XCHRX DOWNER & CO. LTD. AND ANOTHER v. THE AIRPORT AUTHORITY

1999, No. CT15

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. This is an application for leave to appeal against what are said to be decisions on two questions of law made by the arbitrator in an award dated 20 January 1999.

2. The applicants are making some very large claims against the respondent arising out of a construction contract. These claims were disputed. In accordance with the contract between them, these disputes passed through various tiers of a dispute resolution procedure until, on 12 December 1997, the Dispute Review Panel made what the arbitrator has found to be "decisions" as contemplated by clause 75 of the contract. These decisions were on the liability of the respondent in various respects, but the Panel did not finalise the procedure by converting these decisions to enforceable awards in terms of time or money because the time within which it was authorised to make these decisions expired.

3. The applicants decided to accept these decisions, and, on 12 March 1999, they served a notice of arbitration referring to arbitration "all matters the subject of the above Panel Reference which were not decided by the Panel in their decisions given on 12 December 1997.". The respondent did not serve a notice of arbitration in time. A late and ineffective notice purported to refer to arbitration "all of the matters which were decided by the Panel" except some identified decisions.

4. Before the arbitrator, the applicants contented that the decisions made by the Panel were final and binding on the parties, and, therefore, not open to revision by an award of the arbitrator at the behest of the respondent; it not having served an effective notice of arbitration. The respondent sought to answer this by arguing that it was at liberty to raise by way of defence or counterclaim the issues that had been decided against it by the Panel. Further, it argued, that, if it were not entitled to do this, it should be granted an extension of time under section 2GD of the Arbitration Ordinance (Cap. 341.).

5. The arbitrator upheld the respondent's arguments.

6. The first question before me is framed by the applicants in this way -

"Whether, in the circumstances where a decision of the Dispute Review Panel has not been referred to arbitration by either party within ninety days of such decision, a party is able to disregard, challenge or re-open that decision by way of defence or counterclaim made outside that time limit in an arbitration in relation to another matter which has been referred to arbitration."

7. Mr Thomas says that this question is answered by the terms of the contract between the parties; a contract that, in accordance with the philosophy of party autonomy I, and the arbitrator, are bound to honour.

8. That contract says that the parties shall give effect forthwith to "every decision of the Dispute Review Panel which shall be final and binding except and to the extent that it shall have been revised by agreement or an arbitral award.". The same clause goes on to say that "In relation to any Dispute referred to the Dispute Review Panel . . . in respect of which . . . the Dispute Review Panel has given its decision . . . or the time for giving such decision . . . has expired, either party may, within ninety days of such decision or the expiry of such time limit but not otherwise, refer such Dispute to arbitration . . .".

9. One might have thought that those provisions were clear enough. In my view, they say to a party, in the plainest of terms, that - "If the Panel makes a decision against you, and you do not refer it to arbitration, that is the end of the matter; you are bound by it." And, indeed, in parts of his award, this is the construction that the arbitrator placed on these provisions. But he found against the applicants because -

"I do believe that a distinction can be drawn between referring a dispute to arbitration, on the one hand, and seeking to raise substantive defences to a claim so referred on the other. . . the language used by the parties is not, in my view, clear enough to bar a Respondent from raising substantive defences. . . It seems to me that as a matter of pure construction, the words "but not otherwise" have been inserted merely to underscore the ninety (90) day period for submitting disputes to arbitration."

10. With the greatest of respect to the eminence of the arbitrator concerned, I find myself quite unable to agree with this reasoning.

11. As to the binding nature of the decision, I see the matter as profoundly simple. The respondent agreed that the decision would be binding; that is, binding for all purpose, not just for some. When one is considering this binding nature of the decision, there is no distinction such as sought to be drawn by the arbitrator. In this context, one just cannot say that "binding" means that the party bound cannot raise the dispute again as a sword, but he can as a shield. That would mean that the decision was not binding. If I decide, in piece of litigation, that a party has no claim against another, that party cannot, faced with a claim by that other, maintain that he has such a claim. It is no different when the party has agreed that he would be bound by the earlier decision under a contract, especially in a regime that gives great emphasis to party autonomy.

12. As to the interpretation given by the arbitrator to the words, "but not otherwise", again I cannot agree with him. There is no reason why those words should not be given their ordinary meaning in the English language, and no one suggests to the contrary. The word "otherwise" means "another way"; "wise" means "way", so the words "but not otherwise" mean "but not in another way".

13. So, we have a contract that says, in plain terms, that the parties agree that a decision of the Panel is final and binding, unless it is changed by agreement or arbitral award, and a party may seek to challenge it by referring the dispute to arbitration within 90 days, but in no other way. It is quite impossible, in my view, to read the contract as saying that the parties agree that a party bound by a Panel decision may challenge it, not by referring the matter to arbitration, but in some other way; by again opening up that decision as a defence or counterclaim against the other party's claims not decided by the Panel.

14. The arbitrator's decision that the words concerned were inserted by the parties "merely to underscore" the time limit is not, in my opinion, right. The time limit of 90 days is clear; it means 90 days. There is no reason at all why the parties should wish to provide - "When we say 90 days, we mean 90 days, only 90 days, not 91 days, and not some other period."

15. The second question is posed by the applicants in this form -

"Whether any fact or circumstance found by the Arbitrator was capable in law of satisfying the statutory test in Section 2GD(5)(a) of the Arbitration Ordinance (Cap. 341) so as to enable him to hold that it would be just to grant the Respondent an extension of time for serving an arbitration notice."

16. Mr Ma suggested that this was not a question of law. I find that it is. It is not, as Mr Ma suggests, a question of fact resting on a proposition of law.

17. An arbitral tribunal has the power to extend the time "only if it is satisfied that . . . the circumstances were such as to be outside the reasonable contemplation of the parties when they entered into the arbitration agreement . . ."

18. The arbitrator's findings were -

1. this was a new form of dispute resolution;

2. the contract has been entered into 4 years previously;

3. the dispute resolution procedure was not standard;

4. this was the first case referred to the Panel;

5. the applicants served their notice at the last moment;

6. the form of this notice took the respondent by surprise;

7. the respondent believed it could raise their case by defence and counterclaim;

8. "That the circumstances were unusual and unlikely to have been in the contemplation of the parties at the time they entered into the contract are to a large extent established by the wide range of arguments presented to me - the first time these provisions have fallen for interpretation"; and

9. "for all the reasons stated, the circumstances in this matter are such that [the respondent] has satisfied me as to the basic criteria for extending time.

19. Although section 2GD does not say so in express terms, it must, logically and necessarily, have been the intention of the lawmaker that "the circumstances" should relate to why the party applying did not take the step within the time provided in the agreement. Otherwise, it would be a nonsense to extend the time where the party had failed to take the step because it had simply forgotten to do so, although there did exist circumstances not contemplated that had nothing whatsoever to do with the failure to act in time.

20. In this case, the respondent had set a deadline for service of the notice of arbitration as noon on 13 March 1999, which was too late for an effective notice. The respondent set this deadline to allow sufficient time to serve a notice if negotiations to settle failed. So, it is clear that the respondent was late with its notice simply because it calculated the time limit wrongly, thinking that the time expired on 15 March 1999. The respondent does not say that "the circumstances" had any influence on its decision to serve on 13 March, rather than an earlier date. The fact that the respondent miscalculated the date by which the notice should be given is not, in my view, the type of circumstance that is contemplated by the statute. If these sorts of circumstances - simple mistakes of some kind - were sufficient, then, of course, almost every case imaginable would fall within the terms of the statute, and that cannot possibly have been what was intended.

21. Accordingly, in my view, there were no relevant circumstances capable of satisfying the test laid down by the statute.

22. A large part of the argument addressed to me by Mr Ma concentrated on what kind of case this was; "one-off", so that the presumption of finality was strong, or likely to recur, so that this presumption was less strong. In these cases, I find myself in difficulty. I do not have the ability to look at a case in a cursory manner and then decide on where in the scale it falls. I also have difficulty in graduating degrees of "wrongness". All I can do is what I always do with cases before me; study them as carefully as I can, and make what I think is the right decision. In cases seeking leave to appeal, if I conclude, on the arguments then presented to me, that the arbitrator reached the wrong decision, I grant leave. That is not to say that I cannot appreciate that I might be wrong, and the arbitrator might be right, but I can work only on my own view, not on what I anticipate may be the view of others. There are cases, of course, where one might conclude that the matter is in balance; that it is not clear to me that the arbitrator was wrong. In those cases, the place in the spectrum is important. But, in this case, I cannot say honestly that I can see any answer to the applicants arguments. In that event, I believe that leave should be granted.

23. Accordingly, I grant leave to the applicants to appeal on the two questions of law raised.

24. I have not been addressed on costs. The usual order would be that the costs be costs in the cause of the appeal. I see no reason why this order should not be made. I make an order nisi that the costs of this application be costs in the cause of the appeal.