Briefing

October 2011

The Court put HKZM Bridge back on track: What it means for contractors?
The Court of Appeal has recently overturned the Court of First Instance (CFI) judgment that caused a costly delay in the construction of the giant Hong KongZhuhaiMacau Bridge.
On 27 September 2011, the Court of Appeal unanimously overturned the CFI's decision to quash an environmental permit the Director of Environmental Protection (Director) had issued for construction of the Bridge, clearing the way for the HKSAR Government to press ahead with the HK$83 billion cross-boundary project after a five-month suspension. CFI Decision Ms Chu Yee Wah (Ms Chu), a 66 year old resident of Tung Chung brought an action against the Director of Environmental Protection (Director) alleging that the environmental permits that had been issued by the Director had been based on Environmental Impact Assessments (EIA) that did not meet the requirements of the Environmental Impact Assessment Ordinance, Cap. 499 (EIAO). In his judgment on 18 April, Justice Joseph Fok agreed with one of the seven arguments of Ms Chu: that the EIAs were required to provide a "stand-alone analysis" of the environmental conditions if the Bridge was not constructed, but had failed to do so. The judge said a "stand-alone analysis" was necessary so that the Director had all the relevant information needed to decide the level of environmental impact a project would have, and how effective any pollution-mitigation measures might be. The HKSAR Government appealed against the CFI's ruling. Appeal In a 39-page verdict, Court of Appeal Vice-President Justice Robert Tang said that the EIAO only required an assessment of the cumulative impact of a particular project against benchmarks of environmental objective. A stand-alone analysis was, as a matter of construction of the EIAO, not necessary. The EIA had dealt adequately with the existing conditions. Under the EIAO, the Highway Department, the proponent for the Bridge, was in any case obliged to ensure that measures would be taken to minimise the pollution from a construction project. Regardless of the pollution footprint of a designated project, a proponent must minimize pollution. The Director can decide what migrating measures should be adopted in the absence of a "standalone analysis". Whilst the ruling means construction on the Bridge finally can get underway again, the HKSAR Government had already indicated the one-year delay may add HK6.5 billion in current prices, including costs for increase in construction prices and adjustment of construction method to compress the construction timetable. The Bridge will now be constructed in phases, with the main works to be completed first for commissioning in 2016. The pressure is on the HKSAR Government as both the Macau and Zhuhai governments have already started construction on their sections of the Bridge. Since the CFI's ruling in April, the HKSAR Government has also slowed down the progress of the EIA for at least five other projects (including the Central Kowloon Route, Tuen Mun Western Bypass and the Tseung Kwan O-Lam Tin Tunnel) and delayed decisions over whether to grant an environmental permit to the waste incinerator on an artificial island off Shek Kwu Chai. Additionally, the MTRC had withdrawn three EIAs for the Sha Tin-Central link, creating further doubt over whether this project will reach full completion in 2020 as scheduled. The Appeal decision means several major construction projects earlier put on hold will now likely to go through the usual vetting process. For example, MTRC has recently re-submitted the concerned EIA Reports to the EPD for approval. Contractors should be aware that delays resulting from the consequential uncertainty from the Bridge Appeal may result in accelerated programs, arduous construction methods and onerous contractual terms in the contracts for current projects, and should consider carefully the scope of their obligations under such contracts together with reviewing their existing arrangements. The Bridge case is a prime example of the increasing legal challenges mounted against construction projects as a result of growing public concerns about the potential negative impact brought by these giant infrastructure projects. Other recent examples include the judicial review against the third phase of the The Judge also said it was a question of professional judgement as to what information was required to be contained in an EIA to enable the Director to perform the duties. The Court should not interfere unless the Director's judgement was Wednesbury unreasonable. Comment

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Central Reclamation Project in 2004, the suit brought against the demolition of the Queens Pier in 2007, and the outbreak of fierce public protest against the Hong Kong section of the GuangzhouShenzhen-Hong Kong High Speed Rail Project in 2009. These have caused delay, disruptions, and in some instances, suspension to the projects. Contractors should ensure that the risks occasioned by these intervening events are fully provided for and borne by the Employer under the contract. Given the current uncertain economic climate, in addition to the usual entitlements to

extensions of time and loss and/or expenses, contractual mechanism must be put in place to allow recovery of costs for material inflation, wage hike and if appropriate, currency fluctuation in the events of delay and suspension. A full copy of the judgment is available at: http://legalref.judiciary.gov.hk/lrs/common/ju/ju_frame.jsp?DIS=7 8373&currpage=T

For more information please contact

Alvin Ho Solicitor, Hong Kong M: +852 2294 3450 E: alvin.ho@pinsentmasons.com

Vincent Connor Head of Asia Pacific, Hong Kong M: +852 2294 3490 E: vincent.connor@pinsentmasons.com

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