WOON LEE CONSTRUCTION CO LTD v. HOLYROOD LTD

HCCT 68/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION & ARBITRATION PROCEEDINGS

NO. 68 OF 2010

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BETWEEN

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J U D G M E N T

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1.  On 17 June 2010, the arbitrator issued a partial award, essentially in favour of Woon Lee. Holyrood was ordered to pay $4,800,128.89 to Woon Lee, and matters of interest and costs were reserved for further determination.

2.  Holyrood sought leave to appeal against the award, but that application was dismissed on 19 October 2010.

3.  Subsequent to the exchange of written submissions by the parties, the arbitrator made a further award on 28 September 2010, awarding Woon Lee its costs in the arbitration, the arbitrator applying the usual principle that a successful party was entitled to its costs.

4.  Holyrood now seeks leave to appeal against that further award.  In the written submissions put to the arbitrator, Holyrood made two submissions:

(i) First, it was argued that although Holyrood had not been successful in the arbitration proceedings, it had succeeded on part of its case in arguing that the relevant contract was a lump-sum contract, and not a re-measurement contract. The submission was made that it was unreasonable for Woon Lee to have argued that the contract was a re-measurement contract;

(ii) Second, consequently, it was argued that Holyrood was entitled to a reduction of 20% of the costs to which Woon Lee would otherwise be entitled, and that Woon Lee should pay Holyrood’s costs incurred in defending the re-measurement issue.

5.  The arbitrator rejected those submissions, holding that in the circumstances costs following the event was the appropriate order.

6.  It is trite to repeat the test for leave to appeal, but I do only for the completeness.  Mr. Manzoni neatly put it this way: an appeal arises only on a point of law, and then only if the point of law is one of general importance (to use a shorthand), and whether arbitrator has gone obviously wrong (where, as here, the contract is a one-off contract).  That is the test I apply.

7.  It is right that consequent upon the amendments to Rules of the High Court as a result of Civil Justice Reform, made last year, a judge now has a wider discretion in dealing with questions of “issue-based” costs than he might have previously.  In litigation in the Court it will be for the judge to determine whether or not it is appropriate to deal with costs having regard to who was successful in particular issues.  That will always be a decision within the discretion of the judge who has heard the trial and has seen the impact of the issues on the proceedings.

8.  An arbitrator would be entitled to apply the same principles.  But equally, an arbitrator has the same discretion and it will be for him to say at the end of the trial whether or not an issue upon which a party, substantially unsuccessful, succeeded, justifies issue-based costs.

9.  Nothing has been put to me in the argument today to say where or how the arbitrator might have been obviously wrong in his exercise of discretion in this case.  All that is said is the simple submission that the arbitrator was obviously wrong in reaching that conclusion. 

10.  It is right that the arbitrator found that it was “highly improbable” that the parties intended to make a change to a re-measurement contract two years after the original agreement, but he also found the proposition to be “entirely feasible”.  In those circumstances, where the proposition was entirely feasible, it is not possible to say that the arbitrator was “obviously wrong” in reaching the conclusion that in raising the issue Woon Lee had acted either unreasonably or improperly.

11.  That conclusion was essentially a finding of fact on the part of the arbitrator which is simply not open to challenge.

12.  It is also argued for Holyrood that the arbitrator ought to have considered a proportionate costs order.  Mr. Manzoni correctly points out that the arbitrator was not asked to make a proportionate costs order, but to make a proportionate reduction in the recovered costs as a result of the issues-based approach that had been advocated.  Neither was the failure to make a proportionate cost order relied upon in the summons will leave to appeal.  In those circumstances, it cannot be argued that the arbitrator has made any error in respect of a matter he was not asked to consider.

13.  In any event, it would not be an obviously wrong exercise of the costs discretion where the arbitrator to have refused to make a proportionate costs order.

14.  The application for leave to appeal the award is dismissed.

Costs:

15.  The usual rule is that costs should be on an indemnity basis.  Ms Lau opposed that order and sought an order for party and party costs.  The only ground of opposition advanced was that she was instructed to oppose indemnity costs.  This is not a basis upon which an order may be refused.  Mere instructions do not suffice.  It must be proper grounds.  I make an order for indemnity costs accordingly.  There will be a certificate for counsel.