HOP HING IRON WORKS & CONSTRUCTION CO. v. ACG JOINT VENTURE

HCCT 27/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 27 OF 2003

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J U D G M E N T

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1. The Applicant ("Hop Hing") seeks leave to appeal against the Interim and Final Awards of Mr Jonathan Harris ("the Arbitrator") dated 14 March and 17 October 2003 respectively. By a written contract dated 26 April 1999 the Airport Authority engaged the Respondent ("ACG") as main contractor to carry out a project ("the project") in relation to the Northern Runway of Chek Lap Kok Airport. By a Sub-contract ("the Sub-Contract") signed in November 1998 ACG sub-let certain metal and door works ("the works") of the project to Hop Hing. Disputes having arisen between ACG and Hop Hing in respect of the works, the Arbitrator determined their differences in 3 arbitrations heard together. The Arbitrator's Interim Award and his supporting Reasons ("Reasons I") were followed by a Correction dated 26 June 2003 ("the Correction"). Outstanding matters were dealt with in a Final Award and Reasons.

2. The 1st ground for leave to appeal is that in Reasons I §§8.8, 10.3 and 11.1 the Arbitrator erred in law in holding that the parties' ad hoc agreements as to rates for variation works did not override the operation of Main Contract cl. 54.1 (as applied by the Sub-contract). Clause 54.1 stipulated a mechanism whereby the appropriate rates for variation works were to be determined. The Arbitrator accordingly held that, whatever rates for individual variations may have been agreed between the parties in an ad hoc fashion without following the mechanism in cl. 54.1, the same were of no effect. Further, since by these ad hoc agreements Hop Hing was simply promising what it was already obliged to do at rates stipulated by the Sub-Contract and cl. 54.1, such ad hoc agreements were unenforceable for lack of consideration.

3. In my view, the Arbitrator was far from being obviously or even seriously wrong in his conclusion. Even if (as Mr Yuen SC for Hop Hing submits) the relationship between ad hoc agreements and provisions in building contracts similar to cl. 54.1 is a commonly encountered problem in the construction field, I do not think that the Arbitrator's reasoning can be faulted. I therefore reject this ground for leave. I note that I am also doubtful that this ground is a legitimate one for Hop Hing to argue at this stage, given that it did not form part of Hop Hing's pleaded case in the substantive arbitration.

4. The 2nd ground for leave to appeal is that the Arbitrator failed to apply the rate of $200/m which (Hop Hing alleges) the Arbitrator found had been agreed between the parties for the painting of handrails, railings and cat ladders. This point was the subject of correspondence among the parties and the Arbitrator. Hop Hing invited the Arbitrator to correct the Interim Award in this respect. The Arbitrator declined, being of the view there was nothing to correct.

5. In my judgment there is nothing in this point.

6. The Arbitrator held (in Reasons I §5.9) that the evidence adduced in support of a rate of $200/m was "too vague to establish an agreement". Having stated his conclusion, the Arbitrator in fairness to Hop Hing referred to a passage in the transcript of the cross-examination of M T Yan (a witness on behalf of ACG) which, superficially read, might be taken to evidence an agreement for just such a rate. At Reasons I §5.10 the Arbitrator then stated:-

"In my opinion as the right to payment for painting not specifically referred to in the item descriptions arose as a result of an express agreement, which (I have found) operated independently of the other provisions of the Sub-Contract, there is nothing odd in the Parties agreeing the rate to be paid and in my opinion such an agreement would determine the rate to be paid."

That throwaway observation by the Arbitrator cannot amount to a finding that a $200/m rate had been agreed. That no such finding was intended is apparent from the immediately following paragraphs in Reasons I. Thus, for example, in Reasons I §5.12 the Arbitrator stated:-

"Although, this issue is raised in Hop Hing's Closing Submissions it is not addressed by either of the experts who have proceeded on the basis that the valuation issue relates to how rates are to be assessed. I have not been given any figures so far as I can ascertain showing what is payable at a rate of $200/m..."

In the circumstances, I do not see how it can be said that the Arbitrator was obviously (or seriously) wrong.

7. I add that I doubt whether this ground raises a question of law. Insofar as it does not, clearly Hop Hing is unable to seek leave to appeal against the same.

8. For the above reasons, I reject this 2nd ground for leave.

9. The 3rd ground of appeal is that, having found (at Reasons I §8.15) a rate of $10,211.47/m should be paid for the RHS (Rectangular Hollow Section) in the stainless steel louvres, the Arbitrator failed to determine Hop Hing's entitlement on that basis. This point was also the subject of correspondence among the parties and the Arbitrator. Hop Hing invited the Arbitrator to correct the Interim Award in this respect. In Correction §6 the Arbitrator stated that he had made no mistake. In effect the Arbitrator pointed out that his finding of a rate of $10,211.47/m applied to 299 x 60 x 6 mm RHS and not to the 150 x 100 x 6 mm louvres.

10. Given the Arbitrator's clarification, I do not see how he can be said to be obviously (or seriously) wrong. Again I doubt that this point raises a question of law as opposed to one of fact. I refuse leave to appeal on this ground.

11. The 4th ground of appeal is that, having adopted Hop Hing's assessment of $244,188 in respect of the painting of GMS Channels at Vaults C and D, the Arbitrator failed to apply the same. This point, too, featured in correspondence among the parties and the Arbitrator. Both parties thought that it would be helpful for the Arbitrator to clarify what he meant. In Correction §§9-12 the Arbitrator accepted that he had been in error. He had incorrectly assumed that the lower sum in the variation schedule which he had relied on had been calculated by reference to an agreed unit rate. Upon realising his mistake, the Arbitrator then applied the agreed rate of $104/m to arrive at a value of $13,104. But for his error as to unit rate, this would have been the result reflected in the Interim Award.

12. Given the Arbitrator's clarification, I again do not think that he can be said to be obviously or seriously wrong. Much less do I see how this point gives rise to a question of law. I reject this ground of appeal.

13. The 5th ground of appeal is that the Arbitrator erred in ruling that he could not find anything in the witness statement of Y C Ho (filed on behalf of Hop Hing) which demonstrated that part of the sub-contracted works were omitted and awarded to other sub-contractors.

14. This ground raises a question of fact. But Mr Yuen suggests that in making his finding the Arbitrator acted in a way which no reasonable Arbitrator could have acted. That (it is said) would be wrong as a matter of law and hence susceptible of appeal.

15. In Reasons I §§22.17 - 22.19 the Arbitrator states:-

"Mr Ho deals with the omission of doors in the Glide Path buildings in paragraphs 42-43 and his first witness statement, but Hop Hing's advisers appear to have overlooked that a claim in respect of this work had not been pleaded or assessed by the experts.

I cannot find anything else in Mr Ho's witness statements, which demonstrates or even appears to be addressing the question of whether omitted work was awarded to other sub-contractors. This issue is not addressed at all in Hop Hing's Closing Submissions.

The ACG deals with this issue in paragraph 250-1 of its Closing Submissions. The ACG points to evidence which suggests that at least some of the omitted work was not carried out at all. They invite me to find that Hop Hing has failed to discharge the burden of proof which lies with them, namely, to prove on the balance of probabilities that the work forming this claim was omitted and awarded to other sub-contractors. I have concluded that this is the case and so find."

16. It seems to me clear that the Arbitrator considered the totality of Y C Ho's evidence, but felt that the material therein "did not discharge the burden of proof ... to prove on the balance of probabilities that the work forming this claim was omitted and awarded to other sub-contractors". Mr Yuen has directed my attention to passages in Y C Ho's witness statements which Mr Yuen says contradict the Arbitrator's conclusions. Nonetheless, the fact remains that the Arbitrator heard Mr Ho and, on the basis of what he heard, formed a view of the extent to which he could regard Mr Ho's evidence as discharging the burden on Hop Hing. On the basis of what he heard he concluded against Hop Hing. I do not see any substantive unfairness or injustice. I do not think that it can be said that the Arbitrator acted unreasonably and came to a perverse conclusion. This ground for leave is also refused.

17. Mr Yuen does not vigorously pursue the other grounds in Hop Hing's Notice of Motion seeking leave to appeal. The grounds actively pursued by Hop Hing having all been rejected, its application for leave is dismissed.