How Hong Kong contractors should respond to coronavirus outbreak

While it is to be hoped that most employers will take a sympathetic approach to the current situation, experience shows that disputes are still likely to arise. Doing nothing and hoping for the best should not be considered an option.

In response to the rising number of confirmed coronavirus cases in the region, the Hong Kong government and the private sector have reacted with increasing measures to prevent a widespread outbreak.

Government departments and many private companies, including architects and engineers, are adopting flexible working arrangements which may delay services such as the granting of licences and approvals, or cause difficulties with the proper supervision or inspection of works. At least one major developer has shut down all of its construction sites until 17 February, and others may follow suit.

The delivery of materials and pre-fabricated parts from mainland China may be delayed. For example, work in major quarries in the Pearl River Delta region will not resume until at least 10 February, impacting on concrete and asphalt production. There may be risks of infection within construction sites which may result in closures for disinfection and quarantine imposed on workers.

For contractors already operating in an already difficult and challenging economic environment, delay and disruption to projects is likely – but there are things that you can do to minimise loss.

First, read the contract carefully. Depending on the precise wording of the contract, you may be awarded additional time or money, or both. In particular, contractors should carefully analyse provisions regarding:

• extension of time;
• variations;
• suspension;
• force majeure; or
• disturbance to or prevention of the progress of the works.

If necessary, seek legal advice in order to ascertain the proper interpretation of any mechanisms provided under the contract.

Secondly, promptly issue notifications in accordance with the terms of the contract. Compliance with notification requirements is often a condition precedent for there to be any entitlement to either time or money. Serving such notices promptly and in the correct form will prevent any future debate on whether any such entitlements are barred.

Thirdly, maintain detailed records of activities on site including, importantly, what cannot be done or delivered due to the disruption. Records should also cover the costs of maintaining the site, staff and equipment which are idle and record any adverse effects on productivity for work which can still proceed. This will all help to record how the coronavirus outbreak has led to a fundamental change in circumstances and conditions under which the works are to be carried out. Contemporaneous documents often prove to be the best evidence to justify a claim.