LEE BING FAI STEPHEN v. HONG KONG AUTOMOBILE ASSOCIATION

HCA 25/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 25 OF 2015

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REASONS FOR DECISION

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Introduction

1.  The plaintiff (“Lee”) is a professional race driver, and a frequent participant in autosport competitions promoted and organized by the defendant (“the HKAA”). Lee holds a Grade A FIA National Competition Licence issued by the HKAA.

2.  The FIA is the governing body for world motor sport and the federation of the world’s leading motor sport organizations.  Each FIA country has a National Sporting Authority, usually referred to as an “ASN”. The HKAA is the ASN of Hong Kong under the FIA.  The HKAA acts through the Motor Sport Council (“MSC”), a committee established pursuant to Article 22.17 of its articles of association.

3.  The HKAA was the organizer of the Hong Kong Automobile Association Autosport Challenge 2014 Class N2000 (“the Competition”), which was a ‘zone event’ with eight rounds.  The first four rounds took place at a circuit in China, and the last four rounds at a circuit in Malaysia. Despite the geographical locations of the race meetings or rounds, a ‘zone event’ is not an ‘international event’, and is treated for FIA purposes as a ‘national event’.

4.  Lee sought entry to, and was accepted by the HKAA as an entrant to, the Competition.  He drove in all eight rounds of the Competition.  Save for the fourth round, Lee consistently placed in the first three and he won two races (including the seventh round). 

5.  After completion of the sixth round of the Competition, Lee changed racing teams and his vehicle was transferred to the new team.  Upon inspection, it was decided to replace the old engine with a new engine, which was installed.

6.  The main issue between the parties arises from this change of engine, and also from how the ‘seal’ on the old engine came to be broken.  It is the HKAA’s position that the change of engine was unauthorized, and that the seal on the old engine was broken in circumstances which might have caused unfairness (although it is accepted that there were no technical changes in fact made to the engine).

7.  The seventh and eighth rounds of the Competition took place in Malaysia on the weekend of 20 to 22 June 2014.   Lee placed first and third in the two rounds respectively, and ordinarily those provisional results would have become final 30 minutes after the publication of the provisional results (in the absence of any protest or contrary decision by the Stewards of the meeting).

8.  In any event, as a result of the engine matters, but subsequent to the last round of the Competition, the HKAA made two decisions (together “the Decisions”) overturning the race results.  The HKAA first decided (“the 1^st Decision”) that Lee’s results of the seventh and eighth rounds should be disqualified, and subsequently also decided (“the 2nd Decision”) that Lee’s results from the first to sixth rounds should be disqualified. 

9.  Though at least in respect of the 1^st Decision the position is not entirely clear, it seems that both the 1^st Decision and the 2^nd Decision were probably actually made by the MSC.

10.  After failing to obtain satisfactory redress from the HKAA in relation to the Decisions, Lee commenced this action.  By a lengthy statement of claim, Lee pursues various forms of relief against the HKAA, including a declaration that the original race results should be restored and monetary compensation arising from alleged breach of agreements, breaches of natural justice, negligence and defamation.

11.  By summons stated 16 February 2015, the HKAA sought:

(1)  a declaration that in the circumstances of the case the court of the Hong Kong Special Administrative Region should not exercise its jurisdiction in respect of the subject matter of this action or the relief or remedy sought in this action; and

(2)  an order to stay this action on the ground that the HKAA is entitled to rely on an agreement to which Lee is a party to exhaust the agreed appeal procedures, excluding the jurisdiction of the courts of the Hong Kong Special Administrative Region.

12.  At the hearing, Mr Samuel Wong appearing for the HKAA confirmed that he was not suggesting that the jurisdiction of the court had been entirely ousted, but rather that the court should decide in the circumstances not to exercise the jurisdiction.  He also clarified that no part of his submission was predicated upon a suggestion that the parties were parties to an arbitration agreement (and any references in his skeleton argument to arbitration had been by way of analogy only).

13.  At the end of the hearing, I dismissed the application for a stay, and indicated that I would later hand down the reasons for my decision.  These are those reasons.

Further material facts

14.  Though both Lee and the HKAA canvassed at some length matters relating to the merits of the underlying disqualification decisions, I do not need to go too deeply into the merits for the purposes of deciding the stay application.  Some matters do, however, attract comment as I traverse the material facts.

15.  Lee completed an entry form (“the Entry Form”) for the Competition.  The Entry Form required entrants to sign a declaration as to various matters, including that they had read the Regulations issued for the Meeting and agreed to be bound by them and the provisions of the International Sporting Code (“the ISC”) of the FIA and the Hong Kong National Sporting Codes.

16.  As an entrant, Lee also declared that:

(1)  he and all other persons connected with his entry “recognize and accept that the sole jurisdiction in all matters arising out of the race meeting is vested in the Organizing Committee and that none of us will contest before the judicial, civil or commercial powers”; and

(2)  he would comply with the Competition Rules of the HKAA, and the ISC, where applicable

17.  There is no definition of the “Organizing Committee”, but the HKAA was the organizer of the Competition.

18.  The Competition Sporting Regulation contained various information and terms.  The Race Committee and Officials, including the Stewards, were identified by name, and the ASN was identified as the HKAA (note, not the ASN of either the PRC or Malaysia).  The terms included:

(1)  5. General Undertaking:

All drivers, competitors and officials participating in the series undertake, on behalf of themselves, their employees and agents, to observe all the provisions as supplemented or amended, of the National Sporting Code, the series Technical Regulations and the present Sporting Regulations. …  The presentation of a car for scrutineering will be deemed an implicit statement of conformity.

(2)  8. Type of Meeting:

National Car race meeting approved by National Sporting Authority held under the FIA sporting code, National Competition Rules, together with these Regulations and any bulletins, supplementary regulations and/or final instructions issued by the Race Committee.

(3)  14. Protests Appeals and Enquiries:

14.7 Inquiries related to results for awards will not be entertained later than 30 minutes after posting of results on the official notice board.

(4)  15. Interpretation and Penalties:

15.1 The interpretation of the regulations, including any bulletins and final instructions, and the choice of sanctions, where the present regulations have not automatically stipulated these, falls to the Stewards of the Meeting, upon the majority vote of those present. The decisions of the Stewards shall be final, except for the right of appeal as provided in the [ISC].  … 

15.4 The fact that certain sanctions are mentioned in the regulations does not prevent sanctions or additional sanctions being applied by the Stewards of the Meeting if this is considered necessary.

(5)  Appendix A – 2. Scrutineering.

2.2 Any competing car which is modified after official Scrutineering or which is involved in any accident must be presented to the official scrutineers, whose approval must be obtained before the car is driven for any official practice or race.  Breach of this rule will automatically result in exclusion or disqualification.

(6)  Appendix D – 2. Course Rules:

It is deemed that all entrants, drivers and team members are fully conversant with the provisions laid down in the [ISC] of the FIA, and the National Sporting Code. All course rules for this event strictly at here to the above-mentioned codes.

19.  The HKAA’s National Competition Rules (“NCR”) contain numerous provisions relating to the duties of scrutineers, and the powers of the Stewards of the Meeting. The Stewards have the general power and authority to enforce compliance with the Code, the NCRs and supplementary regulations and to adjudicate upon any dispute or protest arising during the meeting, subject to the rights of appeal provided by the NCRs.

20.  One of the requirements of the Stewards is that they prepare a report, giving the results of the competition, together with particulars of all protests lodged, action taken thereon, penalties imposed, together with any recommendations in respect of such cases. The report is to be submitted with any notices of intention to appeal and appeal fees received in accordance with the NCRs.

21.  Despite the fact that the NCR contains some provisions relating to appeals, the rights of appeal in relation to the Competition were designated by the Sporting Regulations to be those as provided for in the ISC at Article 14, which contained terms including:

(1)  14.1.1: Each ASN, through its national court of appeal, constitutes for its own license-holders the final court of judgment empowered to settle any dispute which may have arisen between its sole license-holders on its own territory in connection with national motorsport.

(2)   14.2.1: Each ASN shall nominate a certain number of persons who may or may not be members of the ASN concerned, who will constitute the national court of appeal.

(3)   14.2.2: No members of this court of appeal may sit on a case if they have been involved in any way as competitors, drivers or officials in the Competition under consideration, or if they have participated in any earlier decision concerning or have been involved, directly or indirectly, in the matter under consideration.

(4)   14.3.1: Competitors, whatever their nationality, shall have the right to appeal against the sentence or other decision pronounced on them by the stewards before the ASN of the country in which that decision has been given.

(5)   14.3.6: All parties concerned shall be given adequate notice of the hearing of any appeal. They shall be entitled to call witnesses, but their failure to attend the hearing shall not interrupt the course of the proceedings.

(6)   14.8: For the avoidance of doubt, nothing in the Code shall prevent any party from pursuing any right of action which it may have before any court or tribunal, subject always to any obligations it may have accepted elsewhere to first pursue other remedies or alternative dispute resolution mechanisms.

22.  There are also strict time limits provided for appeal.  An intended appellant has to give notice of his intention to appeal from a decision of the Stewards within one hour of that decision, and then he has a further 96 hours within which to make the appeal itself.

23.  As earlier indicated, the first four rounds of the Competition took place at a track in China.  The last four rounds took place at the track in Malaysia. After the sixth round, Lee switched teams and his vehicle was transferred to the new team.  The new team considered that the old engine had been damaged, and so replaced it with a new engine.

24.  It is Lee’s case that he and his team asked a scrutineer whether the new engine needed to be sealed, and they were told that it did not.  There was apparently no suggestion that any particular permission was needed for the use of the new engine.  It is also Lee's case that later the seal on the old engine was broken by one of the scrutineers (it was presumed for some inspection).

25.  However, it is the HKAA’s case that before changing an engine, the driver must make a written application to the race secretariat for authorization to use a new engine.  It seems to be the HKAA’s position that it did not know of the change of engine until after the completion of the Competition.

26.  By e-mail dated 22 June 2014 (3:06pm), the HKAA wrote to Lee to inform him that the scrutineers reported at the post race scrutineering that an unauthorized engine had been used, which may lead to a disqualification in rounds 7 and 8. The e-mail informed Lee that the “final decision” rested with the MSC, and that he would be informed of the outcome in due course.  The email did not invite comments or submissions and did not invite Lee to any hearing.

27.  By e-mail dated 23 June 2014 (5:50pm), Lee gave some explanation of the circumstances, and indicated that he had tried to find the relevant sporting regulation or technical regulation about engine change application, but could not do so.  Lee stated that neither he nor his team was aware of any requirement to apply for an engine change.

28.  By e-mail dated 25 June 2014 (4:10pm), Wesley Lau, the Secretary of the HKAA (signing “for and on behalf of the Race Director, HKAA Autosport Challenge”) told Lee that his enquiry about Rounds 7 and 8 had been investigated.  The language used is slightly odd, as it reads as though the enquiry was made by Lee about the rounds 7 and 8 and the HKAA was answering it, whereas the enquiry was actually one launched by the HKAA into the rounds 7 and 8.

29.  Anyway, the e-mail pointed out the finding that the new engine was an unauthorized one, and therefore the results obtained in those two rounds were disqualified. Reference was also made to the question over the validity of the old engine and whether the results from rounds 1 to 6 should be disregarded, but identified that “the council” – presumably a reference to the MSC – having considered all the available facts, decided to keep the results of rounds 1 to 6.  The decision was stated to be final.  This is the 1^st Decision.

30.  The publication was made electronically identifying precisely those things, namely that the results from the first six rounds stood, but the results of the last two rounds of the Competition were changed to “DQ”.

31.  By e-mail dated 25 June 2014 (9:55pm), Lee asked the HKAA to identify written regulations about engine change.  Lee also pointed out that he had understood that the case was to be discussed at an MSC meeting the next day (and thereby implied that he was surprised any decision had already been made).

32.  By e-mail dated 26 June 2014 (5:15pm), Lee stated that he was still urgently awaiting the document relating to engine change regulation, and stated that according to a Nick of Malaysia AAM (the Malaysian ASN), it was not open to the HKAA unilaterally to change the race results, and that the provisional results signed by the Stewards had become final. He invited urgent comment.

33.  Rather than receiving comment, Lee received a response which must have been unexpected.  By e-mail dated 27 June 2014 (11:16pm), Wesley Lau notified him that the MSC had convened and reviewed his enquiry – again slightly odd language – and asked him to take note of the following decision reached.  This is the 2^nd Decision:

(1)   the decision to disqualify the result obtained in rounds 7 and 8 was “upheld”; and

(2)   the validity and integrity of the old engine were in doubt, and hence the results from rounds 1 to 6 were disqualified

34.  The e-mail also identified that the matter had been reported to the MSC and the General Committee of the HKAA and received total endorsement.  Lee was advised that the 2^nd Decision was final.

35.  It is obvious that the 1^st Decision and the 2^nd Decision are contradictory, at least in relation to the results of the first six rounds of the Competition.

36.  By e-mail dated 29 June 2014 (10:46am), Lee asked that the e-mail should serve as his official appeal from the 1^st Decision, as superseded by the 2^nd Decision.  Lee asked to be informed of the proper procedure and a time limit and the whereabouts to provide his appeal details.

37.  By e-mail dated 30 June 2014 (10:48am), that request was acknowledged and it was stated that the matter had been passed to the MSC "for further decision".  No procedure for any appeal was identified.  Against the argument subsequently run, it is noteworthy that there was no suggestion that any appeal was long out of time, or that it had been notified to the wrong body.

38.  By further e-mails on 30 June 2014, Lee continued to press for information relating to the Decisions and for documentation of the relevant engine change regulation. That material was simply not provided, and the e-mails were effectively ignored.

39.  Instead, by e-mail dated 9 July 2014 (6:00pm), Wesley Lau , on behalf of the MSC, stated that the MSC had noted Lee’s subsequent e-mails, enclosing documents again in connection with the enquiries, the contents of which and reports submitted by other race officials had already been taken into careful consideration before a decision was made.  The e-mail stated that the MSC had also reported the issue to the General Committee and, after discussion, that committee fully endorsed the decision, which had been informed to Lee.  Hence, it was stated that “the decision is final and binding”.

40.  Lee then engaged solicitors who wrote an e-mail to the HKAA on 11 July 2014 (4:49pm), which amongst other things again asked for information about rules and procedures for complaints and appeals in connection with the decisions made.  That material was never forthcoming.  Instead, the HKAA merely sent to the solicitors a copy of the signed Entry Form, with its declaration.

41.  Subsequently, the solicitors again pointed out that document did not reference any appeal procedure or rules or requirements.  In a later letter, the solicitors lodged a formal appeal notice addressed to the HKAA.  Notwithstanding that the HKAA itself subsequently instructed solicitors, the missives essentially went completely ignored.  It is, therefore, easy to understand Lee’s deep sense of frustration at the approach taken by the HKAA.

42.  The most the HKAA did was to write a letter direct to Lee on 31 October 2014.  That letter pointed out that the General Committee had taken a very serious view of the complaint and believed that it would be in the interests of the HKAA and its members for a “thorough investigation” to be conducted.  The letter states that this was done by way of several meetings of the MSC as well as of the General Committee, when the issues were closely examined and relevant individuals involved were interviewed.

43.  It is worth noting at this point that Lee himself has never been invited for an interview or to a hearing, or even to address submissions in writing.  Nor has he been invited to identify his witnesses who might have been interviewed. There is, at least at first blush, a significant concern as to whether the requirements of natural justice have been simply ignored.  Also, a question can at least be posed as to how a “thorough investigation” could have been performed.

44.  In any event, the letter stated that the General Committee was of the view that the disqualification decision was made properly in all the circumstances.  The General Committee appreciated, however, that there was likely to have been some miscommunication and/or misunderstanding at the time, and that the situation could have been handled in a better way so as to avoid Lee’s resentment.

45.  It is difficult to know precisely what to make of this letter.  On one reading, it seems to identify that some sort of appeal process has been carried out by the General Committee's review of the earlier decision of the MSC.  But the overall description, and the procedure identified, is unsatisfactory to say the least.

46.  The website publication of the race results was subsequently amended to identify that Lee was “DQ” in all eight rounds of the Competition.  As a result, he became ineligible to take part in a particular further competition with significant prize money at stake.  Lee also considers that his reputation has been significantly damaged.

The stay application

47.  In the affidavit leading the application, it was said on behalf of the HKAA that by virtue of the Entry Form and the various other documents incorporated by reference, Lee had agreed that any appeal from the 1^st Decision and 2^nd Decision lay to a court of appeal constituted by the HKAA.

48.  However, by the time of the affidavit in reply, the position of the HKAA had fundamentally changed.  The revised position now taken is that the appropriate route of appeal is to a court of appeal constituted by the ASN of China (in respect of any appeal as regards the results of the first four rounds of the Competition) and to a different court of appeal constituted by the ASN of Malaysia (in respect of any appeal as regards the results of the last four rounds of the Competition).

49.  Where the application is for a stay because of an alleged contractual agreement to resolve disputes in another dispute resolution forum, this equivocation or evolution in the HKAA’s case is not a promising start.

50.  Nevertheless, irrespective of the precise identity of the appellate route, reliance is maintained by the HKAA upon the various provisions of the ISC in particular.

Analysis

51.  However, as I explored with Mr Wong in his submissions, it is difficult to see how those provisions bite in the particular factual circumstances.

52.  I asked Mr Wong to identify first the particular provision of any of the rules or regulations (those which are said to have become contractual terms), which conferred upon the MSC the right to make decisions of this nature; and secondly, the particular provision of any of the rules or regulations, which identified the rights and procedures of an appeal from a decision of the MSC. Ultimately, Mr Wong could not identify any such provision for either point.

53.  It seems to me that the appeal provisions in the ISC relate specifically to appeals from decisions of the Stewards.  But the decisions the subject of complaint by Lee were not made by the Stewards.  Therefore, with respect, I fail to see how those appeal provisions have any relevance at all.

54.  Further, if the decision under complaint was made not by the Stewards, but by someone other body well after a race meeting had concluded, it seems extremely unlikely that the very short timetable for appeals as provided for in relation to appeals from the Stewards could ever be applicable.  To put it another way, the fact that the appeal provisions in the ISC have such a tight timetable strongly points to the fact that those provisions do not apply, except to decisions of the Stewards at a race meeting.

55.  I reject the idea – and Mr Wong’s submission – that Lee had only one hour to notify an appeal from the MSC’s Decisions and that he was therefore out of time for doing so and so is the author of his own misfortune. It is also to be noted that it was not the contemporaneous stance of the HKAA that Lee was out of time; no such point was ever made before this action began.

56.  Therefore, I also do not accept Mr Wong’s submission that this claim is an attempt by Lee to achieve through the back door what he failed to achieve as a result of not appealing in time to the contractually agreed appeal body.  Quite simply, there was no relevant appeal route identified, and no time for any appeal has been identified (so it could not have expired).

57.  Perhaps in recognition of his difficulty, Mr Wong offered (after the luncheon adjournment) two possible solutions.  The first was that the HKAA would undertake to set up a national court of appeal for the consideration of an appeal from the Decisions of the MSC, and would not take any issue as to timing.  The second was to suggest the matter could be referred to a specialist sole sports arbitrator on an ad hoc basis.

58.  The second suggestion is one which the parties can continue to consider between them, but it cannot affect my decision.  The first suggestion is one which I can probably take into account in the exercise of my discretion, but I do not think that it would, in the circumstances, sway what I would otherwise choose to do in granting or refusing a stay.

59.  One of the complaints made in the Amended Statement of Claim (“ASOC”) is that the decisions made by the MSC were ultra vires.  On the material shown to me, there is at least some force in that complaint (but obviously I do not need to, and I do not, decide the point).  This is perhaps exacerbated by the fact that the 1^st Decision stated it was final, but it was subsequently not treated as final because the 2^nd Decision in part overturned it.

60.  But even if the MSC had the power to make the Decisions, there is no appeal route identified.  What seems to have happened as a matter of fact is that the MSC reviewed itself, and/or the General Committee (whose membership may have overlapped with that of the MSC, and may also have overlapped with the Competition officials) reviewed the MSC’s decisions.  Neither of those steps strikes me as being a true appeal, or a satisfactory second tier examination of the matters.

61.  Taken with the fact that Lee was not asked to attend any hearing, and was not asked to make specific submissions for a hearing or an appeal, and was not shown the documents and statements from others provided in support of the complaint leading to the Decisions, there is at least a proper basis for a complaint of serious procedural unfairness in the steps leading to the Decisions and the alleged review of them.

62.  That unfairness arguably would extend to a lack of sufficient or proper reasons given for making the most severe of penalties in disqualification of the result in every round of the Competition, another complaint in the ASOC.

63.  It seems to me the obvious place for such complaints to be considered and determined is the court, which in any event is the appropriate supervisor of sporting regulating authorities: see for example Nagle v. Feilden [1966] 2 QB 633; Chambers v. British Olympic Association [2008] EWHC 2028 (QB).

64.  The ASOC pleads that any term of the Entry Form which purports to oust completely the jurisdiction of the court is contrary to public policy and void. For this proposition, Mr Yu refers me to Chitty on Contracts (31^st ed) at §16-045.  But Mr Wong made plain he was not actually submitting that the court’s jurisdiction was ousted, but simply that it should be declined.  So I do not think this point is determinative.

65.  Anyway, the further point is that although the jurisdiction of the domestic tribunal is founded on contract, the parties are not free to make any contract they like.  Even if there is an agreement to make a tribunal the final arbiter on questions of fact, it cannot make it the final arbiter on questions of law.

66.  As to the relevance of the exhaustion of domestic remedies in cases (arising from paragraph 2 of the summons), that is twofold – see Leigh v. National Union of Railwaymen [1970] Ch 326 at 334:

(1)   first, where there is an express provision in the rules that the plaintiff must first exhaust his domestic remedies, the court is not absolutely bound by that because it's jurisdiction cannot be ousted, but the plaintiff will need to show why the court should intervene with the contractual position; and

(2)   secondly, and contrast, in the absence of such a provision, the court can readily (or more readily) grant relief without prior records to the domestic remedies, but may require the plaintiff to resort first to those remedies

67.  In the final analysis in this case, for the reasons I have already identified above, I reject the submission made on behalf of the HKAA that Lee should have made his appeal to the Malaysian and or PRC ASNs, and that he is now out of time to so doing.

68.  Rather, it seems to me that no contractually agreed domestic remedy has been clearly identified, so that the court is the proper jurisdiction for the resolution of the disputes between the parties.  In any event, it seems to me that the nature of the particular disputes identifies the court as clearly and distinctly the most appropriate forum for the resolution of those disputes, so that even if there had been identified a domestic remedy agreed by contract, I should not have required prior recourse to it.

69.  In this context, and though I say nothing about the merits of the claims, I note the ASOC includes claims in negligence and defamation.  Those seem to me to be claims which should be determined by a court, and provide another reason why a stay of the action is inapt.

70.  These are the reasons why I dismissed the HKAA’s summons.

Costs

71.  At the end of the hearing, the parties addressed me on questions of costs.  Mr Yu sought costs in favour of Lee against the HKAA, whilst Mr Wong suggested that the appropriate order was no order as to costs.

72.  In the light of my decision and the reasons for it, I am not persuaded that there is any reason why costs should not follow the event.  Therefore, I order Lee’s costs of the application to be paid by the HKAA.

73.  Mr Yu also invited me to make a summary assessment of the costs, and provided a statement of costs for such an assessment.  I gave the opportunity to Mr Wong or his instructing solicitors to identify any objections, to be provided after the hearing, with a short time within which Mr Yu or his instructing solicitors could reply.

74.  The summary assessment as revised after the hearing seeks a total sum of $422,588. The main objections raised to this total relate to the suggestion of duplication of costs by fee earners and excessive time spent, as well as objection to counsel’s fees for settling affirmations (which should be solicitors’ work and/or duplicated that work).

75.  I think there is some merit in these objections, though I do not propose to limit the costs to the figures suggested on behalf of the HKAA, namely by a total reduction of $237,340.  In the broad exercise of my discretion, I assess the costs on a summary basis at the figure of $298,000. This sum is payable forthwith.