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CACV000137/1984
| IN THE COURT OF APPEAL |
1984 No. 137
(Civil) |
BETWEEN:
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ATTORNEY GENERAL |
Appellant |
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AND
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TECHNIC CONSTRUCTION CO. LTD. |
Respondent |
Coram: Roberts, C.J., McMullin, V.P. & Silke, J.A.
Date: 14, 15 & 16 November 1984
Data of delivery: 4 December 1984
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JUDGMENT
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Roberts, C.J.
Preliminary
1. On 30th April, 1984, an arbitrator made an interim award, in arbitration proceedings between the appellant and respondent.
2. This award dealt with three issues which the arbitrator was asked to determine. The second of these was not the subject of the application before us. The first and third issues were as follows -
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(1) |
Whether the respondents (i.e. the Government) were obliged to provide the claimants (i.e. the respondent) with information as to where each of the services to be provided should be placed in relation to the other and in relation to the structure of other building works.
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(3) |
What is the answer to the question or issue raised by paragraph 30 of the Points of Claim, namely, whether the architect can grant extensions of time under clause 64(2) of the conditions for delays caused by the respondent's breaches of the contract and whether in consequence thereof time is at large. |
3. The arbitrator's findings were as follows –
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"Issue No.l. |
Yes, the respondents were obliged to provide the claimants with the information specified in this issue. " |
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"Issue No.3. |
The answer to the question raised by paragraph 30 of the Points of Claim herein is that the architect cannot grant extensions of time under clause 64(2) of the conditions for delays caused by the respondent's breaches of the contract and in consequence time is at large. " |
4. The appellant sought leave to appeal to the High Court against the interim award on the first and third issues. His application for leave was dismissed by a High Court Judge on 30th July, after a hearing lasting five days.
Arbitration Ordinance
5. The Hong Kong Arbitration Ordinance ("Cap.341") follows closely, though with significant differences, the Arbitration Acts.
6. Section 1 of the Arbitration Act 1979 ("the Act") with variations to which we will refer later, is reproduced as section 23 of Cap. 341.
7. Section 23(2) provides for an appeal to the High Court on any question of law arising out of an award made on an arbitration agreement.
8. Such an appeal to the High Court may be brought by any of the parties to a reference, either with the consent of all parties to the reference, or with the leave of the court (section 23(3)).
9. Section 23(4) reads as follows -
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(4) The Court shall not grant leave under subsection (3)(b) unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement; and the Court may make any leave which it gives conditional upon the applicant complying with such conditions as it considers appropriate. " |
10. Section 23(7) provides that no appeal shall lie to the Court of Appeal from a decision of the High Court on an appeal under section 23, unless the High Court or the Court of Appeal gives leave.
11. Section 23 of Cap. 341 differs from section 1 of the Act in two respects -
(a) Section l(6A) of the Act, which provides as follows, is absent from Cap. 341 -
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Unless the High Court gives leave, no appeal shall lie to the Court of Appeal from a decision of the High Court- |
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(a) |
to grant or refuse leave under sub-section (3)(b) or (5)(b) above; or |
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(b) |
to make or not to make an order under subsection (5) above. " |
(b) Nor does Cap. 341 contain Section 1(7)(b) of the Act, which provides that no appeal shall lie to the Court of Appeal from a decision of the High Court unless–
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"(b) |
it is certified by the High Court that the question of law to which its decision relates either is one of general public importance or is one which for some other special reason should be considered by the Court of Appeal. " |
12. It was not in dispute that the requirements of section 23(4) were satisfied. The issue before us was whether the judge correctly exercised his discretion to refuse leave to appeal to the High Court.
Application of the Nema Guidelines
13. The judge ruled that he was obliged to follow what have become known as the "Nema Guidelines", which were prescribed by the House of Lords in Pioneer Shipping Ltd. and Others v. B.T.P. Tioxide Ltd. ("the Nema")(1).
14. These guidelines, which set out the principles to be followed by judges, when deciding whether to give leave to appeal under section 1(3) of the Act, gave rise to a strong divergence of view during the next two years, with some English judges following them closely and others apparently attempting to water down their effect.
15. However, the House of Lords has recently reminded judges that the Nema guidelines must be followed in Antaios Compania Naviera S.A. v. Salen Rederierna A.B.("the Antaios")(2).
16. Lord Diplock sets out the correct approach of a judge, when dealing with an application for leave to appeal against an arbitration award, in the following passages of his judgment in the Nema –
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(a)
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at p. 742H - |
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"Where, as in the instant case, a question of law involved is the construction of a "one-off" clause the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong. But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave, the parties should be left to accept, for better or for worse, the decision of the tribunal that they had chosen to decide the matter in the first instance. "
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(b)
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at p. 743D - |
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"For reasons already sufficiently discussed, rather less strict criteria are in my view appropriate where questions of construction of contracts in standard terms are concerned. That there should be as high a degree of legal certainty as it is practicable to obtain as to how such terms apply upon the occurrence of events of a kind that it is not unlikely may reproduce themselves in similar transactions between other parties engaged in the same trade, is a public interest that is recognized by the Act particularly in section 4. So, if the decision of the question of construction in the circumstances of the particular case would add significantly to the clarity and certainty of English commercial law it would be (roper to give leave in a case sufficiently substantial to escape the ban imposed by the first part of section 1(4) bearing in mind always that a superabundance of citable judicial decisions arising out of slightly different facts is calculated to hinder rather than to promote clarity in settled principles of commercial law. But leave should not be given even in such a case, unless the judge considered that a strong prima facie case had been made out that the arbitrator had been wrong in his construction; and when the events to which the standard clause fell to be applied in the particular arbitration were themselves 'one-off' events, stricter criteria should be applied on the same lines as those that I have suggested as appropriate to 'one-off' clauses. |
Does the Nema apply?
17. Counsel for the appellant argued that the Nema guidelines were not binding on the courts of Hong Kong and should not be followed, notwithstanding the general principle, enunciated by Lord Diplock in de Lasala v. de Lasala(3) at p. 558C -
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Different considerations, in their Lordships' view, apply to decisions of the Hose of Lords on the interpretation of recent legislation that is common to Hong Kong and England. Here there is no question of divergent development of the law. The legislature in Hong Kong has chosen to develop that branch of the law on the same lines as it has been developed in England, and, for that purpose, to adopt the same legislation as is in force in England and falls to be interpreted according to English canons of construction. What their Lordships have already said about the common membership of the Judicial Committee of the Privy Counsel and the Appellate Committee of the House of Lords applies a fortiori to decisions of the House of Lords on interpretation of recent English statutes that have been adopted as the law of Hong Kong. Since the House of Lords as such is not a constituent part of the judicial system of Hong Kong it may be that in juristic theory it would be more correct to say that the authority of its decision on any question of law, even the interpretation of recent common legislation, can be persuasive only: but looked at realistically its decisions on such a question will have the same practical affect as if they were strictly binding, and courts in Hong Kong would be well advised to treat them as being so. " |
18. The appellant advanced three arguments -
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(a) |
that there are significant differences between section 1 of the Act and section 23 of Cap. 341, so that they are not "recent common legislation";
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(b) |
that the Nema guidelines are an expression of judicial policy and not an interpretation of recent common legislation;
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(c) |
that the guidelines are based on policy considerations which are not applicable to Hong Kong.
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(a) |
There are two differences between section 1 of the Act and section 23 of Cap. 341, which are referred to earlier. |
19. But section 1(6A) of the Act was not in force when the Nema was decided and thus did not influence the formation of the guidelines. So the Nema was based on a section which was at that time in the same terms as the Hong Kong section, with the exception of section 1(7) of the Act.
20. This subsection requires a certificate of the High Court that a question of law of general public importance is involved, before an appeal lies to the Court of Appeal. from "a decision of the High Court on an appeal under this section." Section 1 (7) is in terms applicable only to a decision on an appeal; this means that leave to appeal must have been given and that a substantive appeal to the Court of Appeal is in issue. The subsection is thus of no relevance to the matter which we have to decide.
21. Our conclusion, therefore, is that the relevant section of Cap. 341 is in sufficiently close terms to section 23 of the Act to amount to "recent common legislation" within the meaning of that phrase in de Lasala(3).
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(b)
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Could the Nema guidelines be said to be not an interpretation of an English statute but an expression of judicial policy not binding on Hong Kong courts? |
22. We do not read the Nema in this way. The guidelines constitute an instruction to English judges as to how the discretion which lies in them to grant or refuse leave to appeal under section l of the Act should be exercised. It has long been established that a "discretion is not one to be exercised according to the fancy of whoever is to exercise the jurisdiction of Equity, but is a discretion to be exercised according to the rules which have been established by a long series of decisions, and which are now settled to be the proper guide to judges" - per Lord Blackburn in Doherty v. Allman(4).
23. The Hong Kong courts are thus, in our opinion, obliged to follow, in accordance with the doctrine of precedent and with the principle of de Lasala(3), such rulings of the House of Lords, as to how judicial discretion should be exercised, as are appropriate to Hong Kong.
24. Only if the circumstances of Hong Kong are such as to justify a diversion from such rulings, should we fail to follow them.
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(c)
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It cannot, we think, be disputed, that the Nema guidelines are based upon the belief that the terms of the 1979 Act (and particularly section 1) indicate that the legislature intended that the avenues of recourse to the courts in arbitrations should be severely restricted. This is summed up by Lord Diplock at p.734 -
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"...... several indications in the Act itself of a parliamentary intention to give effect to the turn of the tide in favour of finality in arbitral awards (particularly in non-domestic arbitrations of which the instant case is one), at any rate where this does not involve exposing arbitrators to a temptation to depart from 'settled principles of law.' Thus section 1(1) removes a former threat to finality by abolishing judicial review (formerly certiorari) for error of law on the face of the award. Section 1(3) withdraws the previous power of an arbitrator to accede to a request to state his award in the form of a special case if such request was made by any party to the reference. " |
25. The similarities of section 23 of Cap. 341 to section 1 of the Act are such that the Hong Kong legislature may properly, in our view, be deemed to have taken the same approach as Parliament to the matter. The differences between the two sections are insufficient to deter us from this inference.
26. We therefore conclude, as did Lord Diplock, that it is proper to assume that those who resort to arbitration in Hong Kong do not wish also to be involved in subsidiary litigation in the courts, save where it is abundantly clear that the arbitrator has made serious errors of law.
27. Thus we find that the Nema guidelines are in force in Hong Kong. We must next decide if the judge applied them correctly.
Application of the Nema guidelines by judge
28. At p.602H of the Antaios(2), Lord Diplock deals with the task of a judge who has to decide any application for leave -
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all that the judge has to decide on the application is: first is this dispute, on the one hand, about a one-off clause or event, or, on the other hand, about a standard term or an event which is a common occurrence in the trade or commercial activity concerned. If it is the former, he must then consider: whether the arbitrator was in the judge's view so obviously wrong as to preclude the possibility that he might be right, if it is the latter, he must then consider whether a strong prima facie case has been made out that the arbitrator was wrong? Unless the answer he would give to the question appropriate to the type of case to which the application with which he is concerned is: 'Yes,' he should refuse leave to appeal. ” |
29. The judge sought to apply the guidelines to the first issue as follows -
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It would follow from what I have said that with regard to the first issue, leave must be refused. I cannot say that its resolution would add significantly to the clarity and certainty of the law of Hong Kong; nor have I been able to say that a strong prima facie case has been made out that the Arbitrator was wrong in his construction. " |
30. The judge makes no specific finding as to whether the terms of the contract between the parties or the circumstances giving rise to the dispute were of a one-off or standard nature. We are inclined to think, however, that he must have classified the dispute as arising from a standard term or a common event, in view of his application to it of the Nema test which is applicable thereto - i.e. has a strong prima facie case been shown that the arbitrator was wrong?
31. The judge dealt with the third issue in two passages of his judgment -
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"I have formed the tentative view that the construction contended for by Mr. Auld (counsel for the appellant) is correct. That must mean, I suppose, that I do find at this stage a strong prima facie case that the Arbitrator was wrong."
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"if one accepts, as I do, the view of the English Commercial judges that there is in reality a spectrum of cases ranging from the extreme one-off kind of case with a unique term applying to special circumstances at the one end to standard terms imposed or accepted as a matter of commercial necessity in general international use at the other, clause 64(2) must fall somewhere in between. It is a standard term in the sense that it has been included in Government contracts for many years; at the same time when one relates it to its English model, it is already many years out of date and it is susceptible of amendment to put its meaning beyond doubt. I am doubtful that the resolution of that issue would add anything to the clarity or certainty of the law. So, after some hesitation, I again refuse leave. Tipping the scales has been the consideration that the parties chose for themselves a tribunal which to paraphrase Lord Denning, M.R. was just as likely to be right as the judge - probably more likely. " |
32. Again, we must assume that the judge had classified this dispute as being concerned with a standard term, to which the prima facie test should be applied.
Were these standard or one-off clauses or events?
33. We agree with the judge's conclusion that both issues arose from standard conditions or common events.
34. Although the judge did not in terms deal with the question, we are satisfied, on the first issue, that allocation of space, between services, within a ceiling void, must be a common event, when the construction of a large scale building is the subject of the contract.
35. Similarly, it must be very common for the engineer to be asked to extend the time for completion of works, whether the delay is due to the fault of the employer or the builder.
36. We were assured that the clauses of the contract relevant to both issues have been included for several years in the standard form used in hundreds of construction contracts by the Government of Hong Kong are still being used.
Strong prima facie case
37. Having listened to extensive arguments on both sides, we see no reason to disagree with the judge's finding on the first issue, that no prima facie case was made out that the arbitrator was wrong.
38. We feel obliged, however, to disagree with his conclusion on the third issue that the appellant had established a strong prima facie case that the arbitrator was wrong.
39. A strong prima facie case must mean, we think, that the judge must be satisfied that it is more likely than the arbitrator was wrong than right.
40. On the third issue we can only say that, having heard argument in considerable detail for three days, we would be unable until we have heard the full argument, to make up our minds either way. We agree that an argument can be mounted that he was wrong, but further than this we are not prepared to go. Thus, it follows that we are in disagreement with the judge in his finding that a strong prima facie case has been established on the third issue that the arbitrator was in error.
"One-off" or "standard"
41. In quotation (b) above from that part of his judgment which relates to the third issue, the judge seems to suggest that there may be an intermediate category between the one-off and the standard. It is hardly surprising that the judge should have reached this conclusion, in view of the substantial divergence of views between various English judges attempting to apply the Nema guidelines.
42. However, such confusion no longer exists, as the result of the Antaios(2) and it is the task of a judge, before whom an application for leave is made, to categorize a dispute either as to a one-off dispute or as a standard dispute, difficult though it may sometimes be to do so.
Contribution to the law
43. In quotation (a) above from his judgment on the third issue, the judge, having decided that on this question there was a strong prima facie case that the arbitrator was wrong, nevertheless refused to exercise his discretion to grant leave to appeal.
44. His two main reasons for such refusal were that the term could easily be amended; and that the issue would not add anything to the clarity of the law.
45. Any term can be altered for future contracts. This does not seem to us, however, to be a proper reason for refusing leave, if the term is a standard one in general use, since the same issues may arise again.
46. The effect of the passage from Lord Diplock's judgment at p.743D of the Nema quote above, seems to be that leave should not be given, where a standard clause is concerned, unless the question of construction in issue would "add significantly to the clarity and certainty of English commercial law". This requirement must be satisfied before the judge determines whether a strong prima facie case has been made out that the arbitrator was wrong.
47. This approach was followed by the judge, who relied upon a passage in the judgment of Lloyd, J. in The Nichos A(5) -
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in what is called a one-off case the discretion should normally only be exercised by granting leave when the Court can see that the arbitrator is obviously wrong in law. In all other cases the discretion should normally only be exercised if two conditions are fulfilled: first that the decision on the point of law in issue will add significantly to the clarity and certainty of the law; and secondly if there is strong prima facie reason to suppose that the arbitrator was wrong. " |
48. In the Antaios(2) at p.602H, Lord Diplock did not refer again to this element of the Nema guidelines, which he set out again in a shorter form.
49. However, we do not regard his omission to refer to it in the Antaios(2) as implying that it no longer applies.
50. The judge was thus correct to address his mind to the question. While this is a matter of difficulty, and somewhat speculative, we would have been reluctant to disagree with his conclusion and would thus have upheld his decision on this ground, even had we not felt obliged to disagree with his finding that a strong prima facie case had been made out on the third issue.
Application for leave
51. For the guidance of judges before whom application for leave to appeal against the awards of arbitrators may come in the future, we would like to repeat the strictures issued by Lord Diplock in the Antaios(2) case.
52. The dangers of protracted and costly arguments on applications for leave to appeal are well illustrated by the progress of this application, which continued for five full days before the judge and three full days before this court.
53. In future, we commend to judges the approach recommended by Lord Diplock at p.603F of the Antaios(2) in which he says -
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generally a brief oral hearing inter parses is permitted of which the average duration is ten to fifteen minutes, the parties are not allowed to use the hearing as art opportunity to argue the appeal that is the subject of the petition. The only question to be determined is whether the case in which leave to appeal is sought is of such a nature that it ought to be re-argued in this House instead of leaving the judgment appealed from as the final judgment in the case. If argument of this length is found to be adequate by the House of Lords to enable it to decide a question whether leave to appeal ought to be given, it should be good enough for commercial judges who have to make up their minds upon a similar question where the criteria as to whether to grant leave or not are, under The Nema guidelines. " |
54. The appeal must therefore be dismissed.
(1) [1982] A.C. 724 ("The Nema")
(2) [1984] 3 W.L.R. 592 ("The Antaios")
(3) [1980] A.C. 546 P.C.
(4) [1878] 3 App.Cas. 709 at p. 728.
(5) [1982] 1 Lloyd's L.R. 52 ("Thel Nichos A")
Representation:
Mr. R. Auld, Q.C. with Miss Gladys L and Mr. P.T. Nunn, Crown Counsel, for the Appellant - Attorney General
Mr. A. May, Q.C., The Hon. O.V. Cheung, Q.C. and Mr. W. Lane (McKenna & Co.) for the Respondent.
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