LEE CHANG YUNG CHEMICAL INDOSRY CORPORATION v. P.T. DOVER CHEMICAL CO

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JUDGMENT

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Fuad, V.-P.:

1. On 20th March 1990' this Court handed down a judgment dismissing an appeal from a decision of Barnett, J. dated 10th October 1989. The judgment has not yet been reported. This Court upheld Barnett, J.'s refusal (but on different grounds) to grant leave to Lee Chang Yung Chemical Industry Corporation ("LCY") to appeal from the interim award of the arbitrator under section 23(3)(b) of the Arbitration Ordinance, Cap.341.

2. LCY wishes to appeal to Her Majesty in Council. They should have applied to this Court for leave to appeal within 14 days from 20th March 1990 (see rule 3 of the Order in Council regulating appeals to Her Majesty in Council). They were late and did not file their Notice of Motion until 11th April, being some 8 days or so late. The reasons for the delay are given in an affidavit sworn by Mr. Geoffrey Miles on 17th July. He is a partner of the solicitors' firm acting for LCY throughout. It is clear from this affidavit that as soon as our judgment was handed down,Mr. Miles was active in seeking the advice of leading Counsel in England and obtaining instructions from his professional clients in the USA about a possible further appeal. Mr. Miles explains that he finally received instructions to proceed with the application for leave to appeal to the Privy Council on 29th March 1990, well within the time allow by the Order in Council.

3. He goes on to say that on that day and subsequent days until 3rd April he was extremely busy with various matters requiring his personal attention before he left to go on leave abroad on 4th April. He expressed regret that on account of all this he had omitted to ensure that the Notice of Motion was issued before his departure, a most unfortunate oversight, as he puts it. Mr. Miles explained that whilst he was on leave it was his practice regularly to telephone his firm's Hong Kong office to discuss any problems that might have arisen and it was only during a telephone conversation with one of his colleagues on 10th April 1990 following service of the sealed Order of this Court that he realized that the Notice of Motion had not been issued.

4. Mr. Scott who appears for P.T. Dover Chemical Company ("Dover") took a neutral stand on the question whether this Court should extend the time for filing the Notice of Motion in exercise of the power given us by rule 3A of the Order in Council. We considered that we had sufficient material before us and that the interest of justice demanded in the circumstances that we should entertain the application notwithstanding the fact that it was out of time. However we wish to take the opportunity of saying that practitioners must be careful to abide by the time limit set by the Order in Council and indeed by the time limits set by Rules of Court. They must not depend on the Court's indulgence in exercise of powers to grant extension of time.

5. Another affidavit sworn by Mr. Miles gives a clear picture of the background. Dover, incorporated in Indonesia, is the other party to the arbitration, as I have indicated, and was the successful respondent before this Court. It was agreed, in. this arbitration, that questions of liability and quantum were to be dealt with separately. There was a lengthy hearing on liability in Hong Kong in 1987. The arbitrator, a Mr. David Gardam, Q.C., by his First Interim Award, and his accompanying Reasons held that Dover were entitled to pursue claims that were entitled Claim A, Claim B, Claim D and Claim E, dismissing Dover's other claims for several million US dollars, whilst LCY were entitled to payment on their counterclaims No. 1, 2, 3 and 4, subject to a very minor set-off in relation to part of counterclaim 2.

6. In June 1988, Dover quantified the value of Claim A, Claim B, Claim D and Claim E at US$970,500.00 together with interest, a figure which was revised in February 1989 to US$973,702.00 (plus interest). Against this sum was to be set LCY's established counterclaims totalling US$460,952.00 (plus interest) subject to the minor set off. A hearing before the arbitrator to determine quantum was fixed to take place in Singapore in May 1989 but before the hearing, and following the submission of documentation from Dover, LCY considered that Dover had, in fact, mitigated or extinguished its total claimed loss and therefore (with Dover's consent) asked the arbitrator to resolve the following question of law:

"Does the rule as to avoided loss apply in the circumstances of this case and to any and, if so, which of the claimant's claims?"

7. Mr. Miles goes on to explain that in his Reasons accompanying his Second Interim Award the arbitrator said:

"Since if it is true that the whole of the claimant's losses had been avoided, it would be a waste of time and costs to make a detailed investigation of (claimant's damage) claims ....".

Thus, while the exact. amount of the credit was not conceded by Dover, it appeared that both the parties and the arbitrator accepted that the point would potentially determine the balance of the arbitration, and thus Dover's claim for US$973,702.00 with interest. In addition the parties had each incurred very substantial costs, in the order of US$1 million for each side.

8. The hearing to determine the agreed question took place in London in May 1989. Following that hearing, the arbitrator issued his Second Interim Award and Reasons dated 23rd May 1989. In his Second Interim Award, the arbitrator expressly held that "the use of the rectifier tower was undoubtedly an action taken by the Claimants in the ordinary course of their business which arose out of the consequences of the breach .... " but says Mr. Miles, he did not apply the general principles set out in British Westinghouse Electric and Manufacturing Company Limited v. Underground Electric  Railway Company of London Limited [1912] AC 673. Rather he held that the phrase "avoided loss" (used in British Westinghouse) meant that the loss must never have been incurred. Applying that interpretation of the expression "avoided loss" to the facts, he held that Dover did not have to give credit for the admitted gain that it had made in the operation of the plant in mitigation or extinction of the losses caused by LCY's breach of contract.

9. Mr. Miles goes on to summarise what happened in the proceedings before Barnett, J. and in this Court.  I will not repeat the same summary.

10. It is submitted by Mr. Mills-Owens on behalf of LCY that this application falls within rule 2(a) of the Order in Council which regulates appeals to Her Majesty in Council, so that an appeal lies "as of right". He points out that the matter in dispute on the appeal, amounts to or is of the value of HK$500,000.00 or upwards, or it can be said that the appeal involves, directly or indirectly, a claim respecting property or some civil right amounting to or of the value of $500,000.00 or upwards. This was, it is said, a "split trial" of the type exemplified in First Pacific Bank Limited v. Robert H.P. Fung [1990] 1 HKLR 527 although in the present case the circumstances were such that if the arbitration were to proceed, it' would have been divided into three rather than the usual two parts. If LCY's submissions as to the applicability and effect of the principles as to "avoided loss" in British Westinghouse are ultimately found to be correct this would undoubtedly reduce an award of damages in favour of Dover by a sum which would be very substantially in excess of HK$500,000.00.

11. To anyone who is not familiar with the procedure that we have to consider today it may seem strange that this Court has to reach a decision as to whether or not an appeal lies "as of right" to Her Majesty in Council, but the authorities make it clear that this Court is bound to form a judgment on the question whether or not an appeal lies "as of right". In my judgment, Mr. Scott's submissions on the point are well founded. I do not think that the analogy  with the "split trial" type of situation discussed in the First Pacific Bank case is a precise one. The statute makes it clear that the application before Barnett, J. and the . appeal to the Court of Appeal concerned only the question whether leave should be given or not to challenge the interim award. The proceedings before Barnett, J. and before this Court concerned only the refusal by him of leave to appeal under section 23(3)(b) of the Arbitration Ordinance. Neither Barnett, J. nor this Court expressed a concluded view on the substantive appeal itself and I am fully persuaded that the order refusing leave under the Arbitration Ordinance, which was upheld by this Court albeit for different reasons, was interlocutory.

12. It was submitted on behalf of LCY by Mr. Mills- Owens that this was a case in which it would be appropriate for this Court to grant leave to LCY to appeal to the Privy Council under rule 2(b) in this Court's discretion because .. the question involved in the appeal was one which by. reason of its general or public importance or otherwise ought to be submitted to Her Majesty in Council for decision. The broad formulation of the question that it was desired to refer to the Privy Council was fomulated in this way:

"In considering mitigation, is the rule as to 'avoided loss' confined to loss which has never been incurred or does it extend to any loss? In particular, does it extend to a loss in fact incurred but against which the Plaintiff/Claimant ought to give credit for admitted gains resulting from mitigation?"

13. Mr. Mills-Owens mounted forceful argument as to why discretion should be exercised in LCY's favour.  I hope you will forgive me at this late hour of the day that I do not rehearse his submission. I am not persuaded that this is an appropriate case for the Court to grant leave under rule 2(b). I, in agreeing with what Hunter, J.A. said in his judgment, of course accepted all that he had to say. His judgment must be read again to understand why I subscribe to the view that this is not an appropriate case for leave to be granted. I think it is very important to bear in mind, when addressing the discretion given by rule 2(b), the qualified rights of appeal in arbitration cases introduced in the United Kingdom in 1979 and brought to Hong Kong in a somewhat modified forms some five years later. I do not suggest for one moment that there will not be cases where arbitration awards cannot properly be taken as high as the Privy Council, but it seems to me that such cases will be rare having regard to the fact that leave must be given by the first instance judge to appeal and then by the Court of Appeal. What I mean to say is that the qualified rights of appeal are severely circumscribed by the new legislation in force in Hong Kong.

14. In the circumstances of this case I think it would be defeating the intention of the legislature to promote speedy finality in arbitration awards if leave were to be given. I accept Mr. Scott's submission that their Lordships in the Privy Council, were they to entertain and hear the appeal and were they to overturn the decision of this Court, they would, in all probability, do no more than remit the matter to the Courts of Hong Kong for further consideration. I would be surprised if they were to express a concluded opinion on the very question that LCY seeks to have taken before the Privy Council. For these reasons I would refuse leave.

Clough, J.A.:

15. I agree and there is nothing I can usefully add.

Penlington, J.A.:

16. I also agree.