HOP HING IRON WORKS & CONSTRUCTION CO. LTD. v. ACG JOINT VENTURE

HCA 2533/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2533 OF 2002

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R U L I N G

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1. Today I have an application for stay in favour of arbitration taken out by the Defendant before me.

2. The two parties are the main contractor and a sub-contractor in relation to a project. Disputes between the parties have already arisen and have been referred to arbitration pursuant to an arbitration clause in the sub-contract between the two parties. In fact the arbitration is due to be heard in early August this year; it is scheduled to last two weeks.

3. On 29 June this year, the Plaintiff issued the present Writ against the Defendant. The Plaintiff alleges in the Statement of Claim that prior to the making of the sub-contract, there was an earlier agreement, the so-called "20th December Agreement", between the parties in which the Defendant, in order to persuade the Plaintiff to adopt a set of budgeted rates for the works to be covered by the sub-contract then under negotiations between the parties, promised the Plaintiff that all future variation works in relation to the steel and metal works in question under the main contract would be carried out by the Plaintiff. In the present action, the Plaintiff basically alleges that the Defendant has breached the 20th December Agreement by failing to give all future variation works to the Plaintiff to undertake.

4. As I said, the Writ of Summons was issued on 29 June, and the Acknowledgment of Service was filed on 9 July. On the same day, the Defendant took out a summons for stay pursuant to the provisions in the Arbitration Ordinance and pursuant to an arbitration clause in the sub-contract. On 11 July, a supporting affidavit was filed and served together with the summons on the Plaintiff by the Defendant.

5. At today's hearing, Mr Lam appearing for the Plaintiff, applies for an adjournment of today's hearing, saying that the Plaintiff needs time in the light of the above chronology to consider the Defendant's application and if necessary to consult counsel on the application. This is strongly opposed by Mr Shepherd appearing for the Defendant. Mr Shepherd informs the Court that there is urgency in resolving the present application. This is because if the Court decides that the present dispute, the subject of the present action, should be referred to arbitration, the arbitrator should be made aware of it as soon as possible, for that may well lead to the adjournment of the hearing of the arbitration of the existing disputes between the parties, as these disputes and the facts and issues relating to the present court action quite clearly overlap, or put at the lowest, have a substantial connection with each other.

6. At this stage I should also mention that in fact in the arbitration proceedings, the Plaintiff has twice applied for leave to amend its claims under the arbitration proceedings to include the present court dispute as part of the disputes in the arbitration proceedings for the resolution of the arbitrator. The two applications were successfully opposed by the Defendant, both on the ground that the disputes go outside the existing scope of disputes under the two arbitration notices which were served by the Plaintiff and which started the ball rolling in the first place, and on the ground that the amendments were not properly formulated. Apparently both grounds were accepted and relied on by the arbitrator in rejecting the two applications.

7. In those circumstances, I am of the view that the present difficulty facing the arbitration proceedings or the urgency for the resolution of the present application for a stay cannot be said to be self-induced, as it were, by the Defendant. Given the arbitrator's rulings and reasons for his decisions, the rejection of the two amendments relating to the disputes, i.e. the subject of the present litigation, cannot be said to have been the fault of the Defendant. At the lowest, the Defendant was simply standing on its strict legal rights to require any dispute to be first made the subject of a notice for arbitration before it could be included as part of the subject of the arbitration proceedings.

8. In those circumstances, I am left with the urgency point urged upon me by Mr Shepherd, which I accept as a valid consideration. On the other hand, I also bear in mind the need on the part of the Plaintiff to have a decent period of time to consider the present application. Yet this need is to a great extent minimised by several factors. First, Mr Lam who appears before me today and has the conduct of the present action has been acting for the Plaintiff for several years in the related arbitration proceedings. He is presumably well familiar with the disputes between the parties and in particular, the two unsuccessful amendments in the arbitration proceedings raising the same dispute, which has since been made the subject of the present litigation. And secondly, the Plaintiff has already got counsel in the related arbitration proceedings who must be well familiar with the disputes between the parties and who, I must assume, must be competent enough to give whatever advice that is required at short notice relating to the present dispute between the parties and relating to the arbitration clause in question. After all, counsel has been instructed to appear in an arbitration.

9. Moreover, although a bulky affidavit with many exhibits have been filed by the Defendant in support of the present application, the contents of the affidavit and the majority of the exhibits must be well familiar to Mr Lam and the Plaintiff's side, they being no more than a recital of the disputes between the parties and the history of the arbitration proceedings and documents generated in the disputes and the arbitration proceedings.

10. Finally, I also bear in mind whether the Plaintiff has any arguable case in resisting the application. As Mr Shepherd appearing for the Defendant lost no time in pointing out to me during this morning's submission, it was the Plaintiff who twice tried to include the present court dispute as part of the arbitration disputes before the arbitrator. So even if the doctrine of estoppel may not be strictly applicable in this sort of situations, it would lie ill in the mouth of the Plaintiff to say that the present dispute is not covered by the arbitration clause in question. Moreover, I have, on a very preliminary basis, heard what Mr Lam has to say in relation to his client's proposed opposition to the present application. From what I have heard, and without prejudice to any further and more detailed submission from the parties, I can really discern no arguable ground for opposing the present application. Perhaps to be more precise, I can really discern no arguable ground for saying that the present dispute, i.e. the subject of the present litigation, is not covered by the arbitration clause in question.

11. So for all these reasons which I bear in mind and the general circumstances of this case which I also bear in mind, and in the exercise of my discretion, I refuse the application for an adjournment. I will proceed to hear the application. And to remove any possible prejudice to the Plaintiff by my decision to proceed with the hearing of the application, I would be prepared to allow the Plaintiff to refer to whatever documents it may wish to refer to during submission in opposition to the application, even though no affidavit has been filed by the Plaintiff in opposition to the present application. But thus far, and in so far as I can see, the matter really turns on the proper construction of the arbitration clause in question as well as the pleaded dispute between the parties as can be gleaned from the Statement of Claim. This I have also borne in mind in reaching my decision not to adjourn the hearing of the present application.