XCHRX Private Company "Triple V" Inc. v. Star (Universal) Co. Ltd. and Another

Con No. 46 of 1994

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

CONSTRUCTION AND ARBITRATION LIST

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J U D G M E N T

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1. I have before me an amended summons in which the Plaintiff seeks the appointment of an arbitrator for the 1st and the 2nd Defendants under Art 11(3)(a) of the UNCITRAL Model Law in respect of two separate disputes arising out of two separate contracts. Mr. Robin Peard has accepted appointment as arbitrator for the Plaintiff.

2. At the last hearing the question was raised whether the Plaintiff which is a Russian Private Corporation had legal capacity but I am satisfied by the second affidavit of Mr. Colin John Wright that there is prima facie evidence that it is a properly constituted corporation according to Russian law and is a legal entity.

Contract No. 93RV-1034HK

3. This contract is dated the 21st December 1993 and on the face of it appears to be signed by the Plaintiff and the 1st Defendant only. It appears to provide for the sale of 100 television sets by the 1st Defendant to the Plaintiff.

Contract No. 93RV-1035

4. This contract is dated the 8th February 1994 and on the face of it appears to be signed by the Plaintiff and the 1st Defendant only. It appears to provide for the sale of microwave ovens by the 1st Defendant to the Plaintiff.

5. It is the Plaintiff's case that the 1st Defendant (D1) was signing as agent for the 2nd Defendant (D2) on the following grounds : -

1.	Mr. Chan Kui Tim, who dealt with the Plaintiff in relation to both contracts, is a director and shareholder of D1 and D2. A company search reveals that 124,999 shares in D2 were held by him out of a total of 499,997 as at the 5th November 1993. Another company search reveals that 221,000 shares in D1 out of a total of 340,000 were held by him as at 28th February 1994. Both D1 and D2 have the same registered office.
2.	It is alleged that Chan Kui Tim told Mr. Vazhnov, a representative of the Plaintiff, before the contracts were signed that his companies were being reorganised and that D2 would be responsible for performing the contracts.
3.	On the 17th December 1993 (before either contract was signed) -
	Mr. Chan sent a notice to the Plaintiff saying that the name of D1 would be changed to that of D2.
4.	Correspondence allegedly relating to both contracts was sent on the 2nd Defendant's letterhead. A letter dated the 3rd February 1994 has been exhibited. It bears D2's letterhead and refers to microwave ovens and television sets but the contracts in question are not specifically mentioned.

6. The Plaintiff says that no television sets have been delivered under contract 93RV-1034HK. D1 says that that contract (including the arbitration clause in it) was superseded by another one which relieved D1 of its obligation to deliver the TV sets. As to contract no. 93RV-1035, the Plaintiff says that the goods supplied are defective and it claims damages for breach of contract. D1 says that it is willing to negotiate a settlement but that the Plaintiff has failed to furnish sufficient particulars to support its claim.

7. There is clearly a dispute between the Plaintiff and D1 in relation to each contract. As to contract no. 93RV-1035, D1 takes a point on the wording of the arbitration clause, which in each contract reads :

"16.	If any dispute shall arise between the Buyer and the Seller in connection herewith which cannot be settled by agreement between them, the same shall be referred in Hong Kong to the" (sic) "Arbitration in accordance with provisions of the Arbitration Ordinance of Hong Kong."

8. D1 says that since it is willing to settle by agreement, it is too early for arbitration. It has not appointed an arbitrator in respect of either contract.

9. D2's position is that it has not signed and is not a party to either contract. It is clear that D1 did not change its name to that of D2; both Defendants are separate legal persons. D2 wants nothing to do with either matter and has not appointed an arbitrator.

10. The contracts are dated after the 6th April 1990 when the UNCITRAL Model Law was brought into effect by the Arbitration (Amendment) no. 2 Ordinance 1989.

11. The Plaintiff's place of business is in Vladivostok in Russia whereas the place of business of both Defendants is in Hong Kong. Delivery of the goods was to be in Russia. The place for arbitration is Hong Kong. Clearly, these are international arbitration agreements as defined in Article 1(3) of the Uncitral Model Law (5th Schedule to the Arbitration Ordinance Cap. 341).

12. There is prima facie evidence of a dispute between the Plaintiff and D1 in relation to contract 93RV-1034HK and an arbitrator ought to be appointed to arbitrate their dispute. It will be for the arbitrator to decide the effect, if any, of the alleged subsequent agreement cancelling the contract.

13. There is likewise prima facie evidence of a dispute between the Plaintiff and D1 in relation to contract 93RV-1035. It is clear that the Plaintiff does not intend to attempt to settle by agreement because it does not believe that D1 is acting in good faith. There is some evidence that D1 may intend to attempt to involve the Plaintiff in negotiations with D1's supplier and the Plaintiff is not interested in becoming so involved. Thus the dispute cannot be settled by agreement and an arbitrator ought to be appointed.

14. The remaining issue is whether D2 ought to be a party to the arbitration. The Plaintiff says it should because it signed the contract by D1 acting as its agent and in view of the correspondence, according to the Plaintiff, it is estopped from denying agency.

15. Article 7(2) says : -

"(2)

The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract."

16. It is arguable that D1 signed the agreement as agent for D2 , in which case D2 signed the agreement by D1 which signed for itself and as agent for D2. The arbitrator, by virtue of Article 16 may rule on his own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. I will therefore for present purposes treat D2 as having signed the contract by its agent, D1. D2 can plead before the arbitral tribunal that it does not have jurisdiction and the tribunal can decide the issue (Article 16(1)) whereupon the provisions of Article 16(3) will apply and it will be open to any party dissatisfied with the tribunal's decision to bring the question before this court within 30 days. The procedure is fully discussed in Fung Sang Trading Ltd. v. Kai Sun Products & Food Co. Ltd. [1992] 1 HKLR 40.

17. I have now been informed that the parties have discussed the question of who should be arbitrator in the event of my finding for the Plaintiff and they had agreed that in those circumstances, Mr. Robin Peard be appointed sole arbitrator and that is provided for in the amended summons. Therefore, Mr. Robin Peard will be appointed sole arbitrator in relation to each of the two disputes, the parties to each arbitration being the Plaintiff and the 1st and the 2nd Defendants.

18. There is no reason why costs should not follow the event in this case. The issue to be decided now is the basis upon which the costs ought to be awarded.

19. I can see no good reason why the 1st Defendant should have opposed the application for the appointment of an arbitrator or failed to concur in the appointment of an arbitrator. Therefore, in relation to the Plaintiff's application for an appointment of an arbitrator for the 1st Defendant, there will be an order for costs in favour of the Plaintiff to be taxed on an indemnity basis and paid by the 1st Defendant. In making that order, I am following the current practice which was described by Kaplan J. as he then was in Safond Shipping Sdn. Bhd 1993 No. MP2635.

20. With regard to the 2nd Defendant, however, it seems to me that having regard to the facts of this particular case where the name of the 2nd Defendant does not actually appear on the contracts, the 2nd Defendant was entitled to oppose and all I have found at this stage is that it is arguable that the 2nd Defendant was a party to the agreement on the basis that it signed it by an agent and therefore, whilst I will make an order for costs in favour of the Plaintiff, the Plaintiff's costs incurred in making the application for the appointment of an arbitrator for the 2nd Defendant in relation to each of the two disputes will be taxed on the normal basis and paid by the 2nd Defendant to the Plaintiff.