VTC6043EX – Contract Management Dr Michael Asinyaka
Chun Wo Building Construction Ltd v Metta Resources Ltd HCCT 29/2013, 19
August 2016.
1. Background of the Project and Agreement
Chun Wo Building Construc�on Ltd, a reputable contractor in Hong Kong, secured a HK$434
million contract with Meta Resources Ltd in 2010 to build Tsz Shan Monastery, a large-scale
religious and cultural project. The construc�on scope was ambi�ous, demanding compliance
with exac�ng architectural standards, including ornate finishes and complex structures such
as medita�on halls and statues. The contract set strict deadlines and performance milestones,
with nearly 1,600 line-item specifica�ons, highligh�ng the project’s need for precision.
Payments were �ed to completed phases, ensuring quality at each stage.
2. Challenges Encountered and Disputed Site Condi�ons
From the outset, Chun Wo faced unexpected site condi�ons that differed from the pre-
contract discussions. Issues such as soil instability and waterproofing complica�ons arose,
necessita�ng costly adjustments to preserve structural integrity. Chun Wo argued that these
condi�ons had not been disclosed fully by Meta, claiming they were induced to sign under
assump�ons that proved inaccurate. Compounding the challenges was Meta’s project
architect, who played a controlling role in project decisions, influencing �melines and project
approvals, which, Chun Wo alleged, led to unnecessary delays and increased expenses.
3. Development of the Legal Dispute
As delays mounted, Meta issued a Cer�ficate of Non-comple�on, hal�ng payments and
enforcing liquidated damages for Chun Wo’s alleged failure to meet project milestones. In
response, Chun Wo argued that Meta’s ac�ons cons�tuted a breach of coopera�ve
obliga�ons and interference in project management. The contractor pursued damages,
contending that Meta’s overreach and site misrepresenta�ons amounted to vi�a�ng factors.
These issues, Chun Wo argued, undermined fair contractual condi�ons, making it difficult to
meet standards without concessions on �meline and budget.
4. The Dispute
Chun Wo ini�ated legal claims against Meta for payment of completed work and materials,
extensions of �me (EOT), and compensa�on for delays, alleging Meta withheld payments
and imposed liquidated damages unfairly. Meta counterclaimed for construc�on defects,
addi�onal charges, and damages for delay, accusing Chun Wo of failing to meet standards.
1
VTC6043EX – Contract Management Dr Michael Asinyaka
5. Key Issues in Court
1. Breach of Implied Terms by Metta: The court found Meta breached implied terms of
coopera�on, hindrance, and preven�on by interfering in the architect Hsin Yieh
Architects & Engineering Ltd.’s (HYA) independent role. Meta’s representa�ves
overstepped, controlling approvals for EOT and deciding whether to issue Cer�ficates
of Non-Conformance, which undermined HYA’s contractual responsibili�es.
2. Consequences of Broken Contractual Machinery: Due to Metta’s interference, the
contractual machinery effectively broke down, rendering some formalities
unenforceable. The court ruled that Metta could not use Chun Wo’s procedural non-
compliance, caused by Metta’s own interference, to withhold recovery for work done.
3. Practical Completion and Defects: Metta issued a notice to terminate Chun Wo’s
remaining works, and practical completion was deemed achieved. Given the definition
of practical completion (buildings ready for use with no major deficiencies), the court
held Chun Wo had no further obligation to rectify alleged defects, consistent with their
duty to vacate the site post-completion.
6. Court’s Ruling and Key Legal Takeaways
The court’s review revealed that, while the unexpected site condi�ons were difficult, they
fell within typical construc�on risk. Meta’s pre-contract representa�ons did not
cons�tute substan�al misrepresenta�on. However, the court recognized Meta’s role in
crea�ng delays, no�ng that the project architect’s influence over project management
infringed on Chun Wo’s ability to perform under agreed terms. Ruling in favour of Chun
Wo on several key claims, the court awarded par�al damages to cover addi�onal
expenses due to Meta’s undue influence and interference, asser�ng that Meta had
breached the implied duty to cooperate. Despite these findings, specific performance was
priori�zed, allowing the contract to con�nue under adjusted terms rather than complete
rescission.
Sources:
htps://conventuslaw.com/report/hong-kong-lessons-in-complex-construc�on-2/
htps://www.lexology.com/library/detail.aspx?g=b1b08f16-e082-4ae5-9cd1-2e4f7286460c
htps://vlex.hk/vid/chun-wo-building-construc�on-862497995
