LINFIELD LTD v. TAOHO DESIGN ARCHITECTS LTD AND OTHERS

HCCT68/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO.68 OF 2001

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REASONS FOR DECISION

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1. On 25 November I granted an order in the terms (amended as to dates) of the 4th defendant's summons for directions. I also dismissed applications for a stay by the Third Party and alternative directions sought by the 2nd defendant. Four days prior to the hearing the 1st defendant and the 4th defendant had reached an agreement as to the terms of the 4th defendant's summons. These are my brief reasons for granting the 4th defendant's application.

Background

2. The entire background is fairly complex. The material parts of the history which are relevant to this application can be summarized as follows.

3. Originally the plaintiff issued two sets of proceedings. The first in time was against the Third Party, the second was against the 1st to 4th defendants. The plaintiff was the developer of a property it owned, the 1st defendant are architects, the 2nd defendant building contractors, the 3rd defendant a specialist marble supplier, the 4th defendant structural engineers and the Third Party are property consultants.

4. The basic reason for the complications which have emerged is that the plaintiff's contracts with the 1st and 2nd defendants and the Third Party contained standard arbitration clauses, whereas their contracts with the 3rd and 4th defendants did not. The 1st and 2nd defendants and the Third Party have successfully applied for a stay of the proceedings against them in favour of arbitration. Thus there are now parallel sets of proceedings firstly, against the 3rd and 4th defendants by writ and secondly against the 1st and 2nd defendants and Third Party in arbitration. The writ action trial is due to commence on 31 May 2004. No date has yet been set for the arbitration.

5. When granting the mandatory stay, Ma J (as he then was) said this :

"Fourthly, insofar as GWA's case may involve casting blame on other parties (and this seems to be alleged: see the affirmation of Wong Chak Yan, the principal of GWA), it is able to bring any such parties into the present action by instituting third party or contribution proceedings. The fact that Linfield and these parties may have arbitration agreements between them does not in any way prevent GWA from issuing third party or contribution proceedings. There is therefore no prejudice in this regard to GWA continuing with the present proceedings even where there are arbitration proceedings afoot."

6. Accordingly, by this application, that is precisely what the 4th defendant's seeks. They have issued Third Party proceedings against the Third Party and contribution notices against the 1st and 2nd defendants, with those notices to stand as the 4th defendant's statements of claim against each party respectively. The effect, quite simply, is to bring them back into the proceedings. All parties will then be before the same tribunal, albeit wearing slightly different hats. As it happens the different hats are of little significance because (and there is no serious challenge to these contentions) :

(a) the plaintiff claims against all five parties on the basis that they are jointly and severally liable;

(b) each complaint that is made against the 4th defendant is also made against either

(i) the 1st defendant, the 2nd defendant and Third Party or

(ii) the 1st defendant and Third Party or

(iii) the 1st and 2nd defendants

(c) there are no allegations solely against the 3rd or 4th defendants;

(d) the 4th defendant's defence is that, if there is any liability, it is that of the other parties and not it.

7. The 2nd defendant and Third Party's main objection (not pursued by the 1st defendant who has consented to this application) is that if the trial proceeds first, with them included, they will lose the benefits of arbitration proceedings (such as privity and costs savings) for which they specifically contracted. Whether there would be an overall costs saving with parallel proceedings continuing where one of those proceedings is a potentially long and expensive arbitration which, as yet, is only in its infancy, is debatable. As for the loss of privity, it is an unfortunate but unavoidable result of the application of the rules of Civil Law procedure upon which the 4th defendant relies. It does not, in my judgment, amount to "special circumstances" which are required to justify not making the directions sought by the 4th defendant.

8. Because of the common issues between the parties, by having all parties in one court there is some prospect of the subsequent arbitration becoming unnecessary. For the sake of good case management it is always open to the parties to agree, now, to either an action by writ in its original form, namely involving all parties as defendants, or to an ad hoc arbitration involving all parties and vacating the trial by consent.

9. If none of the above were to happen there would be fragmented and disjointed proceedings. If the action by writ went ahead against the 3rd and 4th defendants alone and either or both were found to be liable, further proceedings would be inevitable. The 1st and 2nd defendants and Third Party would, once again, be embroiled in court proceedings and arbitration proceedings at the same time.

10. I accept that there is no perfect answer to the situation that has arisen. However I am satisfied that of all the different possible ways ahead and bearing in mind all the possible outcomes depending on who is ultimately successful, the proper course is to grant the 4th defendant's application. The risk of conflicting decisions remains but I am satisfied that that risk is minimized (and could be eliminated with the co-operation of all parties) by this decision.

11. In short, the 4th defendant is exercising its rights under the Civil Liability (Contribution) Ordinance, Cap. 377 and granting those rights is, in my judgment, entirely consistent with good case management.

12. Consequent on this decision, I made further directions as to the timetable for the trial and costs. These are now known to the parties and need not be repeated here.