JAMES BRUCE HUMPHREY v. DUA CONTRACTORS & CO LTD

1996, No. 86
(Civil)

IN THE HIGH COURT OF HONG KONG

COURT OF APPEAL

CIVIL APPEAL

ON APPEAL FROM HIGH COURT ACTION

CONSTRUCTION AND ARBITRATION LIST NO. 28 of 1995

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J U D G M E N T

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Liu JA (giving judgment of the Court):

1. In this appeal, the facts are hardly disputed. The amount of the claimed professional fees and expenses of $140,460 as adjudged in favour of the appellant (plaintiff) is relatively small. No effort has been made on behalf of the appellant (defendant) before us to deal with the plaintiff's alternative claim on a quantum mer uit basis. There was much debate on the plaintiff's claimed professional remuneration before the institution of the High Court action. It was heard by Leonard, J. who delivered himself of a well-reasoned judgment against the defendant on 12 March 1996, from which the defendant now appeals. Against this setting, the litigation may be said to be unusual.

2. The plaintiff is a registered professional surveyor. The defendant is a limited company in the construction business. Mr Tze Fu Yuen was the Managing Director of the defendant and had a controlling interest in it. The defendant's corporate name is "Dua Contractors & Co. Ltd." Mr Tze was also a partner in an unincorporated firm called "Dua Contractors & Co." There was one more name that surfaced in this appeal i.e. "Dua Construction Co."

3. The defendant claimed to be employed by Community Sports Ltd. (the employer) to erect a multi-purpose recreation community hall under Articles of Agreement signed between them. The Articles of Agreement were signed on 15 July 1990 subject to the provisions of the Agreement and Schedules of Building Contract, Private Edition (without quantities), 1986 edition with an amended clause 1 of its Preliminaries Specification. In fact, the Articles of Agreement were not signed in the defendant's corporate name. They referred to "Dua Construction Co." as the Main Contractor and Community Sports Ltd. as the employer, but they were signed by "Dua Contractors & Co.". In this appeal, Mr Beaumount, counsel for the defendant confirms these two names, "Dua Construction Co." and "Dua Contractor & Co.", as synonymous. Although the defendant now seeks to argue that there was no dispute for arbitration, it was an agreed fact before the judge that the defendant applied by letter dated 23 February 1993 to the President of the Hong Kong Institute of Architects and the Chairman of the Royal Institute of Chartered Surveyors (Hong Kong Branch) for the joint nomination of an arbitrator "for the settlement of .... a dispute with the employer [Community Sports Ltd.] under a contract". The plaintiff was nominated arbitrator for that dispute on 22 March 1993. On 17 May 1993, the plaintiff proposed to the defendant and the employer his terms and conditions and a preliminary meeting. The defendant signified its consent to these proposed terms and conditions by signing a copy of them on 21 May 1993. The signed copy of these terms and conditions was duly returned to the plaintiff. On 4 June 1993, a preliminary meeting was held, at which the defendant was represented by Mr Tze, its Managing Director and others, including solicitor and counsel. The employer was in attendance by Mr Jim Bruce. It was not legally represented. The designated architect under the Articles of Agreement and another architect were also present. It was a further agreed fact for trial that what transpired at the preliminary meeting was accurately reported by the plaintiff as arbitrator in his letter dated 7 June 1993:

"There was produced to me 'Articles of Agreement' between the Parties, in the form used in the Standard Form of Building Contract, Private Edition (without Quantities)....... The Articles had been signed and witnessed, and I am satisfied that there is an arbitration agreement within the meaning of the Arbitration Ordinance, Cap. 341.

"The Parties confirmed before me that there were disputes, that they had failed to agree upon an Arbitrator, that notice to concur in an appointment had been served in accordance with Clause 35, that an application for an appointment by the President of the HKIA co-jointly with the Chairman of the RICS Branch had been lodged by the Chairman, and that I had been duly nominated.

"Mr Bruce, for R [Community Sports Ltd], confirmed acceptance of my terms of appointment. C [defendant] had previous done so......I gave notice that I accepted the appointment.....

"For the avoidance of doubt, C confirmed that the 'disputes' set out in their letter to the Chairman of the Royal Institution of Chartered Surveyors dated February 23, 1993, are not intended to limit jurisdiction in this reference, and the appointment is to cover all matters now in dispute between the Parties, whether set out in that letter or not.

"For the purpose of background information only ...the Parties then respectively described their version of the disputes. The Claimant will present claims ... The Respondent will defend those claims, and has counterclaims .......The Claimant joins issue ..... and will reply......

"The Parties agreed that, broadly, the 'Short Form Arbitration Rules' (August 1st, 1992, edition) published by the Hong Kong International Arbitration Centre shall apply.... Directions in accordance with the agreed procedure are set out and attached hereto.............. There will be a further Directions Hearing in September (subject to confirmation).....For convenience, the Claimant may serve documents upon the Respondent by delivering the same to my office......

"I requested that Mr Choi explain the need for Counsel to attend to a Preliminary Meeting, this being somewhat unusual.....It is noted that R does not, at present, intend to be legally represented. ......the Directions annexed hereto are,... fully explanatory and not couched in the legal terms often used.....costs of and preparatory to the Preliminary Meeting, and of those Directions, are to be costs in the Arbitration.....My order and my initial invoice for fees are enclosed." (Emphasis supplied).

4. On 11 June 1993, the defendant paid the plaintiff $10,000, being half of the plaintiff's appointment fee. The other half was paid by the employer. On 13 June 1993, pursuant to the directions given, the defendant served his points of claim in which the defendant was alleged to be the Main Contractor of the employer. On 29 July 1993, the employer served its points of defence and points of counterclaim. In the defence, it was raised for the first time that the defendant was not a party to the contract and had no locus standi in the arbitration. On 18 September 1993, the defendant served his reply and defence to points of counterclaim, which raised two main issues viz. (1) the defendant was the Main Contractor of the employer by novation of a building contract between the employer and Dua Contractors & Co. and (2) the employer had submitted to arbitration and the plaintiff's jurisdiction as the nominated arbitrator. Following the defendant's reply and defence to points of counterclaim, considerable correspondence between solicitors for the defendant and the employer ensued. Throughout this protracted period of correspondence, the defendant maintained its stance that there was a novation of the building contract of Dua Contractors & Co. and alternatively that the employer had submitted to an ad hoc arbitration. On 13 July 1994, solicitors for the defendant disclosed to the plaintiff that the defendant was seeking leading counsel's advice. On 10 January 1995, the defendant's solicitors proposed to the employer's solicitors that on leading counsel's advice the name of the claimant in the arbitration proceedings be amended to "Dua Company".

5. In March 1995, the defendant formally notified the plaintiff that it abandoned its claims in the arbitration. This is what the solicitors for the defendant stated in its notification:

"...a formal notice to abandon the present arbitration proceedings."

6. The plaintiff sought legal advice and supplied the parties with a copy thereof. On 17 March 1995, the employer made submissions on costs and on 20 March 1995, the plaintiff issued an Interim Award on costs.

7. It is difficult to appreciate how, in these circumstances, the costs Award of the plaintiff as arbitrator could be resisted.

8. The first ground of appeal is that there was no dispute between the parties to the arbitration. From the nomination process, the plaintiff's acceptance, the liaison between the parties, the preliminary meetings, the directions given, the pleadings filed pursuant thereto and the subsequent exchange of correspondence, particularly on the issues of novation and submission, an ad hoc arbitration had been clearly agreed between the defendant limited company and the employer for settling various specified disputes. We would simply state our firm conclusion that there were clearly disputes to be settled by the plaintiff as agreed by the defendant and the employer.

9. Ground 2 is based on the alleged technical misconduct on the part of the plaintiff as arbitrator not to adopt the correct rules and procedure for the resolution of the jurisdiction issue which arose from the employer's challenge to the defendant's locus. In essence, it was contended by the employer that the defendant was not a proper party to the arbitration. As a matter of jurisprudence , counsel for the plaintiff conceded that the plaintiff as arbitrator ought to have followed the Domestic Arbitration Rules, Article 11 (g) and (h) as he was entitled to under Article 13 of the Short Form Rules. On behalf of the defendant, it is argued that the failure of the plaintiff as arbitrator to follow the proper procedure amounted to misconduct which would deprive him of costs and expenses. This is not an issue which was pleaded by the defendant at the trial. However, counsel for the defendant conceded before the judge that without such a pleading it was not open to the defendant to canvass such alleged misconduct. It was in fact not pursued. The discussion between Bench and Bar on and the references made in his judgment by the judge to this topic would not have had the effect of resurrecting this dead issue. Counsel for the plaintiff was not obliged to and did not meet it before Leonard, J. Worse still, no assistance was offered to the judge as to what items of fees and expenditure would have been allowed or disallowed in the event that such a charge of technical misconduct could be successfully sustained. We are not prepared to reopen, at the invitation of Mr Beaumont, this issue in this appeal.

10. Technical misconduct was , and as it is before us, confined to two areas, namely (1) whether or not the plaintiff as arbitrator failed to exercise reasonable skill and care in ensuring that the defendant was a proper party to the arbitration, particularly in his failure to bring into focus the different description and signature in the Articles of Agreement and (2) whether the plaintiff as arbitrator misconducted the proceedings by waiving his lien on and releasing, without full payment, the award.

11. Counsel for the defendant submits that the plaintiff should have at least noticed the name misdescription at the preliminary meeting. There was the nomination process with nothing untoward up to nomination. Nomination was duly made and accepted on the plaintiff's terms. No point was taken by the appointing authority on misdescription. At the preliminary hearing, the designated architect, Mr Ratcliffe was in attendance and he was a witness to both signatures on the Articles of Agreement. The description of the defendant was never queried. All proceeded on the basis that the proper parties were before the arbitrator. In fact, even in this appeal, Mr Beaumont for the defendant accepted "Dua Construction Co." and "Dua Contractors & Co." as synonymous. Up to the very end, the defendant maintained a novation of contract and the employer's submission to jurisdiction in an ad hoc arbitration. Ground 9 of the appeal is grounded on mis-description. In these circumstances, the plaintiff as arbitrator was not alerted to any irregularity and it was reasonable for him to entertain the defendant as a party to the reference.

12. Grounds 5 to 7 deal with the complaint about waiver of lien. Clause 6 of the arbitrator's terms of reference enabled the plaintiff as an arbitrator to withhold his award until payment. Clause 6 did not entitle any parties to the arbitration to insist on a strict observance of this clause by the arbitrator. It was a right of lien for the benefit of the arbitrator and one for him alone to waive. The logical consequence must be that once fees are fully paid, the arbitrator cannot exercise his lien on the award and the parties to the arbitration will receive and can demand a copy thereof. The plaintiff as arbitrator was paid half of the fees by the employer and his costs Award was released. It was not misconduct and the defendant has no legitimate complaint to make.

13. The acceptance by the plaintiff of his nomination as arbitrator on his terms, together with the participation in the following proceedings, constituted a valid reference. Even on the basis that the defendant was to be regarded as a doubtful proper party to the building contract in question, there was still clearly an ad hoc reference by the defendant and Community Sports Ltd. to arbitrate their disputes over the issues of novation and submission to reference. An ad hoc agreement to arbitration is described as an agreement "to refer existing disputes to arbitration". See p. 104 Commercial Arbitration by Mustill & Boyd, 2^nd edn. An ad hoc reference of existing disputes can be distinguished from an arbitration clause to refer future disputes to arbitration in an agreement which envisages potential disputes to arise. Whether an agreement is reached to arbitrate existing disputes after they have arisen would depend on whether there are arbitrable disputes and whether there is consensus to refer the existing disputes to arbitration. See p. 132 et seq. Commercial Arbitration by Mustill & Boyd 2^nd ed. Jones Engineering Services Ltd. v. Balfour Beauty Building Ltd. (1992) 42 ConLR 1 provides an example of the finding of such an ad hoc reference to arbitration. Having held that there was an arbitrable dispute, Hirst, J. concluded that there was an ad hoc reference. His conclusion was based on the appointment of an arbitrator, appearance of the parties before him, giving of directions, subsequent compliance with these given directions, and consistent conduct reaffirming the ad hoc reference, including the exchange of pleadings, hearings before the arbitrator and the making of submissions at his request. See Jones supra. at p. 11. The facts and conduct we recited at the beginning of the judgment are, in our view, sufficient evidence of an agreement to submit to an ad hoc arbitration. There is no substance in grounds 3 and 4.

14. No submission is advanced on the alternative basis of quantum mer uit in the plaintiff's claim for his professional fees and expenses. Nothing further need be said.

15. For the reasons we have given, the appeal should be dismissed. We dismiss it with an order nisi for costs of this appeal against the defendant.