XCHRX COMTEC COMPONENTS LTD. v. INTERQUIP LTD.

HCA 5749/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. On 3 December 1998, on an application by the defendant, I referred the parties in this action to arbitration and stayed these proceedings. I also made an order nisi that the plaintiff pay the defendant's costs of the application and the action.

2. The plaintiff now asks me to reconsider that order nisi, and, instead, order that the defendant pay the plaintiff's costs on the application and the action.

3. The plaintiff's argument is put in a variety of ways but what it boils down to is that the defendant's conduct was such that it should pay the costs. The conduct about which the plaintiff complains is that the defendant persistently maintained that the contract that contained the relevant arbitration clause "was not operative". The arbitrator was to be appointed by the Hong Kong International Arbitration Centre (HKIAC). The HKIAC declined to make an appointment because "we are not satisfied that prima facie the parties have signed a contract with an Arbitration clause."

4. In my judgment, I said -

"I understand why the HKIAC thought that it should not make an appointment because they were "not satisfied that prima facie the parties have signed a contract with an Arbitration clause." That decision was contained in a latter dated 5 August 1996. At that time, in the context of this case, it is probably right that it was necessary that the agreement be contained in a document signed by the parties. But section 2AC of Chapter 341 says that it is no longer necessary that the parties should have signed a contract with an arbitration clause . . . . By section 18 of the 1996 Ordinance, the new provision applies to this agreement. There does not seem to be any dispute between the plaintiff and the defendant that the second contract is contained in a written document, that this governs their relationship, and that it contains an arbitration clause. There is no reason to believe that, under the new law, the HKIAC would regard an agreement signed by the parties as necessary."

5. Accordingly, it seemed to me then, as it seems to me now, that the HKIAC declined to make an appointment, not because of the attitude taken up by the defendant, but because it took a particular view of the law. It seems to me that, if the plaintiff had been aware of the change in the law and had reapplied to the HKIAC for an appointment, there was no basis on which the power to make the appointment could have been declined. And, if the HKIAC, had so declined, the plaintiff could have applied to court for the appropriate remedy.

6. As I also said in my judgment -

"[The defendant] maintains now, as [it] said to the HKIAC, that the agreement is not binding, but, if it is, he accepts that it contains an arbitration clause. And, of course, the basis on which the HKIAC declined to make an appointment was not on the ground urged by Dr Beaver, but on its understanding of the law at the time. The defendant was entitled to take this attitude, and will be entitled to take the same attitude in the arbitration proceedings."

7. So, it seems to me, the plaintiff cannot suggest that the defendant is in some way responsible for the plaintiff mistakenly taking legal proceedings when it should not have done so.

8. Nor can it legitimately be argued, as Mr Baillie attempted to do, that the defendant should pay the costs because it did not accept an offer by the plaintiff that the dispute be referred to arbitration, with each party paying its own costs of these proceedings. The defendant has gained more than this.

9. I also reject the argument that the plaintiff succeeded in the application in that the matter has been referred to arbitration, which is the situation that the plaintiff wanted. The fact is that the plaintiff resisted the defendant's application, and it lost. It cannot now, by any sophistry, argue that it won.

10. After all is said and done, the defendant succeeded in its application and the plaintiff was unsuccessful in its opposition. That is the event that should usually govern the award of costs. I see nothing here that should disturb the usual order.

11. Accordingly, the order nisi is made absolute. The plaintiff must also pay the defendant's costs of this application.