MAEDA KENSETSU KOGYO KABUSHIKI KAISHA also known as MAEDA CORPORATION AND ANOTHER v. BAUER HONG KONG LTD

CAMP 154/2018

[2021] HKCA 1420

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 154 OF 2018

(ON AN INTENDED APPEAL FROM HCCT NO 4/2018)

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REASONS FOR DECISION
AND DECISION ON COSTS

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Hon Barma JA (giving the Reasons for Decision and Decision on Costs of the Court):

1.  On 30 August 2018, Mimmie Chan J (“the judge”)  gave leave to the plaintiffs (the main contractor under two contracts with the Mass Transit Railway Corporation for the construction of tunnels for the Hong Kong to Guangzhou Express Rail Link)  to appeal against the 2^nd Interim Award of the Arbitrator, Sir Vivian Ramsay QC (“the Arbitrator”), published on 3 January 2018, as corrected on 3 March 2018 (“the 2^nd Interim Award”)  in an arbitration between the plaintiffs and the defendant (who was their subcontractor under sub-contracts for the excavation for and installation of diaphragm walls under each of the contracts).

2.  The plaintiffs had sought leave, pursuant to section 6(1)(b)  of Schedule 2 of the Arbitration Ordinance (Cap 609), for leave to appeal on four questions, but the judge granted leave to appeal in respect of only two of those questions, namely the 2^nd and 4^th questions.

3.  The 2^nd question concerned whether the conditions precedent requiring the giving of notice of claims under Clauses 21.1 and 21.2 of the sub-contract between the plaintiffs and defendant had been complied with, the Arbitrator having concluded (in favour of the defendant)  that they had been.

4.  The 4^th question concerned whether the valuation of a variation “on the basis of cost plus” should properly exclude “costs” of equipment, which had not actually been incurred, the Arbitrator having concluded (also in favour of the defendant)  that they should not.

5.  In granting leave to appeal on these questions, the judge took the view that the questions raised were of general importance to the construction industry and that the Arbitrator’s decision was open to serious doubt, these being the conditions that had to be satisfied, under section 6(4)(c)(ii)  of Schedule 2 of the Arbitration Ordinance, before the court can grant leave to appeal on a question of law (the judge did not grant leave under section 6(4)(c)(i), which would have required her to find that the Arbitrator’s decision was “obviously wrong”).

6.  In order to appeal further to this court in relation to the judge’s grant of leave, the defendant required leave to appeal from the judge or from this court (section 6(5)  of Schedule 2 of the Arbitration Ordinance), which may only be granted if either (a)  the question is one of general importance, or (b)  the question is one which, for some other special reason, should be considered by the court (section 6(6)  of Schedule 2 of the Arbitration Ordinance).

7.  In accordance with these requirements, the defendant applied first to the judge for leave to appeal her decision of 30 August 2018. On 16 October 2018, the judge dismissed that application.  The defendant then renewed their application to this court by summons dated 29 October 2018.  The summons was accompanied by a draft notice of appeal, and a 5-page written statement in support of the application.  The draft notice of appeal complained that the judge erred in relation to both requirements under section 6(4)(c)(ii), in that neither question was one of general importance, and in any event, the judge was wrong to conclude that the decision of the Arbitrator was open to serious doubt.  There is also a ground of appeal based on the contention that there is some other special reason why the appeal should be considered by the court of appeal, which was, in effect, that the judge’s approach to the 3^rd question on which leave to appeal had been sought by the plaintiffs (on which leave was in fact refused), betrayed an error of approach which must be taken to have infected her approach to the 2^nd and 4^th questions.

8.  In response, the plaintiffs filed a written statement in opposition to the application on 12 November 2018, as required by the relevant practice direction.

9.  However, even before the plaintiffs filed their written statement, the appeal against the Arbitrator’s decision on the 2^nd and 4^th questions was heard by the judge on 8 November 2018.  Following the hearing, the judge reserved her judgment.

10.  On 20 December 2018, this court dismissed the defendant’s application for leave to appeal against the judge’s decision of 30 August 2018, and indicated that reasons for doing so, and a decision on the costs of the application would be handed down later.  This we now do, with apologies for the delay in doing so.

11.  It will immediately be noted that by the time of the filing of the plaintiffs’ statement in opposition, and thus even before the matter was placed before this court for consideration (that being done after the papers for the application, including both parties’ written statements are to hand, or the time limit for doing so has expired), the actual appeal to the Court of First Instance, on the two questions for which leave had been granted, had been heard and concluded, with judgment pending.

12.  In those circumstances, it seemed to us that there could be no useful purpose to be served by permitting the application for leave to appeal to proceed.  The appeal from the Arbitrator’s decision having been heard, it did not seem to us that there was any good reason for it to be “undone”.  To permit the application to proceed would only lead to wasted time, effort and costs, for no good reason, and would involve a waste of the resources of the court, as well as of the parties (not least those already expended on the hearing of the appeal before the judge).  Having regard to this, the requirement of procedural economy, which forms part of the underlying objectives of our procedural system to which the courts have regard, clearly called for this application to be dismissed.  In our view, this reason alone suffices for the dismissal of the defendant’s application for leave to appeal to this court.

13.  That said, however, it also seemed to us that the proposed appeal did not have any reasonable prospects of success.

14.  Although the draft notice of appeal suggested that neither question was one of general importance, and that in respect of neither could it be suggested that the Arbitrator’s decision was open to serious doubt, the defendant’s written statement confined the first point (general importance)  to the 2^nd question, and the second point (whether open to serious doubt)  to the 4^th question.  Be that as it may, it seemed to us that the judge’s decision could not be faulted on either point in respect of either question.

15.  Given that leave to appeal to this court could only be granted if the question on which leave is sought is of general importance (see section 6(6)(a)  of Schedule 2 of the Ordinance), it seems self-contradictory for the defendant to seek to demonstrate that the question was not of general importance and that the judge had erred in thinking that it was.  But beyond this, it seems to us that the judge was quite entitled to find that each of the 2^nd and 4^th questions was of general importance. In relation to the 2^nd question, the judge was well aware that the terms of Clause 21 were not precisely the same as those of similar terms in use in the industry, but it seems to us that having carefully considered a number of similar terms, the judge was entitled to find that there were sufficient similarities that would render a decision on the point useful and of assistance to the wider industry beyond the immediate parties.  In relation to the 4^th question, the judge was similarly well aware of the fact that the provision had been the subject of negotiation between the parties, and she was, in our view, entitled to conclude (as she did)  that it nonetheless raised a question of general importance.

16.  Further, in relation to the question of whether the Arbitrator’s decision was at least open to serious doubt, this is clearly a matter on which the judge must be afforded a margin of discretion.  We do not think that it can possibly be said that the judge’s conclusion as to this fell outside the range of conclusions open to her.

17.  Finally, as to the suggestion that there was some other special reason for this court to consider the questions raised, this was not pursued in the defendant’s written statement.  In any event, it seems to us to be far-fetched to suggest that the judge made the error alleged.

18.  By way of postscript, it may be noted that the judge handed down her judgment on the appeal from the Arbitrator, in which she allowed the appeal in relation to the 2^nd question, but not the 4^th question, on 9 April 2019.  A further appeal by the defendant to this court (Kwan VP, Yuen and Barma JJA)  on the 2^nd question was dismissed by our judgment dated 16 October 2020.  Needless to say, the fact that the plaintiffs’ appeal on the 4^th question was ultimately unsuccessful does not mean that the Arbitrator’s decision was not properly considered by the judge to be seriously in doubt.

19.  In the light of the foregoing, we refused to grant leave to appeal, and the defendant’s summons seeking leave was accordingly dismissed.  So far as costs are concerned, it seems to us that this application was one which was quite pointless, as the hearing date of 8 November 2018 must have been well known to the defendant before it took out this application, which it must have appreciated would almost certainly not be considered by this court until after the actual appeal from the Arbitrator’s decision had already been heard.  In those circumstances, we consider that the plaintiffs should have their costs of this application on an indemnity basis.  We further consider that such costs should be assessed on a gross sum basis, and having considered the statement of costs filed by the plaintiffs, we fix such costs at HK$124,100 as claimed.