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Sunbond Engineering Limited v Konwall Construction & Engineering Co. Ltd
25 May 2004

The court considered issues relating to the ascertainment of terms contained within a contract, the nature of the requirements necessary to prove negligence and the role of experts in court proceedings.

Sunbond sued Konwall for payment for pile driving works it had been sub-contracted to perform at the Yuen Long Town Lot 500 residential development. Konwall resisted the claim arguing that the contract allowed it to set-off, against the amount claimed, costs incurred as a result of Sunbond's negligence and delay in its workmanship.

The relevant clause contained in the sub. contract provided that in instances where a pile had been abandoned "due to whatsoever reason", Sunbond was to be paid for the installation costs of that pile. Konwall argued that it was absurd for it to be taken to have agreed to bear the risk of Sunbond's negligent driving, particularly in circumstances where it had contracted with the employer in the main contract to pay HK$60,OOO per day of delay; on Konwall's view the relevant clause must be read subject to the proviso that Sunbond had installed the piles in accordance with "good building practice in Hong Kong" - the proviso having been taken from Konwall's main contract with the employer.

The court held first, that on its plain wording, abandonment due to negligence fell within the term "due to whatsoever reason". Secondly, it would not be absurd for Konwall to have agreed to have accepted this risk in the absence of evidence to the contrary, the parties may well have reflected such an allocation of risk in the price of the contract. Further, as a matter of principle, a fact that was only known by one party at the time of contracting was not to be taken into account when assessing what both parties' intentions were when entering into the contract, and since the existence of the payment for delay clause was not a fact known by Sunbond, it was not to be taken into consideration by the court in determining the ambit of the relevant clause. Finally, although the main contract did contain an obligation to "follow good building practice in Hong Kong," the express wording of the sub-contract did not serve to properly incorporate the obligation into the relevant clause - Konwall were therefore precluded from relying on these words.

The court went on to consider the position if, contrary to its findings, the clause, properly construed, did excuse Konwall from having to pay for abandoned pile costs incurred as a result of Sunbond's negligence. Konwall argued that the high incidence of abandoned piles was evidence that Sunbond had failed to use "controlled tamping" - a technique whereby piles are initially driven using a smaller hammer and a lower drop height to prevent damage to the pile tip. The court was not impressed. A party alleging negligence in respect of many individual acts cannot simply look at them in the round and make a statistical observation, expecting the court to infer negligence simply from a high number of abandoned piles - what has to be shown is negligence in relation to each pile complained of. There was no "statistical short-cut" .

The court was also critical of the parties' use of experts, both of whom were found to have fallen into the trap of putting themselves into the position of a judge deciding which of the cases were made out on the evidence. Expert testimony of this kind is of no use - weighing the strengths of the parties' evidence and submissions is a matter for the court not the expert and this decision demonstrates that the court has no compunction in striking out such evidence.

This case reinforces the need to ensure that the issue of incorporation of terms into a contract is carefully considered at the drafting stage. It also demonstrates that proving the elements of negligence can be burdensome but that it is a necessary task if an action is to be successfully prosecuted. Finally, it serves as a salutary warning in the context of expert instruction. The purpose of an expert report is to provide expert evidence and it is not to usurp the position of the judge or to make submissions on the credibility or reliability of witnesses of fact.

Herbert Smith, Construction Update
November 2004

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