XCHRX NG KIN, KENNETH v. THE H.K. FOOTBALL ASSOCIATION LTD

1994 No. A2383

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

____________

_______________

H E A D N O T E

_______________

Arbitration - Article of Association of a Hong Kong Company - whether complies with Article 7(2) of Model Law - Section 23(1) of the Companies Ordinance - whether dispute within Articles - whether discretion should be exercised in favour of a stay.

_______________

J U D G M E N T

________________

1. I have before me an application made by the Defendant for a stay of these proceedings under the provisions of Section 6 of the Arbitration Ordinance Cap. 341.

2. The Defendant is a sports association. The Plaintiff is, inter alia, a football referee and is a member of the Defendant through his membership of member clubs of the Defendant. The Plaintiff is President of the Shek Kip Mei Sport Association and he is also Secretary of the Wah Hung Athletic Association. He was a FIFA International Referee. Both Shek Kip Mei Sport Association and Wah Hung Athletic Association are member clubs of the Defendant.

3. On 30th December 1993, the Council of the Defendant made a decision that the Plaintiff was unwelcome to take part in their activities or to register himself as an official of the Defendant or its member clubs.

4. The Plaintiff objects to these decisions and submits that in making them the Defendant acted ultra vires its Rules and that it had no power under its Articles or Rules to pass those sanctions. On 12th March 1994, he issued a writ claiming, inter alia, a declaration that the said decision of the Council is null and void and in breach of its rules. He has also sought an interlocutory injunction.

5. The Defendant bases its application for a stay on Article 49 of its Article of Association which states as follows :

"All members of the Association including Member Clubs and Associate Member Clubs and members thereof respectively shall submit and refer all differences and questions coming within the provisions of the Laws of the Game, or the Rules of the Association to the decision of the Council who may determine the same or may appoint Committees or Commissions or other persons for the purpose of hearing and determining the same, and the fact of membership as aforesaid shall constitute an agreement to refer all such differences and questions in accordance with the Rules of the Association, and shall be enforceable as an agreement under the Arbitration Ordinance." (emphasis added)

6. It is important to have regard to Article 7 of the Model Law which by reason of Section 2 of the Ordinance contains the definition of "arbitration agreement" which applies to both domestic and international cases.

7. Article 7 provides as follows :

"Article 7. Definition and form of arbitration agreement

(1) "Arbitration agreement" is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(2) The arbitration agreement shall be in writing. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract."

8. No document has been produced which contains the Plaintiff's signature nor is there before me any document which indicates that the Plaintiff has assented to the arbitration clause. In normal circumstances, the absence of such a signature or document would be sufficient to defeat this application. However, Mr. Ng who appeared for the Defendant, referred me to Section 23(1) of the Companies Ordinance which provides as follows :

" 23. (1) Subject to the provisions of this Ordinance the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles."

9. No doubt this section gives effect to Hickman v. Kent or Rommey Marsh Sheep Breeders Association [1915] 1 Ch. 881 in which Astbury J. after considering various conflicting decisions decided that Articles of Association of a Company do in fact constitute a contract between the Company and its members in respect of their ordinary rights as members. On this basis, the judge held that an article providing for the reference of disputes to arbitration was a sufficient submission in writing within the Arbitration Act 1889.

10. Section 27 of the 1889 Act, provided that :

" 'submission' means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not."

11. Section 27 of the 1889 Act is, of course, different to Article 7 of the Model Law which insists upon a signed agreement or a record of the agreement to arbitrate contained in an exchange of letters etc.

12. The first issue I have to decide is whether Article 7(2) has been complied with, for if it is not, there can be no question of there being an arbitration agreement in support of which the stay can be granted.

13. In my judgment, an agreement to arbitrate contained in Articles of Association of a Company incorporated in Hong Kong under the Companies Ordinance is a valid arbitration agreement within Article 7(2) of the Model Law by reason of the effect of Section 23(1) of the Companies Ordinance. The whole purpose of Section 23(1) is to create a binding agreement between the Company and its members and the reference to signing and sealing is, in my judgment, dispositive of this issue. [In other cases there may well be additional documents that contain a record of the agreement to arbitrate].

14. Mr. Martin Liao, who appeared for the Plaintiff, has made a number of submissions which he submits, should lead me to conclude that it would not be appropriate to grant the stay. It is common ground that I have a discretion under the section.

15. Mr. Liao's first point is that Article 49 does not envisage and makes no provision for arbitration of disputes between the Defendant itself and its members. Rather, he submits, it envisages disputes between members concerning the Rules or the Laws of the Game. This conclusion he submits follows from the words used. Furthermore, this contention would seem to follow from the fact that if a dispute of the sort envisaged by Article 49 does arise then it is the Defendant itself who makes the decision either directly, or through a Commission, Committee or other person. It would seem unlikely that it was ever intended for the Defendant to arbitrate disputes involving allegations of its own wrongdoing.

16. In my judgment, there is much force in this argument and I feel bound to conclude that ex facie Article 49 does not cover the situation which has arisen in this action and thus there is no agreement to arbitrate the dispute which has in fact arisen.

17. This view is sufficient to dispose of the whole matter but out of deference to Counsel's helpful and careful argument and lest this matter should go further, I will express my views, briefly, on the remaining points.

18. Mr. Liao's next point, which also seems a good one, is that the present dispute is not one coming within the rules. The whole basis of the action commenced by the Plaintiff, is that the Defendant has acted outwith the Rules.

19. The Defendant has appreciated a problem with Article 49 because Mr. Lee in para. 60 of his affirmation in order to deal with the partiality point (the Defendant deciding a dispute where they are a party) said this:

"To ensure impartiality, the Council has decided that the present dispute should be heard before an arbitrator to be appointed by the Hong Kong International Arbitration Centre. Alternatively, the Association can agree with Ng as to who is a suitable person to hear and determine the dispute."

20. I am sure that this course of action was intended to deflect any possible charge of bias or partiality but the fact remains that the Article means what it says and this cannot unilaterally be altered by the Defendant in order to avoid this particular problem. In any event, as I have held, this point is of great assistance on the question of the construction of Article 49.

21. Mr. Liao relied upon the fact that this dispute did not arise from a commercial contract, but from the rules of a Sport Association. This, in itself, is insufficient in my judgment to oppose a stay if the claim was otherwise sustainable. Such a dispute as is set out in the Statement of Claim is arbitrable and it could be said that it is better to arbitrate such disputes rather than have them heard out in the full glare of publicity with possible damage to the sport in question.

22. Next, it is said that injunctive relief is claimed and that this factor renders it inappropriate to grant a stay. I disagree. I accept that an arbitrator cannot grant an injunction but under Section 14(6) of the Arbitration Ordinance, the Court can grant an injunction for the purposes of and in relation to a reference to arbitration.

23. Mr. Liao submits that I should exercise my discretion against granting a stay because the dispute involves allegations of impropriety and thus such it would be better to have the matter resolved in Court proceedings rather than arbitration. There is some force in this submission and if I had got to the stage of exercising discretion, this is a factor which would have led me, I believe, to exercise my discretion against granting a stay.

24. Rule 33(3)(g) provides in effect that no legal representation is allowed in an enquiry or disciplinary proceedings. This, submits Mr. Liao, should lead me to exercise my discretion against granting a stay. I disagree. If the parties are bound to arbitrate and if they have agreed that there should be no legal representation, I see no hardship in requiring them to comply with their contractual bargain.

25. Next, it is said that there is no dispute and thus nothing to go to arbitration. This is an extravagant proposition and I reject it.

26. The Plaintiff submits that he is entitled to a public trial because the Defendant's decision impugns the Plaintiff's reputation. This is a factor which I would have taken into account.

27. In conclusion, I am satisfied that on balance it would not have been a proper exercise of discretion to grant a stay and had I not decided this matter on the construction of Article 49 itself, I would have dismissed the summons for a stay.

28. For all these reasons therefore, this summons is dismissed and I make a costs order nisi in favour of the Plaintiff.

Postscript

29. On Friday 27th May, after this judgment was prepared Mr. Denis Chang, Q.C. who leads for the Defendant, asked for an urgent appointment to inform me of certain new developments of which he wanted me to be aware prior to delivering this judgment.

30. As I mentioned earlier in this judgment the Plaintiff was seeking an interlocutory injunction. That application came on before Mayo J. I believe on 23rd May. By the time that application came on the Defendants had passed a resolution purporting to expel the Plaintiff from the Defendants. In the light of this development the Plaintiff abandoned his claim for an injunction which was directed towards his previous purported suspension.

31. Mr. Liao told me that the Plaintiff will challenge the expulsion on the grounds that the Plaintiff is not a member of the Defendants for the purposes of Article 11 of the Articles of Association. He also told me that the Plaintiff will still contest the suspension.

32. I am grateful to Counsel for providing this update. However, none of these new matters affects my decision to decline the stay.