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HCCT000133/2000
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO. 133 OF 2000
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| BETWEEN |
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DAILY WIN ENGINEERING LIMITED |
Plaintiff |
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AND |
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THE INCORPORATED OWNERS OF GREENWOOD TERRACE |
Defendant |
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Coram: Hon Burrell J in Chambers
Date of Hearing: 7 June 2001
Date of Decision: 7 June 2001
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DECISION
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1. This is an application by the defendant to stay proceedings in favour of arbitration pursuant to Section 6(1) of the Arbitration Ordinance, Cap.341. There is no dispute between the parties that the contract between them contains a valid arbitration clause (Clause 35 of the Standard Building Contract) and that a dispute exists between them concerning the contract. It is also not in dispute that, in such circumstances, the court has no discretion and must stay the proceedings unless the arbitration is null and void or inoperatable or incapable of being performed.
2. The plaintiff opposes the stay on the basis that there is a binding supervening agreement between the parties not to rely on Clause 35 and to resolve their differences by litigation in court instead. The plaintiff relies on the following in support:-
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A purported oral agreement between the parties to this effect at a meeting held on 25 November 2000. |
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A letter written by the Urban Property Management Limited ("UPML"), purportedly on the defendant's behalf, on 1 December 2000 which said : |
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We issue this letter to enquire your Company of the following matters:- |
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(1) |
... |
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(2) |
... |
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(3) |
If your Company shall disagree to adopt the methods in paragraphs (1) and (2), we suggest the matters to be determined by arbitrators appointed by The Hong Kong International Arbitration Centre (HKIAC) or be determined by the Court. |
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The above methods are suggested without prejudice to the rights of both parties. Please let us have your reply within the next 7 days, so that follow-up works can be arranged." |
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A reply from the plaintiff's solicitors on 8 December 2000 which said in relation to paragraph (3) of the above letter: |
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"(3) Agree to your proposal that the disputes between the Incorporated Owners and our client be dealt with in court rather than arbitration." |
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3. The plaintiff's case is simply that the 1 December letter constitutes an offer to abandon Clause 35 and litigate instead and the letter of 8 December accepts that offer and taken together, they confirm the oral agreement made on 25 November.
4. The defence position is twofold. Firstly it says there is no such agreement. Secondly, in the alternative, if it is arguable that the letters do constitute an agreement not to arbitrate, it is a matter for the arbitrator to decide. The defendant needs only establish a prima facie agreement to arbitrate. Mr David Tsang, counsel for the defendant correctly cited the following propositions of law, with which Mr Danny Choi for the plaintiff did not disagree. (Mr Choi merely sought to distinguish the judgment of Liu J.A. in Star (Universal) v. Private Company Triple V [1995] 2 HKLR):-
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(i) |
Liu J.A. in Star (Universal) said at p.132: |
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"There is prima facie evidence of a dispute between the plaintiff and D1 in relation to contract 93 RV-1034HK and an arbitrator ought to be appointed to arbitrate their dispute. It will be for the arbitrator to decide the effect, if any, of the alleged subsequent agreement cancelling the contract. |
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I agree. If the judge were to go into the matter more deeply, he would in effect be usurping the function of the arbitrator. Whilst, clearly, the judge had to make a judgment as to whether there existed an underlying agreement to arbitrate, he could do no more than to form a prima facie view. Here, in exercising his jurisdiction under art 11(3), Leonard J in effect asked himself whether it was arguable that Contract No. 1034HK still subsisted, despite the existence of the subsequent agreement. This seems to me the correct approach." (emphasis added) |
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(ii) |
Section 13B Cap.341 :- |
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"Article 16 of the UNCITRAL Model Law applies to an arbitral tribunal that is conducting arbitration proceedings under a domestic arbitration agreement in the same way as it applies to an arbitral tribunal that is conducting arbitration proceedings under an international arbitration agreement." |
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(iii) |
Article 16 of the UNCITRAL Model Law:- |
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(1) |
The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause." |
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5. Applying the law to those facts relied on by the plaintiff [(a), (b), and (c) above] :-
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(a) There is a plain dispute on the affirmations as to what was said at the meeting on 25 November 2000. It is a matter of fact to be determined by the arbitrator should he be called upon to resolve it. |
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(b) and (c) should be looked at together. The following points can be made against them constituting a binding agreement. |
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(i) |
The 1 December letter does not purport formally to record the alleged agreement made on 25 November. |
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(ii) |
The 8 December reply does not refer to any alleged agreement of 25 November either. |
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iii) |
The 1 December letter commences by saying it is "making enquiries" and concludes by saying "the above methods are suggested without prejudice to the right of both parties." |
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iv) |
Paragraph 3 of the 1 December letter cannot be construed as an offer to the plaintiff for them unilaterally to choose the forum of their choice. It does not demonstrate an intention by the defendant to be bound by whatever the plaintiff chooses. Had that been the defendant's intention, paragraph 3 would have concluded with words such as "we are willing to abide by whichever forum you choose" |
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v) |
The clear meaning of paragraph 3 is that the defendant is merely noting that if the proposed settlements in paragraphs (1) and (2) are not accepted then the matter will be resolved either by an arbitrator or by a court. Had they intended to say "If (1) or (2) above are not accepted we consent to this matter being determined by a court rather than an arbitrator", they could and would easily have said so. |
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vi) |
The 1 December letter was not written by the plaintiff. Although other documents do say that UPML act on behalf of the defendant, this one does not. This is a relatively small point which on its own would be of little significance. However, taken with all the other points made, it does add some weight to the defendant's arguments. |
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(vii) |
If the 1 December letter is not an offer then the 8 December letter cannot be an acceptance. |
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(viii) |
The 8 December letter by using the words "proposal" and "rather than arbitration" misquotes the 1 December letter. |
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6. All the above supports the contention that there was no agreement not to arbitrate and therefore that there is an arbitration agreement which is valid. As already stated, the defendant does not have to go that far. In my judgment, the submission that there is not even a prima facie case (for the arbitrator to resolve) that a valid arbitration agreement exists is unsustainable.
7. I grant an order in terms of the defendant's summons dated 28 February 2001.
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(M.P. Burrell) |
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Judge of the Court of First Instance |
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High Court |
Representation:
Mr Danny Choi, instructed by Messrs M.F. Ko & Co., for the Plaintiff
Mr David Tsang, instructed by Messrs Ho & Wong, for the Defendant
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