An Overview of Construction Law in Hong Kong
Construction law in Hong Kong is complex and multifaceted, encompassing a wide range of legal principles and regulations. This article provides an overview of key aspects of construction law in Hong Kong, covering both civil and criminal aspects.
I. Civil Cases in Construction Law
A. Front-loading Nature of Construction Claims
The litigation system in Hong Kong places a high value on early and thorough preparation in construction disputes. The Hong Kong Practice Direction for Construction Disputes (PD 6.1) mandates the first Case Management Conference within 28 days of pleadings closing. This conference is a crucial step that addresses key aspects of the case, including factual witness statements, expert reports, and trial length estimations.
This ‘front-loading’ approach underscores the necessity for parties meticulously to consider all aspects of their claims and gather supporting evidence from the outset. Failure to do so can lead to significant difficulties during the Case Management Conference and potentially hinder the successful prosecution of the claim.
B. Common Areas of Dispute
1. Failure to Issue Certificates
Construction contracts often include provisions requiring the contract administrator (usually the architect) to issue specific certificates as a condition precedent for payment. Disputes arise when the contract administrator fails to issue these certificates despite being obligated to do so.
The Hong Kong approach, as established in the case of W Hing Construction Co Ltd v Boost Investments Ltd [2009] 2 HKLRD 501, underscores the binding nature of these certificates. The court has no power to disregard the failure to issue a certificate or adjudicate the underlying dispute, highlighting the importance of these documents in construction contracts.
2. Consequence of Denying a Defendant the Opportunity to Rectify After Breach
In Pamax Limited v Cross Max Interiors Limited HCA2181/2002, the court ruled that denying a defendant the opportunity to rectify a breach can be fatal to a plaintiff’s claim for rectification costs. This principle applies when the contract allows the defendant to remedy their breach.
The court’s decision highlights the importance of providing a defendant with a reasonable opportunity to rectify their breach before pursuing further legal action. This approach promotes fairness and encourages parties to resolve disputes amicably.
C. Procedural and Practical Considerations
1. Joint Experts
The Hong Kong court system generally favours the appointment of joint experts rather than separate experts for each party in construction disputes. This approach promotes efficiency and reduces the potential for conflicting expert opinions. Parties must provide a compelling justification for using separate experts.
2. Arbitration Clauses
Unlike UK law, Hong Kong law does not distinguish between one-contract and two-contract cases when determining the validity of an arbitration clause. The court will examine the wording of the documents and the relevant background to ascertain the parties’ intentions. A specific reference to arbitration is not required.
3. Stay of Proceedings Pending Arbitration
Hong Kong courts prioritise arbitration and will generally stay proceedings if a valid arbitration agreement exists. The arbitrators, not the courts, are primarily responsible for determining the validity of the arbitration agreement.
Further, according to section 20(8) of the Arbitration Ordinance (Cap. 609), any grant of stay is not subject to appeal.
Should a plaintiff contend that an arbitral tribunal (the “Tribunal”) lacks jurisdiction to adjudicate their claim, they may initially seek to persuade the Tribunal of this issue. However, if the Tribunal ultimately asserts jurisdiction, the plaintiff’s usual recourse would be to challenge the Tribunal’s jurisdiction before the courts. This approach, as exemplified in the case of Wing Bo Building Construction Ltd v Discreet Ltd [2016] 2 HKLRD 779, underscores the Hong Kong courts’ commitment to arbitration as the primary mechanism for resolving construction disputes.
II. Criminal Cases in Construction Law
Construction law in Hong Kong also encompasses criminal aspects, primarily focusing on health and safety during the construction process. The following ordinances are particularly relevant:
- Factories and Industrial Undertakings Ordinance (Cap. 59)
- Construction Site (Safety) Regulations (Cap. 59I)
- Factory and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations (Cap. 59Z)
- Factories and Industrial Undertakings (Safety Management) Regulations
- Occupational Safety and Health Ordinance (Cap. 509)
These regulations establish statutory duties to ensure a safe working environment during construction. Breaches of these duties can lead to criminal prosecution, penalties for companies and individuals, and potential civil liability.
Enforcement of the aforesaid is usually through a combination of industrial summonses and quasi-criminal regulations.
III. Key Takeaways
1. Thorough Preparation: Hong Kong construction law emphasises early and thorough preparation of cases and evidence, especially civil cases.
2. Importance of Certificates: Failure to issue required certificates can be fatal to a party’s claim.
3. Opportunity for Rectification: Denying a defendant the opportunity to rectify their breach can defeat a plaintiff’s claim for rectification costs.
4. Favorable Approach to Arbitration: Hong Kong courts generally favour arbitration and will stay proceedings if a valid arbitration agreement exists.
5. Emphasis on Health and Safety: Construction law in Hong Kong prioritises health and safety during the construction process, with potential criminal consequences for breaches.
This overview only provides a preliminary understanding of the critical aspects of construction law in Hong Kong. Please contact us to learn more about our expertise in litigation in construction law and other industries.