A second legal row is brewing over Hong Kong’s troubled deep tunnel sewage collection network that was completed nearly five years late at the end of 2001. This follows the breakdown of talks between Paul Y Construction and Italian JV partner SELI and the Drainage Services Department (DSD) over outstanding claims totalling about US$26M. Industry insiders confirmed that Paul Y-SELI has formally instituted legal proceedings after notifying the DSD that it planned to resolve the dispute through mediation. If that fails then the next step is to launch arbitration proceedings.
Central to the row is a decision by the DSD’s consulting engineer, Montgomery Watson, to grant Paul Y-SELI over 600 extra days to complete its contract. The extension was granted in September – nearly two years after the contract finished – and meant Paul Y-Seli was not liable for liquidated damages for late completion, saving the consortium about HK$90M.
Spurred by Montgomery Watson’s decision, Paul Y-SELI is claiming additional cash partly to cover the variations for extra work that led to late completion in the first place. It is also seeking additional extensions to time beyond the 600 days it has already received.
DSD is counter claiming, which could nullify Montgomery Watson’s decision to award the 600 days.
Confusing the issue further, is that Paul Y-SELI actually accelerated construction to meet the government’s November 2001 deadline. Insiders said it was ironical Paul Y-SELI had to resort to legal action as the government pledged more than four years ago that such action would not be needed. This followed a government decision to sack the original consortium, Campenon Bernard/Maeda (CBM), and re-award the contract to complete the 25km network of tunnels to three consortiums, Paul Y-SELI, Skanska and Gammon Skanska-Cementation, in late 1996 and 1997.
DSD chief engineer Chiu Wing-wah declined to comment on the claims, but said: “Overall speaking, two of the three tunnel completion contracts are about to be finalised with all claims impartially assessed by the engineer (Montgomery Watson) and satisfactorily resolved. The finalisation process of the remaining one is still on-going. We have been following normal contractual procedures to finalise these contracts.”
Paul Y-SELI was responsible for finishing the deep tunnel network in Chai Wan on Hong Kong Island and across Victoria the harbour in Kwun Tong and Tseung Kwan O in Kowloon.
