International Construction Law Review
HAS THE DUST FINALLY SETTLED ON LATENT DAMAGE?
DAVID BATESON AND OTTO MAK1
This question of “latent damage” in building works and its interaction with the limitation legislation has long vexed common law jurists. The common law on this issue as received in different jurisdictions—Australia, Canada and New Zealand—has diverged from that of England and Wales. An opportunity to grapple this question recently presented itself to the Hong Kong Court of Final Appeal (CFA) in The Bank of East Asia, Limited
v. (1) Tsien Wui Marble Factory Limited and (2) Riva & 3 Others
[2000] 1 HKC 1. In five different speeches covering a total of 133 pages, the CFA has decided to follow the “English position” by a bare majority of 3–2. Within the majority, their Lordships were split into two camps as to the ratio decidendi
of the case.
History
The Bank of East Asia (BEA) decided to re-develop its headquarters in the prime Central District of Hong Kong in the late 1970s. They engaged the firm of Palmer and Turner (P&T, the 2nd to 5th defendants) as the Architect. Gammon Construction was selected as the main contractor and Tsien Wui Marble Factory Limited (TW, the 1st defendant) as the nominated sub-contractor to carry out the external stone cladding works. The new headquarters, a highrise building of 24 storeys, were completed in late 1982. Approximately 12 years after the new building was completed, a small percentage of the cladding panels installed by TW was discovered to begin to fail in places. In 1996, BEA decided to completely replace the whole of the external cladding, at the cost of HK$38 million.
BEA issued a writ against TW in June 1994, suing in contract and in tort, for defective design and poor workmanship in installing the cladding. Two years later in May 1996, BEA issued another writ against P&T, also suing in contract and in tort for their professional negligence in failing to identify TW’s negligent design and to supervise TW’s defective workmanship, thereby causing to BEA to incur costs in replacing the cladding system. Those two actions were consolidated at the trial. Surprisingly, BEA did not sue the main contractor, Gammon.
During the trial, TW continued to deny that they were negligent, on the ground that they engaged an independent external consultant to design the cladding. The design was subsequently rubber-stamped by P&T. P&T’s counsel made a concession that P&T were negligent in approving the
[2000
The International Construction Law Review
676