ORIENMET MINERALS CO LTD v. WINNER DESIRE LTD

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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JUDGMENT

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1. The parties are in dispute over two agreements relating to aluminium ingots. In a judgment handed down on 7 April 1997, I held that the parties had submitted to an international arbitration, and stayed an action instituted by the plaintiff. This arbitration agreement did not identify the names or numbers of arbitrators, or any mechanism for appointment. On 21 May 1997, the plaintiff issued a summons seeking an order for the appointment of an arbitrator for the defendant. This application did not come to court. On 2 June 1997, the parties signed a consent summons. The relevant part of this reads - "The parties do hereby mutually appoint Mr. Kenneth Kwok QC as the single arbitrator of this matter pursuant to Article 10(1) of the Model Law on International Commercial Arbitration".

2. Strangely, the parties did not approach Mr Kwok beforehand to obtain his agreement to act as arbitrator and to ascertain his fee for doing so. However, after his appointment, Mr Kwok agreed to act, stipulated his fee and re- quired an undertaking from the solicitors to pay this fee. The plaintiff agreed to this fee and its solicitors gave the required undertaking. The defendant did not so agree and its solicitors did not give the undertaking. Instead, the defendant's solicitors proposed that another arbitrator be appointed.

3. On 10 September 1997, the plaintiff issued a summons seeking an order that the stay to its action be removed, a declaration that the arbitration agreement had ceased to have effect, a declaration that the arbitration had been terminated, and an order that the plaintiff be at liberty to proceed with its action to trial.

4. On 21 October 1997, the defendant issued a summons seeking an order that the appointment of Mr Kwok be rescinded and that another arbitrator be appointed in his place.

5. This are the summonses now before me.

6. The plaintiff seeks the relief in its summons on the basis that the defendant has wrongfully repudiated the agreement to submit the dispute to Mr Kwok as arbitrator, that the plaintiff has accepted that repudiation and that the arbitration agreement has been terminated.

7. In an affirmation filed on behalf of the defendant, Mr Zhong Min Xin says that, at the time the consent summons was signed, the fee of Mr Kwok and the terms on which he was prepared to act were unknown to the parties. Mr Zhong says that, upon being advised of the requirement of joint undertaking by the solicitors, he instructed the defendant's solicitors to ascertain Mr Kwok's fee before making a decision. Upon being advised of Mr Kwok's fee, the defendant "decided not to accept the fee quotation and to instruct the Defendant's Solicitor to contact the Plaintiff's Solicitor to arrange for an appointment of another arbitrator." Mr Zhong goes on to say that "The reason why the Defendant did not enable it's Solicitor to give their undertaking for Mr Kwok's costs was purely a matter of the fee quotation of Mr Kwok which the Defendant decided not to accept. It is the Defendant's position to agree to an arbitrator where his fee quotation would be acceptable.".

8. So, the defendant's position is that it feels that it has the right not to proceed with the arbitration by Mr Kwok because it does not wish to agree his fee. There is no suggestion by the defendant that there was an difficulty about the undertaking; it was "purely a matter of the fee quotation". Nor is there any suggestion by the defendant that Mr Kwok's fee was unreasonable.

9. Mr Tang accepts that there was a clear implication in the agreement to appoint Mr Kwok as arbitrator that the parties would pay his reasonable fee. There is no evidence that Mr Kwok's fee was unreasonable. If the defendant had thought it unreasonable, it would, no doubt, have said so. The defendant had no right to repudiate the agreement on any other basis; it had no right to repudiate on the basis that it found the fee unacceptable, and demand that another arbitrator be appointed. It follows that its repudiation of the agreement to submit the dispute to the arbitration of Mr Kwok was wrongful. This repudiation went to the root of the agreement. The plaintiff was entitled to accept it and treat the arbitration agreement as terminated.

10. The arbitration agreement having been terminated, there is no basis on which a stay of the plaintiff's proceedings can stay in place.

11. In the result, the plaintiff is entitled to have the stay removed, and I so order. The defendant's summons is dismissed.

12. There seems no reason why costs should not follow the event. I make an order nisi that the defendant pay the costs of both summonses.