COVID-19 outbreak and the Hong Kong construction industry

05 August 2020 by Justin Yuen, Tamara Liu

On 27 July 2020, the Centre for Health Protection reported a large-scale outbreak cluster on a construction site at the Peak with 13 workers of Kin Shing (Leung’s) General Contractors Limited being infected with COVID-19.  Over 100 people work in the same construction site on a daily basis.  As it is likely that more and more large-scale cluster outbreaks in construction sites will occur, contractors may ask whether they could seek extensions of time for the completion of works due to shortage of manpower caused by infected workers.

In our newsletter on 13 February 2020, we mentioned that contractors seeking extensions of time should demonstrate how the present situation with COVID-19 could constitute a “special circumstance” which has affected the progress of work under the 2005 Private Form and 1999 Government Form contracts.  We also mentioned that the shortage of labour and manpower due to quarantine measures and restrictions on the movement of populations across the border, especially at around the beginning of the year, may constitute a special circumstance. 

However, if  contractors merely rely on a shortage of labour due to an outbreak in the construction site per se to seek an extension of time, it is questionable whether this would be sufficient to demonstrate that such an outbreak on the site constitutes a special circumstance, entitling an extension of time under the above standard form contracts. 

Further, the architect may argue that the contractors should have used their best endeavours to ensure that there was sufficient manpower to execute the works.  For instance, under clause 39 of 1999 Government Form, the contractors are required to “make his own arrangements in regard to the provision of such labour, skilled and unskilled, as may be required for the execution of the Works and shall use all diligence in arranging for a sufficient and suitable supply of such labour”.

It is worthwhile to note that the Finance Committee of the Legislative Counsel has approved a proposal made by the Government to alleviate the difficulties faced by the construction industry.  Under the proposal, the Government would forgo liquidated damages arising from the outbreak of COVID-19 for public works contracts by granting extensions of time of up to six months under the contractual provisions, upon receipt of applications from the contractors, save for contracts with provisions for general damages.  Imposition of liquidated damages can be withheld by relevant works department immediately, pending processing of contractors’ extension of time applications pursuant to the contract.

To sum up, whilst we are of the view that the shortage of construction labour due to quarantine measures and restrictions on the movement across the border arising from the outbreak of COVID-19 may be construed as a special circumstance entitling an extension of time, the shortage of manpower caused by infected workers, for example, in an affected construction site, may not constitute a special circumstance itself under the above standard form contracts to justify the grant of an extension of time.