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Mitsui Construction Co Ltd v A-G of Hong Kong

(1986) 10 ConLR 1, 33 BLR 1, [1986] LRC (Comm) 245
Court: PC
Judgment Date: circa 1986
Catchwords & Digest
CONTRACT - FORMATION OF CONTRACT - OFFER AND ACCEPTANCE - STATEMENT OF INTENTION
OR WILLINGNESS - STATEMENT OF INTENTION -- INTERPRETATION OF LANGUAGE
The appellant company had entered into an engineering contract with the Hong Kong Government, relating
to the construction of a tunnel. The contract included Bills of Quantities priced by the appellant company
which were based upon the best assessment by the Government's technical advisers of the likely geological
conditions to be met in execution of the work. As it turned out, the estimates were wildly wrong and, in
accordance with the contract, the Engineer granted an extension of 784 days for completion of the work. The
appellant company was paid for the work executed at the rates in the Bills of Quantities, but it claimed that it
was entitled, under the contract, to an adjustment of the rates to be agreed or fixed by the Engineer. The
Government claimed that, on the true construction of the contract, the Engineer had no power to agree or fix
any adjusted rates, because he had not exercised his power under the contract to order a variation of the
works to be done.
The dispute was referred to arbitration, with three issues raising points of law formulated for decision. The
interim award was in the form of a special case for the decision of the High Court, where Rhind, J, affirmed
the arbitrator's decision in favour of the appellant company. On appeal by the Government, the majority of the
Court of Appeal (Cons and Fuad, JJ, Huggins, V-P, dissenting) reversed Rhind, J. The appellant company
appealed to the Privy Council by leave of the Court of Appeal: Held appeal allowed.
(1) The fact that the contract was badly drafted was no reason to depart from the fundamental rule of
construction of contractual documents that the intention of the parties must be ascertained from the language
they had used, interpreted in the light of the relevant factual situation in which the contract was made.
However, the poorer the quality of the drafting, the less willing any court should be to be driven by semantic
niceties to attribute to the parties an improbable and unbusinesslike intention, if the language used was
reasonably capable of an interpretation which attributed to the parties an intention to make provision for
contingencies inherent in the work contracted for. The Government's construction was to be rejected
because it suggested that the parties had deliberately embarked upon a substantial gamble and it was
somewhat improbable that a responsible public authority and responsible engineering contractors would
intend to do that.
(2) The courts below also erred in two respects on the question of construction facing them. First, they had
devoted too much attention to reported decisions (especially that of the South African Court of Appeal in
Grinaker Construction (TVL) (PTY) Ltd v Transvaal Provincial Administration [1982] 1 SALR 78) on
construction of other contracts containing supposedly similar provisions. In the view of the Board such cases
concerned differently worded contracts applied to different facts and were of no assistance in construing the
contract in the instant case. Secondly, it was wrong to draw comparisons between some of the terms of the
contract in the instant case with analogous, but differently worded, terms in other forms of building and
engineering contracts commonly used. Such comparisons were seldom a useful aid to construction and may
be, as in the present case, positively misleading.
(3) On a construction of the various terms of the contract in the light of the above principles, clearly the
Engineer had power to make an adjustment in the rates to take account of the differences between the
executed and billed quantities whether or not he had made a variation order.
Case History

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Annotations
-Reversing

Case Name

Citations
Court
(1986) 10 ConLR 1, 33
Mitsui Construction Co
BLR 1, [1986] LRC
PC
Ltd v A-G of Hong Kong
(Comm) 245
Mitsui Construction Co (1984) 10 Con LR 1, 26
CA
Ltd v A-G of Hong Kong BLR 113

Cases referring to this case

Annotations: All CasesCourt: ALL COURTS
Sort by: Judgment Date (Latest First)
Treatment
Case Name
Citations
Court
LPA Umbrella Trust, Re; [2014] EWHC 1378 (Ch),
Considered
Pensions Regulator v [2014] All ER (D) 59
Ch D
A. Admin Ltd
(May)
Gesner Investments Ltd [2011] EWCA Civ 1118,
Applied
CA
v Bombadier Inc
[2011] All ER (D) 90 (Oct)
[2009] EWCA CIV 668,
Oxonica Energy Ltd v
Applied
[2009] All ER (D) 13
CA
Neuftec Ltd
(Sep)

Date

Signal

circa 1986
circa 1984

Date
08/05/2014
11/10/2011
09/07/2009

Signal