LEUNG KWOK TIM t/a TIM YIP ENGINEERING CO v. BUILDERS FEDERAL (HONG KONG) LTD

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9196 OF 2000

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DECISION

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1. This is an application by the defendant to stay proceedings pending arbitration.

2. Those facts which are not in dispute are as follows. The plaintiff has issued a writ, claiming $8,413,019 which is the total sum due on 39 different invoices submitted to the defendant for payment for work done by the plaintiff. The defendant has managed to locate the invoices and contractual documents in relation to 35 of the 39 jobs. They are all the same and contain the same arbitration clause. In relation to the other four, the defendant has not been able to locate the relevant documents but submits that an inference should be drawn that such documents do exist, albeit that they have been misplaced, and that they fall into the same category as all the others. The amounts due under the four "missing" contracts are only about $15,000 in any event.

3. The existence of the arbitration clause is not challenged. The sole ground upon which the stay application is opposed is that there is, in truth, no dispute to be referred to an arbitrator. It is accepted that if there is a dispute, the stay is mandatory. Per Bokhary JA (as he then was) in Tai Hing Cotton Mill v. Glencore Grain Rotterdam BV [1996] 1 HKC 363 :

"          (1) Under art 8(1) of the Model Law, the court was not concerned with investigating whether the defendant had an arguable basis for disputing the claim. If a claim was made against him in a matter which was the subject of an arbitration agreement and he did not admit the claim, then there was a dispute within the meaning of the article. If he sought a stay of the action, the court must grant a stay unless the plaintiff could show that the arbitration agreement was null and void, inoperative or incapable of being performed ...."

and Waung J in Louis Dreyfus Trading Ltd v. Bonarich International (Group) Ltd [1997] 3 HKC 597 :

"          (1) In order to deprive a party to an arbitration agreement of its right to mandatory stay, there had to be proof of an unequivocal admission as to liability and quantum. ...."

4. The high water mark of the plaintiff's case is the fact that its pleaded case is that when invoices were sent out, liability was not denied and the defendant asked for time to pay. Therefore, it is said, there is no dispute. This pleaded allegation is supported by evidence on affirmation to the same effect from the plaintiff. There is no document or correspondence in which the defendant states that it does not deny liability or that it is asking for time to pay. The plaintiff's case is that such statements were oral.

5. The onus of proving the existence of a dispute lies on the defendant. Because the definition of "dispute" is wide, it is often a relatively easy onus to discharge. Here, the evidence on affirmation from the defendant's senior executive specifically disputes both liability and quantum. The issue therefore is, does the plaintiff's allegation that the defendant orally did not deny liability and asked for time to pay constitute a "clear unequivocal admission of both liability and quantum"? Despite valiant attempts by Mr Lau, the plaintiff's counsel, to persuade the court that the answer to this question was "Yes", I must disagree. It is a disputed allegation of non-denial. As such, it falls significantly short of an unequivocal admission of both liability and quantum.

6. I am satisfied also that the arbitration clause (clause 29) has been incorporated as part of the contract between the parties. Further, it is clear that its effect is unaffected by clause 30 which is the "applicable law" clause. Reference in that clause to "The courts of Hong Kong" does not have the effect of revoking the arbitration clause. To be fair, Mr Lau did not pursue this part of his submission with much enthusiasm.

7. Whilst the court has inevitable sympathy with the plaintiff who clearly has a strong case and is waiting for his money, the strong bias in favour of arbitration results, on the facts of this case, in the stay being granted.

8. The only remaining question is whether there should be a stay in relation to all 39 contracts or merely the 35, in respect of which the relevant contractual documents have been located.

9. The plain common sense approach is to stay all 39. It is reasonable in my judgment to infer that the remaining four fall into the same category as the 35. The works in question are similar in nature. They are merely four small jobs in a series of jobs done by the plaintiff, who is a sole proprietor, for the defendant. It is not suggested that there was anything different or unusual about the outstanding four. It is safe to conclude that contractual documents for them did exist and that they were identical to the 35 which still exist. They, therefore, contained the same arbitration clause.

10. The application for a stay must be granted, in respect of all 39 contracts. I make a costs order nisi in the defendant's favour. Accordingly, I make no order on the plaintiff's Order 14 summons with no order as to costs.