A AND ANOTHER v. X

HCMP 1535/2024

[2025] HKCFI 2475

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1535 OF 2024

____________________

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D E C I S I O N

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A.  INTRODUCTION

1.  On XXXXXX, the Defendant (“X”) took out a summons for an order that the proceedings in this action be stayed in favour of arbitration pursuant to s.20 of the Arbitration Ordinance (Cap.609) (“AO”) and/or the inherent jurisdiction of the Court (“the Stay Application”).

2.  In the hearing before me, X is represented by Mr XXXXXX, and the 1^st and the 2^nd Plaintiffs (“A” and “B” respectively, and “A&B” collectively) are represented by Mr XXXXXXXX.

B.  BACKGROUND

3.  A&B have been involved in some court and arbitration proceedings in Hong Kong (“Relevant Proceedings”). X were A&B’s former solicitors and acted for A&B in the Relevant Proceedings.

4.  Between XXXXXXXXXXXXXXXXXXXXX, 4 engagement letters (“Engagement Letters”) were signed between the parties. Each of the Engagement Letters contains a clause (“the Arbitration Clause”), which is as follows:

“XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
   XXXXXX”

5.  Before the existence of these proceedings, there were some discussions between A&B and X regarding some unpaid bills issued by X to A&B. On XXXXXXX, a partner of X (“Mr Y”), sent an email (“Email”) to B. In that email, after referring to 20 bills (“the 20 Bills in Email”), Mr Y said:

“As of today, the following bills remain outstanding:

[A table setting out the 20 Bills in Email]

……

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

If you have any questions on any of the outstanding bills, please let us know as soon as possible. We should add that if any of the outstanding bills are disputed, you have a right to apply to have them taxed or resolved by arbitration. Otherwise, we look forward to receiving payment of all of the outstanding bills as soon as possible.

……”

6.  On XXXXXXXXX, A&B commenced these proceedings for taxation by an Originating Summons (“the OS”). In the OS, A&B are seeking an order in relation to the taxation of some bills issued by X. The OS is supported by an affirmation filed on that same date. That affirmation is an affirmation made by a partner (“the solicitor”) of the firm representing A&B in this case. In that affirmation, the solicitor produced an unsworn copy of B’s 1^st Affirmation (“B-1^st”), and the solicitor confirmed that the contents of B-1^st had been read and agreed by B. In §13 of B-1^st , B made it clear that the subject matter in these proceedings are 48 bills issued by X to A&B (“the 48 Subject Bills”).

7.  On XXXXXXXXXXX, X filed the 1^st Affirmation (“Y-1^st”) of Mr Y in opposition to the OS. XXXXXX Y-1^st, XXXXXXXXXXXXXXX

XXXXXXXXXXXXX

XXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

XXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

XXXXXXXXXXXXXXX

XXXXXXXXXXXXXX

8.  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXX

9.  On XXXXXXXX, A&B filed the sworn B-1^st. §§16 to 18 of that affirmation have been frequently referred to by counsel in their respective submissions. Those paragraphs are as follows:

“概述訟費評定之因由

16. 就上述賬單，第一原告人及本人認為有包括但不限於以下的問題：

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

17. 除上述各項以外，第一原告人及本人亦認為被告人在處理各委任書所示的案件時有缺漏、疏忽，在此特意保留追討包括但不限於被告人專業疏忽／失職的權利。

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX”

10.  On XXXXXXXX, the first call-over hearing of the OS was held before Master XX. As to what happened in that hearing, Mr Y said the following in his 2^nd Affirmation (“Y-2^nd”) filed on XXXXXXXXX:

“11. On XXXXXX, [X] attended the 1^st call-over hearing before Master XX. [Z], an associate of [X] at that time, attended the hearing on behalf of [X]. I was informed by [Z] and verily believe that during the hearing, Master XX directed [A&B] to set out all grounds relied on in [the OS], in particular including whether negligence is relied on, in a supplemental affirmation. In response to the Master … Solicitors for [A&B], did not inform the Court at the call-over hearing that [A] and/or [B] intended to pursue any claims of negligence against [X]. At the same hearing, [Z] also informed the Court that:

a. [X] was proceeding on the basis that no negligence allegations had been made by [A&B];

b. all of the Engagement Letters between [X] and [A&B] contained arbitration clauses in the form of the Arbitration Agreement; and

c. [X] expressly reserved its right to challenge the jurisdiction of the Hong Kong Court, particularly if [A&B] intended to pursue any claims of negligence.”

11.  There is no evidence from A&B disputing §11 of Y-2^nd. In the hearing, I asked Mr XXX whether anything in that paragraph is disputed. After taking instructions, Mr XXX told me that in the hearing before Master XX on XXXXXXXX, A&B’s solicitors told the Master that A&B would raise a negligence claim. Mr XXXX asked me not to accept this allegation, for there is no evidence in support of the allegation. Further, had this allegation been raised at an earlier time, X would have had applied for the transcript of the hearing on XXXXXXXXXX to show what exactly occurred in this hearing. Raising this allegation at the substantive hearing of the Stay Application only and not at an earlier time is grossly unfair to X and would cause prejudice to X. I agree with Mr XXX and accept his submissions. As to what happened in the hearing on XXXXXXXX, I would take the description in §11 of Y-2^nd as an accurate account of that hearing.

12.  On XXXXXXXXXX, X received an undated and unsworn copy of the 2^nd Affirmation of B (“B-2^nd”), in which A&B raised allegations of negligence against X (“the negligence claims”). In my view, the negligence claims have been raised in the following paragraphs in B-2^nd:

“XXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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XXXXXXXXXXXXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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XXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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X XX

XXX

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XXXXXXXX

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX”
(Underline added)

13.  On XXXXXXXX, the solicitor made an affirmation, in which the solicitor produced an unsworn copy of B-2^nd. The solicitor confirmed that the contents of B-2^nd had been read and agreed by B.

14.  On XXXXXXXXX, X’s solicitors issued a letter to A&B’s solicitors, in which X’s solicitors asked A&B to (a) confirm in writing that A&B will not rely on any allegations of negligence in connection with X’s retainer in the OS; or (b) consent to a stay of the OS in favour of arbitration. A&B’s solicitors did not reply to this letter.

15.  On XXXXXXXXX, X took out the Stay Application and filed Y-2^nd in support of the Stay Application.

16.  On XXXXXXXX, the solicitor made an affirmation, in which the solicitor produced an unsworn copy of the 3^rd Affirmation of B (“B-3^rd”). The solicitor confirmed that the contents of B-3^rd had been read and agreed by B.

17.  On XXXXXX, X filed the 3^rd Affirmation of Mr Y in response to B-3^rd.

18.  At the time of the hearing before me, B-2^nd and B-3^rd remained unsworn. I asked whether there would be an undertaking from A&B that these 2 affirmations would be sworn and filed within a specific period of time. On XXXXXX, A&B’s solicitors wrote to the court and offered an undertaking that they would file and serve the sworn B-2^nd and B-3^rd on or before XXXXXXX. Since A&B have offered this undertaking, I would treat the matters set out in these 2 affirmations as part of the evidence before me for the purpose of the Stay Application.

19.  All the 3 affirmations made by B are made by her on behalf of A and herself.

C.  CORE ISSUE – ANY WAIVER?

20.  S.20 of the AO provides:-

“(1) Article 8 of the UNCITRAL Model Law, the text of which is set out below, has effect—

‘Article 8. Arbitration agreement and substantive claim before court

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

……’

……

(5) If the court refers the parties in an action to arbitration, it must make an order staying the legal proceedings in that action.” (Emphasis added)

21.  There is no dispute that each of the Engagement Letters is a contract between A&B and X, and the Arbitration Clause is indeed an arbitration clause.

22.  The basis of A&B’s objection to the Stay Application is that X has waived the right to arbitrate. Mr XXX for A&B has put forward the following:

(1)  X had already entered the first statement on the substance of the dispute, ie Y-1^st, before seeking to challenge the jurisdiction of the Hong Kong Court, and hence X has waived the right to arbitrate.

(2)  Even before the commencement of these proceedings, X has waived the right to arbitrate by the Email. As a result of the waiver by the Email, the Arbitration Clause should be regarded as inoperative.

23.  Whether these proceedings should be stayed in favour of arbitration depends upon whether the waiver point contended by A&B is correct.

D.  THE PARTIES’ REESPECTIVE SUBMISSIONS

24.  X is seeking an order to stay the proceedings in this action in favour of arbitration pursuant to s.20 of the AO and/or the inherent jurisdiction of the Court.

(1)  It is trite that if the conditions in s.20(1) of the AO are met, the Court must refer the parties to arbitration and make an order staying the action in favour of arbitration. This has been made plain by s.20(1) and (5) of the AO. The Court has no discretion under s.20 of the AO.[1]

(2)  Apart from the jurisdiction under s.20 of the AO, the Court also has an inherent jurisdiction to order a stay of the proceedings in court in favour of arbitration. The Court has to consider the balance of convenience and fairness as between the parties. The Court should exercise its discretion in such a manner to ensure that its procedures are used in a logical, fair and cost-efficient manner.[2]

25.  Mr XXX for A&B submits that:

(1)  Y-1^st

(a)  Y-1^st is the first statement on the substance of the dispute. By filing the same on XXXXXXXXXXX, X has waived the right to arbitrate.

(b)  In §17 of B-1^st, the negligence issue has already been raised by A&B. Mr XXX submits that negligence can both be a shield against X’s claim and a sword against X. In §17 of B-1^st, A&B have already raised that negligence would be relied upon as a defence in refuting X’s claim, and A&B also reserved the right to raise a counterclaim against X by relying upon negligence. Mr XXX submits that this is a fair and correct reading of §17 of B-1^st, bearing in mind that §17 is under the section “概述訟費評定之因由” in that affirmation.

(c)  In Y-1^st, X has stated their substantive opposition to the OS, without reserving X’s right to refer the matter to arbitration. Y-1^st must be X’s first statement on the substance of the dispute.

(d)  It was only after the filing on Y-1^st on XXXXXXXXXX, in the 1^st call-over hearing of the OS on XXXXXXXXX, X indicated that it would reserve the right to refer the matter to arbitration. By that time, X has already waived the right to refer the matter to arbitration, and no such right could be reserved in that hearing.

(e)  The Stay Application was only taken out on XXXXXX XXX, nearly 4 months after the filing of Y-1^st on XXXXXXXXXXX.

(f)  Since the Stay Application was only made after X submitting its first statement on the substance of the dispute, ie Y-1^st, one of the conditions in s.20(1) of AO is not met. Accordingly, X’s application for a stay under s.20(1) of AO must be refused.

(2)  The Email

(a)  Mr XXX refers me to Li Wenjun v Chen Chunhui and Anor[3], in which Anthony Chan J said:

“32. An arbitration agreement is inoperative if a party has waived his right to arbitrate. There would be such a waiver if :

(1) a party has a right under a contract or by operation of law;

(2) he knows of the existence of the right or the facts giving rise to such right; and

(3) he has by conduct, clearly and unequivocally abandoned his right, or indicated that he is not exercising his right.

See Polytec Overseas Ltd v Grand Dragon International Holdings Co Ltd [2017] 3 HKLRD 258, [52].

33. In my view, the court should take a holistic view in examining the conduct of Chen generally in this action, and to evaluate the particular action or non-action relied upon by Li to contend that Chen had abandoned the right to arbitration in light of his conduct.”

(b)  By the Email, X has clearly waived the right to arbitrate. At the time of that email, X must know the right to refer the dispute between A&B and X to arbitration under the Arbitration Clause. The scope of the Arbitration Clause is very wide. Any dispute in relation to the bills issued by X would fall within the Arbitration Clause. By the Email, X clearly and unequivocally told A&B that A&B might elect between taxation and arbitration.

(c)  Taxation of a solicitor-client bill is a two-stage process: (i) making of an “order to tax” and (ii) the taxation itself after an order to tax is made. In Stage 1, liability would be determined. In Stage 2, the quantum of costs would be assessed.[4] Hence, in Stage (i), whether there are any vitiating factors that would affect the solicitor’s right to recover fees, for example, misrepresentation, negligence or mistake, would be determined. By saying that A&B have a right to dispute the outstanding bills by taxation, X must be saying that A&B have a right to bring the issue of negligence in the taxation proceedings in the Court.

(d)  In the circumstances, by the Email, X must have waived the right to arbitrate.

26.  Mr XXX for X refers me to the following principles on waiver:

(1)  In order to establish an operative waiver, it must be shown[5]:

(a)  a party has a right under a contract or by operation of law;

(b)  he knows of the existence of the right or the facts giving rise to such right; and

(c)  he has, by conduct, clearly and unequivocally abandoned his right or indicated that he is not exercising such a right.

(2)  There must be sufficiently clear evidence that the applicant had clearly indicated to the other side, by its word or conduct, that it was “unequivocally exercising its right to litigate”, or that it was “abandoning its rights under the arbitration agreement”, or that it agreed that “arbitration would no longer comprise the final means of dispute resolution”.[6]

(3)  Absent “overwhelming evidence of an unequivocal waiver”, a stay in favour of arbitration should be ordered. To do otherwise would be to usurp the function of the arbitration tribunal which is empowered by Article 16.1 of the UNCITRAL Model Law to rule on its own jurisdiction including any objection as to the existence or validity of the arbitration agreement.[7]

27.  Mr XXX submits that neither Y-1^st nor the XXXX Email constitutes waiver as alleged by A&B.

(1)  Y-1^st

(a)  In order for a party to file a “statement on the substance of the dispute”, the scope of the dispute between the parties must be clearly defined. A party cannot be taken to have filed any “statement on the substance of the dispute” (and thereby waived its right to seek a mandatory stay under s.20 of AO) when the scope of the dispute remains undefined or unclear. Mr XXX relies upon Shanghai Gopher Asset Management Co Ltd v China Bas Group Ltd and Anor[8], in which DHCJ Le Pichon pointed out at §73 that an application by defendant, even on an unless order basis, that the plaintiff serve a statement of claim was not a submission to the jurisdiction because the defendant merely wished to see how the claim was pleaded before contesting jurisdiction.

(b)  At the time when Y-1^st was filed, no allegation of negligence was raised, and the scope of the dispute between the parties in the taxation proceedings remained uncertain.

(c)  In §17 of B-1^st, A&B did not raise any positive allegation of negligence, but merely reserved the right to raise allegation(s) based upon negligence. Mr XXX submits that had negligence been relied upon as a ground to object X’s bills, negligence would have had been a subparagraph under §16 of B-1^st. Further, no particular of any negligence claim has been given in §17 of B-1^st. It would not be possible to say that any allegation of negligence has been properly raised in that paragraph.

(d)  Even in the 1^st call-over hearing on XXXXXXXX, the scope of the dispute between the parties remained unclear. In that hearing, A&B’s solicitors did not indicate whether they were going to pursue a negligence claim against X, and hence Master XX directed A&B to set out all grounds relied upon in support of the OS by a supplemental affirmation, in particular including whether negligence is relied upon. Due to the uncertainty of the scope of A&B’s claim, X expressly reserved the right to challenge the jurisdiction of the Court if A&B would pursue negligence against X in that hearing.

(e)  After A&B producing an unsworn copy of B-2^nd, X asked A&B to confirm whether A&B would not rely upon any allegation of negligence in the present proceedings, or whether A&B would consent to a stay of the OS in favour of arbitration. In the absence of any confirmation from A&B, X took out the Stay Application.

(f)  In these circumstances, Y-1^st cannot be said as X’s first statement on the substance of the dispute, and X should not be regarded as having waived the right to arbitrate by filing that affirmation.

(g)  In any event, even if Y-1^st is regarded as X’s first statement on the substance of dispute and as a result X is precluded from seeking a mandatory stay under s.20 of AO, X is entitled to seek a stay of the OS under the Court’s inherent jurisdiction. The Arbitration Clause remains valid, and X is entitled to hold A&B to the contractual bargain.

(2)  The Email

(a)  The statement relied upon by A&B in the email starts with the phrase “if any of the outstanding bills are disputed”. At the time of the email, X was uncertain as to (i) whether any of the outstanding bills would be disputed, and (ii) if so, on what grounds. Given that X did not even know what disputes might arise between the parties and whether any such disputes in question, if properly construed, would fall within the Arbitration Clause, it cannot be said that X had waived its right to refer such disputes to arbitration pursuant to the Arbitration Clause.

(b)  On any view, the statement in the email merely identified the options open to A&B for resolving any dispute on the outstanding bills (“…you have a right to apply to have them taxed or resolved by arbitration”). It could not mean that X would waive its right to stay any taxation proceedings commenced by A&B in favour of arbitration, regardless of what issues may be raised by A&B in the taxation proceedings.

(c)  A clear and unequivocal waiver of X’s right to arbitrate would only occur if X’s words or conduct showed that it was unequivocally exercising its right to litigate, or it agreed that arbitration would no longer comprise the final means of dispute resolution. However, the statement in the email expressly refers to arbitration as one of the means of dispute resolution. This plainly shows that D had not abandoned the option of arbitration.

E.  DISCUSSION

28.  As to the principles on waiver, I accept the principles referred to in counsel’s respective submissions and mentioned in §§25(2)(a) and 26 above. I bear those principles in mind in assessing the merits of the parties’ respective cases.

E1.  Y-1^st

29.  In my view, Y-1^st cannot be regarded as X’s first statement on the substance of the dispute. It cannot be said that X has waived the right to arbitrate by that affirmation.

30.  In the OS and in B-1^st, at nowhere A&B stated that A&B would pursue a negligence claim against X in these proceedings. As to the construction of §17 of B-1^st, I agree with the interpretation suggested by Mr XXX. At that paragraph, A&B only reserved the right to raise a positive negligence case. A&B did not put forward a negligence case in B-1^st. I also agree that without giving any particular of negligence in §17 of B-1^st, it cannot be said that any allegation of negligence has been properly raised in that paragraph. Without properly raising any allegation of negligence in B-1^st, it cannot be said that A&B have been relying on negligence as a shield or sword against X. Put it simply, nothing concerning negligence has been properly raised against X in B-1^st. In fact, if any allegation of negligence against X has already been properly raised in B-1^st, in the hearing before Master XX on XXXXXXX, A&B’s solicitors would have no difficulty in telling the Court that A&B in fact has already put forward a negligence case against X. The fact that A&B’s solicitors did not inform the Court whether A&B intended to pursue any allegation of negligence against X in that hearing also indicates that no negligence case has been properly raised in B-1^st.

31.  I am of the following view:

(1)  On XXXXXXXXXXX, at the time of the filing of Y-1^st, “the substance of the dispute” between the parties (“the Original Dispute”) did not include whether X was negligent in providing legal services to A&B. Y-1^st can only be a statement in response to the Original Dispute, ie a dispute involving no allegation of negligence against D.

(2)  On XXXXXXXXXXX, A&B provided an unsworn copy of B-2^nd to X. The negligence claims were raised for the first time in that affirmation. At that point of time, there was a material change in the substance of the dispute between the parties (“the New Dispute”).

(3)  Before taking out the Stay Application, X did not submit any statement on the substance of the New Dispute.

(4)  The dispute now between the parties is the New Dispute, not the Original Dispute. It would not be correct to say that by filing Y-1^st on XXXXXXXXXX, X has waived the right to arbitrate the New Dispute, in respect of which notice was only given to X on XXXXXXXXXXX.

32.  Mr XX submits that if his construction concerning §17 of B-1^st is not accepted and allegations of negligence have only been raised for the first time in B-2^nd, since X has already waived the right to refer the matters in B-1^st to arbitration by filing Y-1^st after seeing B-1^st, X has lost the right to seek a mandatory stay of all the claims made by A&B in these proceedings pursuant to s.20 of AO. Mr XX submits that if a defendant has filed a defence and thereby has waived his right to refer the plaintiff’s claim to arbitration, when the plaintiff amends the statement of claim at a later time, the defendant would still have no right to refer the dispute in the amended statement of claim to arbitration. By the same token, since X has already waived the right to refer the matters in B-1^st to arbitration by filing Y-1^st, even if the negligence claims are only added by B-2^nd, X would still have no right to refer the dispute now between the parties to arbitration.

33.  With respect, I am unable to agree with Mr XX.

(1)  In Li Wenjun[9], Anthony Chan J said:

“41. In Ahad v Uddin [2005] EWCA Civ 883, [19], Lord Phillips MR explained that where an amendment of a pleading will introduce issues which the defendant says he is entitled to have resolved by arbitration, the defendant should object to the amendment on this ground at the time the amendment application is made :

‘Permission to amend in such circumstances is required and, so it seems to me, the appropriate course is for the defendant, if he contends that the amendment sought will introduce new issues which he is entitled to have resolved by arbitration, to object on this ground to permission being given to amend. …’”

(2)  These proceedings are commenced by the OS and there is no pleading in this case. Hence, when A&B introduce the negligence claims into these proceedings, A&B would have no need to make an application for leave to amend any pleading, and X would have no opportunity to raise an objection in the leave application.

(3)  In the first call-over hearing on XXXXXXXX, X expressly referred to the Arbitration Clause and submitted that if A&B intended to pursue any claims of negligence in these proceedings, X reserved the right to dispute the jurisdiction of the Court. In my view, in that hearing, X has already made it clear that if there is any material change in A&B’s case, X may apply for a stay and for an order referring the dispute to arbitration.

(4)  Subsequently, A&B raised the negligence claims in B-2^nd.

(5)  In the circumstances of this case, it cannot be said that X’s right to refer the New Dispute to arbitration has been waived by the filing of Y-1^st, which was filed before A&B putting forward the New Dispute.

34.  Mr XX further submits that if the negligence claims are only raised for the first time by A&B in B-2^nd, the proper approach is that although X would be entitled to have a mandatory stay in respect of the negligence claims and the negligence claims would be referred to arbitration, the matters raised in B-1^st should be resolved in court proceedings, for X has waived the right to refer those matters to arbitration by filing Y-1^st after seeing B-1^st. With respect, I am unable to accept these submissions.

(1)  As said in the above, I am of the view that after A&B raising the negligence claims in B-2^nd, there has been a material change in the substance of the dispute between the parties. The dispute now between the parties is the New Dispute, not the Original Dispute. It cannot be said that Y-1^st is X’s first statement on the substance of the New Dispute. Accordingly, X is entitled to have the mandatory stay under s.20 of AO to refer the New Dispute to arbitration.

(2)  For the sake of discussion, if Mr XX’s analysis is right (ie X would be entitled to have a mandatory stay of the negligence claims raised in B-2^nd only), I would still grant the stay sought by X under the inherent jurisdiction of the Court. In my view, both the matters raised in B-1^st and the negligence claims put forward in B-2^nd would affect A&B’s liability under the 48 Subject Bills, and (if liability is established) the quantum payable by A&B to X under those bills. To resolve all the issues relating to 48 Subject Bills by one single tribunal would save much time and costs. On the contrary, it would not be logical to say that while the negligence claims put forward in B-2^nd must be referred to arbitration (by reason of s.20 of AO), the matters raised in B-1^st should be resolved in court proceedings. That approach would cause the parties to incur more costs and to wait for a longer time in order to have a final resolution of all the differences between them. That would not be a just and fair arrangement. Having considered the balance of convenience, insofar as may be necessary, I would exercise my discretion and stay all the claims in these proceedings in favour of arbitration under the inherent jurisdiction of the Court.

E2.  The Email

35.  Regarding the Email, my view is as follows:

(1)  The part of the Email relied upon by A&B is as follows:

“If you have any questions on any of the outstanding bills, please let us know as soon as possible. We should add that if any of the outstanding bills are disputed, you have a right to apply to have them taxed or resolved by arbitration. Otherwise, we look forward to receiving payment of all of the outstanding bills as soon as possible.” (Emphasis added)

(2)  The expression that A&B “have a right to apply to have [the 20 Bills in Email] taxed or resolved by arbitration” does not mean that X has waived any right to object to any application raised by A&B, including the right to make an application for stay in favour of arbitration in response to A&B’s application. In my view, there is no clear and unequivocal waiver in the Email rendering the Arbitration Clause inoperative as contended by A&B.

(3)  Further, it is plain that “the outstanding bills” in the Email are the 20 Bills in Email, not any other bills. As said in the above, among the 48 Subject Bills, only 18 of them are the bills mentioned in the Email. It is far-fetched and contrary to common sense to say that by the Email, X has clearly and unequivocally waived all the rights under the Arbitration Clause in relation to any dispute of any nature concerning any bill.

36.  I refuse to accept A&B’s waiver arguments based upon the Email.

E3.  No waiver

37.  In my judgment, the waiver point taken by A&B fails. X is entitled to have an order staying the proceedings herein in favour of arbitration. Accordingly, the Stay Application must be allowed.

E4.  Costs

38.  As to the costs of the Stay Application, there is no dispute that costs should follow the event. The differences between the parties are (a) whether indemnity costs should be ordered; and (b) whether A&B should be jointly and severally liable to pay the costs.

E4.1  Indemnity costs

39.  The general rule is that when a party fails in resisting an application for a stay under s.20 of the AO, indemnity costs should be ordered against that party. In Chimbusco International Petroleum (Singapore) Pte Ltd v Fully Best Trading Ltd[10], Mimmie Chan J said:

“14. I see no reason at all to differentiate between unsuccessful attempts to resist enforcement of an arbitral award made under an arbitration agreement, and unsuccessful attempts to resist enforcement and recognition of the arbitration agreement itself. The reasons and observations made by Reyes J in A v R (Arbitration: Enforcement), that recourse should not be made to the Court, that parties should comply with arbitration awards made under the arbitration agreement, all apply with equal force to a case where a party to the arbitration agreement unmeritoriously seeks to challenge the arbitration agreement, and refuses to refer the dispute to arbitration in accordance with the agreement. Parties to an arbitration agreement should expect that the Court will recognise and enforce the arbitration agreement, and if they take the risk of instituting court proceedings in breach of such an agreement, they should expect to pay costs on a higher scale if they fail in their attempt to impeach the agreement.

15. The observations made by Reyes J and the Court of Appeal as to the need to further the objectives of the CJR are equally applicable, as justification for awarding costs on an indemnity basis where there are challenges to an arbitration agreement. Unmeritorious challenges to an arbitration agreement, and the use of court proceedings when the parties have agreed to have their rights and disputes resolved by arbitration cannot be conducive to the underlying objectives of the CJR, bearing in mind the duties of the parties, and their lawyers, to assist the court in the cost-effective and efficient resolution of a dispute, and to ensure the fair distribution of the resources of the court.” (Emphasis added)

40.  Mr XXX submits that notwithstanding A&B’s failure in resisting the Stay Application, this Court should depart from the general rule and decline to order indemnity costs against A&B, for there are special circumstances in this case. According to Mr XX, A&B commenced the taxation proceedings on the faith of the express representation in the Email that they could choose between arbitration and taxation. Mr XXX submits that due to the impression given to A&B by the Email, it is entirely understandable that why A&B would think that it is open for them to seek to challenge their liability to pay the bills by way of taxation proceedings instead of arbitration.

41.  With respect, I am unable to agree with Mr XX. As said in the above, among the 48 Subject Bills in these proceedings, only 18 of them are the bills mentioned in the Email. I do not accept that there can be a reasonable belief that by reason of the Email, X has waived all the rights under the Arbitration Clause in relation to any dispute of any nature concerning any bill. Further, A&B’s subjective belief is neither here nor there. A&B, with the benefit of advice from their legal representatives, made an informed choice to contest the Stay Application made by X. A&B lost in their challenge. A&B must face the consequences of their own informed choice. I am of the view that there is no special circumstances justifying a departure from the general rule of ordering indemnity costs.

E4.2  Joint and several liability to pay costs

42.  Mr XXX suggests that A&B be severally liable to pay costs to X, and each plaintiff be responsible for 50% of the costs. Mr XXX has fairly told me that there is no authority in support of this approach, but he has to put forward this request made by A&B.

43.  The general rule is that the liability to pay costs to the successful party is joint and several. If one of the unsuccessful parties has raised a separate claim/defence but failed on that claim/defence, that unsuccessful party would be solely liable for the costs incurred by the successful party in meeting that separate claim/defence.[11]

44.  In these proceedings, the challenge against the 48 Subject Bills are raised by A&B jointly. There is no reason to depart from the general rule as described in the above. A&B are jointly and severally to pay costs to X under the costs order made in this decision.

F.  DISPOSITION

45.  I allow the Stay Application and make an order that all further proceedings in this action be stayed in favour of arbitration to be administered by XXXXXXXXXXXXXXXXXXXXXXXXXX.

46.  Costs of the Stay Application be paid by A&B to X forthwith on an indemnity basis, and those costs be summarily assessed. There be leave to X to lodge and serve a bill of costs (limited to 3 pages) within 7 days, and leave to A&B to lodge and serve a list of objections (limited to 3 pages) within 7 days thereafter. A&B are jointly and severally liable under the costs order.

47.  I am minded to publish a redacted version of this decision for the development of the law. Tentatively, in the redacted version, I am prepared to name P1, P2 and D as “A”, “B”, and “X” respectively. The parties are directed to provide an agreed draft redacted version to the Court for my consideration within 28 days. The parties shall use their best endeavours to try to reach an agreement on the proposed redacted version. If there is any disagreement, the parties shall also inform the Court the disagreed matters and the reasons in support of the parties’ respective positions within the same timeframe. For avoidance of doubt, the order pronounced in this decision takes effect from the date of this decision, not from the publication of the redacted version of the decision.

48.  Lastly, it remains for me to thank both counsel for the helpful assistance provided to the Court.