TAIGO LTD v. CHINA MASTER SHIPPING LTD

HCCT 22/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 22 OF 2010

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BETWEEN

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FURTHER REASONS FOR DECISION

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1.  On 9 June 2010, I heard this application for leave to appeal against an award by arbitrators made on 20 March 2010, when, without calling upon counsel for the Respondent to reply, I dismissed the application with reasons to be delivered later. Those reasons were handed down on 17 June 2010.

2.  Shortly thereafter, I was asked by the solicitors for the Applicant to reopen the matter, as they pointed out that I had not dealt with an argument in support of the application for leave to appeal, expressed in the Amended Notice of Originating Summons in the following terms:

“Further, the learned Tribunal erred in not dismissing (China Master’s) counterclaim in the circumstances where the learned Tribunal accepted (Taigo’s) closing submissions that there was no “sufficient details or particulars and evidence in support to make finding” (Reasons §63) and there was no request by either party or order for directions for the hearing to be conducted on a “split” basis (i.e. the issue of quantum to be determined at a subsequent hearing).”

3.  The order made on 9 June 2010, has not yet been perfected.  There is no doubt as to the existence of the jurisdiction to reconsider an order that has not been perfected: see Wong Kam Hong v Triangle Motors Ltd [1998] 2 HKLRD 330.

4.  The argument on the part of the Applicant is an argument which seeks to take advantage of the fact that in the course of the arbitrators, dealing with the matter on the basis of a “documents only” arbitration, China Master did not put any specific evidence before the arbitrators as to the damages it had suffered should Taigo be found to be liable.

5.  It is right that the arbitrators had not ordered a split trial, in the conventional sense, in that prior to the commencement of the arbitration, there had been no directions that the question of liability and the question of damages would be dealt with separately.  Mr Maurellet properly accepts that in the absence of a prior direction the usual rule is that the matters of liability and quantum should be determined in one hearing.

6.  The arbitrators were well aware of the situation.  On 8 December 2009, they ordered China Master to provide Taigo with:

“the information and documents sought in order to properly understand (China Master’s) claim and the effort in mitigation.”

China Master apparently did not then supply any documents.  A further notice was issued by the arbitrators on 5 January 2010, in which they warned China Master that the failure to supply further evidence may jeopardise China Master’s case.

7.  Still no documents or information were supplied.  The matter was the subject of further comment in similar vein by the arbitrators on 14 January 2010.

8.  But when the award was issued it contained these paragraphs:

“62…. we are satisfied with most of the items except the most major item (d) of Loss of Income…. The Tribunal does not have sufficient evidence to accept that the market rate, if any, after repudiation of the T-C/P by TAIGO, is at US$2,000 per day.

63        The Tribunal is satisfied that (China Master) must have suffered substantial damages but we are not able to have sufficient details or particulars, and evidence in support, to make a finding.  Accordingly, the Tribunal exercises its discretion to first published a First Final Award, leaving this Loss of Income to be dealt with in another Final Award in case the parties cannot settle.”

9.  the fact that no split trial was ordered is not a reason to say that it was not open to arbitrators, in the conduct of an arbitration, to determine to issue a notice to liability only, and to consider a question of damages at a later date.  I accept Mr Maurellet’s submission that in the present case the court is dealing with arbitral proceedings which are both intended and designed to confer flexibility.  In the present case the parties where the parties had agreed to a documents only hearing the arbitrators were able, on the basis of the documents to determine liability.  No authority is cited for the proposition that it is not open to the arbitrators of those circumstances to issue an award is to liability and determine quantum later.

10.  I do not see anything either wrong or prejudicial to Taigo in the course that has been followed.  If the arbitrators were unable to determine quantum on the basis of the documents they were perfectly entitled to call for evidence if the parties cannot agree the quantum.  That the arbitrators decided to exercise their discretion in this way, even after having warned China Master that they would proceed to resolve the issue in the absence of evidence, and subsequently, apparently changed their minds, and decided to allow further time, is a matter that was entirely within the discretion of the arbitrators. 

11.  Liability having been determined, Taigo will have an ample opportunity to put any relevant evidence they have before the arbitrators as to the question of damages, as will China Master.  Mr Maurellet correctly says that the procedure accords with common sense and justice and is not prejudicial to Taigo in any sense at all.  Taigo now knows that it has to pay, the only issue is as to how much.

12.  The argument seeks simply to overturn a matter of discretion exercised by the arbitrators in the manner in which they conducted the hearing.  While it would have been perfectly proper for the arbitrators to have found against China Master on the basis was no evidence to support any loss in relation to the counterclaim, I cannot say that it is open to argument that they have acted contrary to principle in allowing further evidence as to quantum to be met.

13.  I am satisfied the course adopted by the arbitrators was quite within their discretion, and does not provide any basis upon which leave to appeal the award might be given.