IOM3 (HK) Technical Talk - Extension of time and Liquidated Damage to Underground work

On 20 November 2018, the IOM3 Hong Kong Branch held an evening seminar on the topic of “The Extension of Time (EOT) and Liquidated Damage (LD) to Underground Work” at Hong Kong Polytechnic University. Presentations were given by Mr Dennis Wong and Miss Vivian Wong, who are Partner and Senior Associate of Clyde & Co respectively. The seminar was very well attended, attracting over 100 participants resulting in a full house.  

Dennis firstly introduced EOT and LD, sharing with us an example from Gibraltar which involved a case regarding unforeseen ground conditions. The judgement highlighted that courts would expect experienced contractors to make reasonable assessment on the possible variability of ground conditions based on the information provided to them, and include in their tender appropriate allowance both in terms of cost and time, to address those conditions. The assessment of possible ground condition should not be limited to the factual data provided by the client, but must also include reasonable assessment of the history of the site which might identify some specific risks. Failure to make a reasonable plan and action to deal with the potential ground conditions was seen as a fault by the contractor.  He highlighted the importance of “foreseeability” and explained it in Australian and Hong Kong positions. He gave some tips about how to protect ourselves if we are Contractor or Employer. 

Vivian took over the stage from Dennis. She reminded the audience of the implication of  no oral modification clause. For example,  “All the variation to this Contract must be agreed, set out in writing, and signed on behalf of both parties before they take effect”. She elaborated further the latest contract interpretation rule by using several new cases as examples, illustrating the English position and Hong Kong Position.  

In addition to EOT, Vivian gave a detailed account on LD. With the use of recent examples, she explained to the audience the rule against penalty clauses in contracts.  In particular, she highlighted a recent change of law in UK since 2015 whereby the validity of LD clauses will depend on whether the party has a legitimate interest in enforcing contractual obligations, and the LD amount should not be “out of all proportion”. She explained that careful review of the contracts is essential as there are cases where “$0” or “nil” rates are inadvertently put in the LD clauses and the Court held that the right to recover damages were restricted. Vivian drew a clear conclusion on the topic, and many interesting questions were given from the floor and the speakers’ replies to them led to a very fruitful discussion to close the seminar. 

We would like to thank Hong Kong Polytechnic University for providing the venue for this event, and give appreciation to the speakers – Mr Dennis Wong, and Miss Vivian Wong of Clyde & Co for their interesting and very professional presentations.   

With kind permission from Mr Dennis Wong and Miss Vivian Wong, we are able to share the PowerPoint slides, and these can be downloaded here.