XCHRX ASIA ROCK ART LTD. v. W. HING CONSTRUCTION CO. LTD.

HCCT10/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO.10 OF 2000

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J U D G M E N T

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1. On 29 March 2000 having heard submissions from Mr Ronny Wong, SC, for the appellant, and Mr Michael Thomas, SC, for the respondent, I refused leave to appeal against the Second Interim Award on liability of the arbitrator Ms Teresa Cheng dated 12 January 2000. These are my brief reasons.

2. The questions posed in the originating motion (as amended) are as follows :

"(1) Whether the learned Arbitrator erred in law in finding that the Nominated, Sub-Contract ['the said Contract'] contain the following implied term ['the Alleged Implied Term'] :

'The Respondent would give possession of and access to such parts of the site as were required by the Claimant to enable it to carry out and complete the Sub-Contract Works in accordance with the Sub Contract'.

(2) Whether the Learned Arbitrator erred in law in finding that the Respondent acted in breach of the Alleged Implied Term.

(3) Whether in the absence of any claim submitted by the Claimant under Clause 29 and any certification by the Replacement Engineer in respect of the claim so submitted under Clause 22 the Learned Judge Arbitrator erred in law in finding that the Claimant is entitled to claim recover various heads of damages under Clauses 29(b) and (c) of the said Contract."

3. In the consideration of whether leave should be granted, question (3) above is of particular importance. Mr Thomas contends that if question (3) gives rise to no question of law which would substantially affect the rights of one or more of the parties then, by virtue of s.23 of the Arbitration Ordinance, leave should be refused. If leave is refused on question (3), questions raised under questions (1) and (2) become academic and, again because of s.23, should not be addressed.

4. It is therefore necessary to start with question (3) as amended and set out clauses 22 and 29 of the contract :

"22. Application for payment

The Sub-Contractor shall deliver to the Contractor on dates to be agreed with the Contractor statement in quadrupliate (sic) in a form approved by the Contractor showing : -

(a) the estimated value of the Sub-Contract Works done in accordance with the Sub-Contract up to end of such periods with adjustments for variations listed separately; and

(b) a priced list of materials delivered to the Site for use in the permanent Sub-Contract Works; and

(c) all further estimated sums which the Sub-Contractor considers to be due in accordance with the Sub-Contract;

so that the Contractor may submit such claims for consideration and certification by the Engineer. Provided that the Engineer shall only be obliged to certify payment for materials which are not prematurely delivered to and are properly stored on the Site."

"29. Termination of the Main Contract

If for any reason the Contractor's employment under the Main Contract is determined (whether by the Contractor or by the Employer and whether due to any default of the Contractor or otherwise), then the employment of the Sub-Contractor under this Sub-Contract shall thereupon also terminate and the Sub-Contractor shall be entitled to be paid :-

(a) The value of the Sub-Contract Works completed at the date of such determination, such value to be calculated according to clause 16 of this Sub-Contract.

(b) The value of work begun and executed but not completed at the date of such termination , such value to be calculated according to clause 16 of this Sub-Contract.

(c) The value of any unfixed materials and goods delivered upon the Site for use in the Sub-Contract Works the property in which has passed to the Employer under the terms of the Main Contract.

(d) The cost of materials or goods properly ordered for the Sub-Contract Works for which the Sub-Contractor shall have paid or of which he is legally bound to accept delivery. On such payment by the Contractor any materials or goods so paid for shall become the property of the Contractor.

(e) Any reasonable cost of removal from the Site of his temporary buildings, plant, machinery, appliances, goods and materials."

5. An analysis of question (3) does not, in my judgment, give rise to a question of law which would be appropriate for determination by this court on an appeal from the learned arbitrator. The question falls into three parts :

(i) "In the absence of a claim submitted under Clause..." - this is a question of fact.

(ii) "In the absence of any certification by the engineer ..." - this also in a question of fact.

(iii) "The learned arbitrator erred in law in finding that the claimant is entitled to recover various heads of damages under clauses 29(b) and (c) ..."

6. What the appellant would seek to argue on appeal is that because the losses claimed were not certified by the engineer, there is no liability on the appellant under the contract. It would be argued that the respondent is not entitled to any relief where it failed to comply with the contractual mechanism for being so compensated. However, as submitted by Mr Thomas in reply, the contract does not lay down a mechanism for making a claim under clause 29. The arbitrator found that the respondent was liable under clause 29 and specifically made the point in her award that she rejected the argument being advanced again in this application for leave. She stated :

"... As rightly pointed out by the Claimant, there was no condition precedent or time limit defence pleaded or proved that would preclude the Claimant from recovering its entitlement either as loss and damage for breach of the first implied term or as payment under Clause 29. The Respondent has not been able nor indeed attempted to point to any contractual provisions or principles of law in saying that the Claimant is now no longer entitled to claim for these sums because it failed to put it in the Final Measurement and/or claim under Clause 29. The grounds relied upon by the Claimant is the evidence of Mr. Batley and the agreements reached in a meeting on 16th April 1993 (which I deal with below). Whilst Mr. Batley's independence and experience in quantity surveying was not challenged, his evidence relating to whether the claim was justified and whether the Replacement Engineer would have assessed and paid the Claimant if submissions were made to the Replacement Engineer, is not of assistance to me. It is entirely a matter for me as to whether the claim is justified. There is no evidence on what the Replacement Engineer would or would not do."

7. The appellant conceded in the arbitration that the claims properly come within clause 29 but argues that the learned arbitrator made a "glaring" error of law in failing to determine that there was no liability to pay them because a contractual mechanism had not been followed.

8. This issue, which was fully canvassed in the arbitration and carefully dealt with in the award, falls short of being a question of law fit for consideration on an application for leave to appeal. Quite simply, it was found that the express terms of clause 29 entitled the respondent to recover its losses and there was no provision in the contract which prevented the arbitrator from enforcing those rights. Such a ruling does not give rise to a moot point as to how a particular clause of the contract should be constructed.

9. If this decision, that there is no question of law as provided by s.23 of the Arbitration Ordinance, is unduly harsh, then the appellant would fail to get leave in any event, on the application of the "PT Dover" test. In Lee Chang Yung Chemical Industry Corp v. PT Dover Chemical Company [1990] 1 HKC 132, Hunter JA set the criteria which the court must apply on leave applications. In this application, the appellant acknowledges that the appropriate test is the one applicable to "one-off" cases, which is as follows :

"Where the proposed question of law is specific to the particular case (e.g. it involves the construction of a 'one off' contract or clause, or the application of either a 'one off' or a standard form of clause to a 'one-off' event which is unlikely to recur), leave should not be granted unless it is apparent to the Judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument that the arbitrator was obviously wrong.

Even if it appears possible to the Judge that argument might persuade him that the arbitrator might be right, leave should be refused.

It must be shown that the Arbitrator was so obviously wrong as to preclude the possibility that he was right; ..."

10. It is high threshold for good reason. The parties agreed to arbitrate their differences before a single arbitrator, and further agreed that her award should be final and binding upon them. The award has been made, and the mutual interest in speedy finality in the resolution of disputes would be defeated if an appeal through the courts were too readily permitted.

11. Because the courts uphold the principle that the parties have autonomy over their own affairs and that their agreement to arbitrate their differences should be respected, a losing party cannot appeal to the court merely to reargue a case that the arbitrator has rejected, or to maintain that the arbitrator was in error because she failed to accept its arguments on the law or on the facts.

12. Applying the test to each of the three questions posed, it seems to this court that the arguments that the learned arbitrator was right are preferable to those that she was wrong. It is not necessary, for the purpose of this judgment, to make a ruling but the following observations in relation to each of the three questions are apposite.

13. Concerning question (1), she held that the appellant was obliged to give the respondent possession of and access to the site for the work they had contracted to do. It is frankly difficult to understand the argument that she was obviously wrong to imply such a term.

14. Concerning question (2), on any view this involves only a finding of fact.

15. Concerning question (3), as already dealt with, the arbitrator found that, contrary to the appellant's contention, there was no contractual bar which prevented recovery of those losses claimed in the arbitration which, as conceded by the appellant, came within the scope of clause 29. A mere perusal of the contract and the reasons in the award suggests she was right.

16. Having declined to grant leave to appeal, the costs of resisting the application shall be the respondent's (in the appeal), to be taxed if not agreed.