GRAND OCEAN & WILLIAMS CO., LTD v. 江苏华西村海洋工程服务有限公司

HCCT 24/2022

[2023] HKCFI 86

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 24 OF 2022

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BETWEEN

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DECISION

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1.  This is the Plaintiff’s Summons for leave to issue a Concurrent Writ of this action and serve it on the Defendant in Jiangsu, PRC. The Summons was issued at the direction of M Chan J, who was not satisfied that such an order should be granted pursuant to an ex parte application because of the existence of an arbitration clause in two of the contracts upon which the Plaintiff is using.

2.  The Writ of this action was issued on 14 April 2022 and re-filed on 7 November 2022 after amendment concerning the Defendant’s address. Although the Defendant had not appeared today, I am satisfied it had received proper notice of this hearing.

Background

3.  The relevant facts can be briefly stated. The Plaintiff, a Hong Kong company, was engaged by the Defendant, a Mainland company, as a sub-sub-contractor to provide post-trenching services in relation to a pipeline project at Lamma Island, Hong Kong. An agreement was signed by the parties on 9 February 2020 (“Agreement”).

4.  The Agreement was governed by Hong Kong law and the Defendant had confirmed its acceptance of the jurisdiction of Hong Kong courts (Cl. 11) :

“This Agreement shall be governed by the laws of Hong Kong. Any dispute arising out of the performance of this Agreement or matters related to this Agreement shall be settled by both Parties through amicable negotiations. If no agreement can be reached, either party shall be entitled to issue legal proceedings at the Courts of the HKSAR. [Defendant] hereby confirms that [it] accepts the jurisdiction of the courts of Hong Kong to determine any matters in respect of this Agreement.”

5.  In the course of providing the services under the Agreement, the Plaintiff was asked by the Defendant to and did carry out additional works which fell outside the Agreement: (i) a pressure test of the pipeline; (ii) constructing a Tee Point for the pipeline; and (iii) removal of an anchor which obstructed the pipeline.

6.  In respect of the Pressure Test and the Tee Point, two Contracts were signed after the completion of the works. The Contracts were governed by PRC law (Cl. 1) and each of them contained an arbitration clause in favour of 江蘇仲裁委員會 (“Tribunal”) (Cl. 9). No contract was signed in respect of the Anchor Removal.

7.  On 25 November 2021, the Plaintiff was informed by the Defendant of the demobilisation of the Trencher which was essential for carrying out the project and for the Plaintiff to continue with its works under the Agreement. Such removal, the Plaintiff contends, constituted a repudiatory breach of the Agreement.

8.  In this action, the Plaintiff sues for outstanding payments under the Agreement, as well as for all 3 pieces of additional works.

Applicable principles

9.  In order to obtain leave to serve out of jurisdiction under O 11, r 1, the Plaintiff must demonstrate: (i) there is a good arguable case that its case comes within one of the gateways under O 11, r 1; (ii) there is a serious issue to be tried on the merits of the case; and (iii) Hong Kong is the appropriate forum under the principles governing forum conveniens for the trial of this action (see Fong Chak Kwan v Ascentric Ltd [2021] 6 HKC 401, per Cheung JA, [12]).

10.  It is generally accepted that a good arguable case means something more than a prima facie case or being merely sufficient to raise an issue, but less than proof on the balance of probabilities: China Medical Technologies Inc (In Liquidation) v Paul, Weiss, Rifkind, Wharton & Garrison LLP [2019] HKCFI 2631, per G Lam J (as he then was), [51].

Breach of the Agreement

11.  In respect of the Plaintiff’s cause of action based on breach of the Agreement, the matter is fairly straightforward. Plainly, the gateways under O 11, r 1(d)(iii) and (d)(iv) are satisfied.

12.  In respect of the former, the claim is brought to enforce a contract, or to recover damages or obtain other relief in respect of the breach of a contract, which (in either case) is by its terms governed by Hong Kong law. As for the latter, the claim is brought to enforce a contract, or to recover damages or obtain other relief in respect of the breach of contract, which (in either case) contains a term to the effect that this court shall have jurisdiction to hear and determine any action in respect of the contract (see para 4 above).

13.  The serious issue to be tried on merits is demonstrated by the evidence filed by the Plaintiff in this application, and the forum conveniens requirements are met based on the facts that the Agreement was made in Hong Kong, governed by Hong Kong law and the breach was committed in Hong Kong (under Cl. 5 of the Agreement, the Plaintiff should be paid via its Hong Kong bank account).

Breach of the Contracts

14.  Although both Contracts provided for arbitration by the Tribunal, there is evidence of a Mainland lawyer adduced by the Plaintiff that there is no such Tribunal in existence in the Mainland, the Arbitration Clauses are invalid under PRC law (the governing law of the Contracts) and they cannot be complied with.

15.  In Klockner Pentaplast GmbH v Advance Technology (HK) Co Ltd [2011] 4 HKLRD 262 [P#23], [36] and [43], Saunders J held that where an arbitration clause failed to meet the legal requirements under Mainland law as to validity (it failed to identify an arbitration institution), it is null and void, inoperative or incapable of being performed. Accordingly, the court declined to stay proceedings in Hong Kong in favour of arbitration.

16.  Despite the difference in the nature of the present application, I am of the view that, like Klockner, the Arbitration Clauses contained in the Contracts are void and incapable of being performed. In the premises, I do not believe that the Arbitration Clauses impact upon this application.

17.  The Plaintiff relies on O 11, r 1(e) as the gateway for the causes of action under the Contracts: “the claim is brought in respect of a breach committed within the jurisdiction of a contract made within or out of the jurisdiction, …”.

18.  Like the Agreement, both Contracts stipulated that payment was to be made to the Plaintiff’s bank account in Hong Kong (Cls. 4). The non-payment by the Defendant constituted breaches of the Contracts committed in Hong Kong.

19.  The evidence adduced by the Plaintiff suggested that the Plaintiff’s Invoice for the Pressure Test was amended after taking into account the Defendant’s comments and the lump sum for the Tee Point was agreed by the Defendant. There are clearly good arguable cases on merits.

20.  The additional works were carried out in Hong Kong and to be paid in Hong Kong. The Contracts were made in Hong Kong, albeit with the application of PRC law. I have little doubt that Hong Kong is the appropriate forum for the trial of these causes of action having taken into account the governing law of the Contracts.

Anchor Removal

21.  There was no written contract for this piece of work. However, the work was ancillary to a Hong Kong project and carried out in Hong Kong. The quotation provided to the Defendant was in Hong Kong currency (although the Invoice was in RMB). The Invoice asked for payment to the same Hong Kong bank account of the Plaintiff. I believe that, in the circumstances, there is at least a good arguable case that the oral agreement for the Anchor Removal was by implication governed by Hong Kong law. The gateways under O 11, r 1(d)(iii) and 1(e) therefore apply. In respect of the latter, there is at least a good arguable case that the Plaintiff was entitled to be paid in Hong Kong.

22.  I am also satisfied that there is a good arguable case on merits. Indeed, it is difficult to see on the material before the court any valid reason for the Defendant not to have paid for the work done.

23.  Finally, Hong Kong is, I believe, the appropriate forum for the trial of this claim given that practically everything to do with it is connected with Hong Kong.

Disposition

24.  For these reasons, I grant the order sought in the draft order before the court with amendments.