XCHRX CHUNG SIU HONG CELMENT AND OTHERS v. PRIMEQUINE CORPORATION LTD. AND OTHERS

1999, No. A10332

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

________________

JUDGMENT

________________

1. This is an application by the first defendant that the matter in respect of which proceedings are being taken by the plaintiffs in this court be referred to arbitration.

2. The parties are partners in a business formed for the purpose of investing in thoroughbred horses. The plaintiffs allege that the partnership was formed in about September 1995 "pursuant to an agreement . . . made and evidenced by . . . a written agreement . . . and the conduct of the" partners. The plaintiffs then allege certain specified clauses of the written agreement, and certain clauses in a written management contract. Then the plaintiffs allege breaches of the written agreements by the first defendant and demands for accounts. The plaintiffs also allege "further and alternatively" that the first defendant is under a duty to account "by virtue of . . . its fiduciary position as manager . . . [under the written agreements] and/or its duty under" section 30 of the Partnership Ordinance (Cap. 38). Further breaches of the written agreements, and this duty, are alleged. There is then an allegation that the plaintiffs gave notice of dissolution of the partnership, but "alternatively" the plaintiffs say the court ought to dissolve the partnership. The relief claimed is a declaration the partnership has been dissolved, or an order that it be dissolved, an order for winding up, all necessary accounts and inquiries, or an account.

3. Each of the written agreements contain a clause reading as follows -

"In the event of their [sic] being any dispute in the interpretation and operation of this Agreement, [the first defendant] may appoint an independent lawyer recommended by the President of the New Zealand Racing Authority, who shall arbitrate between the parties."

4. The plaintiffs have filed evidence by Mr Chung Siu Hong Clement (the first plaintiff). In this, Mr Chung alleges that there is no such body as "the New Zealand Racing Authority". Mr Chung does not explain what the parties had in mind when they mentioned "the New Zealand Racing Authority" in the agreements. Indeed, he says that he was unaware of the arbitration clauses until this application.

5. The evidence that there is no such body as "the New Zealand Racing Authority" appears from an exchange of letters between the plaintiffs' solicitors and Mr PA Tolley, the Racing Control Administration Manager of New Zealand Thoroughbred Racing Inc. Mr Tolley says that there "used to be a New Zealand Racing Authority which had a Chairman and not a President. This body is now defunct and was replaced by the New Zealand Racing Industry Board." Mr Tolley says that his institution is happy to co-operate "if in fact we are the body you are referring to."

6. In a more recent letter dated 22 September 1999, Mr Tolley says that "the Racing Authority in New Zealand who controls thoroughbred racing is or was the New Zealand Racing Conference. That organisation has been in existence since early 1896 and the name was changed to New Zealand Thoroughbred Racing Inc on 1 April 1999.". He goes on to say that "The New Zealand Racing Conference has as its head a President, whereas under the New Zealand Thoroughbred Racing Inc the head is referred to as the Chairman. The President of the then NZRC and the current Chairman of the NZTR Inc have over the years been called upon to appoint independent persons to settle disputes in racing of all kinds. In this regard, the current Chairman, Mr Murray Acklin, would be available to recommend an independent lawyer experienced in New Zealand thoroughbred racing to arbitrate between any parties of a dispute."

7. That is the evidence before me. On this basis, Mr Ling submits that I should not order that the matter refer the parties to arbitration because, in the words of Article 8 of the Model Law, "the agreement is null and void, inoperative or incapable of being performed.".

8. In the agreements before me, the parties expressed their preference to have their disputes resolved by arbitration. It is my duty, especially in the present philosophy strongly in favour of party autonomy, to implement that desire if it is at all possible. The parties want their disputes resolved by "an independent lawyer". That is perfectly possible. The only problem is the instrumentality by which that lawyer is to be recommended. It cannot have been the common intention of the parties to these agreements that the lawyer should be recommended by a person who does not exist. It is much more probable, even certain, that their common intention was that the lawyer should be recommended by the head of the racing authority responsible for thoroughbred racing in New Zealand. It would be, in my view, quite wrong to allow the use of capital letters in the phrase "Racing Authority" to frustrate the parties intentions. The person, on the evidence, who is the head of the New Zealand racing authority in this context is Mr Acklin, and he is willing to co-operate. Accordingly, I find that the agreement is not "null and void, inoperative or incapable of being performed.".

9. The second point taken by Mr Ling is that not all the disputes in this litigation fall within the terms of the reference. The reference is "any dispute in the interpretation and operation of this Agreement". I have already recited the allegations of the plaintiffs. I have no doubt at all that these disputes relate to the operation of the agreements. If the agreements did not exist, neither would the disputes so they must arise from their operation. Mr Ling suggests that the question of dissolution arises from the termination of the agreement, not its operation. This is pure sophistry. The dispute is not the dissolution. The dispute concerns the operation of the agreement, and, as a result of this dispute, the plaintiffs seek dissolution. Once the arbitrator resolves the disputes, he will make the appropriate award. If, for some reason, that award requires implementation by the courts, that causes no difficulty.

10. The last point taken by Mr Ling is that the agreements were not signed. He did not press this. He was right not to do so. There is no need for arbitration agreements to be signed, just that they be in writing. The agreements is writing are those sued upon by the plaintiffs.

11. Accordingly, I find that the first defendant's application falls squarely within Article 8 of the Model Law, and I have no discretion but to order that the matter be referred to arbitration. I do so.

12. There seems no obvious reason why costs should not follow the event. I make an order nisi that the plaintiffs pay the costs of the action and this application.

13. There is another summons before me by the plaintiffs for an order to answer interrogatories. In view of my decision on the reference to arbitration, this summons must be dismissed, with an order nisi that the plaintiff pay the costs of it.