KEN FORWARD ENGINEERING LTD. v. WELTIME HONG KONG LTD.

CACV 321/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 321 OF 2002

(ON APPEAL FROM HCCT 47 OF 2002)

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J U D G M E N T

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Hon Mayo VP (giving the judgment of the Court):

1. This is an appeal from a Decision of Burrell J. who heard an Originating Motion issued by the applicant for leave to appeal against an Arbitration Award out of time. The Judge dismissed the Motion.

2. It is necessary to hear this appeal in two separate parts. In the first an application is made to adduce additional evidence.

3. The additional evidence which it is sought to adduce is affidavit evidence which is filed in support of the applicant's contention that the reason for the non compliance with the requirement to lodge an appeal within 21 days of the publication of the Award was attributable to the negligence of the solicitor then representing the applicant and his failure to inform it of his misunderstanding of the rule relating to when time begins to run for an appeal against an award.

4. When the Judge was seized of the Motion he had before him an affidavit sworn on 15th May 2002 by Mr. David Chow a director of the applicant company in which the explanation for the delay in complying with the 21 days time limit was that he had been unable to obtain the Award from the Arbitrator as she had insisted upon payment of her fees before she would furnish the applicant with a copy of her Award.

5. Mr. Chow stated in his affidavit that he was unable to pay the Arbitrator's fees of $350,000 due to impecuniosity. His impecuniosity had been brought about as a result of the failure of another party to a different Arbitration which the applicant was engaged in to pay the amount ordered by that Arbitrator to the applicant timeously.

6. In his affidavit in support of his application to adduce additional evidence Mr. Chow affirms that his then solicitor never advised him that time began to run for the appeal from date when the Arbitrator informs the parties that the Award is available for collection by the interested parties.

7. Mr. Chow expresses the opinion that his solicitor was clearly labouring under the misapprehension that time only began to run from the date when the parties actually received copies of the Award. He goes on to affirm that his solicitor never admitted that he was under this misapprehension.

8. It would seem to us that the critical point to weigh in determining whether leave should be granted to adduce this additional evidence is when Mr. Chow became aware of the position.

9. It would appear from his affidavit in support of the application that he became aware of the position on 15th May 2002 two days before the return date of the Motion.

10. Para 17 of the affidavit reads:

"In paragraphs 4 and 5 of my first affidavit in HCCT 47 of 2002 dated 15 May 2002, I depose that I had been advised of the time limit and was aware that we were out of time to file an appeal. However, I wish to emphasize that it was only on that day (15 May 2002) that I received this advice (by reading the Affidavit prepared for me) and hence first became aware of it. Until that moment, I was led to believe that we were still within time, and this explains why no particular urgency was shown by the Applicant in paying its half share of Miss W M Whittaker's fees for the award until it was in receipt of funds (from another arbitration between the Applicant and Healthy Sun Limited in which the Applicant was awarded about HK$2 million), nor in pressing the Respondent or the Respondent's solicitors, who did not pay its half share for another 2 weeks. There is now produced and shown before me marked exhibit 'DCCK-2' a true copy of the Applicant's brief chronology for the period between 1 March 2002 and 30 May 2002."

11. It was accordingly open to him to decline to swear the affidavit as originally drafted and insist upon the Motion being proceeded with on the basis that his solicitor had misunderstood the relevant provisions. This might well have necessitated instructing other solicitors and having to seek an adjournment of the hearing.

12. What however is not acceptable is to proceed with an application on a basis where an important part of the evidence in support is lacking and when it is unsuccessful seeking the indulgence of the court to hear it on a revised basis.

13. There is a further dimension to this matter.

14. It can be seen from the transcript of the hearing before the Judge and from Mr. Chow's affidavit that counsel representing the applicant was fully aware of the complaint that they had only learnt of the fact that the application was being made out of time shortly before the hearing.

15. Notwithstanding this counsel proceeded with the application simply on the basis of the applicant's impecuniosity.

16. What needs to be borne in mind is that it is wholly unsatisfactory that an application of this nature should be proceeded with on a speculative basis.

17. If it is necessary to make a serious allegation of negligence against a solicitor the rules of natural justice dictate that the court should hear from the solicitor whether he accepted there was any foundation to the complaints being made against him. This of course is an entirely different matter to the solicitor being reluctant to give evidence which may be of assistance to the applicant in making the application.

18. However in our view the main reason why this application should be dismissed is that the applicant and his legal advisors were well aware of the matters which are deposed to at the time of the hearing of the Motion on 17th May 2002 and chose to proceed with the application exclusively on the basis of the applicant's impecunosity.

19. We advised the parties of our Ruling during the hearing. These are our reasons for our decision.

20. This then brings us to the second limb of this appeal. This is whether the Decision of the Judge when he declined to grant an extension of time to the applicant can be impugned.

21. The first point which is made by Mr Westbrook SC for the applicant is that the Judge was misled by the applicant's former solicitor when reliance was placed exclusively upon the applicant's impecuniosity in support of the application. In view of the decision not to grant leave to permit the applicant to adduce additional evidence there is insufficient supporting evidence to enable it to make out a case that the solicitor's alleged negligence should constitute a ground for setting aside the Decision.

22. One of the main complaints made by the applicant is the manner in which the application was heard by the Judge.

23. According to Mr Westbrook there was some misunderstanding as to whether the application was one for directions or whether it was the substantive application.

24. It is not readily apparent how there could have been any misunderstanding on this.

25. It is most unusual for a judge hearing a relatively simple application of this nature to entertain an application for directions. What directions would be sought?

26. Certainly the Judge does not appear to have had any doubts in the matter. As can be seen at the conclusion of his judgment he criticises the parties for the unrealistic time estimate which was given to the application. Clearly it was his impression that he was dealing with the substantive application.

27. He says at p. 6 of his judgment:

"13. Finally, I consider it appropriate to make the following observation. This case was put in the court's 9.30 a.m. list. It should not have been. The hearing took closer to two hours. Practitioners should be aware that the 9.30 a.m. list is for very short matters only such as time summonses, call overs, summons for directions and other largely uncontentious matters. It should not be used as a back door to get relatively short but nonetheless contentious issues an early date. In this instance, I do not lay blame on one particular side or the other. Apparently, the applicant was not aware that the respondent had briefed senior counsel to strenuously oppose the application in the 9.30 a.m. list. Mr Hingorani was only instructed during the morning of the hearing, after Miss Cheng had commenced her submissions. I therefore merely encourage solicitors to consult each other to discover the true nature and likely length of the hearing."

28. If the applicant's counsel formed the view that there was insufficient time to dispose of the matter properly it would have been his duty to seek an adjournment of the application. He did not do so. Ostensibly he placed before the Judge all the matters which he considered to be necessary in the circumstances. It is accordingly not open to the applicant to subsequently argue that it has had insufficient opportunity of presenting its case to the Judge when the application is dismissed.

29. What needs to be added in this connection is that it was not necessarily the case that this application should be an unduly protracted one.

30. The words of Leonard J at p. 95 of The Garden Co. Ltd v On Lee General Contractors Ltd [1995] 2 HKC 89 are apposite.

"It is worth repeating, as I did in another case, the words of Lord Donaldson in The Kelaniya [1981] 1 Lloyds Rep. 30 at p. 32, in reference to an arbitrator and the parties to a dispute:

'There is a strong presumption that they have also accepted him for better or worse in relation to questions of law. This is not, however, to say that, even in a one-off case, an arbitrator is allowed to cavort about the market carrying a small palm tree and doing what he thinks appropriate by way of settling the dispute. What it does amount to is that the courts will normally leave him to his own devices and leave the parties to the consequences of their choice. They will only intervene if it can be demonstrated quickly and easily that the arbitrator was plainly wrong.'

I emphasise the words 'quickly and easily'. This court has been provided with seven lever arch files containing bundles of affidavits, copies of law reports, skeleton arguments and so on. The Notice of Motion runs to eleven pages. The hearing occupied 9 hours 5 minutes of the court's time on three separate dates, whereas the estimate of time endorsed on the Notice of Motion was not exceeding two hours. Part of the 9 hours 5 minutes was taken up by an application for an order to the arbitrator to give reasons. The estimate of time for that was not exceeding 15 minutes. So a total estimate of 2 hours 15 minutes was followed by a hearing of 9 hours 5 minutes.

It may not be realistic in a complex case to expect the 10 to 15 minute hearing contemplated by Lord Diplock in The Antaios; Antaios Compania Naviera S.A. v. Salen Rederierna AB [1985] AC 191. That length of hearing may be sufficient where there is a simple dispute on the meaning of a single clause or phrase. More time may be needed in some cases. However, an application for leave should normally be short. This is the second case of its kind in a row where I have been treated to elaborate submissions more appropriate to a substantive appeal than to an application for leave. The previous case occupied 81/2 hours of the court's time.

By now it should have dawned upon the profession that leave to appeal will be granted only in exceptional cases and clients involved in arbitration should be so advised. If it cannot be demonstrated quickly and easily that the arbitrator is wrong, elaborate arguments are unlikely to succeed.

In future, applicants for leave to appeal against an arbitrator's finding on a point of law are likely to find that limits on the time allowed for submissions will be imposed by the court. Where arbitrations are delayed and costs increased by unmeritorious applications for leave to appeal especially on Interim Awards, the taxation of costs on an indemnity basis may in future have to be considered."

31. As has been pointed out by Ms Cheng SC for the respondent the Notice of Originating Motion ran to 57 pages and no single point of law has succinctly been made out in the Notice.

32. Unless an applicant is able to identify in a relatively short compass that something has gone seriously awry in an arbitration the prospects of being able to convince a judge that leave should be granted to prosecute an appeal are slender indeed.

33. What all of this indicates is that there is no reason why the Notice of Originating Motion should not have been disposed of within a reasonable time. Certainly it would not have been necessary to trawl through the 57 pages of the Notice.

34. While it is undoubtedly normally the case that it is not the function of the Court of Appeal to hear the merits of an appeal de novo we are persuaded in the present case to depart from this. This is because it is apparent from a perusal of the transcript of the proceedings before the Judge that the question of the merits was not considered in any depth at all.

35. In a case such as this where there has been fairly substantial delay for which no acceptable explanation has been forthcoming it is still necessary for a judge to consider the merits of the proposed appeal.

36. Needless to say in such a situation the merits would need to be overwhelming for it to be right to grant leave to proceed.

37. Mr Westbrook places reliance on four grounds of appeal.

38. According to him his fourth ground is his strongest. This has been referred to as the settlement agreement point.

39. An agreement was concluded between the parties as to the terms upon which the applicant would vacate the site.

40. The letter recording the agreement was in these terms:

"KEN FORWARD ENGINEERING LIMITED

Our reference: YP/9811/G484	13th November, 1998
Mr. Chan Kam Ling	BY HAND
c/o Hip Hing Construction Co., Ltd.,
29/F, New World Tower,	Without prejudice
16-18, Queen's Road Central,
Hong Kong.

Dear Sir,
	Re:	The arbitration between Ken Forward Engineering Ltd.
		And Weltime Hong Kong Limited
	Project:	Lot No. 1861, D.D. 100, Sheung Shui, N.T.
	We refer to the above matter and our meeting dated 7th November, 1998 during
which we have agreed the following terms with a view to settling the present dispute amicably:-

a) the Employer shall pay us the sum of HK$5,000,000.00 on or before 17th November, 1998;

b) the Employer shall engage another Quantity Surveyor to agree with our Quantity Surveyor on a fair assessment of our works done as soon as possible;

c) the Employer shall waive all its claims against us whatsoever howsoever and fully discharge us from our obligations under the contract;

d) subject to the above terms and conditions, we shall hand over the subject site to you on behalf of the Employer on 18th November, 1998;

e) meanwhile, we shall suspend the arbitral proceedings until and unless there is no agreement reached on the assessment as per on paragraph b) herein.

Thank you for your kind attention.

	Yours faithfully,
	For and on behalf of
	KEN FORWARD ENGINEERING LTD.
	(Signed) Authorised Signature(s)"

41. The complaint which is made by Mr Westbrook is that notwithstanding the clear stipulation that all of the respondent's claims would be waived the Arbitrator still made a finding that the respondent did not exercise a waiver "in respect of mass concrete and superstructure reinforcement by reason of being unaware of relevant facts and that the agreement did not constitute a final settlement".

42. Mr Westbrook went on to submit that the Arbitrator appeared to have confused the equitable doctrine of waiver which requires knowledge before the waiver can be operative with waiver which varies a contract and is supported by consideration.

43. To ascertain whether there is any merit in this ground it is necessary to turn to the relevant part of the Award which deals with this matter which is at p. 299 on bundle B of the appeal bundles before us:

"h) Save in respect of the waiver, an agreement in terms put by the Claimant's letter dated 13th November 1998 is generally consistent with the lack of a reply from the Respondent and with the parties' conduct both before and afterwards; I am not persuaded that the Respondent expected that the QS assessment might conclude that the Claimant had been overpaid and that it might recoup any overpayment; a waiver and discharge of the Claimant from its obligations would not be inconsistent with a mutual agreement to determine the Contract; I therefore find that an agreement was made in terms put in the Claimant's letter; however, because the Respondent was unaware at the time of the defective work which is the subject of the Counterclaim, I find and hold that there was no waiver in this respect and find and hold that the Contract was terminated by agreement."

44. What is significant from this passage are the first six words.

45. The question of waiver was considered by the Arbitrator on the page which precedes this passage. As has been pointed out by Miss Cheng this related to a finding of fact which cannot be attacked on an appeal.

46. It is pertinent to note that the letter of the applicant dated 13 November 1998 purported to record the terms of an oral agreement reached between the parties at a meeting on 7 November 1998. It is common ground that there was no reply to that letter. There is a factual dispute between the applicant and the respondent as to what was agreed at the meeting. The conflicting evidence in this respect was set out by the Arbitrator in some detail in the Award, see in particular pages 290 to 292 in bundle B of the appeal bundles for the respondent's evidence and contention, and pages 294 to 297 for the applicant's evidence and contention. It was against this conflict in evidence that the Arbitrator made the finding at page 298 that the respondent did not waive the claims for the defective work that is the subject matter of the counterclaim and she has expanded on this at page 299 in the passage set out above.

47. The point of law raised by Mr Westbrook, that there was a valid agreement to vary the existing contract as purportedly recorded in the letter of the applicant does not arise, in the absence of facts found by the Arbitrator to support it.

48. The next ground to be considered is the one referred to as "the jurisdiction point".

49. Complaint is made that the jurisdiction of the Arbitrator was limited to the applicant's entitlements under interim certificates 2-5 as at the date of such certificates. The last certificate was issued on 2 April 1998 and dealt with the situation up to 30 March 1998.

50. Complaint is also made that the Arbitrator acted outside her jurisdiction in settling all accounts between the parties.

51. The Arbitrator considered the situation up to 31 August 1998.

52. The respective cases of the parties are set out in the Statement of Claim, the Defence and the Counterclaim and Reply and Defence to Counterclaim.

53. If objection was to be raised on the question of the Arbitrator's jurisdiction, under section 13B of the Arbitration Ordinance Cap 341, which applies Article 16 of the UNCITRAL Model Law, this should have been done at a much earlier stage in the arbitration.

54. Rather than raising this objection the applicant proceeded to present their case on the basis of the time parameters of the Arbitrator. They would clearly be estopped from now raising this issue at this time.

55. It needs to be added that when the experts who gave evidence for the respective parties gave their testimony they did so on the basis that they were referring to Final Accounts.

56. Also it is apparent from the final submissions made by counsel on behalf of the applicant that he included material over and above the items included in the interim payment certificates.

57. It is in our view somewhat artificial to attempt now to contend that the award should be strictly confined to the interim payment certificates.

58. One reason for this is that the deposit of $20 million which was a bone of contention in these proceedings was specifically referred to in the second interim payment certificate. It would accordingly be difficult for the Arbitrator not to take cognisance of the said deposit and the submissions made in relation to it.

59. We do not consider that it has been demonstrated that the Arbitrator was plainly wrong in the approach she adopted.

60. The next ground to be considered is the one referred to as the re-design issue.

61. This related to a contention which was being advanced by the applicant that as the original plans were not being proceeded with by the respondent the damages recoverable by them from the applicant would thereby be greatly diminished.

62. It is apparent that this issue was ventilated fully before the Arbitrator.

63. This is not a matter where there would be any prospect of success on an appeal.

64. Finally there is the "delay and disruption claim".

65. Complaint is made that the Arbitrator failed to consider a report prepared by a Mr Mackintosh which dealt with this topic. He also gave evidence in relation to it.

66. The reason why the Arbitrator refused to consider these claims was that they were never pleaded.

67. That was on the face of it a good reason why she should not do so.

68. We have dealt very briefly with the grounds advanced by the applicant.

69. What is very clear is that none of these grounds appears to have any prospect of success.

70. They fall far short of surmounting the formidable hurdle which has to be passed for leave to be granted to the applicant to lodge an appeal.

71. Even if these grounds had been fully argued before the Judge it is virtually inevitable that his decision would have been the same.

72. It is apparent from what was before the Judge that there was insufficient material to meet the exacting requirements which would justify leave being granted to prosecute an appeal.

73. It is clear from the Judge's Decision that his analysis of the law cannot be faulted.

74. So far as Order 3 rule 5 is concerned he placed reliance upon Chiu Sin Chung v Yu Yan Yan Angela [1993] 1HKLR 225.

75. He then went on to consider Carl International (HK) Ltd v Ernst Komrowski & Co. [1996] 2 HKC 490 in relation to Arbitration proceedings and the passage from the judgment of Rogers JA as he then was in Wong Bik Ling Kitty v Crowe Insurance Group (HK) Ltd [2000] 1 HKC 233:

"Secondly, Rogers JA in Wong Pik (sic) Ling Kitty v. Crowe Insurance Group (HK) Ltd [2000] 1 HKC p.235:

'The judge then exercised his discretion to condone the late filing of the application.

In my view, the judge erred in principle in relying on these matters as a basis for exercising his discretion to extend time. The fact that one party may not feel that a decision might not be in his favour or that he had little to gain from it other than costs is no ground for extending time to appeal when he subsequently finds out that his worst feelings might be right.

The fact that the award might be wrong in itself is not a ground on its own for extending time although it is, of course, a consideration to be taken into account.

In those circumstances, it then falls upon this court to exercise its own discretion.

Arbitration proceedings are quite separate from court proceedings. The point of them is that they are the choice of the parties. The matter is left to the parties and the arbitrator except in exceptional circumstances. The court only interferes in the outcome of arbitration proceedings in exceptional circumstances and certainly not just because the court might feel that the decision might be wrong.'"

76. He also considered Kwan Lee Construction Co. Ltd v Elevator Parts Engineering Co. Ltd [1997] 1 HKC 97 from which it is clear that sitting back and waiting for a copy of an award is not an excuse which will justify a failure to comply with the requirement of lodging an appeal within the prescribed time.

77. In addition to this the Judge's analysis of the facts cannot be faulted.

78. For all these reasons in our view the appeal should be dismissed and the applicant should bear the costs of the appeal.

79. This being so the appeal is dismissed and we make an order nisi that the respondent is to have the costs of the appeal.