LEUNG KWOK HUNG t/a KAISER (M&E) DECORATION ENGINEERING CO v. JOHNSON CONTROLS HONG KONG LTD

HCCT 56/2017

[2018] HKCFI 1500

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 56 OF 2017

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D E C I S I O N

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1.  The principles for granting a stay of action for arbitration under s 20 of Arbitration Ordinance are clear, and are not disputed by the parties in this case.

2.  The dispute between the Plaintiff and the Defendant, as can be seen from the Statement of Claim and the affidavits filed, is whether the Defendant was entitled under the Subcontract to terminate the agreement between the Plaintiff and the Defendant on the ground of the Defendant’s suspension of work and alleged breach, and whether the Plaintiff is entitled to payment of amounts said to be due in respect of work done by Plaintiff under the Subcontract, and to damages in respect of the Defendant’s wrongful repudiation of the agreement.

3.  The Subcontract contains an arbitration clause, whereby “any dispute whether arising during the execution or after the completion of the Subcontract works, in regard to any matter or thing of whatsoever nature arising out of” the Subcontract is to be arbitrated. This is a widely drafted clause. It covers disputes which arise during the execution of the Subcontract works, or which arise after the completion of the Subcontract works, and such disputes are covered by the clause if they are “in regard to any matter or thing of whatsoever nature arising out of” the Subcontract, which is very wide indeed in scope.

4.  On plain reading of the clause, there is no scope in my view to confine it to disputes due to execution of the Subcontract Works, or disputes on the performance of the Subcontract or the Subcontract works, or to exclude disputes due to the Plaintiff’s abandonment and non-performance of the Subcontract works, as the Plaintiff suggests.

5.  On my reading of the arbitration clause, it clearly extends to disputes such as the present one, which arises with regard to whether the Defendant is entitled to rely on clause 6.3 or 6.4 of the terms and conditions to terminate the Subcontract on the basis of the Plaintiff’s alleged breach, and whether the Plaintiff is entitled to payment for the works it had carried out under the Subcontract. Such dispute arose during the execution of the Plaintiff’s works, and falls within the wide description of “any matter or thing of whatsoever nature arising out of” the Subcontract.

6.  The Plaintiff’s action is clearly “in the same matter” that is the subject of the arbitration agreement.  The claims made and the issues in dispute all fall within the scope of the arbitration clause.

7.  It is trite, that an arbitration clause in a contract which constitutes an arbitration agreement is separable from the underlying contract itself. Termination and discharge of the underlying agreement does not affect the validity and operation of the arbitration agreement. There is accordingly no basis to argue that the arbitration agreement between the parties in this case has been terminated, or is inoperable, by reason only of the abandonment or discharge of the Subcontract by breach.

8.  Plainly, there is a prima facie case of an arbitration agreement which covers the dispute which has arisen between the parties. I am not satisfied that the arbitration agreement is inoperative.

9.  For these reasons, the Defendant’s application for stay of the action to arbitration is granted. The costs are to be paid by the Plaintiff to the Defendant, on indemnity basis, following the usual orders granted in cases of unsuccessful resistance to enforcement of arbitration agreements and awards under the Arbitration Ordinance.