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BCL Law Notes Commercial Remedies BCL Notes

Philips Hong Kong V. Ag Of Hong Kong Notes

Updated Philips Hong Kong V. Ag Of Hong Kong Notes

Commercial Remedies BCL Notes

Commercial Remedies BCL

Approximately 497 pages

These are detailed case summaries (excerpts from cases - not paraphrased) I made during the Oxford BCL for the Commercial Remedies course....

The following is a more accessible plain text extract of the PDF sample above, taken from our Commercial Remedies BCL Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Philips Hong Kong v. AG of Hong Kong

Facts

The decision was given in proceedings commenced by Philips Hong Kong Limited (“Philips”) by originating summons. The purpose was to obtain a ruling of the Hong Kong High Court upon the provisions contained in a contract which Philips had entered into with the Government of Hong Kong in connection with the construction of a highway project known as “Route 5” between Tsuen Wan and Sha Tin. The contract contained an arbitration clause and the present proceedings were initiated by Philips to obtain the ruling of the court on preliminary issues prior to arbitration.

Instead of adopting the more usual course of employing a main contractor with overall responsibility for constructing the Shing Mun Section and allowing the main contractor to sub-contract portions of the contract, the Government entered directly into a total of seven separate contracts, the designated contracts, including the Philips contract.

The flow charts identified as Key Dates interfaces with other contracts. Key Dates were dates which a contractor was under an obligation to meet so as to enable other contractors to continue with their work unimpeded. If those dates were not met by a contractor, then the contract specified a liability to pay liquidated damages to the Government at a daily rate. In addition the whole of the contract work was required to be completed within a specified time and, if this was not met, the contract provided that the contractor was required to pay additional liquidated damages also at a daily rate.

In the case of the Philips contract, the works were to commence on the date to be notified by week 36 by the engineer and had to be completed by week 195 (a period of 160 weeks). The amount of liquidated damages which was payable for not completing the whole of the works within the specified time was $74,104 per day, a figure set out in the Appendix to the Form of Tender. That Appendix also specified the amount of the liquidated damages for delay in meeting Key Dates. The amount stated varied according to the section of the works to which they related, the sum increasing according to the number of other contractors who could be affected by the delay.

Holding

Defendant’s argument

At this stage Mr. Nicholas Dennys Q.C. does not suggest on behalf of Philips that the sum claimed by the Government by way of liquidated damages is in fact exorbitant in view of the very substantial delay which in fact occurred in the execution of this contract by Philips. Instead he bases his argument on what could have happened in a number of different hypothetical situations. He suggests that if one or more of those situations had happened, the sum which would then be payable by way of liquidated damages would be wholly out of proportion to any loss which the Government was likely to suffer in that situation and that this is sufficient to establish that the provisions are penal in effect.

Hypothetical cases argument – Rejected

If Philips' approach is correct this would be unsatisfactory. It would mean that it would be extremely difficult to devise any provision for the payment of liquidated damages in the case of a contract of this sort which would not be open to attack as being penal. As is the case with most commercial contracts, there is always going to be a variety of different situations in which damage can occur and even though long and detailed provisions are contained in a contract it will often be virtually impossible to anticipate accurately and provide for all the possible scenarios. Whatever the degree of care exercised by the draftsman it will still be almost inevitable that an ingenious argument can be developed for saying that in a particular hypothetical situation a substantially higher sum will be recovered than would be...

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