UDL ARGOS ENGINEERING & HEAVY INDUSTRIES CO., LTD v. DRAGAGES HONG KONG LTD

HCA 1264/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1264 OF 2007

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J U D G M E N T

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1.  In October 1996 the defendant Dragages contracted with Cathay Pacific to build Cathay Pacific’s new headquarters at Chek Lap Kok.

2.  In May 1998 the plaintiff UDL Argos won a sub-contract for structural steelworks from Dragages.  The sub-contract contained a provision that any disputes arising between the parties in connection with the sub-contract shall be referred to the arbitration and final decision of a single arbitrator.

3.  UDL Argos claims that the work was completed towards the end of 1999 and it submitted a final account which was for $2,941,927.04 being the balance of the total sum of $12,791,354.04 still unpaid.

4.  This amount was not then and has not since been paid or reduced; however, the matter was not advanced for some years until November 2006, when Li Kam Wa of UDL Argos wrote to Dragages to pursue completion.  The matter was taken up by Alan Donnet of Dragages and the two met on 8 February 2007.

5.  Mr Donnet told Mr Li that he believed the matter had been resolved in an exchange of letters and undertook to search his files and revert.

6.  And so he did.  He wrote to Mr Li by letter of 8 March and told him that a letter from Dragages of 17 January 2001 and a response from UDL Argos of 22 January 2001 amounted to a settlement of moneys due under the sub-contract; so that was that.

7.  Mr Li searched his company’s records for copies of these letters, but could not locate either.  He responded, by letter of 20 March, which contained the following paragraphs:

“	We refer to your information provided in the meeting on 8 February 2007 and that as per your letter … dated 8 March 2007 and confirmation to the fact that contrary to your misplaced belief there was NO executed or enforceable settlement agreement for the Subcontract final account ever concluded.
	Given the above results as your thorough search and investigation we believe you are now in a good position to proceed and process with your obligation to certify and pay for valued work done under the Subcontract.
	We therefore would expect a constructive proposal leading to finalization of this matter to be in place on or before 31 March 2007 beyond which time we would refer this to our lawyers for necessary process of recovery without further notice.”

8.  It is quite apparent from this exchange that one party regarded the matter of final payment as resolved whilst the other, UDL Argos, claims close to $3 million remains outstanding.

9.  As a result of this impasse UDL Argos brought this action, seeking a declaration that there is no settlement between the parties.

10.  Dragages have responded with an application that the action be stayed to arbitration, upon the basis that this amounts to a dispute arising between the parties being parties to the sub-contract, by whose terms they are bound to refer the same for arbitration.

Should There Be a Stay?

11.  Mr Wong representing UDL Argos argues ‘No’, based on the proposition that a settlement agreement that by compromise resolves a dispute between parties to a contract arising out of the contract is a separate and distinct agreement.  The original contract comes to an end; the parties are no longer bound by provisions limiting how disputes are to be resolved.  In support of this he quoted from Foskett’s The Law and Practice of Compromise, 6^th Edition at paragraph 6.01:

“	End of dispute
	An unimpeached compromise represents the end of the dispute or disputes from which it arose.  Such issues of fact or law as may have formed the subject-matter of the original disputation are buried beneath the surface of the compromise.  The court will not permit them to be raised afresh in the context of a new action.  If the parties have agreed that their original dispute may be resurrected in certain circumstances then, of course, the position may be different.  The principle has been neatly stated judicially on a number of occasions:
		In Plumley v Horrell (1869) 20 LT 473, Lord Romilly M.R. said this:
		‘	Prima facie everybody would suppose that a compromise means that the question is not to be tried over again.  That is the first meaning of compromise.  When I compromise a law suit with my adversary, I mean that the question is not to be tried over again.’
		In Knowles v Roberts (1888) 38 Ch D 263, Bowen L.J. expressed the position thus:
			As soon as you have ended a dispute by a compromise you have disposed of it.’”

12.  Mr Wong submitted that as Dragages holds firm to the view the issues are now resolved it cannot in the same breath revise the provision of the now inoperative sub-contract that there must be submission to arbitration.

Discussion

13.  The difficulty about this proposition is that UDL Argos does not accept there is a settlement agreement.  Its pleaded case states in part:

“	13.	The Plaintiff avers that the Alleged Settlement Agreement has not come into existence or further or in the alternative, none of the terms alleged to comprise part of the Alleged Settlement Agreement have any legal force or effect, whether to deprive the Plaintiff of entitlement to payment of the Price or otherwise.
	14.	Further or in the alternative, the Plaintiff avers that, subject to discovery herein, on a proper construction of the said letter dated 17 January 2001 of the Defendant and the said letter dated 22 January 2001 of the Plaintiff, the letters are incapable of forming any Alleged Settlement Agreement whether as alleged by the Defendant or at all.
	15.	There being no settlement agreement between the Plaintiff and the Defendant in respect of the [sub-contract] whether in terms of the Alleged Settlement Agreement or at all, the Plaintiff avers that it is entitled to payment by the Defendant of the payment of the balance of the Price, …”

And the balance of the Price, referred to therein, is the said sum of $2,941,927.04.

14.  As Mr Lewis for Dragages put it, there has been no document paraded headed “Settlement Agreement” setting out unequivocal terms and signed by both sides.  And he agrees that it may well be on points of construction, that the two letters Mr Donnet referred to fall short of binding the parties to a compromise.  Until that is dealt with the matter of a final payment is still unresolved and disputed, and the parties are committed to take their differences to an arbitrator and not this court.

My Ruling

15.  As I find, the parties have not settled their dispute, at least not yet.  It behoves Dragages to produce the two letters in question and perhaps that will assist to resolve matters speedily.  But in the meantime the parties are not ad idem and if they remain at loggerheads, they must go to an arbitrator for resolution.

16.  The application for a stay to arbitration is granted.

17.  Costs of the application, nisi, are to the defendant.