LEGEND INTERIORS LTD v. WING MOU ENGINEERING LTD AND ANOTHER

HCCT 15/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION LIST

ACTION NO. 15 OF 2004

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J U D G M E N T

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1. In September 2002 International Properties Overseas Limited ("International") as Employer contracted with the Plaintiff, Legend Interiors Ltd ("Legend"), as Main Contractor for certain building works ("the Project") in South Bay Road. By a Sub-Contract ("the Sub-Contract") dated 5 September 2002 Legend in turn sub-contracted piling, excavation, demolition and alteration works under the Project to the 1st Defendant, Wing Mou Engineering Limited ("Wing Mou").

2. The Main Contract between International and Legend included General Conditions of Contract of which GC-35 provided for arbitration of any dispute or difference which might arise between the parties:-

"as to the construction of this Contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith".

3. The Sub-Contract provided (among other things) as follows on a document written on Legend headed notepaper:-

" 15. Form of Contract

The documents forming the contract are to be taken as mutually explanatory and the Contract Sum shall be deemed to cover the complete requirements of the Contract Documents as set out by Associated Architects Limited.

This contract is awarded on the principle that the contractor is to perform and fulfil all duties as described in the contract document signed between Legend Interiors Limited and our client International Properties Overseas Limited on a back to back basis. It is the contractor's responsibility to ensure that they are fully acquainted with the scope of work and liability under this contract. In case of doubt, the contractor should study the drawings and contract document, which are available in Legend office for reference. No extra claims not compensation will be entertained if the contractor fail to acquire the information in this respect.

...

20. The following shall form part of this contract.

a. Signed agreement together with Schedule of rate dated 7 August 2002 at HK$8,546,000.00 (After discounted) (Appendix I)

b. Scope of Work (Appendix 2)

c. Construction Drawing List (Provided by AA, Wong & Cheng and Twin Way) (Appendix 3)

d. Tender conditions and specification (Available in Legend office for review)

e. Correspondence between Legend and Wing Mou (Appendix 4)

f. Approval letter from BD for Structural (Alternations and Additions) works ref. BD 2-3/3723/49/3(S) dated 15 July 2002 (Appendix 5)

g. Approval letter from BD for Excavation and Lateral Support and Underpinning works ref. BD 2-3/3723/49/3(S) dated 27 June 2002 (Appendix 6)"

4. The Conditions of Tender ("the Conditions of Tender") referred to in Sub-Contract cl. 20(d) included Clauses CT-02, -26 and -30 in the following terms (among others):-

" CT-02 OTHER TENDER DOCUMENTS

.01 The tender documents listed hereunder shall not be issued to the tenderer but shall be available for inspection during normal office hours at the office of the Architect:-

.01 Standard Articles of Agreement for Building Contract;

.02 General Conditions of Contract; and

. .03 Crown Lease, Conditions of Sales, Conditions of Grant, Conditions of Exchange, Permit, License and other documents of the Site.

...

CT-26 FORM OF CONTRACT

The Form of Contract shall comprise the Standard Articles of Agreement for Building Contract, the General Conditions of Contract (both of which are listed in Clause CT-02 of these Conditions of Tender hereinbefore and are available for inspection during normal office hours at the office of the Architect) together with and as supplemented, varied and modified by Supplementary Conditions of Contract issued by the Architect as part of the tender documents in accordance with Clause CT-01 of these Conditions of Tender hereinbefore. The General Conditions of Contract (hereinafter referred to as the 'General Conditions') are based on the 'Schedule of Conditions of Building Contract (Standard Form of Building Contract) for use in Hong Kong, (Private Edition Without Quantities), issued under the sanction of the Hong Kong Institute of Architects, the Hong Kong Institute of Surveyors, and the Society of Builders, Hong Kong, Second Edition 1976 (April 1998 Revision)'. The system of enumeration of the General Conditions referred in this Contract have been revised in accordance with Sub-clause SC-01.02 of the Supplementary Conditions of Contract.

...

CT-30 CONTRACT DOCUMENT

All tender documents to which reference is made in Clauses CT-01 and CT-02 of these Conditions of Tender hereinbefore including but not limited to the Form of Tender, the Conditions of Tender, the Articles of Agreement where completed, the General Conditions of Contract together with the Appendix thereto, the Supplementary Conditions of Contract, the General Specifications and the Particular Specification, the Drawing, the General Summary and the Schedule of Rates as required to be submitted by the tenderer under Clause CT-20 of these Conditions of Tender, the Letter of Acceptance together with any Contractual Correspondence and any other relevant document accepted by the Architect as part of the Contract document."

5. Differences having arisen between Legend and Wing Mou in relation to the Project, Legend issued a writ against Wing Mou and the 2nd Defendant ("Siu") on 16 February 2004. By the Writ, Legend claims damages against Wing Mou for breach of the Sub-Contract and reimbursement from Wing Mou of monies paid by Legend to employees of Wing Mou, of Wing Mou's sub-contractor (Hung Fat Eng. Co.) and of Wing Mou's sub-sub-contractor (Star Works Company) pursuant to the Employment Ordinance (Cap. 57) ("EO") ss. 43C-H. By the Writ Legend also seeks to enforce Siu's personal undertaking to the effect that Siu:-

"indemnify [Legend] in full in respect of any liabilities and/or loss and/or damage and/or legal costs and/or incidental expenses that [Legend] might suffer caused by [Wing Mou] and/or its agents and/or servants arising from the Sub-Contract".

See Statement of Claim §23. Siu is Wing Mou's Managing Director.

6. In my judgment the Sub-Contract incorporated the arbitration agreement found in GC-35. By its Clause 20(d) the Sub-Contract expressly incorporated the Conditions of Tender. By CT-02, 26 and 30 the Conditions of Tender expressly incorporated the General Conditions, including GC-35. It follows that the Sub-Contract included GC-35.

7. Mr Dawes (appearing for Legend) has referred me to Arbitration Ordinance (Cap. 341) ("AO") s. 2AC(3)(b). That provides:-

"A reference in an agreement:-

(a) ...

(b) to a document containing an arbitration clause, constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement."

Mr Dawes argues that the section means that GC-35 does not form part of the Sub-Contract. He submits that AO s. 2AC(3)(b) only incorporates an arbitration agreement where a contract refers to the document containing such arbitration agreement. AO s. 2AC(3)(b) does not apply (Mr Dawes says) where a document (such as the Sub-Contract) refers to a document (such as the Conditions of Tender) which then refers to another document (such as the General Conditions) containing the arbitration agreement. GC-35 (Mr Dawes suggests) is contained in too remote a document to be covered by AO s. 2AC(3)(b).

8. I disagree. The short answer is that the "agreement" between Legend and Wing Mou is contained in and evidenced by a signed document on Legend headed notepaper and the other documents specified therein (especially the Conditions of Tender). That "agreement" refers to the General Conditions which contains GC-35. Mr Dawes' reasoning requires one to construe "agreement" in AO s. 2AC(3) as narrowly referring solely to the document on Legend notepaper. There is no warrant for such a restricted reading.

9. My view on this question is fortified by the principle of construction embodied in Interpretation and General Clause Ordinance (Cap. 1) ("IGCO") s. 7 that the singular in a statute imports the plural and vice versa unless the context otherwise requires. Mr Dawes accepts that AO s. 2AC(3)(b) would catch the present situation if the word "document" therein had been in the plural. But the IGCO enables the word "document" to be construed precisely in that way.

10. In his Skeleton, Mr Dawes argued that Sub-Contract cl. 15 (reproduced above) only made the Main Contract between International and Legend applicable "back-to-back" for the limited purpose of describing Wing Mou's duties under the Sub-Contract. That may or may not be the case. I do not have to decide the point as it seems to me plain that, whatever cl. 15 means, cl. 20(d) causes GC-35 to be incorporated into the Sub-Contract.

11. In light of my conclusion and given that there is undoubtedly a dispute between the parties as to Wing Mou's performance under the Sub-Contract, I am bound to stay the proceedings brought by Legend against Wing Mou to arbitration pursuant to GC-35.

12. I raised the question in Court whether Legend's claim for reimbursement of wages paid under the EO fell within the terms of the arbitration agreement. It seems to me on consideration that the claim does, because it arises in connection with the relation of main contractor and sub-contractor subsisting between Legend and Wing Mou. Insofar as essentially there is a dispute among the two as to the extent to which on a final account between them certain amounts (including all or part of the reimbursement paid by Legend under the EO) remain due and owing to Legend from Wing Mou, it seems to me that the claim for reimbursement should also go to arbitration.

13. Finally, Mr Hui (appearing for Wing Mou and Siu) asks that I stay Legend's proceedings against Siu pending the outcome of arbitration proceedings between Legend and Wing Mou. I decline to do so. Siu is not party to the arbitration agreement. He will not be bound by the arbitrator's findings. Assume, for example, that the arbitrator finds wholly in favour of Legend. Assume further that Wing Mou fails to pay any arbitration award in Legend's favour. If Legend were to sue Siu for the amount awarded, Siu might well argue that he was entitled to have all issues raised in the arbitration re-opened in litigation against him since he was not party to the arbitration and there is no res judicata as against Siu.

14. I appreciate that this is an unfortunate situation. In an ideal world all matters relating to the same issues between different parties should be dealt with in a solitary forum at the same time. But this is not an uncommon situation where 2 persons are within the terms of an arbitration agreement and a 3rd party guarantor is not. In the absence of any unequivocal agreement on Siu's part to be wholly bound by the findings of the arbitrator, I do not see that I should exercise any discretion under the Court's inherent jurisdiction to grant a stay.

15. I shall now hear the parties on costs.