HORIZON GROUP INVESTMENTS LTD v. T & F TECHNOLOGY LTD

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9668 OF 2000

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DECISION

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1. By a written agreement dated 26 October 1999, the plaintiff sold electronic goods to the defendant. The plaintiff is an agent for the manufacturer, "Integral" in Belarus.

2. The agreement contains an arbitration clause in the following terms:

3. The plaintiff served a Statement of Claim dated 26 October 2000, claiming US$187,710.80 for goods sold and delivered.

4. The defendant seeks a stay of this writ action because the claim is disputed and there is an arbitration clause.

5. Ordinarily, a stay in such circumstances would be granted because of the mandatory provisions of Article 8(1) of the UNCITRAL Model Law :

"(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed."

6. Mr R. Clement, for the plaintiff advances three reasons why the stay should not be granted:

(a) Firstly, he contends that there has been an unequivocal admission of liability and quantum. If there has been there is no disputed which is referable to arbitration and a stay would be refused. As evidence of the unequivocal admission, he relies on two documents:

7. As to the Statement of Account (the details of which I do not recite because of my decision hereafter), Mr Pong, for the defendant, points out two difficulties with it, firstly, it is unsigned and secondly, it contains blanks.

8. Moreover, he submits, at its highest, it is a Statement of Account at the end of the tax year which should not be categorized as an admission, let alone as unequivocal admission of liability.

9. The second document relied on is the letter of 9 October to Integral. I set it out in full:

10. It is submitted by the plaintiff, that this constitutes a complete admission of liability to them of the sum claimed. The difference between the two sums mentioned in the penultimate paragraph being the $187,710.80 claimed by the plaintiff. It amounts, so it is submitted, to a statement that "we don't owe Integral, we owe Horizon".

11. In my judgment, it does not carry such an unequivocal meaning. Taken in the context of the overall correspondence together with the affirmation evidence from the defendant which simply says, "we have paid you US$159,930.80 (which they have) but the balance of the goods were defective", it is not possible to conclude that there is no dispute between the parties.

(b) Secondly, Mr Clement relies on the wording of the arbitration clause, in particular the words "All disputes ...." which may arise out of or in conection with the present contract ...." Mr Clement correctly states the law when he submits that if there is no dispute arising out of this contact, as at the date of the issue of the writ, then there should be no stay. In this context he relies on letters from he defendant prior to the issue of the writ in which the defendant's position is stated as a denial of any contractual relations at all between themselves and the plaintiff.

12. On 1 October 2000, the defendant's solicitors says " .... our client has never requested your client to sell and deliver the goods ....". On 16 October 2000, they wrote ".... our client ahs never had any agreement with your client".

13. The submission made is that if there is no contract, how can there be a dispute arising from it. The simple answer is that the existence of an agreement is or may be an issue between the parties. That issue does not make the dispute, as between these parties, disappear. The statements made on the letters were on instructions. The mere recital of the client's, possibly misconceived, instructions would not bar a referral to arbitration in a stay summons such as this.

14. In my judgment, the submission made is ingenious but incorrect.

(c) The third reason for resisting a stay is the submission that by making two applications for an extension of time to file a defence, the defendant has fallen foul of the provision which requires the defendant to apply for a stay "not later than when submitting his first statement on the substance of the dispute".

15. Mr Clement submits that, prior to the amendment of the law in 1997, the mere act of applying for an extension of time to file a defence would have been fatal. Prior to 1997 it would have been. The law then was that an application for a stay should be made "at any time after appearance and before delivery of any pleadings or taking any other steps in the proceedings ..." Applying for an extension of time to file a defence would have been "a step n the proceedings" which constituted a submission to the jurisdiction. Mr Clement argues that he law haw not changed and that an application for an extension of time to file a defence accounts to a "statement on the substance of the dispute". I reject his argument. An application for time contains no statement on the substance of the dispute. It is a procedural step only, which the defendant had to take to preserve his position. The solicitors would have been negligent if they had not done so. The sort of document which would prejudice his position would be those which contain statements about his defence, such as the defence itself, an affidavit in opposition to an application for summary judgment or an application for leave to defence summary judgment proceedings. A purely protective application such as a request for more time, contains no such statement.

16. Having disposed of the three grounds advanced for refusing a stay, and as there is no submission that the agreement itself is "null and void, inoperative or incapable of being performed", the stay must be granted in terms as sought in the defendant's summons dated 11 January 2001.