XCHRX DRAGOMAR S.p.A. v. GEOWORKS CONTRACTORS (HK) LTD.

1997, No. A5399

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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REASONS FOR JUDGMENT

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1. The parties are involved in the construction industry. The plaintiff is taking proceedings against the defendant to recover money. The defendant now applies for a stay of the proceedings on the grounds that the dispute between the parties is subject to an arbitration agreement. I heard this matter on 22 January 1998. I granted the stay with costs. I said I would hand down my reasons later. These are those reasons.

2. On 8 August 1994, the parties and another company entered into a joint venture agreement. This agreement contains provisions for the settlement of disputes by a Management Board set up under the agreement, but goes on to provide that "Any matter which can not be resolved in [this manner] shall" be referred to mediation, and "Any matter which can not be resolved in [this manner] shall be finally settled" by arbitration. The plaintiff argues that, in the first place, its dispute with the defendant does not arise under the agreement, and, in any event, the dispute does not fall within the arbitration clause.

3. Although the agreement sets out in considerable detail the rights and obligations of the plaintiff and the defendant in relation to the works that the plaintiff was required to do under the joint venture, it did seem to contemplate that there would be another agreement to this same end. It is common cause that no such agreement was entered into. The plaintiff went ahead with the works assigned to it as if the agreement was all that governed the relationship between the plaintiff and the defendant. Miss Landon challenges this. She says that the work was done by the plaintiff pursuant to requests by the defendant quite outside the joint venture agreement. The plaintiff does not seem to be able to give any details of these requests. The contemporaneous documents totally contradict what Miss Landon submits. Every document before me emanating from the plaintiff is consistent only with the fact that the plaintiff thought that it was carrying out the works under the regime provided for in the written agreement. The same applies to all other documents produced. In spite of this, Miss Landon fully accepts that where the parties act in terms of a written agreement and behave as if it were binding on them, the court will accept their intentions and treat the agreement as binding. There is no doubt at all, in my view, that both the plaintiff and the defendant accepted that the joint venture agreement was sufficient for their purposes, and adopted it as binding on them. Their conduct is consistent with no other conclusion.

4. Miss Landon says that, in any event, the scheme for the settlement of disputes provided in the agreement does not cover disputes other than those concerning "matters of policy concerning the combined activities of the Joint Venturers". I do not accept this. On a reading of the whole of clause 5 of the agreement, the Management Board was intended to be the first "court" of recourse in the event of any dispute as to matters relating to the joint venture. In any event, clause 18 - the mediation and arbitration clause - is clearly designed to cover any "matter which can not be resolved" by the Management Board, not only matters that might be within the jurisdiction of the Board. This is so, as I see it, on a strict wording of the provisions, but, even if there were room for doubt, where the parties have agreed upon a manner of resolving disputes outside the courts, the court should not strain to allow one of the parties to litigate.

5. Accordingly, I believe that the parties have bound themselves to an agreement that provides for mediation and arbitration as the means of resolving their disputes, and they should be held to that. It is not disputed by Miss Landon that, in this event, there had to be a stay.

JK FINDLAY

Judge of the High Court,
Court of First Instance.