WAI YIP ELECTRICAL ENGINEERING CO LTD v. CHEVALIER (ENVIROTECH) LTD

HCCT 47/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 47 OF 2004

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J U D G M E N T

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I.       Introduction

1.  Wai Yip claims $3,059,342.43 for work done under 3 agreements, identified as the 1st, 2nd and 3rd contracts.  The contracts relate to work done at Tai Po.  Wai Yip issued a generally endorsed writ on 7 July 2004 for $4,642,722.73 said to be outstanding under the 3rd contract alone.  Later, on 1 September 2004, Wai Yip filed a statement of claim seeking $3,059,342.43 on all 3 contracts.

2.  Between the issue of the writ and the statement of claim, Chevalier applied by summons dated 20 August 2004 to stay these proceedings to arbitration.  Chevalier applied on the basis that the 3rd contract, unlike the 1st and 2nd contracts, was subject to an arbitration agreement.

3.  Wai Yip countered by taking out a summons for summary judgment on 13 September 2004.  It is Wai Yip's case that Chevalier has admitted liability for $3,059,342.43 under the 3 contracts.  Wai Yip says that there is thus no dispute to refer to arbitration.  Instead final judgment should be entered for the allegedly admitted amount.

4.  Chevalier denies that there has been an unequivocal admission.  Whether or not there has been is the sole issue which I have to decide.  If there is no admission, the litigation on the 3rd contract must be stayed to arbitration.  Further, if there has been no admission, there can be no final judgment on the 1st and 2nd contracts.

II.      Background

5.  The construction works under the 1st and 2nd contracts were completed in May 2002, those under the 3rd contract in June 2003.  On 29 March 2004 Wai Yip submitted final accounts for the 3 contracts to Chevalier.

6.  By e-mail dated 29 April 2004 Mr. Patrick Wong, Chevalier's Senior Project Manager, responded to Wai Yip as follows:-

"Further to our telephone conversation 2 days ago, I have discussed with our QS department and the original total amount that you entitled to claim for Tai Po project is HK$3,059,342.43 (retention + VO, etc.)."

Wai Yip contends that the e-mail is a clear admission of liability under the 3 contracts for the amount stated.

7.  By letter dated 10 May 2004 to Chevalier, Wai Yip stated that, despite repeated demands from June 2003 onwards, Chevalier had not paid the balance due under the 3 contracts.  Wai Yip referred to a "special discount offer" of $1.5 million and a payment schedule which it had put to Chevalier on 23 March 2004.  That offer had been made to encourage speedy settlement.  But as of the letter's date Chevalier had not replied.  Wai Yip accordingly gave notice that, unless Chevalier responded within 14 days, the offer would lapse and Wai Yip would commence legal action.

III.     Discussion

8.  Chevalier's stay application only concerns the 3rd contract.  By Arbitration Ordinance (Cap.341) s.6, a stay is mandatory where a contract is subject to an arbitration agreement.  The exception to that rule is where the Court takes the view that no genuine dispute exists because there has been a clear admission as to liability and quantum by a defendant.

9.  With laudable fairness, Mr. Jonathan Wong (appearing for Chevalier) does not take any point on the mismatch between the writ and statement of claim.  By suing in respect of the 3 contracts, the statement of claim introduces causes of action not found on the writ.  Mr. Wong accepts, however, that the writ can easily be amended to bring it in line with the statement of claim.  At the start of today's hearing Mr. Leung (appearing for Chevalier) agreed at the Court's invitation to amend the writ to reflect the statement of claim.

10.  Mr. Wong instead concentrates on the substantive issue of whether there has been an unambiguous admission.  He says that there has not been for one or more of 3 reasons.

11.  First, the e-mail refers to a telephone conversation.  What was said there, has to be examined at a hearing before the e-mail can be regarded as admitting anything.  Mr. Patrick Wong of Chevalier says on affirmation that he only intended the e-mail to be a "starting point" to further negotiations.

12.  Second, the e-mail refers to the "original total amount" of Wai Yip's entitlement.  The e-mail thus only proposes an "original" point from which deductions and adjustments may yet have to be made.  The e-mail cannot be construed as conceding a "final" figure.

13.  Third, subsequent events show that there has been no final settlement between Wai Yip and Chevalier.  For example, on the 3rd contract alone, the writ claimed significantly more than the alleged admitted amount.  Further, Wai Yip made a special discount offer.  Why would it do so, if Chevalier had made a clear admission?

14.  I am not persuaded by Mr. Wong.  In particular, I comment as below on his points.

15.  First, the e-mail plainly refers to a result which its writer has drawn from a prior telephone conversation.  That conclusion is of an entitlement on Wai Yip's part to a final payment of $3,059,342.43 on the 3 contracts. 

16.  I note that it would be odd to read the e-mail as merely a starting point.  Normally, when one envisages further negotiations, one puts forward a lower figure than one's target amount.  One does not start by suggesting an "entitlement" on the part of the other side to a higher amount from which one then bargains that other side down.

17.  Second, I do not see how a reference to "original total amount" negates the e-mail's acceptance of liability for the amount specified.

18.  Third, the issue is whether Chevalier has made an admission.  The conduct of Wai Yip or Chevalier following the e-mail is strictly irrelevant on that specific question.

19.  I therefore find that there has been an admission on Wai Yip's part of liability for $3,059,342.43 under the 3 contracts.  In the circumstances there can be no genuine dispute on any of the 3 contracts. 

IV.     Conclusion

20.  A stay is refused.  Chevalier's summons is dismissed. 

21.  As for Wai Yip's summons, there will be final judgment for $3,059,342.43 under the 3 contracts.  There having initially been a discrepancy between the writ and statement of claim, I do not think it is right for interest to run from the date of the writ.  In the circumstances, it seems to me that interest should simply run at the judgment rate from today (when the writ was formally amended) until payment.

22.  I shall now hear parties on costs.