Westbrook argues that there was no legal basis to offer immediate refunds to purchasers under Options A, B and C. Under the Sale and Purchase Agreement, the Authority (Mr. Westbrook notes) could have waited until at least 7 days after the completion date before paying any refunds.
247. Mr. Westbrook submits that the Authority should have waited until the end of 1999 before granting the option to rescind. After that, the Authority need only have advised purchasers that completion would or would not proceed as planned. Purchasers could then decide what to do on the basis of their contractual rights.
248. Taking account of delays from inclement weather, Mr. Westbrook suggests that the Authority would have been entitled to extend completion to 26 March 2000. Purchasers would then have until 3 April 2000 under the Sale and Purchase Agreement to decide whether or not to rescind. This means that the Authority should not be entitled to claim lost interest for the period up to 3 April 2000.
249. As stated in G9, I do not believe that the Authority could have waited to notify purchasers about where matters stood. The Authority in my view acted reasonably in giving purchasers an option to rescind in September 1999.
250. Further, cl.4(2)(a) of the standard Sale and Purchase Agreement for a Tin Chung unit provided as follows:-
“Subject to Clause 4(2)(b), if the Vendor fails to complete the Building by the Completion Date or any extended date as extended by any extensions of time granted by the Chief Architect under Clause 4(3)(a), the Purchaser shall be at liberty by notice in writing to the Vendor to rescind this Agreement and upon service of such notice, this Agreement shall be rescinded within 7 days thereafter and the Vendor shall repay the Purchaser all amounts paid by the Purchaser on account of the purchase price of the Property under this Agreement together with interest thereon at the rate of 2% per annum above the prime rate specified by The Hong Kong and Shanghai Banking Corporation Limited from time to time from the date or sates such amounts were paid to the date of repayment, the payment of such amounts and interest to be in full and final settlement of all claims by the Purchaser against the Vendor hereunder.”
251. Consequently, if the Authority had waited (as Mr. Westbrook suggests it ought to have done) for 6 months before refunding purchasers' monies, the Authority would have had to pay out an additional 6 months of interest. Given cl.4(2)(a), the Authority could not (contrary to Mr. Westbrook's submission) have saved on interest by delaying payment for 6 months.
252. Sub-issue (2). The Authority was apparently about to issue an extension of time (EOT) for wet weather covering the period to 26 March 2000. But this was withdrawn. No reason could be given by the Authority's witness (Mr. S. H. Ho) at trial for the withdrawal.
253. Mr. Westbrook says that there is clear evidence that an EOT would have covered the period to 26 March 2000.
254. I do not think that the available evidence supports Mr. Westbrook's contention.
255. Sub-issue (3). Mr. Allen suggests that the Authority overpaid Option B purchasers by $281,801.52. This conclusion is based on an arithmetical analysis of monies paid to a sample of 8 Option B purchasers. I am not persuaded that one can conclude from a sample calculation that as a whole Option B purchasers were overpaid by $281,801.52.
256. Sub-issue (4). B+B accepts that 40 arresting piles were reasonable for Block 1. But B+B says that arresting works were enough there and restoring works were unnecessary. On Block 2, only arresting works were carried out. But B+B say that no remedial works were warranted at Block 2.
257. On Block 1, Mr. Westbrook argues that, since the arresting works brought the tilt of Block 1 to 1:235, it was extravagant to have restoring works as well. Those restoring works raised differential settlement to about 1:373. That improvement (Mr. Westbrook submits) would not be perceptible to the naked eye and the building was structurally safe in any case at 1:235. Thus (Mr. Westbrook reasons), the cost of restoration was disproportionate to any benefit obtained. Block 1 units could simply have been sold with (Mr. Westbrook ventures) at a 5%-10% discount.
258. I disagree.
259. At 1:235 the tilt of Block 1 would still be perceptible when viewed alongside other blocks. That would clearly affect the marketability of units within Block 1. But, as Mr. Pennicott points out, B+B has not adduced evidence on the difference in value between units in a Block 1 with 1:235 and 1:300 tilts respectively.
260. There was no evidence of the difference in valuation between a flat in a 1:235 building and an equivalent flat in a building built to 1:300. In submission, Mr. Westbrook assumed a 5%-10% discount in price due to any perceptible tilt.
261. But at (say) a 10% discount in price, the loss to the Authority would be in the order of $20+ million per block. If the diminution in value of a unit in a tilted block were greater than 10%, the overall loss to the Authority would obviously be much more for that block.
262. Therefore, it is impossible in the absence of hard valuations to conclude that restoration works aimed at bringing Block 1 to 1:300 or better was a waste of resources as compared to the economic benefit obtained.
263. Mr. Pennicott rightly stresses the reality of the situation. The 1:300 criterion is the accepted norm in Hong Kong. It is far from clear that, without a substantial discount, a person would be prepared to move into Block 1 with a 1:235 tilt, even if told that the block (albeit substandard) was “structurally safe”.
264. In those circumstances, I do not believe that the Authority was wrong or unreasonable to instruct CMWAL to restore Block 1 to 1:300.
265. On Block 2, Mr. Westbrook notes that Block 2 never exceeded the specification of 1:300. Insofar as it is suggested that work on Block 1 may have affected Block 2, Mr. Westbrook submits that, with careful planning, adverse effects (if any) could be minimised. There was therefore no basis (Mr Westbrook concludes) for works on Block 2.
266. I disagree.
267. Any prediction of long-term settlement is subject to uncertainty. I have previously accepted Dr. Kennard's present prediction of 1:333 as perhaps the best estimate of overall long-term settlement at Block 2. If one takes a conservative error margin of 10%, differential settlement could actually be below the 1:300 specification.
268. The figure of 1:333 is one which Dr. Kennard has calculated for the purposes of this trial having the benefit of ongoing settlement monitoring data that was not available in late 1999 and early 2000. Mr. C. M. Wong would have had limited data available to him when designing works for Block 2.
269. If one further takes account of the uncertainty due to the sensitive soil conditions around Blocks 1 and 2 and serious doubts about the integrity of the pile lengths used in Blocks 1 and 2 generally, I do not think that the Authority can be said to have acted unreasonably in conducting arresting works for Block 2.
270. In particular, it is difficult to say that the Authority acted unreasonably when in authorising works on Block 2 it was acting on the considered advice of its consultant, CMWAL. B+B has not suggested that Mr. C. M. Wong was negligent in that advice. Other engineers might have given different advice. Mr. Morton may, with the benefit of hindsight, think that Mr. C. M. Wong was too conservative. But none of that makes CMWAL's suggested course of action or the Authority's acceptance of that course unreasonable.
271. It might be true that, with careful planning, the effects of Block 1 works on Block 2 could be minimised. But without hindsight, I doubt that adverse effect of Block 1 works on Block 2 could have been ruled out when CMWAL was considering what ought to be done.
272. Sub-issue (5). Mr. Westbrook complains of the "extraordinary time" between the reporting of uneven settlement to the Building Committee in September 1999 and the commencement of remedial works by Gammon in May 2001.
273. Mr. Westbrook submits that Mr. C. M. Wong could have saved time if he had appreciated certain matters earlier.
274. One such matter (according to Mr. Westbrook) was that mini-piles were prone to buckling and were clearly not a superior solution to the bored H-piles originally proposed for the strengthening works. Another delay was caused by consideration of RSS. RSS (Mr. Westbrook says) was “an untested and experimental method with limited prospect of success”. The switch to jacked piles (Mr. Westbrook thinks) was "simply a new-fangled solution to the same problem". PIP ("Pakt-in-Place") piles could have been chosen from the start. That would have been adequate (if reinforced with H-piles). But (Mr. Westbrook points out) Mr. C. M. Wong rejected that solution early on.
275. The length of time taken was due (Mr. Westbrook concludes) to Mr. C. M. Wong being "allowed to keep changing the design, according to each flight of fancy, with no sensible control or guidance" from the Authority.
276. I am not persuaded by Mr. Westbrook's argument.
277. Mr. C. M. Wong had only one chance to get it right. As for the Authority, although conscious of a need to fast-track remedial works, its priority was to succeed in rectifying the uneven settlement identified. This called for caution and conservatism in the decision process. The Authority did not want to rush for the sake of rushing.
278. The design proceeded against the backdrop of new settlement data and the availability of new construction techniques (such as RCD and jacked piles). Proposals evolved as new ideas were considered and developed to deal with a complex and unprecedented situation.
279. I do not think that consideration of RSS was unreasonable in the circumstances. CMWAL and the Authority were groping towards a solution to the unique problem with which they were confronted. The solution was far from self-evident. The Authority cannot then be faulted for considering RSS even though the method was revolutionary.
280. In my judgment, the time taken by CMWAL in designing the strengthening works was neither excessive nor unreasonable in all the circumstances.
281. Sub-issue (6). I do not think that Blocks 3 to 6 could have been occupied earlier than they were. It seems to me that, following investigation and analysis, Mr. C. M. Wong promptly recommended that remedial works were unnecessary for those blocks. That advice was not immediately accepted by HKU which took a more cautious approach before giving a final endorsement. I do not believe that it was unreasonable for the Authority to follow the conservative approach suggested by HKU.
282. As for Block 2, for the reasons already given, it was reasonable to execute remedial works at Block 2. That block could not be occupied until after the works were carried out.
G14. If the answer to G13 or any part thereof is "yes," what is the amount or amounts of the reduction(s)?
283. Given the answer to G13, G14 does not apply.
G15. Is the Quantum of Claim A as pleaded in RRASOC §57 and Appendices 8-11 or as set out in Re-Amended Defence Appendix 1 Tables 1-3 or some other figure?
284. Claim A comprises 8 components:-
| (1) | $9,718,242 deposit interest repaid to prospective purchasers who exercised rights of rescission under Options A and C. |
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| (2) | $48,773,400 shortfall in resale values of flats originally subject to agreements rescinded under Options A and C. |
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| (3) | $2,189,600 refund of price difference to Option B purchasers. |
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| (4) | $921,588 interest paid on deposits of Option B purchasers. |
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| (5) | $1,058,400 legal fees spent on rescission agreements. |
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| (6) | $16,227,061.23 lost interest on deposits of Option A and C purchasers. |
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| (7) | $151,165,934.60 lost interest on completion monies of Option A and C purchasers from date of anticipated receipt (7 March 2000) to actual date of receipt. |
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| (8) | $7,226,349.55 lost interest on Option B purchase monies. |
285. In total, Claim A amounts to $237,280,575.30. It follows from the answers to G11 and G13 that the Authority is entitled to that quantum of Claim A.
D. Restoration and Stabilisation Works (Claim B)
G16. In principle is HKHA entitled to be reimbursed as damages the costs incurred to Gammon in respect of:-
| (1) | the entirety of the arresting works at Block 1 and in particular the additional 26 piles; |
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| (2) | the restoring works at Block 1; and/or |
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| (3) | the arresting works at Block 2. |
286. I would answer "yes" to all 3 parts of G16.
287. Sub-issue (1). Mr. Morton suggests that 26 additional piles for the arresting works at Block 1 were excessive. He has variously suggested that 0, 4 or 5 piles in addition to the 40 piles in CMWAL's design would have been sufficient.
288. Mr. C. M. Wong proposed the 26 pile solution to cater for creep, the consequences of which he had not previously taken into account. B+B does not now fault Mr. C. M. Wong for failing to consider creep initially.
289. If one assumes creep and a live load of 17.5% (in accordance with Building Regulations) the initial 40 piles would have meant 9 over-stressed piles. Mr. Morton's 44 pile answer would not solve this problem. The 4 extra piles would themselves have been over-stressed, because Mr. Morton has wrongly assumed that all piles had a starting capacity of 5,000 kN.
290. Mr. Morton's 45 pile solution proffered towards the end of his cross-examination might possibly cure the problem. But because the solution was put forward late in the trial, it is not possible to be certain of this.
291. For instance, Mr. Morton acknowledged that he had not considered the effect of rubber connections between the top of the pile and the pile cap. Due to the limitation of the pile head detail incorporating laminated rubber bearings, the jacked piles used were incapable of resisting tension force or transmitting shear force. The jacked piles could only take axial compression force. Mr. Morton apparently has not factored this consideration into his calculations.
292. It is easy with the benefit of hindsight now to put forward a 45 pile solution. But, even if that were right, that does not mean 26 additional piles was unreasonable in the sense of being outside the range of solutions which a competent engineer might put forward. Given that Mr. C. M. Wong is not said to have been negligent, I find it difficult to see how his 26 extra piles can be characterised as "overkill," excessive or unreasonable. Nor can I see how the Authority can be faulted for acting on Mr. C. M. Wong's advice to add 26 piles.
293. As far as the assumption of 17.5% live load is concerned, I do not believe that Mr. C. M. Wong can be faulted for designing works in accordance with Building Regulations. It may be that live loads of anywhere between 5%-8% would be closer to the load which one might encounter in real life. But that does not make Mr. C. M. Wong's use of 17.5% unreasonable.
294. Mr. Morton himself conceded so much in cross-examination:-
| “ | Q. | The suggestion, therefore, I make to you is that there is nothing that somehow excludes the remedial scheme that C M Wong was designing from the same requirements that existed originally in the B+B contract, namely to comply with the Building Regulations? |
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| | A. | In other words, that the new foundation should comply with the Building Regulations. |
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| | Q. | Yes. |
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| | A. | That does appear to be the case. |
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| | Q. | Therefore, in order to do so, he [Mr. C M Wong] had to use the same criteria; namely the 17.5 or the 17.8 per cent live load figure? |
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| | A. | That would appear to be the case, yes. |
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| | Q. | In those circumstances, do you agree that it was perfectly proper for C M Wong to use that figure of 17.5 or 17.8 per cent? |
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| | A. | Certainly he was entitled to use that figure, certainly, unless he felt that there was some benefit in -- if he could make a case to the client that there was a good case for not making that, but it was his decision. |
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| | Q. | He was entitled to use that figure? |
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| | A. | He was entitled to use that, apparently he was.” |
295. Sub-issues (2) and (3). See G13 sub-issue (4).
G17. If the answer to G16 or any part thereof is "yes," what are the costs to which the Authority is entitled and in particular were the costs actually incurred unnecessarily and unreasonably increased (and if so by how much), by:-
| (1) | the alleged failure by C M Wong initially to take into account an allowance for creep in the implemented remedial design work scheme; |
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| (2) | the alleged failure by C M Wong to take into account the impact of the weight of the jacking machine; |
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| (3) | the alleged failure by C M Wong to take into account the impact of the lowering of the water table during anchor drilling; |
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| (4) | the alleged failure by C M Wong to take into account the effect of disturbance and ground displacement caused by the jacked piles; |
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| (5) | the alleged unnecessary emergency demolition and removal of soil; |
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| (6) | causing the cracking of pile cap F3 and its associated repair; |
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| (7) | the alleged undue delay in the implementation of the remedial scheme? |
296. Sub-issue (1). B+B no longer contends that there should be a reduction of damages on this ground.
297. Sub-issue (2). I do not think that settlement from the pile jacking machine constituted a "novus actus" which broke the chain of causation such that ensuing delay or costs ceased to be attributable to B+B. Again there is no suggestion that Mr. C. M. Wong was negligent in failing to appreciate that the machine's weight might cause accelerated settlement at Blocks 1 or 2.
298. Sub-issue (3). Similarly, I do not think that the lowering of the water table during anchor drilling was a "novus actus". Again there is no suggestion that Mr. C. M. Wong was negligent in failing to anticipate a lowering of the water table. Such event is something which might happen in the course of a complex and difficult operation through no one's fault.
299. Sub-issue (4). This issue does not give rise to a "novus actus". No negligence on the part of Mr. C. M. Wong is suggested.
300. Sub-issue (5). The emergency demolition and removal of soil was necessary. This helped to arrest differential settlement and enabled restoration works to be carried out later.
301. Sub-issue (6). B+B no longer contends that there should be a reduction of damages on this ground.
302. Sub-issue (7). There was no undue delay. See the answer to G13 sub-issue (5).
G18. What is the quantum of B+B's admitted liability in respect of consultant's fees incurred by the Authority in relation to:-
| (1) | the investigation of the foundations of Blocks 1 to 6; |
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| (2) | the remedial work carried out at Block 1? |
303. See the discussion of QS issues below.
G19. Is B+B liable for any other and if so which consultant's fees incurred by HKHA in relation to Blocks 1 to 6 and if so:-
| (1) | which block(s); and, |
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| (2) | what is the quantum of such liability? |
304. See the discussion of QS issues below.
E. Costs incurred to Yiu Wing and costs of the reinstatement works (Claim C)
G20. What is the quantum of B+B's admitted liability in respect of the loss and expense paid to Yiu Wing by HKHA in respect of Block 1?
305. See the discussion of QS issues below.
G21. Is B+B liable for any other loss and expense paid to Yiu Wing by HKHA in respect of Blocks 1 to 6 and if so:-
| (1) | which block(s); and, |
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| (2) | &what is the quantum of such liability? |
306. See the discussion of QS issues below.
G22. Is B+B liable for the acceleration costs paid to Yiu Wing for Block 4 and, if so, what is the quantum of such liability?
307. See the discussion of QS issues below.
G23. Was HKHA entitled to deduct liquidated damages for late completion against Yiu Wing and, if so, has it failed to mitigate its losses by electing not to do so?
308. B+B no longer pursues this issue.
G24. What is the quantum of B+B's admitted liability in respect of the variations paid to Yiu Wing by HKHA in respect of Block 1?
309. See the discussion of QS issues below.
G25. Is B+B liable for any other variations paid to Yiu Wing by HKHA in respect of Blocks 1 to 6 and, if so:-
| (1) | which block(s); |
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| (2) | which variations; and, |
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| (3) | what is the quantum of such liability? |
310. See the discussion of QS issues below.
G26. What is the quantum of B+B's admitted liability in respect of the reinstatement work carried out or to be carried out on Block 1?
311. See the discussion of QS issues below.
G27. Is B+B liable for any other reinstatement work carried out on Blocks 1 and 2 and, if so, what is the quantum of such liability?
312. See the discussion of QS issues below.
F. Pile Depth Investigation Costs (Claim D)
G28. What is the quantum of B+B's admitted liability in respect of the pile depth investigation costs for Blocks 1 and 2?
313. See the discussion of QS issues below.
G. Direct Costs (Claim E)
G29. What is the quantum of B+B's admitted liability for direct costs in relation to:-
| (1) | the investigation and monitoring of differential settlement at Blocks 1 and 2; and, |
| | |
| (2) | the execution of the remedial works to Block 1? |
314. See the discussion of QS issues below.
H. In-house Costs (Claim F)
G31. What is the quantum of B+B's admitted liability for in-house costs related to the reinstatement works carried out at Block 1?
315. See the discussion of QS issues below.
G32. Is B+B liable in respect of any other in-house costs that relate to Blocks 1 and 2 and if so what is the quantum of such costs?
316. See the discussion of QS issues below.
IV. Engineering Issues
A. General Remarks
317. Where the engineering experts have disagreed, I have generally preferred the evidence of Dr. Kennard and Dr. St. John to that of Mr. Jesse or Mr. Morton. This is because Mr. Jesse and Mr. Morton struck me at times to be more advocates for B+B's cause, rather than wholly impartial experts. Let me give some examples.
318. On Issue E7 Mr. Pennicott suggested to Mr. Jesse that the use of 2 metre layers would result in more reliable information and better comply with a contractor's obligation to submit the most accurate calculations.
319. In response, Mr. Jesse began by quibbling about what Tomlinson (a textbook authority) did or did not say about calculations using thinner layers. Mr. Jesse then concluded:-
“So I am strongly of the view, very strongly of the view, that notwithstanding the fact that it may have been more accurate, given the use to which these calculations are put and their requirements, that it is perfectly legitimate to produce these calculations knowing necessarily or knowing that in fact you might have been able to produce a more accurate calculation using thinner layers.
The reason for that is that this borehole to borehole methodology is so conservative and has so many in-built factors of safety in it that given the way the specification is written, this is probably one of the very few opportunities that is legitimately available to a person producing these calculations to actually produce something that is more likely to reflect reality.”
320. Mr. Jesse appeared unduly defensive and obscure. It is unclear to me how he distinguished between being "more accurate" and being "more likely to reflect reality". If using 3 m instead of 2 m layers was less accurate, how could Mr. Jesse maintain that it was "legitimate" to be less accurate in the interests of reflecting "reality". It seemed to me that Mr. Jesse was attempting to cobble together a vague justification of B+B's conduct.
321. In Mr. Morton's case, I repeatedly had to invite him to answer Mr. Pennicott's questions directly.
322. Then, towards the end of cross-examination, Mr. Pennicott suggested that Mr. Morton had mis-calculated the load on the remedial piles added to the Block 1 foundation. Once a load had been locked onto the original piles and pile cap (Mr. Pennicott argued based on Dr. Kennard's evidence) then, as a matter of elementary physics, that load could not be re-distributed among any additional piles or pile cap extension. Mr. Morton (it was put) had ignored this principle.
323. Mr. Morton initially gave a long, rambling answer which failed to address the question. Mr. Pennicott repeated his proposition. Mr. Morton continued to digress. I interrupted to indicate that it would be more helpful to the Court, if Mr. Morton could just state whether or not he agreed with Mr. Pennicott.
324. Mr. Pennicott put his question again and then the following ensued:-
| “ | Q. | Do you agree that once the load is locked into the piles, that the stress is locked into the pile cap, you cannot change history in terms of reducing or redistributing that original -- |
| | | |
| | A. | No, I believe it can be. I disagree. It can be redistributed. |
| | | |
| | JUDGE. | You stand by the calculation at case 3 of an average load per pile of 175 tonnes? |
| | | |
| | A. | Yes, if you assume that it is completely redistributed. I would accept that there are going to be interim cases and it is going to vary with time, but there could be a different distribution to this. |
| | | |
| | JUDGE. | Let us be blunt, Mr. Morton. Do you say this is a reasonable calculation at case 3 or this is an extreme calculation? |
| | | |
| | A. | I think it is an extreme calculation. |
| | | |
| | JUDGE. | This on case 3 is an extreme calculation? |
| | | |
| | A. | The numbers I have put on the page is the upper limit. |
| | | |
| | JUDGE. | Is an extreme calculation? |
| | | |
| | A. | Yes.” |
325. My impression was that Mr. Morton at first avoided facing up to Mr. Pennicott's question. Pressed to answer in plain language, Mr. Morton said he disagreed with Mr. Pennicott's proposition. But gradually it became apparent that he was disagreeing only because of a possibility that in some unlikely “extreme” situation (not clearly specified by Mr. Morton), Mr. Pennicott could conceivably be wrong. I was left thinking that Mr. Morton was unwilling to admit to a straightforward error.
326. Exchanges of this nature accordingly undermined the confidence which I might otherwise have had on Mr. Jesse and Mr. Morton as experts.
B. Contract and Design
E1. The expected pile lengths at the 2 blocks.
327. This concerns the interpretation of lengths given in the September 1996 Foundation Design Report. I prefer Dr. Kennard's to Mr. Jesse's interpretation of the pile lengths given. The "net lengths" refer to length below cut off level.
E2. The depth of negative skin friction (NSF) to be adopted.
328. The experts agree that B+B's settlement calculations adopted different NSF layer depths to those used in the pile design capacity. It was illogical to use 2 different sets of values in a single design. B+B appears to have chosen the value set which most conveniently produced the desired result for the relevant calculation.
C. Installation
E3. Interpretation of preliminary test piles result and the averaging of results.
329. I think that the results of PP2 should have been taken into account. On averaging, I accept Dr. Kennard's view that averaging was not legitimate.
E4. The number of piles that had an FOS of less than 2.
330. I accept Dr. Kennard's evidence that, on the basis of a correct assessment of NSF and a proper interpretation of preliminary pile results, a significant proportion of piles in Blocks 1 and 2 would have an FOS of less than 2.
E5. Did Block 2 breach PS Clause 19.27(2) where the FOS of piles had to be at least 2?
331. I would answer "yes".
E6. The use of all available borehole data for settlement analysis.
332. In my view, B+B ought to have used the borehole information derived from A31-73, A31-75 and A31-76. This is because, although the boreholes were outside the footprints of Blocks 1 or 2, they were still within the one or other block's zone of influence.
E7. Did B+B select sub-surface layers that were generally too thick, 3 m instead of 2 m, when the interval where SPT values were taken as 2 m?
333. I would answer "yes". Again I prefer Dr. Kennard's evidence to that of Mr. Jesse.
E8. Using the highest SPT values rather than the average value for the layers.
334. The experts agree that this was incorrect. This would lead to error in settlement values ranging from a decrease in settlement of 19% to an increase of 35% at various borehole locations.
D. Settlement
E9. The curve fitting as carried out by Mr. Morton.
335. In the course of trial, the differences between Dr. Kennard and Mr. Morton on curve fitting narrowed considerably. At the end of the day, I agree with Mr. Westbrook that the final results did not differ greatly.
E10. Live loading and live load settlement.
336. For the reasons stated in G16 sub-issue (1), I believe that Mr. C. M. Wong's use of 17.5% live load was reasonable.
E11. Were Blocks 1 and 2 fit for purpose?
337. See the answers to G2 and G3.
E12. The issue of creep and its magnitude.
338. B+B now accepts that Mr. C. M. Wong's estimates of creep for Blocks 1 and 2 in their unremediated state were reasonable.
E. Remedial Works
E13. Could Block 2 be safely occupied while works at Block 1 were being carried out?
339. The question assumes that Block 1 alone required strengthening works. Given my conclusion that the works to Block 2 were justified, this issue does not arise.
E14. Design development of the remedial works.
340. See the answer to G13 sub-issue (5).
E15. Delay to the Works contract.
341. See the discussion of QS issues below.
E16. Review of Mr. Morton's SAFE analysis of Block 1 remedial works.
342. The SAFE analysis relates to the number of additional piles (whether 0, 4, 5 or 26) needed for the Block 1 remedial works when creep is taken into account. See the answer to G16 sub-issue (1).
E17. SAFE analysis and pile load summary including the iteration process and comments on Mr. C. M. Wong's models
343. See the answer to G16 sub-issue (1).
E18. The explanation of the structural appraisal section in Dr. Kendall's expert report
344. This does not give rise to a substantive issue.
E19. Rationale for Block 2 strengthening works.
345. See the answer to G13 sub-issue (4).
E20. The effect of the 700 tonnes piling machine on Blocks 1 and 2
346. The weight of the piling machine did affect settlement. See the answer to G17 sub-issue (2).
E21. Mr. Morton's UNISETTLE analysis
347. B+B no longer relies on the UNISETTLE analysis.
E22. Use of PIP piles for strengthening works
348. Mr. C. M. Wong's early rejection of PIP piles cannot be regarded as negligent or unreasonable. Use of PIP piles might have been an option for the remedial works. That does not mean that they were the only possibility. Different engineers might consider that there other types of piles were better suited for the envisaged works.
349. Mr. Pennicott cross-examined Mr. Morton on Mr. C. M. Wong's early rejection of PIP piles. Mr. Morton was asked whether he criticised Mr. C. M. Wong for not choosing PIP piles. Mr. Morton's reply was:-
“It was a view that he [Mr. C. M. Wong] took at the time and that was a reasonable conclusion, possibly, but he did not finish up with the socketed H-piles except in a very few cases.”
Therefore Mr. Morton himself does not think that Mr. C. M. Wong acted unreasonably.
E23. Apportionment of 'arresting' and 'restoration' works for Blocks 1 and 2
350. In light of my conclusions on the reasonableness of remedial works at Blocks 1 and 2, the issue of apportionment does not arise. See also the discussion of QS issues below.
F. Miscellaneous
E24. Remedial piling plan
351. There is no dispute on the sequence.
E25. Schedule of tolerance
352. The schedule merely illustrates lift tolerances. It does not give rise to a live issue.
V. QS Issues
A. General Remarks
353. Where the quantum experts have disagreed, I have generally preferred the views of Mr. Everson (the Authority's expert) to those of Mr. Allen.
354. As quantum experts in a construction case, Mr. Everson and Mr. Allen had to confine their evidence to the estimation of quantities and the measurement and valuation of works.
355. Mr. Everson studiously avoided giving opinions on causation, programming or liability.
356. In contrast, Mr. Allen repeatedly strayed beyond the limits of his admissible expert evidence. He had no hesitation in expressing his opinions on matters of engineering, programming or causation.
357. This was despite the fact that Mr. Allen accepted that he was neither an engineer nor a forensic programming expert.
358. Nor, in contrast to the Authority's factual witnesses, had Mr. Allen been a participant in the events leading up to this action. Mr. Allen had no firsthand experience of what transpired on site in the immediate aftermath of the discovery of uneven settlement. He could not have had any particular insight into what caused what.
359. The result was that Mr. Allen's views on a whole range of matters had no particular relevance to the Court.
360. Examples of specific areas in which Mr. Allen strayed beyond his expertise were as follows:-
| (1) | Whether Yiu Wing would have completed work on Blocks 1 to 6 on time even if there had been no uneven settlement. |
| | |
| (2) | Whether EOTs were reasonable. |
| | |
| (3) | Whether certain reinstatement works are attributable to B+B's breach. |
361. During a project, a quantity surveyor might routinely be asked (and remunerated) by an employer or contractor for his views on matters of programming or causation. But that does not render the same views admissible in Court when a quantity surveyor gives quantum evidence.
362. Mr. Westbrook responds that, even if Mr. Allen has strayed beyond his expertise, it should not really matter because Mr. Westbrook could make similar points by way of submission. Mr. Westbrook expressly adopted as his own submissions such points advanced by Mr. Allen as I thought were inadmissible.
363. Mr. Westbrook is plainly entitled to make such submissions as he deems appropriate. But the difficulty is that, in advancing its “submissions” through Mr. Allen in the first place, B+B has fatally undermined Mr. Allen's credibility as impartial expert in the Court's eyes. Mr. Allen has become no more than another advocate of B+B's cause, the very thing which an expert is not supposed to be. I do not think that Mr. Westbrook's response gets around this problem.
364. I am thus unable to place much reliance or confidence on Mr. Allen's evidence.
B. Claim B: Restoration and Stabilisation Works
QS1. Was it commercially reasonable to re-sequence the programme to give Block 2 priority?
365. In June 2001 the Authority decided to re-sequence the remedial works being undertaken by Gammon. Until then, it had been envisaged that Block 1 works would be completed before those on Block 2. But, having carried out financial calculations, the Authority thought that there would be some benefit if Block 2 became available for re-sale and occupation ahead of Block 1. Gammon was thus asked to proceed in accordance with a Programme 02C. Later, in November 2001, Gammon produced a refined version (Programme 03) for the re-sequenced works.
366. The re-sequencing did not lead to the early re-sale of Block 2 units. This was in part because Government changed its housing policy in December 2001, so that only limited of HOS flats went for sale.
367. Mr. Westbrook says that there was no engineering justification for the re-sequencing. The new timetable only led to expenditure of more money without tangible benefit to the Authority. Mr. Westbrook submits that the costs of the re-sequencing should therefore not be visited on B+B.
368. In my judgment, the re-sequencing was a reasonable attempt by the Authority to mitigate loss from B+B's breach. It is true that the anticipated benefits did not materialise. But that by itself is no bar to a claim for the costs associated with re-sequencing.
QS2. EOT for additional piles (153 days)
369. QS2 raises 2 sub-issues:-
| (1) | Was the $2.2 million of prolongation costs paid by the Authority to Gammon for 153 days' EOT reasonable? |
| | |
| (2) | Was CMWAL's award of 153 days' EOT reasonable? |
370. Sub-issue (1). The $2.2 million was paid as a commercial settlement.
371. Mr. Westbrook submits that the amount is unreasonable, because there is no evidence that the Authority attempted to ascertain Gammon's true prolongation costs.
372. As far as quantum is concerned, Mr. Allen assesses $577,210 as the amount that ought to have been paid.
373. B+B has the onus of establishing a failure to mitigate. I do not think that it discharges that burden for B+B simply to say that there is no evidence of negotiations with Gammon on prolongation costs.
374. I think that the Authority was entitled to form the view (based on its experience as a major developer) that Gammon in all the circumstances would have incurred significant prolongation costs from 153 days' EOT. It was consequently reasonable for the Authority to propose a settlement, rather than waste time and resources by first requiring Gammon to “prove” prolongation costs and then engaging staff to scrutinise the “proofs” tendered.
375. Further, the settlement figure of $2.2 million appears reasonable. I accept Mr. Pennicott's point that the $2.2 million is in line with Gammon's tendered rates. The $2.2 million amounts to $14,380 per day. This compares favourably (from the Authority's viewpoint) with Gammon's tendered preliminaries daily rate of $46,624. It is also within Mr. Allen's alternative daily average rate, which ranges from $11,925 to $13,130.
376. Sub-issue (2). Mr. Allen attributes 56 of the 153 days' EOT to the 26 additional piles for Block 1. He ascribes the remaining 97 days to re-sequencing. Given my conclusion that the 26 extra piles and the re-sequencing were reasonable, it follows that the 153 days' EOT was also reasonable.
QS3. Are CMWAL extensions of time for 213 days reasonable?
377. Mr. Allen contends that a reasonable extension was 197 (instead of 213) days. The difference of 16 days between the parties appears to be accounted the following:-
| (1) | a difference of 1 day (28 instead of 29 days) for delays due to additional excavation and installation of strain gauges; and, |
| | |
| (2) | a difference of 15 days (25 instead of 40 days) for delays due to Yiu Wing's failure to remove materials and rubbish (the Yiu Wing rubbish delay); delays due to backfilling and extraction of sheet piles; and delays due to suspension of excavation works for CCTV and exposure of piles. |
378. Sub-issue (1). Gammon asked for 28 days' EOT. On assessment, Mr. C. M. Wong reckoned that there were 23 working days plus 6 public holidays. He consequently gave an EOT of 29 days, 1 day more than Gammon claimed. Mr. C. M. Wong explained that “as a professional engineer, I had an obligation to assess the EOT in a fair and consistent manner”. I do not think that Mr. C. M. Wong was wrong to decide as he did.
379. Sub-issue (2). Mr. C. M. Wong based his assessment of 40 days on Programme 03. By this, the critical activity "Trial jacked pile (JH18)" was to start on 17 May 2001. But, according to the As-built Programme, the corresponding event (ID14) actual started on 30 June 2001. There is a difference of more than 40 days. Mr. C. M. Wong's assessment of 40 days must accordingly have been reasonable.
380. Mr. Westbrook submits that the use of Programme 03 by CMWAL as a baseline was "fundamentally flawed". This (he says) is because Programme 03 was not issued until November 2001, whereas the delaying events being assessed took place months beforehand. One should (Mr. Westbrook argues) assess the delay by reference to the earlier Programme 01.
381. I disagree. Programme 03 was the operative programme at the time when Mr. C. M. Wong was assessing how much EOT to allow Gammon. Consequently, it would have been appropriate for him to make use of that latest programme.
QS4. Calculation of Site overheads
382. The Authority claims $3,371,946.22 as the sum paid to Gammon in relation to site overheads for 206 days' EOT (that is, 213 days less 7 days (for the Yiu Wing rubbish delay, which the Authority concedes is not attributable to B+B).
383. The figure claimed by the Authority is assessed on the assumption that costs were incurred in the extended period following the original completion date. Mr. Allen suggests that prolongation costs should be calculated by reference to the discrete points in time when delay actually occurred.
384. I accept that the Authority's figure and approach as reasonable.
QS5. Calculation of Head Office overheads
385. In assessing what Head Office overheads were attributable to the EOTs granted to Gammon, the Authority used a formula.
386. Mr. Westbrook submits that this was wrong. He argues that actual loss must be proved. A formula assumes that there has been loss due to EOTs and estimates that loss as a proportion of fixed overheads. B+B should not (Mr. Westbrook says) be liable for such purely notional amount.
387. The evidence of Mr. Lawrence Chung, the Authority's Chief Quantity Surveyor, was that the Authority assumed all contractors in Hong Kong were working to full capacity and could move on to a new job once the current one was finished. Mr. Westbrook queries the reasonableness of those assumptions.
388. Mr. Westbrook submits that, if a formula can be used, the Authority must ascertain the veracity of the inputs into the formula. The Authority should demand proofs of alleged expenses. It should not take it for granted that costs were incurred as asserted by a contractor.
389. I disagree with Mr. Westbrook.
390. One must distinguish 2 situations.
391. In Situation A, a contractor claims against an employer for additional overheads. The contractor relies on a formula in support of his claim. In Situation B, an employer pays extra overhead costs to a contractor based on a formula and then claims reimbursement from a third party whose fault led to the payment having to be made by the employer.
392. In Situation A, it may or may not be appropriate to rely on a formula. The Court, for example, might feel that a contractor has to prove actual (as opposed to estimated) loss. The Court may require evidence that, but for delay on the project, the contractor would (say) have taken on other work.
393. But Situation A is not the present case. It is unnecessary to decide whether a formula approach is valid in such setting.
394. The present action is more like Situation B. In consequence of EOTs granted following B+B's breach, the Authority faced a claim for additional overheads from Gammon.
395. In contrast to Situation A, the issue is not whether Gammon has proved actual loss. Gammon is not a party to these proceedings. The question is whether the Authority has acted reasonably in compensating Gammon for Head Office overheads. If yes, the Authority is entitled to reimbursement. If not, the Authority has failed to mitigate loss and cannot recover.
396. Further, this being a question of mitigation, the burden is squarely on B+B to show unreasonableness in the Authority's approach to Gammon's Head Office overheads.
397. I do not think that B+B has met that burden. I believe that the Authority's approach was reasonable in all the circumstances.
398. Rather than use up time and expense in a detailed assessment of Gammon's claim, the Authority pragmatically decided that it would pay for overheads based on a formula (which was more favourable to the Authority than similar ones found in standard textbooks). This approach followed the Authority's usual practice with contractors, although it did not adhere to the strict letter of the Authority's manual guidelines.
399. For the Court now to require the Authority to have demanded “proofs” of actual loss from Gammon, would be akin to weighing conduct with the “nice scales” which Banco de Portugal has said are not to be used.
400. On quantum, I accept Mr. Everson's assessment of $3,426,235.69 for Head Office overheads based on 206 days' EOT. This gives an average daily rate of $16,632.21.
QS6. What is a correct assessment (of quantum only) for the 14 variation orders over $50,000 (subject to Issue QS7)?
401. I think that the Authority is entitled to claim the entirety of RE/067 and RE/170 from B+B as incidents in the course of remedial works. The assessments of the other 12 variation orders over $50,000 have been agreed.
QS7. What is a correct assessment of all variations (whether over or below $50,000)?
402. I accept Mr. Everson's assessment of $6,586,090.28. I do not think that a sampling percentage should be taken as Mr. Allen suggests. On SE71 (lift shaft rectification works), I do not think that the figures for supervision or coring should be reduced. Those figures were based on Gammon's overall quotation as accepted by the Authority.
QS8. Are the re-measurement figures correct?
403. Remeasurement of Gammon's work is agreed at $136,123,148.69.
QS9. What is the correct cost of potential omissions from the remedial works as noted in Mr. Morton's Report?
404. Given my conclusion that all remedial works on Blocks 1 and 2 were justified, Scenario 4 (full liability) is applicable.
405. Mr. Everson assesses Scenario 4 at $151,707,420.88, Mr. Allen at $145,901,989.33. The differences are a result of the allocation of variation orders, prolongation costs and preliminaries.
406. The allocation of variation orders produces a small difference of under $200,000.
407. On prolongation costs, I have found in the Authority's favour.
408. On preliminaries, Mr. Everson proceeds on the increased value of the re-measurement works, but excluding prolongation costs. Mr. Allen's calculation is based on a tender breakdown and the principle that preliminaries are not re-measured.
409. On the whole, I prefer Mr. Everson's approach to variation orders. Scenario 4 is therefore to be valued at $151,707,420.88.
Claim C: Yiu Wing
C.1 Yiu Wing Prolongation Costs
QS10. Are all the EOTs relating to Yiu Wing attributable to B+B's breach?
410. Yiu Wing were granted the following EOTs:-
| (1) | Blocks 1 and 2: 572 days (4 October 1999 to 27 April 2001). |
| | |
| (2) | Block 3: 535 days (4 October 1999 to 21 March 2001). |
| | |
| (3) | Block 4: 567 days (4 October 1999 to 22 April 2001). |
| | |
| (4) | Blocks 5 and 6: 514 days (4 October 1999 to 28 February 2001). |
411. Mr. Westbrook argues that B+B should only be held liable for the consequences of 114 days' EOT in relation to Blocks 1 and 2.
412. The 572 days' EOT for Blocks 1 and 2 may be broken down as follows:-
| (1) | 58 days from 4 October to 30 November 1999. This covers a period of suspended works under MC-209 up to the issue of AA-01. |
| | |
| (2) | 305 days from 1 December 1999 to 30 September 2000. This covers the time taken to execute AA-01; a gap between 23 March and 8 May 2000 during which MC-209 continued in force; and the time taken to carry out BSE-6 (order for re-wiring to comply with the new COP). |
| | |
| (3) | 14 days from 1 to 14 October 2000 for inclement weather. |
| | |
| (4) | 139 days from 15 October 2000 to 28 February 2001. During this time, Mr. C. M. Wong carried out a structural assessment of Blocks 1 to 6. The assessment would normally have been done by HYA as Contract Manager. But HYA declined to do so on the ground that it was in conflict with the Authority in relation to the uneven settlement. |
| | |
| (5) | 58 days from 1 March to 27 April 2001. MC-209 remained in force during this time. The period ended a result of the omission of remaining work and the certification by the Authority of sectional completion by Yiu Wing of Blocks 1 and 2 on 27 April 2001. |
413. B+B accepts liability for Block 1 and 2 EOTs up to 23 March 20000. Accordingly, at least the 1st period and part of the 2nd period just identified must be attributable to B+B.
414. I think that the remaining periods are also attributable to B+B.
415. On that part of the 2nd period not accepted by B+B, I have already decided that, but for B+B's breach, the likelihood is that Tridant would have completed its works on time and there would be no need to re-wire to meet the new COP.
416. In respect of Mr. C. M. Wong's structural assessment during the 4th period, B+B's breach would inevitably give rise to queries about HYA's management and supervision of B+B's work. It ought to have been reasonably foreseeable from the outset that a breach in connection with pile lengths and differential settlement, could compromise HYA's integrity and prevent HYA from acting further in connection with the project.
417. As for the 5th period, the imposition of the suspension order was a direct consequence of B+B's breach. How long to maintain the order would not have been an easy question for the Authority in light of the impending remedial works at Blocks 1 and 2. On the whole, I do not find that the Authority acted unreasonably in continuing MC-209 until 27 April 2001.
418. On Blocks 3 to 6, Mr. Westbrook says that no EOTs should be attributable to B+B's breach.
419. I disagree.
420. As a result of B+B's breach, it was reasonable:-
| (1) | to investigate all blocks; |
| | |
| (2) | to remove the transformers in Blocks 3 and 4 in anticipation of possible remedial works there; |
| | |
| (3) | to disconnect utilities and other services; and, |
| | |
| (4) | to re-wire in all blocks to conform with the new COP. |
The majority of EOTs in Blocks 3 to 6 are thus linked with B+B's breach. That breach is accordingly a dominant cause of those EOTs.
QS11. Method of assessment: if delays are attributable to B+B's breach, what is the correct entitlement to prolongation costs which the Authority are entitled to recover from B+B?
421. Mr. Everson assesses Yiu Wing's prolongation costs at $31,009,025.62; Mr. Allen at $8,298,251.97. Mr. Allen's figure excludes head office overheads and NSC costs. Mr. Allen apportions site costs on the basis of his analysis of the COW's diary.
422. I prefer Mr.Everson's figure.
423. For similar reasons as those stated in relation to Gammon, I think that the Authority is entitled to claim head office overheads, despite reliance on a formula.
424. The NSC costs relate to Tridant and Otis.
425. I have previously found that Tridant's costs of performing electrical work (including COP upgrade work) are attributable to B+B.
426. In relation to Otis' re-installation of lifts at Block 4, that was the result of the removal of the lifts on Mr. C. M. Wong's advice, when remedial works were still envisaged for Block 4. I therefore think the Authority is entitled to claim for those costs.
427. I have already commented on Mr. Allen's analysis of the COW's diary.
QS12. Calculation of prolongation costs for periods other than those assessed by the Authority?
428. I have determined prolongation costs on the basis of the periods assessed by the Authority.
QS13. Is it appropriate to apportion costs between resources utilised for purposes attributable to B+B's breach and those utilised in defects rectification works and other unrelated works?
429. I have rejected B+B's argument that the extent of Yiu Wing's defective work was so great that Yiu Wing could not have completed on time, regardless of any breach by B+B. B+B's breach was the dominant cause of the EOTs granted to Yiu Wing. Even if one accepts the principles stated in Laing, apportionment does not arise.
C.2 Yiu Wing Variation Costs
QS14. Do the variation costs paid to Yiu Wing arise from uneven settlement?
430. Mr. Allen assesses B+B's liability for variations paid to Yiu Wing at $3,171,656. He does not accept that all Yiu Wing variation costs claimed by the Authority are attributable to B+B's breach.
431. Mr. Everson offers no view on liability. He confines himself to saying that, if the Authority is right on causation, the value of the variations claimed by the Authority should be $24,261.894.58.
432. Mr. Allen's figure is significantly lower than that of Mr. Everson, because in Mr. Allen's opinion only variations relating to Blocks 1 and 2 and the investigation works in connection with Blocks 3 to 6 were due to uneven settlement.
433. I have not found this an easy question to answer.
434. I believe that Mr. Allen's quantum is far too low. I think that many variations relating to Blocks 3 to 6 are clearly connected with the uneven settlement. For example, there are the BSE variations on electrical re-wiring to comply with the new COP.
435. My difficulty arises because (as Mr. Westbrook comments), during cross-examination, there were obscurities in the evidence of Mr. Alex Yau (an Architect), Mr. Tsang Wai-lun (a Building Services Engineer) and Mr. Tommy Ip (a Quantity Surveyor) as to why certain variations were or were not attributable to the uneven settlement.
436. Nonetheless, on balance, I accept Mr. Pennicott's submission that, having been involved in the Tin Chung project on a day-to-day basis for a good part of their professional lives, the Authority's staff are in the best position to say what was or was not the result of uneven settlement on the basis of their actual experience. In particular, Mr. Yau, Mr. Tsang and Mr. Ip have lived through the project.
437. Let me take an example raised by Mr. Westbrook in his closing submissions.
438. Variation AA-46 relates to timber doors. It might be thought that installation of timber doors has nothing to do with uneven settlement. Mr. Westbrook suggested as much to Mr. Yau. Mr. Westbrook also showed documents to Mr. Yau suggesting that defects in the doors were due to Yiu Wing.
439. However, even if Mr. Westbrook's reading of the documents is correct, it does not seem to me to deal with Mr. Yau's reason for ascribing AA-46 to B+B’s breach. In his witness statement, Mr. Yau observed that the workmanship defects on the timber doors would not have held up certification of completion in October 1999, if there had been no uneven settlement. Had there been no breach by B+B, any defects in the doors due to Yiu Wing would have become apparent and been rectified by Yiu Wing during the maintenance period.
440. Mr. Yau also noted that the door defects were likely aggravated as a result of seasonal changes, while flats remained vacant for a longer period than originally anticipated.
441. Mr. Westbrook criticised Mr. Yau's vagueness on the detail of the variation works claimed by the Authority.
442. But it is unsurprising that, with the passage of time, Mr. Yau, Mr. Tsang and Mr. Ip are hazy in their recollections of the specifics of numerous variations. I do not think that their inability to remember every detail ultimately affects their credibility and reliability as witnesses.
443. I accordingly conclude in the Authority's favour on this question and adopt Mr. Everson's assessed quantum.
QS15. Is there liability for the cost of variation items that are partly paid?
444. The Authority has actually paid to Yiu Wing $22,372,042.92 of the $24,266,578.11 total assessed value of variations. Yiu Wing having gone into liquidation, the balance of $1,894,535.19 was paid by way of set-off against amounts due from Yiu Wing to the Authority. After set-off, a net balance remains due to the Authority.
445. Thus, the Authority has effectively “paid” to Yiu Wing the entire amount now claimed from B+B as variation costs.
QS16. Is there liability for variation costs not yet paid at all?
446. This issue does not arise.
QS17. Valuation of variations
447. I have accepted Mr. Everson's figure of $24,261,894.58.
448. As far as valuing variations is concerned, the only dispute arises out of AA-07. The question is whether valuation of AA-07 should be based on Gammon's specific rates for the Site or on rates in a UK publication (“Wessex”) containing UK regional data. Mr. Everson opts for the former (at $4,433,842.60), Mr. Allen for the latter (at $3,348,972.49). I think that the former is appropriate. Mr. Everson's assessment of AA-07 is included in the quantum of $24,261.894.58.
QS18. What is the overhead amount included in prolongation costs which could, if prolongation costs were not allowed, be included in the valuation of variations carried out in the extended period?
449. I have allowed the claim for prolongation costs. This issue does not arise.
C.3 Acceleration Costs
QS19. Were the acceleration costs for Block 4 a result of B+B's breach?
450. When remedial works for Block 4 were ruled out, the Authority hoped to mitigate by completing Block 4 as soon as possible. It intended to market and sell Block 4, along with Blocks 3, 5 and 6. The Authority offered Yiu Wing an acceleration payment as an incentive to finish Block 4 earlier than had been programmed. In the event, for independent reasons, Block 4 was not completed within the desired time-frame. But Yiu Wing was paid $837,624.20 for 10 days' acceleration.
451. I think that it was reasonable for the Authority to attempt mitigation by bringing forward the completion of Block 4. The cost can be claimed from B+B, even though abortive.
QS20. Are Yiu Wing's acceleration costs properly substantiated?
452. I think that the $837,624.20 is sufficiently substantiated. The sum is a discounted cost and appears reasonable. Further, although Yiu Wing failed to meet the completion date of 31 January 2001, it achieved 10 days' acceleration.
C.4 Yiu Wing Reinstatement Costs
QS21. Should Yau Lee tender be used for assessing the value of the notional reinstatement works?
453. It has been agreed that Unistress contract rates should be used for Stage 1 and Yau Lee rates for Stage 2.
QS22. Breakdown of reinstatement works
454. Mr. Everson's figure for the entire reinstatement works is $43,824,773.76. Mr. Allen's figure is $21,595,088.53. The difference between the 2 experts is $22,229,968.23.
455. Mr. Pennicott's submission conveniently breaks down the $22.2 million plus difference into 6 disputes over the following sums:-
| (1) | about $3.5 million; |
| | |
| (2) | about $6.8 million; |
| | |
| (3) | about $5.75 million; |
| | |
| (4) | about $2.1 million; |
| | |
| (5) | about $1.5 million; and, |
| | |
| (6) | about $4.4 million. |
456. Sub-issue (1). A difference of $3.5 million arises because Mr. Allen has made his own assessment of what will be done by way of Stage 2 works. In contrast, Mr. Everson has generally assumed that work which is not in the Unistress tender, but in the Yau Lee tender, will be executed in Stage 2. However, Mr Everson has extracted those items of the reinstatement which according to the Authority’s witnesses (such as Mr Alex Yau) are not attributable to B+B’s breach. Mr. Allen is not in a position to say what will or what will not be done in Stage 2. I therefore prefer Mr. Everson’s approach.
457. Sub-issue (2). A difference of about $6.5 million arises because Mr. Allen has made his own assessment as to which works in Bill Nos. 8 and 9 are attributable to B+B's breach. This was not a course open to Mr. Allen as a quantum expert. Again I prefer the approach of Mr. Everson who based his assessments of Bills 8 and 9 on Mr. Yau's evidence.
458. Mr. Westbrook has queried the value of Mr. Yau's evidence. He has also characterised as unhelpful the Authority's approach of only pleading those items in Yau Lee's bills which are not being claimed. How (Mr. Westbrook asks) is one to identify what is being claimed by the Authority?
459. For the reasons given above, I accept Mr. Yau's evidence.
460. As far as the Authority's pleading is concerned, I think that the Voluntary Particulars in RRASOC Appendix 14A is reasonably clear that everything in Yau Lee's tender is claimed which is not pleaded as having been deducted.
461. Sub-issue (3). A difference of about $5.75 million arises from Mr. Allen's failure to allow for lift installation. I have held that this item is attributable to B+B's breach.
462. Sub-issue (4). A difference of about $2.1 million arises from the experts' approaches to contingencies.
463. Mr. Everson excludes all contingencies in the Unistress works but adds 12.16% to Stage 2. Mr. Allen calculates 14.68% of the Yau Lee tender; deducts the Unistress contingency of $1,010,000; and then applies his percentage to the reduced figure.
464. At the end, the difference between the experts on this aspect is marginal. If one adds together their percentages for preliminaries, dayworks and contingencies, one arrives at 32.62% for Mr. Everson and 33% for Mr. Allen.
465. For consistency, I adopt Mr. Everson's figures.
466. Sub-issue (5). A difference of about $1.5 million arises in relation to electrical works.
467. Mr. Everson has used the Samba Engineering Ltd. (Samba) tender within the Yau Lee bills as his basis, but minus items not due to uneven settlement. Samba's tender was the lowest for electrical works. Mr. Allen has taken a figure based on Unistress' electrical works for Stage 1 and added an element for Stage 2 ($1,000 per flat/common area + $280,000 for a security system).
468. There is little to choose between either method. Both contain arbitrary elements. Nonetheless, I am inclined to Mr. Everson's approach as probably more realistic.
469. Sub-issue (6). A difference of about $4.4 million arises from the different treatment of preliminaries. See the comments in sub-issue (4). Again, for consistency I adopt Mr. Everson's approach.
470. It follows from the foregoing comments on sub-issues (1)-(6), that I prefer Mr. Everson's overall figure for reinstatement.
QS23. Are items of repair (due to deterioration in the period from installation by Yiu Wing to the date of the Yau Lee reinstatement tender) attributable to B+B's breach?
471. I answer "yes" to this question. I note that, in calculating reinstatement from the Yau Lee bills, the Authority has excluded $5,024,000 for Block 1 and $3,840,000 for Block 2. This relates to defects by Yiu Wing and its sub-contractors.
C.5 Mr. C. M. Wong Reinstatement Works Fee
QS24. Mr. C. M. Wong's fee for reinstatement works
472. The Authority decided to undertake the reinstatement in 2 stages for reasons independent of B+B's breach. The question is whether CMWAL's fee for abortive work on the 1st stage or its fee for design and tender work on the 2nd stage should be deducted to reflect this fact.
473. Here I agree with Mr. Westbrook. I think that the $92,850 for the 1st stage should be deducted and the $79,300 for the 2nd stage should be kept. This gives a figure of $306,770.42 for CMWAL's reinstatement work fee.
474. The Authority also claims $150,667 as structural engineering fees for the reinstatement.
475. Again I agree with M. Westbrook that it is hard to see how much (if any) structural engineering can be involved in Stage 2 of the reinstatement. I therefore disallow the claim for $150,667.
C.6 The Authority's in-house costs for reinstatement (Claim F)
QS25. Should costs be assessed according to estimated time or as a percentage of the value of reinstatement works?
476. Mr. Everson assesses the Authority's in-house reinstatement costs at $6,134,928; Mr. Allen at $3,004,852. Both amounts exclude head office overheads). The difference arises in part because Mr. Everson has used a time-based approach, while Mr. Allen 's approach is valuation-based.
477. Both calculations incorporate subjective elements. On the whole, I prefer Mr. Everson's approach as probably more reasonable.
QS26. Are head office overheads recoverable?
478. In cross-examination, Mr. Santiago Chuen (Senior Finance Manager of the Authority) defined overhead costs as "the indirect costs of the Housing Authority at the corporate level". He continued as follows:-
| “ | Q. | Again, are these costs that are going to be incurred by the Housing Authority in any event? |
| | | |
| | A. | Yes. |
| | | |
| | Q. | They are? |
| | | |
| | A. | They are. |
| | | |
| | Q. | So they are not costs that are specifically dependent upon the Tin Shui Wai, Tin Chung Court project, whether it finishes on time or whether it overruns? |
| | | |
| | A. | No. |
| | | |
| | Q, | So can you just tell me on what basis do you ask for 16.05 per cent overheads on top of the annual average staff costs for the civil servants in this notional exercise? |
| | | |
| | A. | It is a policy in the Housing Authority for us to include full costs for projects, to include full costs. Full costs means all direct and indirect costs, so on that basis I included 16.05 per cent. |
| | | |
| | Q. | Even though you accept that those costs would have been incurred, in any event? |
| | | |
| | A. | Yes.” |
479. Mr. Pennicott asserts that "but for the breach the Housing Authority's officers concerned would be devoting their time to other matters". This does not accord with Mr. Chuen's oral evidence.
480. I therefore disallow the Authority's claim for $984,694 on this head.
D. Claim D: Pile Depth Investigation Costs
D.1 Bachy (Phases 1-3)
QS27. Final Account
481. This is partly agreed at $4,113,720.47.
QS28. Is there substantiation for Works Order No.S22?
482. There is a dispute over $26,831.27 (net of retention) because of a lack of supporting documents. But there is evidence that the work has been done and the amount paid. In my view, the amount can be claimed.
QS29. Should costs for piles claimed under WO S.28-01 for transporting equipment from hole to hole for P47A, 47B and 47C be included?
483. This is a dispute over $15,019.07. The work has been executed and paid. But Mr. Westbrook argues that it was unnecessary to pay the amount.
484. The issue is whether as a matter of contractual construction, transportation between particular piles amounts to transportation between "stations". If "yes," the amount is recoverable. Otherwise, no payment shall be made for transporting equipment from hole to hole within an investigation station.
485. I am not persuaded that a "pile" can be a "station". The claim is not allowed.
D.2 Gammon (Phase 4)
QS30. Final Account
486. This is partly agreed at $1,450.977.76.
QS31. Backfill quantity
487. This is a dispute over $30,344.88. This arises because according to the records less soil seems to have been excavated than filled back. Mr. Allen suggests that there is some error. I am not satisfied that there is an error. The amount is allowed.
E. Claim B: Restoration & Stabilisation Works: Consultants
E.1 C. M. Wong Investigation Works (CRB/SP/99/25)
QS32. Final account payment agreed
488. This is agreed at $1,704,863.
E.2 C. M. Wong Stabilisation and Restoration Works (CRB/SP/2000/7) -- Consultancy Fees
QS33. How should CMWAL's fee be calculated?
489. The question is whether CMWAL's fees in connection with the abortive first tender for strengthening works should be allowed. The fee for the first tender was $3,397,000.
490. Here I accept that the CMWAL's fees are part of the Authority's reasonable costs in the design development of the remedial scheme which was ultimately executed.
491. It is agreed that, in relation to CMWAL's fees for the second tender, the Authority should recover 6.46% of the Gammon's final account sum determined to be recoverable from B+B.
492. Since I have found that Gammon final sum to be $151,707,420.88, CMWAL's recoverable fee is $9,800,315.33.
493. There are various additional fees for extra work and adjustments. These are agreed at $6,134,000 and $289,289.85 respectively.
QS34. Total CMWAL fee
494. In light of the answer to QS33, the total fee recoverable is $19,620,605.20.
Q35. Whether fees for pile cap cracking should be included?
495. The answer is "yes". The sum involved is $289,289.85 (which is included in the 19,620,605.20 of QS34).
E.3 C. M. Wong Stabilisation and Restoration Works (CRB/SP/2000/7) -- Residential Site Staff
QS36. Time-related charges; whether EOT period is 416 days as awarded or 253 days as contended by Mr. Allen?
496. Given my conclusion on Gammon EOTs, the figure should be $5,021,093.81.
E.4 University of Hong Kong in respect of third party audit (CRB/SP/2000/06 and CRB/SP/2000/38)
QS37. Final account payments
497. The sum is agreed at $380,000.
E.5 Coffey Asia: development and detailed design of RSS scheme
QS38. Final account payments
498. Since it was reasonable to consider RSS, Coffey's fee for RSS-related work should be allowed. The amount is $2,430,120.92.
E.6 Coffey Asia: Independent Reviewer (CRB/SP/2000/65)
QS39. Final Account
499. This is partly agreed at $1,266,220.
QS40. Whether the 'ceiling budget' of $626,220 can be exceeded to $927,660, without prior approval?
500. The cap of $626,220 was surpassed without prior approval. But the work was done and the Authority retrospectively agreed that the cap could be exceeded. The $927,660 has been paid to Coffey. It is recoverable from B+B.
QS41. Whether the work undertaken on the provisional sum of $200,000 is claimable at $221,614 without prior approval?
501. For similar reasons as those in the answer to QS40, the excess of $21,614 is recoverable.
E.7 Binnie Black Veatch (CRB/SP/2000/48)
QS42. Final account
502. This is partly agreed at $1,139,385.
QS43. Whether work for Blocks 3-6 is recoverable?
503. The dispute is over $48,736. The settlement of Blocks 3 to 6 was audited by BBV in December 2000 - January 2001, just before those blocks were marketed for re-sale. In my view, it was reasonable to have this further review. The sum is recoverable.
QS44. Extra services
504. Given B+B's liability for the works at Blocks 1 and 2, the sum of $407,852.22 is recoverable.
QS45. Whether additional fees (up to November 2002) relating to pile cap cracking recoverable?
505. This is agreed as due. The sum is $198,665.25.
QS46. Whether additional fees (December 2002 - June 2003) relating to pile cap cracking are recoverable?
506. This is agreed as due. The sum is $249,852.50.
QS47. Extended design audit due to "creep' EOT
507. Given that B+B is liable for the additional 26 piles and the 153 days' EOT awarded to Gammon, the correct sum is $179,935.75.
QS48. What portion of the additional fee for site auditing is required for the disputed EOT period (253 or 416 days)?
508. Given my findings on Gammon's EOTs, the additional fee is $275,000.
E.8 Whittaker Associates
QS49. Is there a link between supplemental agreement and B+B breach?
509. As a result of the uneven settlement, Whittaker was hired to negotiate a supplemental agreement with Yiu Wing. It was hoped that a package could be put together whereby Yiu Wing would do the reinstatement work at an agreed cost and time frame. The negotiations proved unsuccessful.
510. Mr. Westbrook submits that much of the negotiations were concerned over Yiu Wing's own defects. The supplemental agreement also concerned all blocks. Mr. Westbrook further suggests that Whittaker's fees ($2,000 per hour) were too high. Mr. Allen thinks that $1,200 per hour would have been more reasonable.
511. In my view, but for the uneven settlement, the Authority would not have had to negotiate with Yiu Wing. It was reasonable to hire Whittaker as a consultant and negotiator. I do not find it remarkable that the negotiations referred to defective work by Yiu Wing. At the very least, that would have been an obvious bargaining tactic to make Yiu Wing more tractable in discussions.
512. I do not think that the fees agreed with Whittaker were too high.
513. I allow the claim for $343,000 paid by the Authority to Whittaker.
QS50. Are the rates appropriate?
514. See the answer to QS49.
E.9 Breakdown of consultancy fees between blocks
QS51. Apportionment between blocks
515. In light of my conclusions, this issue does not arise.
QS52. Apportionment to different remedial works scenarios
516. In light of my conclusions, this issue does not arise.
F. Claim E: Direct Costs
QS53. Item 1.1: Security guard provided by Estates Management (September 1999 to April 2001)
517. This is for additional security guards for traffic and access control of the roads leading to Blocks 1 and 2. I am satisfied that the Authority (through Mr. Yau's evidence) has substantiated its case. I allow the amount of $1,335,737.31, which I believe to be reasonable.
QS54. Item 1.2: Off-site storage of Yiu Wing's materials (February 2002 to July 2003)
518. The claim is for $142,800. Mr. Allen rejects the claim because he says reinstatement should have started much earlier than it actually did, long before the date when storage charges were incurred. Given that I have accepted that there was no unjustifiable delay in the design and execution of remedial works, this claim is allowed.
QS55. Item 1.3: Site Office miscellaneous expenses provided by Gammon (11 June 2001 to July 2003)
519. The claim is for $1,154,874.04. Since I have rejected B+B's case on apportionment (said to arise because Yiu Wing would not have completed defects rectification even if there had been no breach), the sum is allowed in full.
QS56. Item 1.4: Temporary power and fire pumps provided by Gammon (20 December 2001 to July 2003)
520. The claim is for $1,188,243.54. Since I have rejected B+B's case on apportionment, the sum is allowed in full.
QS57. Item 1.5: Insurance for Blocks 1 and 2 (27 April 2001 to July 2003)
521. The claim is for $350,572.01. Given rejection of B+B's cases on apportionment of responsibility and on delay in the design and execution of remedial works, the sum is allowed in full.
QS58. Item 1.6: Security guard provided by Gammon (28 April 2001 to 31 July 2003)
522. The claim is for $1,758,672. I think that 24 hour security is justified. I do not think the claim should be apportioned. The amount is allowed in full.
QS59. Item 2.1: Disconnecting and reconnecting the Electricity Supply to Blocks 1, 2, 3, 4 and 6
523. The claim is for $1,539,846.
524. Although alleging that the Authority did not act with reasonable despatch in relation to remedial works, B+B also complains that electricity and other utilities were disconnected too soon. If the Authority had waited a little (Mr. Westbrook submits), it would have been apparent that disconnecting utilities to Blocks 2 to 6 was unnecessary.
525. Electricity was disconnected on the advice of Mr. C. M. Wong. That advice is not alleged to have been negligent. With the benefit of hindsight, it may not have been necessary to disconnect electricity to (say) Blocks 3 to 6, but that does not render the claim unreasonable. The amount is allowed in full.
QS60. Item 2.2: Disconnecting and reconnecting the Telephone Supply to Blocks 1, 2 and 4.
526. The claim is for $1,509,948.57. For similar reasons as those in answer to QS59, the amount is allowed in full.
QS61. Item 2.3: Disconnecting and reconnecting STDN system for Blocks 1-6
527. The claim is for $1,507,437. It relates to Hong Kong Cable TV connections. For similar reasons as those in answer to QS59, the amount is allowed in full.
QS62. Item 2.4: Disconnecting and reconnecting Gas Services for Blocks 1-6
528. The claim is for $1,283,000. For similar reasons as those in answer to QS59, the amount is allowed in full.
QS63. Item 2.5: Water heater deterioration Blocks 3-6
529. The claim is for $128,000. It concerns protective wrapping for water heaters.
530. The Authority accepts that the protection of water heaters was needed for a combination of reasons, including delay to occupation of flats and to guard against damage during defects rectification.
531. Nonetheless, I accept that, but for the uneven settlement, it would have been unnecessary to implement this measure. The amount is allowed in full.
QS64. Item 2.6: Further deterioration of water heaters Blocks 1 and 2
532. The claim is for $312,140. It has 2 components: $168,650 (for inspection, replacement of spare parts and 1 year warranty) and $143,490 (for additional in-house staff to supervise testing and inspection).
533. Mr. Allen suggests that reinstatement could have taken place earlier and so deterioration would have been less. He also queries the incurring of additional in-house staff costs and the need for extensive supervision.
534. I allow the amount in full.
535. I have previously considered the question of alleged delay.
536. In respect of in-house staff, I accept the Authority's submission that, even though the Authority's staff would be on-site, Claim F in-house costs do not allow for the time spent supervising water heating testing. That supervision is a separate and distinct claim.
QS65. Item 2.7: Electrical and Mechanical Services Dept. (EMSD) Service charge for security system
537. The claim is for $57,000. EMSD became involved because, as a result of the uneven settlement, Yiu Wing were unable to carry out certain works under the original superstructure contract. I allow the item in full.
QS66. Item 2.8: Removal and reinstatement of street lamps
538. Given B+B's liability for all remedial works to Blocks 1 and 2, the quantum of this claim is $20,005.20.
QS67. Item 2.9: Off-site storage and insurance (Wise) (28 April 2002 to July 2003)
539. This claim is for $182,604.48. Given my rejection of B+B's case that reinstatement should have started earlier, the amount is allowed in full.
QS68. Item 2.10: Off-site storage and insurance (Tridant) (28 April 2002 to July 2003)
540. This claim is for $119,608.24. Given my rejection of B+B's case that reinstatement should have started earlier, the amount is allowed in full.
QS69. Item 2.11: Block 2 lift caretaker maintenance (28 April 2002 to July 2003)
541. This claim is for $87,000. Given my rejection of B+B's case that reinstatement should have started earlier, the amount is allowed in full.
QS70. Item 2.12: Taking down lifts to Block 1 and off-site storage
542. This claim is for $967,100. Give my conclusion on Block 1's lift shaft rectification works, the claim is allowed in full. I am not persuaded that the Authority failed to mitigate by not agreeing a package deal with Otis to remove, store and re-install the original lifts.
QS71. Item 3.2: Material testing fee
543. The claim is for $581,349.93. Given B+B's liability for remedial works to Blocks 1 and 2, the amount is allowed in full.
QS72. Item 3.3: Material testing fee for reinstatement contract
544. The claim is for $205,000. Given B+B's liability for remedial works to Blocks 1 and 2, the amount is allowed in full.
QS73. Item 3.5: Settlement survey and verticality check
545. The claim is for $1,644,058. Given my rejection of B+B's case that reinstatement should have started earlier, the amount is allowed in full.
QS74. Item 3.6: Structural verification fee
546. The claim is for $3,101,648. Given the discussion in G10 in relation to the 4th component of the 572 days' EOT granted to Gammon, the amount is allowed in full.
QS75. Can costs be allocated in principle?
547. Given my conclusions, this issue does not arise. In principle, costs can be apportioned.
VI. B+B's contribution claim
548. HYA has not appeared at trial.
549. Mr. Westbrook submits that HYA must bear equal blame with B+B for damage caused by the uneven settlement.
550. HYA was under an obligation to ensure that B+B kept accurate and proper records.
551. HYA's on-site staff verified the pile records which formed the basis of the RSE Report and which turned out to be inaccurate. HYA's on-site staff must have known of the discrepancies in the pile records. Accordingly, HYA's on-site staff must also have acted fraudulently in approving the pile records.
552. All engineering experts agree that HYA's performance as supervising officer was "not that which could be expected from a reasonably competent engineer".
553. In the premises, HYA is liable to pay contribution to B+B. I assess HYA's contribution at 50% as Mr. Westbrook suggests.
VII. Conclusion
554. There will be judgment in the Authority's favour against B+B for $553,749,915.11 (Sum X). Annex I to this Judgment contains a worksheet (extracted from the Joint Report by Mr. Everson and Mr. Allen) setting out how Sum X has been calculated. The parties have liberty to apply to correct arithmetical or clerical errors in my calculations.
555. There will be judgment on B+B's contribution claim against HYA for 50% of Sum X.
556. Interest is to run at the judgment rate from date of judgment until payment, on the amounts respectively due from B+B to the Authority by way of damages, and from HYA to B+B by way of contribution.
557. The parties are at liberty to restore this action for submissions on whether and (if so) to what extent there should be pre-judgment interest.
558. There will be a costs order nisi as follows:-
| (1) | B+B is to pay the Authority's costs. |
| | |
| (2) | HYA is to pay the costs of B+B's contribution claim. |
| | |
| (3) | The Authority is to have liberty to restore this action for consideration of the question whether and (if so) to what extent, along with B+B, AXA should be responsible for the Authority's costs. |
| | |
| (4) | All costs are to be taxed (if not agreed) on a party-and-party basis. |
| | (A T Reyes)
Judge of the Court of First Instance
High Court |
Mr. Ian Pennicott, instructed by Messrs. Johnson Stokes & Master, for the Plaintiff.
M/s Minter Ellison, for the 1st Defendant, absent
Mr. Simon Westbrook SC, instructed by Messrs. Mallesons Stephen Jaques, for the 3rd Defendant.
M/s Wilkinson & Grist, for the 4th Defendant, absent.
ANNEX