XCHRX WISHING STAR LTD. v. PAUL Y-ITC CONSTRUCTION LTD.

HCMP1156/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.1156 OF 2000

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J U D G M E N T

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It is regrettable that the subject matter of this summons has reached the stage of a chambers' hearing. The background is simply as follows. The original dispute between the parties went to arbitration. During the course of the arbitration, the parties reached a settlement. The settlement was reduced to writing on 14 February 2000. Since then a variety of minor disputes have arisen between the parties as to what the settlement was, whether it was varied by consent, who should do what to bring it into effect, whether it was contingent on other events and so on. Some of the disagreement have been resolved, some have not. Three issues remain :

1) Was the written settlement of 14 February varied by agreement in two respects the next day?

2) Has the plaintiff adopted the correct procedure in seeking to enforce the settlement, varied or otherwise?

3) If the settlement sum of $9 million is to be paid over to the plaintiff should it bear interest?

I shall deal with each issue in turn.

1. Was the settlement varied by consent?

The parties negotiated well into the night on 13 February 2000 by telephone. At 3:00 am on 14 February an agreement was reached. It was put into writing as follows :

"By consent, it is ordered that :

(1) R to pay to C a sum of HK$9mil within 7 days from the date hereof in full and final settlement of all the C's claims and after [taking into account and] satisfy the Resp's counterclaims in this arbitration.

(2) C to consent to payment out to the Resp.

(3) Costs of this reference, including those of the Arbitrator, live notes and interpretation services and rental charges to be borne and paid by the parties in equal shares upon receipt of the relevant debit notes/invoices. Subject as aforesaid, regardless of any previous costs orders, each party to bear its own costs.

(4) R to sign the Final Account (copy attached hereto) forthwith and to use its best endeavours (but such endeavours shall exclude the bringing of legal or arbitration proceedings against the Employer) to procure the payment due thereunder from the employer as soon as possible and to release the payment to C within 3 days upon receipt of the same or alternatively, upon C's request in writing, to write to the employer to signify its consent to the employer's direct payment of the said sum to C under the said Final Account.

(5) C will not object to R using documents obtained from C in discovery to seek EOT from the Employer if necessary."

Following this, there were further conversations and phone calls concerning those parts of the above agreement which have been underlined (by me).

As a result, on 15 February Mr Leung, for the plaintiff, sent to Miss Mak, for the defendant, a revised consent order together with a letter. In the revised version paragraph (5) had been deleted and paragraph (4) redrafted as follows :

"The Respondent shall, forthwith upon the Claimant's request in writing, write to the Employer to signify its consent to the Employer to effect the direct payment of the balance of payment under the Final Account (copy attached hereto as attachment B) to the Claimant and if so requested by claimant in writing, the Respondent shall sign the Final Account and return the same to the Claimant forthwith."

The letter to which this amendment was enclosed and which followed the telephone discussions stated :

"We refer to the telephone conversation between your Miss Mak and our Mr. Leung this afternoon and write to confirm our client's agreement ('the said agreement') that it has no objection to the Respondent using documents obtained from the Claimant in discovery to seek EOT from the Employer if necessary

However, your Miss Mak has kindly agreed to its deletion (i.e. paragraph 5) from the draft Consent Order previously sent to you today and not to disclose this letter to your client save for the purpose of enforcing the said agreement against our client, should our client fail to abide by the same."

On 16 February Miss Mak replied as follows :

"We refer to the telephone conversation between your Mr. Leung and our Ms. Mak this morning. The parties have agreed that paragraph 5 of the agreement reached in the morning of 14 February 2000 need not form part of the Consent Award. We will send this letter together with our letters exchanged yesterday to the Arbitrator and request that a Consent Award be made in the terms agreed by the parties. Should you have any further comments, please raise them with us and with the Arbitrator today."

There can be no doubt that the consent award "in the terms agreed" referred to the revised one which had been sent immediately prior to this letter and which prompted the writing of it.

Unfortunately, further disputes arose about the method of making a payment to the defendant out of money in court. This muddied the waters and delayed the payment of the $9 million to the plaintiff. Even though the payment out was eventually made on 16 March, no payment of $9 million has yet been made because the defendant contends that they only agreed that clause (5) need not form part of the settlement but it still bound the parties and further, there was no agreement to vary paragraph (4).

As already indicated, I resolve this issue in the plaintiff's favour. The faxes and enclosures invite no other interpretation. What is more, the revision to paragraph (4) seems to be in the defendant's favour because whereas beforehand, it was placed under an obligation to use its best endeavours to do something, in the revised version it was under no such obligation.

The first question is therefore answered in the affirmative.

2. Does this court have jurisdiction to grant the relief sought?

In summary form the summons seeks :

(a) a declaration that the revised settlement is valid and binding;

(b) leave to enforce it under section 2C of Cap.341;

(c) an order for specific performance of the agreement;

(d) an order for payment forthwith of $9 million plus interest;

(e) costs.

Section 2C of Cap.341 provides :

"If the parties to an arbitration agreement reach agreement in settlement of their dispute and enter into an agreement in writing containing the terms of settlement (the 'settlement agreement') the settlement agreement shall, for the purposes of its enforcement, be treated as an award on an arbitration agreement and may, by leave of the Court or a judge thereof, be enforced in the same manner as a judgment or order to the same effect and, where leave is so given, judgment may be entered in terms of the agreement."

Miss Mak submits that this only provides for the enforcement of a single written agreement whereas here, the terms are in dispute. Further she submits, leave to enforce is not a right, it is only granted by exercise of the court's discretion.

In answer to these points - the dispute has now been resolved by the court, section 2C is applicable. It is a matter of discretion but it is only rarely and for exceptional reasons that the discretion would not be exercised in favour of enforcement.

Miss Mak further relies on section 24(1) of Cap.341 which provides :

"In all cases of reference to arbitration the Court or a judge thereof may from time to time remit the matters referred, or any of them, to the reconsideration of the arbitrator or umpire."

The court clearly has power to remit matters back to the arbitrator. In this case that would not be appropriate for two reasons. The first reason is by far the most important, namely, this matter is crying out for finality and a final resolution of the issues between the parties. Enough time and costs have already been incurred. To remit the matter to the learned arbitrator now, who has always expressed her willingness to assist, would mean that today's hearing and much of the correspondence leading up to it has been a waste of time and money. This court clearly has jurisdiction to resolve the matter and it should do so. The second reason is that it is arguable that the arbitrator, although willing, does not have jurisdiction to resolve it. The question arises - is a subsequent variation of a settlement part of the arbitration of which the arbitrator is seized? However, in view of the first reason above, it is not necessary to answer this question.

3. Interest

Miss Mak submits that if the defendant is obliged to pay over the $9 million settlement sum, which I have ruled it undoubtedly is, no interest should be awarded. Her argument stems from the fact that there was no provision for payment of interest in the original award and the court's discretionary power to award interest pursuant to section 48 of Cap.4, High Court Ordinance relates only to claims for debt and damages. Her fall back submission is that if any interest is due, it should only commence from the date the payment out of monies to her client was effected, namely on 16 March 2000.

In my judgment, her elaborate arguments are entirely answered by the clear words of section 2GI of Cap.341.

"Interest is payable on the amount of an award from the date of the award at the same rate as for a judgment debt, except when the award otherwise provides."

I have determined that the date of the award should be the date of the agreement to the revised version, namely 16 February. The agreement provides for seven days in which it should be paid. Interest at the judgment rate should therefore run from 23 February 2000.

Order

A) The settlement agreement between the parties is valid and binding and was as follows :

1. The respondent shall pay to the claimant a sum of $9 million within seven days from the date hereof in full and final settlement of all the claimant's claims after taking into account and satisfying the respondent's counterclaims in this arbitration.

2. The claimant shall consent to payment out to the respondent.

3. Costs of this reference, including those of the arbitrator, live notes and interpretation services and rental charges shall be borne and paid by the parties in equal shares upon receipt of the relevant debit notes/invoices. Subject as aforesaid, regardless of any previous costs orders, each party shall bear its own costs.

4. The respondent shall, forthwith upon the claimant's request in writing, write to the Employer to signify its consent to the Employer to effect the direct payment of the balance of payment under the Final Account (copy attached hereto as attachment B) to the claimant and if so requested by claimant in writing, the respondent shall sign the Final Account and return the same to the claimant forthwith.

B) Leave be granted to the plaintiff to enforce the agreement under section 2C of the Arbitration Ordinance, Cap.341.

C) The defendant shall pay to the plaintiff forthwith the sum of $9 million plus interest at the judgment rate from 23 February 2000 to the date of payment.

D) The costs of and arising from this summons be the plaintiff's to be taxed if not agreed (a costs order nisi).

For the sake of completeness, the plaintiff's summons to file Leung Tak Kin's 4th affidavit with an abridgement of time was also granted but with no order as to the costs of that summons.