DOWNER & CO. LTD AND ANOTHER v. THE AIRPORT AUTHORITY

CACV 282/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 282 OF 1999

(ON APPEAL FROM HCCT15/1999)

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J U D G M E N T

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Hon Rogers JA :

Introduction

1. This is an appeal from a judgment of Findlay J given on 10 September 1999 whereby he granted leave to appeal the First Partial Award of the Arbitrator, Mr Neil Kaplan, QC in an arbitration commenced on 12 March 1998.

The history

2. The parties to this litigation are the Airport Authority and the 1st and 2nd applicants who are conveniently referred to as the joint-venture. The parties entered a contract dated 12 December 1994 whereby the joint-venture would construct tunnels and associated works at Chek Lap Kok Airport. Disputes arose between the parties. Under the contract, those disputes would be governed under the terms of clause 75. This clause provided for what, in effect, is a 4-stage dispute resolution process. Disputes are first submitted to the Project Manager. If one of the parties is dissatisfied with the decision of the Project Manager, then the matter can be submitted to the Project Director. If one of the parties is dissatisfied with the decision of the Project Director, the matter can then be referred to the Dispute Review Panel. Under clause 75.4 :-

"The parties are required to give effect forthwith to ...

(c) Every decision of the Dispute Review Panel which shall be final and binding except and to the extent that it shall have been revised by agreement or an arbitral award."

3. Clause 75.8 (a) provides that :

"In relation to any Dispute referred to the Dispute Review Panel ... either party may, within ninety days of such decision or the expiry of such time limit but not otherwise, refer such Dispute to arbitration ..."

4. On 12 December 1997, the Dispute Review Panel signed and dated decisions as to liability in respect of the matter in dispute between the parties but did not decide all the issues between the parties and, in particular, did not decide the amounts due.

5. It appears from the evidence filed on behalf of the Airport Authority that that party was in no hurry to take the decisions of the Panel to arbitration. The Airport Authority stood to gain nothing from the arbitration. However, they prepared themselves for the eventuality that the joint-venture might seek arbitration, but it would seem that the Airport Authority, or at least its advisers, had miscalculated when the period of 90 days would expire. A meeting had been set up for 13 March in anticipation of filing on 16 March 1998 the necessary papers for an arbitration. However, the period of 90 days from the decision of the Panel expired on 13 March and not on 15 March (which was a Sunday) as had been thought.

6. The joint-venture served its Notice of Arbitration on the Airport Authority on 12 March referring to arbitration "all matters the subject of the above Panel Reference which were not decided by the Panel in their decisions given on 12 December 1997."

7. This notice apparently took the Airport Authority by surprise. At one stage, they believed that they could raise as a defence and counterclaim the matters which had been decided against them by the Panel. They, therefore, considered that there was no need to apply for arbitration in respect of those matters and therefore cancelled the meeting. That meeting had been scheduled for 4 p.m. on 13 March primarily so that the Airport Authority could give the necessary authority to serve Notice of Arbitration. After further deliberation, the Airport Authority considered that it was appropriate for them to commence arbitration in respect of the Decisions made by the Panel and therefore sought leave of the Arbitrator for an extension of time in addition to seeking to raise as a defence and counterclaim issues which had been decided against them.

8. The Arbitrator issued his First Partial Award on 20 January 1999 and the Notice of Motion seeking leave to appeal was issued on 10 February 1999.

9. The first question raised was :-

"Whether, in the circumstances where a decision of the Dispute Review Panel has not been referred to arbitration by either party within ninety days of such decision, a party is able to disregard, challenge or re-open that decision by way of defence or counterclaim made outside that time limit in an arbitration in relation to another matter which has been referred to arbitration."

10. The second question was :-

"Whether any fact or circumstance found by the Arbitrator was capable in law of satisfying the statutory test in Section 2GD(5)(a) of the Arbitration Ordinance (Cap. 341) so as to enable him to hold that it would be just to grant the Respondent an extension of time for serving an arbitration notice."

11. Findlay J decided that the Arbitrator was clearly wrong in respect of both matters and gave leave to appeal in respect of both questions.

12. There is no dispute between the parties that the exercise of the Court's discretion to grant leave to appeal in respect of questions of law arising out of an arbitration award under section 23(3)(b) should be made in accordance with the principles set out in In Re P.T. Dover Chemical Co. v. Lee Chang Yung Chemical Industry Corporation [1990] 2 HKLR 257. In the first place, there is a presumption in favour of finality and against granting leave. In the second place, a distinction is drawn between questions of law arising in "one-off" cases and those of general importance to a substantial section of the commercial community. As Hunter JA said at p.264 of the P.T. Dover case :-

"At the top of the scale or spectrum the presumption of finality is strongest in the 'one-off' case or 'one-off' event. ...

At the bottom end of the scale the presumption is weakest where the dispute arises between Hong Kong parties out of a standard form of contract in regular use in Hong Kong; turns upon the construction of that contract in the context of events which are commonplace or likely to recur; and has given rise to a question of law decided by a non-legal arbitrator, e.g. an architect or engineer."

13. In this case, of course, the Arbitrator does not fall into that latter category.

14. I would only add to this that it also emerges that the notion of finality in respect of arbitration stems from the fact that arbitration is an alternative to court proceedings chosen by the parties and that the court should interfere as little as possible. If arbitration is to be successful, it should also be speedy and appeals to the court not only detract from the finality of arbitration but also inevitably lengthen the decision-making process considerably.

15. In this case, the judge below based his decision upon the fact that he considered that the Arbitrator was clearly wrong. In respect of the first matter, he considered that where a party has not referred a decision of the Panel to arbitration, it could not be open to them to challenge the decision by way of defence or counterclaim. The decision of the Panel was to be respected and final and binding unless set aside either by agreement or an arbitral award.

16. The judge below also analysed in some detail the Arbitrator's reasons for holding that he was in the alternative also entitled to extend the time for commencing the arbitration under section 2GD(5)(a) of the Arbitration Ordinance. That is a comparatively new section and reads as follows :-

"(5) An arbitral tribunal may make an order under this section extending a period only if it is satisfied that-

(a) the circumstances were such as to be outside the reasonable contemplation of the parties when they entered into the arbitration agreement, and that it would be just to extend the period;"

17. The judge considered that none of the factors which were considered by the Arbitrator in making his First Partial Award fell within the category of matters which would have been outside the reasonable contemplation of the parties in 1994.

18. It has to be borne in mind that this court is considering the exercise of the judge's discretion to allow the commencement of an appeal against the First Partial Award. Hence, the hearing of the appeal has not taken place. It is for that reason, in my view, important that this court should confine its comments as closely as possible to avoid causing any prejudice to the hearing of the appeal. In those circumstances, I consider that it is apposite simply to say that I would not fault the reasoning of the judge in granting leave to appeal and, in any event, since it was an exercise of discretion, I do not see that there are grounds for this court to interfere with the judge's exercise of his discretion. I do not consider that the judge took into account matters which he should not have done or failed to take into account any matters or, in any way, misconstrued the facts before him. Neither do I consider that his decision was so wrong that it should be interfered with. This is the same in respect of both questions.

19. In any event, section 2GD is a comparatively new section, added to the Arbitration Ordinance in 1996. Although its equivalent has been the subject of decisions in England, I consider it would be of some advantage for the section to be considered in Hong Kong. It could be anticipated that it would not be unusual for arbitrators to be asked to exercise the power of extension which this section gives and it would, no doubt, be of some assistance if guidelines as to the exercise of the powers under that section were considered in an authoritative judgment.

Hon Godfrey VP :

20. I agree. The only question we have to decide is whether the judge was entitled, in the exercise of his discretion, to grant leave to appeal. I am not satisfied that the judge went so far wrong here as to justify us setting aside his decision to grant leave to appeal. This appeal itself must therefore be dismissed, with costs.