XCHRX YAU HING (TO YUEN) CO. LTD. v. HIGH WOOD INVESTMENTS LTD.

HCCT83/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO.83 OF 1998

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J U D G M E N T

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1. The Plaintiff and Defendant are the only two contracting parties in four Building Contracts arising out of the same development. The contracts have been called A, B, C & D (one contract) and E.

2. The Plaintiff has commenced proceedings against the Defendant in relation to B, C & D and E. No problems or disputes arose over Contract A which has now been satisfactorily completed. The Defendant's application is to stay all proceedings in relation to B, C & D and E and refer all matters to arbitration.

3. The difficulty arises because of the following unusual set of circumstances. Contract A clearly did incorporate an arbitration clause. It was a standard form of Building Contract containing the usual arbitration clause, clause 35. Had a dispute arisen under Contract A, it would have been referred to arbitration. Contracts C & D and E clearly did not incorporate an arbitration clause. They were ad hoc building contracts which did not adopt the Standard Form of Building Contract and thus the arbitration clause.

4. As far as Contract B is concerned, the position is less clear. The Defendant submits that the Standard Form of Building Contract terms should be incorporated by implication because it followed on from Contract A, which did contain them, and there is evidence in the terms of the contract document which suggest that the parties intended them to be incorporated. The evidence relied on is words such as, "in accordance with clause 35 of the said conditions". However the conditions themselves are not incorporated and Mr Pong, for the Defendant, submits that this must have been an oversight. He further submits that if the arbitration clause is incorporated by implication, the court must stay the proceedings in relation to Contract B because they have shown that a dispute exists between the parties. He finally submits that if Contract B is stayed, then so should C & D and E. They are a series of contracts relating to the same development, with the same parties. It would be undesirable to have Contract B resolved by an arbitration and Contracts C & D and E resolved by a judge.

5. Miss Chung, for the Plaintiff, submits that the Standard Form of Building Contract containing the arbitration clause should not be incorporated into Contract B by implication. She submits first of all that the mere fact that Contract B followed Contract A and was in relation to the same development is no ground for saying that Contract B should contain the same arbitration clause that is contained in Contract A. I agree with her. The contracts have things in common but they relate to different works and are self-contained. Furthermore, the due completion date for Contract A was 16th September 1994. It was in fact duly completed and discharged before either the commencement of works under Contract B or the letters of intent which formed the basis of the agreement between the parties.

6. I find merit in her submission also that the evidence of the parties' intent upon which Mr Pong relies, namely the references to the "said conditions" in the Articles of Agreement for Contract B, whilst they appear in the Articles of Agreement do not appear in the Letters of Intent or in any of the tendering correspondence prior to the awarding of Contract B to the Plaintiff. What is more, the Letters of Intent predate the commencement of the works, the Articles of Agreement post-date their completion. Whilst I accept that it is not unusual for the formal contract document to be prepared whilst the work is under way and sometimes not executed until after they have been completed, the fact remains that the first evidence in writing that the parties may have intended to include an arbitration clause in Contract B comes after the contract has been completed. The actual dates are as follows :

7. Thus, the first time the Plaintiff saw the evidence of intent upon which Mr Pong relied was after the works had been completed. Mr Pong submits however that in December 1995, when the contract documents were in fact signed, they were so because they did in fact reflect the intentions of the parties. Unfortunately one link in the chain of his argument is still missing, namely that the December 1995 document contained only evidence of intent, it did not contain actual reference to the incorporation of the Standard Form of Building Contract. The chain of events outlined above is not challenged by the Defendant. In my judgment, the Defendant has failed to show that the arbitration clause should be impliedly incorporated into Contract B. The Plaintiff is entitled to rely on the fact that it is in fact absent from the contract coupled with the fact that such evidence of the parties' intention as there is post-dates the completion of the works.

8. Having determined the case in relation to Contract B in the Plaintiff's favour, no issue arises in relation to Contracts C & D and E. The only argument in favour of a stay in relation to those contracts depended on the success of the argument in relation to Contract B, which has failed.

9. For the sake of completeness, I add this. Had the Defendant succeeded in persuading the court that there should be a stay in relation to Contract B, I would not have been persuaded that I should also grant a stay in relation to Contracts C & D and E. I readily accept that if Contract B had gone to arbitration, it would have been desirable for the others to go as well. However I am unaware of any provision which would enable a court to refer a matter to arbitration following a stay of proceedings, which had been opposed, in relation to a contract which contains no arbitration clause simply because it would be convenient. A finding, therefore, in the Defendant's favour on Contract B would have led to a most unsatisfactory outcome, namely the one thing that neither side wanted which was a stay in relation to Contract B and no stay in relation to Contracts C & D and E.

10. Finally, I see no reason in this case why the costs should not follow the event. I make a costs order nisi in the Plaintiff's favour.