JIN HAI AN CONSTRUCTION ENGINEERING LTD v. GOLDEN ROCK BEACH INC AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-----------------

-----------------

JUDGMENT

-----------------

1. This is an application for a stay of proceedings which is made by the 2nd Defendant in this case. The Plaintiff is a company incorporated in Hong Kong which claims that it entered into an agreement with the 1st Defendant, a company incorporated in United States of America. The agreement in question is a written contract dated the 31st December 1987. It is in the Chinese language and has been produced as an exhibit, with a certified translation. The first part of it reads as follows:

"Agreement

Party A: Golden Rock Beach Inc. New York, USA.

Party B: Jin Hai An Construction Engineering Ltd.

4. Particulars of the agreement follow. Clause 6 reads:-

"6. Arbitration: In the course of performing this Agreement, if disputes arise between parties, (both parties) shall solve the dispute through the spirit of friendly conciliation, if (it) cannot be resolved, Party B shall nominate an arbitration venue, to be approved by Party A. The decision of the arbitration institution shall be final, costs of litigation shall be born by the losing parties."

5. Everything I have so far quoted from the agreement indicates that there are but two parties, namely the Plaintiff and the 1st Defendant. Clause 4 reads:-

"4. Repayment guarantee: Both Party A and Party B agreed to invite Wai Wah Company to be the credit guarantee of repayment, guarantees that Party A shall perform the Agreement, if Party A cannot repay on time Guarantor shall be responsible for repayment. Guarantor fee is 5%, that is US$32,500.00, Party A is responsible to pay it."

6. At the foot of the document appear three signatures. The first appears under the heading "Golden Rock Beach Inc."; the second under the heading "Jin Hai An Construction Engineering Ltd."; the third is the signature of the 2nd Defendant under the heading "Wai Wah Company".

7. The issue for me to decide is whether Mr. Ng Chun Wah the 2nd Defendant signed the document only in order to accept the responsibility as guarantor set out in clause 4 or whether he was a party to the arbitration agreement in clause 6.

8. Apart from the fact that the heading of the agreement clearly indicates that it is made between the Plaintiff and the 1st Defendant, the wording of clause 6, the arbitration agreement, clearly indicates that the arbitration agreement is being made between the Plaintiff and the 1st Defendant only.

9. The effect of the agreement between the Plaintiff and the 1st Defendant was that the Plaintiff would lend money to the 1st Defendant for the purposes of a building project in United States of America. The money was to be transmitted through the 2nd Defendant's bank account. In due course the 1st Defendant was to repay principal and interest together with an element representing profit on the ventures. On 19th April 1988, three days before the money was advanced to the 1st Defendant, the 2nd Defendant executed a statutory declaration in which he said: "On the 31st December 1987, I, in the name of Wai Wah Company, endorsed a contract executed between Golden Rock Beach Inc. & JHA Construction and Engineering Ltd. in the capacity of a guarantor." A copy of the contract is exhibited to the declaration.

10. I find that the 2nd Defendant endorsed a contract made between the Plaintiff and the 1st Defendant in order to guarantee the performance of the contract by the 1st Defendant. Clause 6 of the document was an arbitration agreement between the Plaintiff and the 1st Defendant. The 2nd. Defendant was not a party to it. There being no arbitration agreement between the Plaintiff and the 2nd Defendant in relation to the 2nd Defendant's guarantee, the 2nd Defendant is not entitled to a stay of proceedings in favour of arbitration. His liability to the Plaintiff, if any, is separate and distinct from any liability of the 1st Defendant to the Plaintiff. The Plaintiff is entitled, in order to avoid the inconvenience of suing the 1st Defendant, which is situate abroad to take proceedings against the 2nd Defendant under the guarantee and to prove the failure on the part of the 1st Defendant to pay the moneys due under the agreement between the Plaintiff and the 1st Defendant.

11. The application for a stay is accordingly dismissed. There will be an order that the Plaintiff's costs of and occasioned by the application are to be taxed if not agreed and paid by the 2nd Defendant.