HYUNDAI ENGINEERING AND CONSTRUCTION CO LTD v. VIGOUR LTD

cacv 128/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 128 of 2004

(on appeal from HCCT NO. 100 of 2003)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  These were three applications following the judgment of this court given on 25 February 2005.  The first application was an application for leave to appeal to the Court of Final Appeal, the second application was for a stay of the arbitration proceedings pending the hearing of any appeal or any further application for leave to appeal and the third was for a variation of the costs order.  At the conclusion of the hearing this court refused the various applications with reasons to be given.

2.  The background to this case can be gleaned from the judgment of this court and the judgment of the court below.  The first ground upon which leave to appeal was sought is that the amount involved exceeds $1 million.  The provisions of section 22(1)(a) of the Court of Final Appeal Ordinance, Cap. 484 (“the Ordinance”) have been consistently interpreted as requiring a claim for a liquidated amount of $1 million.  As previously indicated in the judgments, the claims and counterclaims under the building contracts are of very substantial amounts which would make the threshold of $1 million irrelevant.  Furthermore, the costs of the arbitrations that are at present in train again comfortably exceed any such limit.  Nevertheless, there is no claim in this case for a liquidated sum and hence an application on that footing must fail.

3.  No doubt with amounts ultimately at stake as substantial as in this case, the court may be more willing to accede to an application under section 22(1)(b) of the Ordinance.  Nevertheless, there has to be a matter of great general or public importance involved in the questions.  The questions proposed are

(1)   whether an agreement made between two parties after disputes have arisen to forbear from litigating or arbitrating their existing and future differences is legally binding and enforceable or void as being an ouster to the court’s jurisdiction and contrary to public policy;

(2)   whether an agreement to resolve differences by discussions and third party mediation is void and unenforceable for uncertainty;

(3)   assuming an agreement to reach agreement by negotiation and third party mediation is unenforceable for uncertainty, what is the test for severance of the unenforceable term.

4.  In summary it should be stated at the outset that the matter in issue on this appeal was the construction of a highly unusual agreement of which there was clearly no precedent and it is most unlikely that its provisions would ever be repeated.

5.  The first question was not raised in the form now proposed.  The issue had been as to whether the agreement as a whole was enforceable.  As framed the question ignores the agreement as presented and is confined to one part of it only.  This court construed the agreement differently from the way it had been construed in the court below.  That is hardly surprising given the fact that both parties had disagreed with the construction put upon the agreement in that court.  That, however, does not give rise to justification for leave to appeal.

6.  The second question also seeks to sever part of the agreement from the construction of the agreement as a whole.  As such the question posed would be academic.

7.  The third question is, again, a matter which was not the subject of the appeal in its form as presented.  It is difficult to envisage how the law as to severance could apply to an agreement such as is involved in this case.  If and in so far as it is suggested that the wording of the agreement in relation to mediation and discussions can be severed from the rest of the agreement it would simply remain an agreement which was an ouster of the court’s jurisdiction.

8.  The application for a stay of the consequence of this court’s judgment could only be effected by the grant of an injunction to prevent the continuation of the arbitrations which are at present on foot.  Since this court has upheld the judgment of the court below to the extent that the submission to arbitration under Clause 86 of the Contracts was unaffected by the entry of the parties into the so-termed March Agreement there is no legal basis upon which such an injunction could be granted.  Even if there were a legal basis for granting such an injunction, it would not appear that this case was a suitable case for that to happen.  The observation that can be made is that, if the arbitrations proceed unnecessarily, costs will be occasioned.  Those costs might be very high, even by the standards of heavy litigation, nevertheless, the incurring of those costs would not constitute irreparable damage which would justify the courts prohibiting a party pursuing a remedy which it has found it is entitled to pursue.

9.  The matter as to costs was faintly argued on the basis that in the judgment of the court below it had been held that the defendant had repudiated the March Agreement.  It was said that this connoted a stigma on the defendant and that the defendant was thus justified in bringing the matter before this court to remove that stigma.  Whilst that might be a reason why the defendant was more keen to bring the appeal, it is clear that the parties are locked in litigation and the appeal would have been brought irrespective of the finding of repudiation.  This is amply borne out by the fact that the defendant has made a further application for leave to appeal to the Court of Final Appeal notwithstanding there is no finding of repudiation to create such a stigma.

10.  In the skeleton argument, the plaintiff raised the question of costs of the application before the judge below on 30 July 2004.  Upon examination it was clear that the costs order made by the judge was that the costs of that application should be costs in the appeal.  There is accordingly, no need for this court to make any further order.

Hon Le Pichon JA:

11.  I agree.

Hon Yuen JA:

12.  I agree.