WOON LEE CONSTRUCTION CO., LTD v. HOLYROOD LTD

HCCT 43/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION & ARBITRATION PROCEEDINGS

NO. 43 OF 2010

____________

________________________________

REASONS FOR DECISION

________________________________

Introduction:

1.  On 19 October 2010, I heard this application for leave to appeal against an award by an arbitrator, made by way of a Partial Award on 18 June 2010, and a supplemental award made on 6 July 2010, when, without calling upon counsel for the Respondent to reply, I dismissed the application with reasons to be delivered later.  These are my reasons for that decision.

The amendment of the originating summons:

2.  Pursuant to O 73 r 2(d) RHC, leave to appeal against an award of an arbitrator must be sought by way of originating summons.  Paragraph 17 of Practice Direction 6.1 requires:

“Every application for leave to appeal against an arbitration award shall contain a succinct statement of each ground upon which it is sought to contend that the arbitral tribunal erred in law. Reference shall be made to the paragraph or passage of the award and reasons where each alleged error is to be found. A copy of the award and reasons forming part of the award and any documents expressly incorporated in the award of such reasons shall accompany the application.”

3.  By O 73 r 5(2) a time limit is established for an application for leave to appeal against an arbitrator’s award in the following terms:

“In the case of an appeal to the Court under section 23(2) of the Arbitration Ordnance (Cap 341), the summons must be served, and the appeal entered, within 30 days after the award has been made and published to the parties:

Provided that, where reasons material to the appeal are given on a date subsequent to the publication of the award, the period of 30 days shall run from the date on which the reasons are given.”

4.  The originating summons in this case, filed on 30 July 2010, that is within 30 days after the award had been made and published, specified two errors in the following terms:

“(a) That the Arbitrator erred in law in finding at paragraph 100 that, insofar as the instruction of the variation was given by the Respondent to the Claimant orally, as a matter of construction, the Claimant’s entitlement under Clause 11(4) of GCC (if any) would not be subject to the contractual requirements and the Clause 8.03 of the Preliminaries.

(b)     That the Arbitrator erred in law in finding at paragraph 104 that if the evidence shows additional or varied work to have been carried out by the Claimant for the Respondent, the Respondent would be entitled to be paid for that work if the contract requirements have otherwise been fulfilled.”

5.  On 14 October 2010, the solicitors for the Claimant filed an inter partes summons seeking leave to amend the originating summons.  The essence of the amendments were first to recast, essentially in different terminology, the grounds that had been originally pleaded.  In so far as that variation did not expand the grounds originally pleaded it was probably unobjectionable.

6.  But the amendment also sought to introduce an entirely new ground, an argument based upon the legal principle of ex turpi causa non oritrur actio. Mr Manzoni objected to the amendment on the grounds that it was out of time.

7.  I am satisfied that Mr Manzoni is right when he says that the proposed amendment amounts to an application to extend time.  In Free Form Construction Co Ltd v Shinryo (Hong Kong) Ltd [2008] 3 HKC 415 at 417, a decision prior to the present Practice Direction, a Motion for leave to appeal without an affidavit was filed, with the affidavit in support only been offered several days before the hearing, some three months after Motion was filed. Reyes J found the application for leave to file the affidavit was tantamount to an application to extend the time for launching a motion seeking leave to appeal against an award, and that such leave should, in principle, only be given in exceptional circumstances and then only for compelling reasons. 

8.  A fortiori, the application to amend the originating summons in the present case, by adding an entirely new ground of appeal, is in precisely the same way, in effect, an application to extend time.  The power of amendment is not a licence to file an originating summons asserting one ground, and then, after time has expired, to amend the originating summons, adding entirely new grounds.

9.  Mr Yau sought to argue that the expression “summons” in O 73 r 5 did not refer to the originating summons, and that accordingly he was not restricted in making the amendment proposed.  The argument was hopeless. The only way in which an appeal against an arbitrator’s award may be made is by an originating summons.  Although Rule 5 refers only to a “summons”, the only “summons” that could possibly be intended is the originating summons.

10.  If it is intended by a party seeking leave to appeal against an arbitrator’s award to subsequently vary or add to the grounds upon which the leave is sought, and the 30-day period has expired, he must do so, not merely by seeking to amend the originating summons, but by making an application for leave to appeal out of time.  That application must be appropriately supported by an affidavit containing a clear statement of the reasons for the inability to comply with stipulated time limit.  As Reyes J said in Free Form, such leave will only be given in exceptional circumstances and then only for compelling reasons.

11.  Not only in this case was there absolutely no explanation at all provided for the delay, other than an irrelevant assertion that solicitors had been changed, the proposed argument was hopeless.

12.  The question of any illegality on the part of the Respondent was not pleaded, nor argued, at the hearing of the arbitration, so it is not surprising that the arbitrator did not consider it.  The argument turned upon an assertion that there was a private arrangement between the parties in relation to payments due to be made by the Claimant to the Respondent in order to deceive a bank.  Even if there was, such a private arrangement it went nowhere to establish that the contract, the subject of the arbitration, was illegal.

13.  It was not in any way necessary for the Respondent to plead or rely upon that private arrangement, if it existed, as part of its case.  The modern law of ex turpis causa, as explained by the House of Lords in Stone & Rolls Ltd v Moore Stephens [2009] 3 WLR 455 makes it clear that the court ignores the public conscience and is concerned only with whether the plaintiff has to plead and rely upon his own illegality to recover the sums concerned.  Here that was plainly not the case.  Consequently, the argument was hopeless.

14.  I accordingly dismissed the application to amend the originating summons with costs on the application of the amendment to the Respondent.

The application for leave to appeal:

15.  Notwithstanding the assertions of the solicitor for the Claimant in the affidavit in support, it is quite plain that the clause at issue, clause 11(4), was not a standard clause.  The argument concerned only a clause in the Preliminaries, an individually written clause specific to the individual contract.  There was no evidence at all that the particular clause had ever been used in any other contract. 

16.  It is right that oral instructions happen regularly in building contracts, but that is not sufficient to justify leave to appeal.  There was no dispute as to whether or not oral instructions were given.  The only dispute was whether the Preliminaries altered the inevitable consequences of clause 11 of the contract.

17.  The effect of the argument for the Claimant is that a contractor would not be entitled to payment in respect of any oral variation requested by the owner and actually carried out by the contractor in accordance with the owner’s instructions.  That is an argument which defies business commonsense.  The argument only need be stated to demonstrate that far from getting the construction “obviously wrong”, the arbitrator has actually got the construction of the contract “obviously right”.

18.  There is simply no basis upon which leave to appeal this experienced arbitrator’s award should be given.

Costs:

19.  Mr Yau sensibly accepted that there was no basis upon which he could oppose the usual rule that costs should be on an indemnity basis.  I made an order for costs accordingly.