ACME METAL WORKS LTD v. T.S. WONG AND CO LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

Case No: 1989, Con-15

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JUDGMENT

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1. On 26 October 1989, I had before me a summons issued by the Defendant for an order that these proceedings be stayed pursuant to section 6(1) of the Arbitration Ordinance, Chapter 341 and asking for an order that the costs of the application be paid by the Plaintiff. By consent, I ordered the stay and reserved the decision as to costs to be handed down with reasons later.

2. Mr Graham argues that there is no reason why the costs should not follow the event. He came to court prepared to argue the matter, to be told by Mrs Clough that the stay was not opposed. If a decision not to continue with the proceedings had been made earlier, he says, the summons would not have been necessary.

3. Mrs. Clough says that the decision not to oppose the summons could not have been made until the Defendant disclosed the details of the dispute regarding the Plaintiff's claim in the affirmation by Mr Hau Chi Ming served on Saturday, 21 October 1989. In the affirmation of Mr Yan Dick Chung of 24 October 1989, the Plaintiff maintains there is no dispute between the parties and says arbitration should not be ordered.

4. The writ in this matter was issued and served on 18 September 1989. This claimed the sum of $546,526.29. The writ was preceded by an invoice in this sum dated 11 May 1989 and a letter demanding payment dated 17 August 1989. On 21 August 1989, the Defendant wrote to the Plaintiff complaining about defects to some windows. It raised no other argument about the amount claimed. The Plaintiff replied to this letter, again drawing attention to the invoice and demanding payment. It said that the defect rectification on site would not resume until "we have received your payment of the agreeable amount acceptable to us". This statement, Mrs Clough says, shows that the Plaintiff was willing to negotiate payment of a lesser amount to cope with the defects complained of.

5. Following service of the writ, the Defendants solicitors notified an intention to contest the proceedings on 29 September 1989.

6. On 3 October 1989, the Defendant's solicitors wrote to the Plaintiff's solicitors saying that the commencement of the action "in respect of a dispute of the outstanding amount due" was in breach of an arbitration provision. It went on to invite the Plaintiff to discontinue the action and said the Defendant would apply for a stay if it did not do so.

7. On 4 October 1989, the Plaintiff's solicitors asked that the summons for a stay be delayed, and the Defendant's solicitors agreed.

8. On 10 October 1989, the Plaintiff's solicitors wrote saying that their client denied that there was an arbitration agreement or that there was an outstanding dispute. It went on to say that, if the Defendant alleged that there were outstanding defects, details should be supplied. The letter argued that the Defendant was using the reference to arbitration as a delaying tactic and the court would not refer the matter to arbitration. It advised the Defendant not to apply for a stay.

9. The Defendant's solicitors replied to this letter on 12 October 1989 identifying the arbitration clause and saying, as to any disputes, their client was owed $159,021.10 under the contract.

10. On 13 October 1989, the Plaintiff's solicitors replied, still arguing about the arbitration provision and asking for full details of the disputes.

11. By letter dated 16 October 1989, the Defendant's solicitors gave the items, by general description, showing how the sum of $159,021.10 was made up.

12. The summons claiming the stay was issued on 19 October 1989.

13. So what was the position between the parties immediately before the Defendant issued the summons to stay? The Plaintiff was not admitting that the parties had agreed to submit disputes to arbitration. The Defendant was saying that there was such a provision and that there were disputes that should go to arbitration. It had given figures relating to the amount it claimed, leaving a balance in its favour. It had given general headings showing how it reached the figure which it said was due to it. It is true that the detail given by the Defendant would not have been sufficient for a statement of claim and, it may be, for all I know, that its figures are entirely without justification. But I do not think there is any duty on a Defendant to convince the Plaintiff, or me, that it has a justifiable defence and claim; that is a matter for the arbitrator. All that is necessary is that there should be a dispute. It may be that it is not enough for a defendant to say that there is a dispute, without giving some basis for this assertion, but that is not the case here: The Defendant has shown how, in broad detail, it makes up the figure it says is due to it and says, therefore, the fact that anything is due to the Plaintiff is in dispute.

14. In my view, the Plaintiff should have realised, immediately before the issue of the summons, that there was a dispute that should be referred to arbitration. Whether or not it thought that dispute was justified is an another matter, and not for it, or me, to decide. After that, until the day of the hearing, nothing changed. As late as 24 October 1989, the Plaintiff was disputing in the affirmation filed on its behalf that there should be a stay, although its solicitors did write to the Defendant's solicitors on the same day offering to allow the matter to proceed to arbitration if the Plaintiff's costs of the action and the application were paid by the Defendant. Understandably, in my view, the Defendant did not accept this offer

15. In my judgment, the Defendant was entitled to issue the summons and was entitled to assume the need for the proceedings until the last minute. It is entitled to its costs and I make an order that the Plaintiff pay the costs of the application for the stay.