Cases - Mitsui v Attorney General of Hong Kong

Record details

Name

Mitsui v Attorney General of Hong Kong

Date

(1986)

Citation

33 BLR 14

Keywords

Contracts - price - bills of quantities - additional quantities - whether the contractors were entitled to extra payment

Summary

The claimant contractors agreed with the defendant Government to excavate and construct a tunnel from Ma Mei Ha to Nam Chung. It was accepted that the nature of the ground through which the tunnel was to pass could not be predicted accurately in advance. The contract therefore specified different linings, suitable for different ground conditions, but did not specify where lining was to be required or of what type, which would be decided by the engineer as the work proceeded. The bills of quantities was priced by the contractors with reference to estimated lengths of tunnel which either were to be left unlined, or were to be lined with each of the different types of lining respectively.

Clause 74(4) of the contract provided:

'If the nature or amount of any omission or addition relative to the nature or amount of the Works or to any part thereof shall be such that in the opinion of the Engineer the rate contained in the Contract for any item of the Works is by reason of such omission or addition rendered unreasonable or inapplicable then a suitable rate shall be agreed upon between the Engineer and the Contractor.'

The estimates in the bills were wildly wrong and the extent of linings (and the most expensive lining) required increased substantially. The Privy Council considered whether the additional quantities gave rise to additional payment under clause 74(4). Lord Bridge, finding for the contractors, stated:

'... If the contract documents were understood in the sense contended for by the Government, engineering contractors tendering for the work would have two options. They could either gamble on encountering more or less favourable ground conditions or they could anticipate the worst case and price their tenders accordingly....It follows that, if the Government are right, there is a large element of wagering inherent in this contract. It seems to their Lordships somewhat improbable that a responsible public authority on the one hand and responsible engineering contractors on the other, contracting for the execution of public works worth many millions of dollars, should deliberately embark on a substantial gamble.... By contrast, if the Contractors' submission is correct, ...the rates can be suitably adjusted. Given the inherent uncertainty as to the scope of the work that will be required, a provision to this effect would seem an eminently sensible means of ensuring that the Contractors receive no less, and the Government pay no more, than a reasonable price for the work actually done.'