XCHRX SUN FOOK KONG (CIVIL) LTD. v. WELLEAD CONSTRUCTION & ENGINEERING CO. LTD. AND ANOTHER

1999, No. CA 2852 & 3592

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

_________________

JUDGMENT

_________________

1. Wellead Construction & Engineering Co. Ltd (Wellead) was employed as a subcontractor on two contracts in respect of which Sun Fook Kong (Civil) Limited (SFK) was the main contractor. SFK alleges that, during the course of the work, it made loans to Wellead of which $741,076 is due, and that Mr Kwan Wah Choi (Mr Kwan) guaranteed the loans. That is the basis for SFK's claim in action 2852/99 (the first action). In that first action, Wellead and Mr Kwan filed a defence saying, in essence, that Wellead was forced to sign the loan documents, and that Mr Kwan did not understand the contents of the documents. There was also a counterclaim in which Wellead alleged that that SFK owed it over $6 million under the two construction subcontracts. This counterclaim is also the subject of Wellead's claim in action 3592/99 (the second action).

2. I now have before me summonses issued by SFK in both actions by which it seeks orders that Wellead's counterclaim in the first action and its claim in the second action be referred to arbitration.

3. The law on this topic is now contained in Article 8 of the Model Law. For convenience, I set out what this says -

"A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed."

4. In both actions, after it had issued summonses requesting that the matters be referred to arbitration, SFK did submit statements on the substance of the disputes. Mr Kwong made some half-hearted point about this, but clearly it has no substance. The request is the summons, not the hearing, and this was before the submission of the statements.

5. The first sub-contract is a signed document and clearly contains an arbitration agreement. The second sub-contract was not signed, but there were proposals and counter-proposals in writing during which an arbitration agreement contained in the base document was not disputed by Wellead as part of the proposed agreement. There is undoubtedly a prima facie case that the arbitration agreement relating to the second sub-contract was in writing as envisaged by section 2AC of the Arbitration Ordinance (Cap. 341.). There are, as Mr Kwong points out, arguments against this, but I am satisfied that there is sufficient evidence that the agreement was in writing to raise a case fit for consideration by the arbitrator. Whether or not there was an arbitration agreement as required by law is a matter for the arbitrator, not me.

6. The only other point made by Mr Kwong is a little hard to follow, but, as I understood him, it was this: SFK started proceedings on the basis of the alleged loans, and the only way of ascertaining if, in fact, anything is due by Wellead to SFK under these loans is by ascertaining if the state of the account between the parties under the two sub-contracts. That may well be so, but the difficulty I have with this argument, as I communicated to Mr Kwong, is how this argument fits into Article 8 for the purposes of the applications before me. Article 8 leaves the court with no discretion; if SFK brings itself within the provision, I must refer the matter to arbitrator. It is possible, I suppose, to raise an argument that, in some way, one of the matters in respect of which SFK has brought its action is the state of the account between the parties under the sub-contracts, and, therefore, Wellead is entitled to have that dispute referred to arbitration, but that is not a application before me now. If Wellead wishes to raise this argument, for what it is worth, it must do so in an application by it for that relief. All I am concerned with is the applications by SFK, and there can be no doubt that SFK has brought itself within the provisions of Article 8.

7. Accordingly, I order that Wellead's counterclaim in the first action and its claim in the second action are referred to arbitration.

8. I have heard no argument on costs, but there seems on reason why costs should not follow the event. I make an order nisi that Wellead pay SFK's costs of action in respect of the counterclaim and the claim by Wellead and of this application.