C&A INVESTMENT (INT'L) CO LTD v. CGF EN BIO-TECH INTERNATIONAL CO LTD

   HCA375/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 375 OF 2009

------------------------

BETWEEN

------------------------

-----------------------

DECISION

------------------------

1.  On 1 December 2009 Master Hui granted the defendant’s summons dated 1 April 2009 and struck out the plaintiff’s statement of claim.

2.  At the hearing on 1 December 2009 the claim was struck out primarily because the plaintiff had not complied with an unless order dated 9 July 2009 which stated :

“… unless the Plaintiff do make an application to amend its Statement of Claim by 4.00 pm on 23^rd July 2009 the Plaintiff’s Statement of Claim be struck out …”.

The deadline was not met.  No application to amend had been made in time.

3.  Thereafter, claims of “misunderstanding” and “mistaken beliefs” between solicitors were exchanged which led to a confused situation.

4.  After the deadline had passed (in fact half an hour afterwards) the defendant’s solicitors had faxed an agreement to a 7-day extension to “file and serve the amended statement of claim”, whereas, in fact, the unless order had related to “making an application to amend …” and not to “filing and serving …” an existing amendment. At that stage there was no amendment to file and the deadline for applying to amend had passed. The plaintiff later purported to file an amended statement of claim, on 30 July, 7 days after the deadline for making the application to amend.

5.  No point is served by referring to the ensuing correspondence which failed to advance the matter, save a reference to one letter dated 25 August 2009 from the defendant’s solicitors which stated :

“… we propose that the Amended Statement of Claim filed by the Plaintiff on the 30^th July 2009 be set aside and/or you apply leave of the Court to withdraw the filing of the Amended Statement of Claim so filed with costs to the Defendant and then you take out an application for leave to amend the Statement of Claim in whatever ways you required returnable before Master Hui with 2 hours reserved pursuant to the terms of the Order made by Master Hui on the 9^th July 2009 and in such event, we have no objection to your application being made out of time.  However, we will reserve our rights to oppose your intended amendments when required.”

6.  Thus, they succinctly said — we do not object to your making an application to amend but we will oppose it. This, in essence, had been their position throughout.

7.  The Master, after a 2 hour contested hearing struck out the claim, it seems, primarily on the procedural grounds which in my judgment he was perfectly entitled to do. The failure to meet the original deadline of an unless order was serious in itself and the explanations given for this and subsequent delays by the plaintiff have failed to impress. For example, that the main witness for the plaintiff was usually in the PRC and was difficult to locate, also that the plaintiff was desirous of negotiating with the defendant (even though it was plain that the defendant was not) or, more recently, that it has been difficult to get instructions over the Christmas and New Year holidays. The latter being the reason offered for the very late issuing of a summons for relief from sanction under Order 2 rules (4) and (5) dated 28 December 2009 which could have been made in August.

Abuse of process

8.  It must not be forgotten that the original summons dated 1 August 2009 applied for a strike out not on the procedural grounds which subsequently came to be the dominant issue but on the ground that the plaintiff had commenced arbitration proceedings in the PRC on the same subject matter. It is an underlying and well established principle that parties who enter into an arbitration agreement do so intending to honour and adhere to it.

9.  These parties were involved in two joint ventures (“JVs”) in the PRC. Both JV agreements contained identical and widely drafted arbitration clauses. Both JVs went to arbitration in the PRC. The parties were the same, the clauses in issue were the same. I accept also that the factual issues were strikingly similar.

10.  When the plaintiff commenced proceedings in Hong Kong their claim concerned both JVs. (The “Xinhui” claim was for $5.381 million and the “Hainan” claim was for $1.4 million.) The plaintiff was substantially successful in the Xinhui arbitration and by its draft re-amended statement of claim sought to delete the Xinhui JV entirely. The Hainan arbitral award had been handed down in April 2009 in which the plaintiff was only partially successful. In the draft re-amended statement of claim the plaintiff sought to litigate in Hong Kong for the remaining sum not secured by the Hainan award, namely about $1 million.

11.  The plaintiff submits it is entitled to do so because, it says, the issues in the re-amended statement of claim are either different from the issues in arbitration or were not within the scope of the arbitration or were not addressed by the tribunal.

12.  I do not accept this submission. It is not suggested that the tribunal lacked jurisdiction to deal with particular issues. Accordingly what went before the tribunal was a matter for the parties. It is not a question of whether an issue was in fact before the tribunal, rather it is a question of whether it could have been. The arbitration clause is drafted in the widest of terms. In short, I am satisfied that what is claimed in Hong Kong either could have been, or even, actually was claimed in the PRC arbitration. It was within the scope of the PRC agreement.

13.  It is worthy of note that in an effectively identical arbitration, albeit before a different tribunal in a different place, the plaintiff was almost wholly successful. By the same token, the plaintiff could have been wholly successful in the Hainan arbitration. The fact that it wasn’t doesn’t open the door to relitigate in Hong Kong. It is finally worthy of note that the plaintiff has taken no steps to either appeal or enforce the Hainan award.

14.  These factors, briefly outlined, viewed in context together with the procedural irregularities upon which the Master made his decision and in the light of the plaintiff’s delay persuade me that the Master’s decision should remain and that relief from sanction should not be made.

15.  Accordingly, the appeal is dismissed, the summons for relief is dismissed, both with costs to the defendant.