Wong Chun Ho t/a Hong Kong World Wide Enterprises Co v. The Owners of the "Adri Xv" (Indonesian Flag)

Case No.CACV 38/1972

Court

Court of Appeal

Date—

Judge—

Case Document

100%Judiciary

CACV000038/1972

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO. 38 OF 1972

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BETWEEN
	WONG CHUN HO trading as HONG KONG WORLD WIDE ENTERPRISES COMPANY	Plaintiff (Appellant)
	and
	The owners of the "ADRI XV" (Indonesian Flag)	Defendant (Respondent)

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Coram: Blair-Kerr, S.P.J., Pickering & Leonard, JJ.

Date of Judgment: 16th January, 1973.

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JUDGMENT

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Pickering, J.:

1. The events giving rise to this case were well recounted by the learned judge in the court below, as follows:

	"This is an application to set aside an Arbitration Award and for an order that an agreement to refer a dispute to arbitration shall cease to have effect, and in the alternative to remove the Arbitrators or to remit the Award for reconsideration. By a Memorandum of Agreement dated 4th September 1970 the Applicant agreed to purchase and the Respondents agreed to sell three vessels for breaking up. The Respondents had previously contracted to purchase these vessels from the Indonesian Army.
	The Memorandum of Agreement was, one assumes, not drafted by a person with legal training. Although it was for the sale and purchase of three vessels each of over 3,000 tons it was declared to be 'C.I.F. Deliveried in Kaohsiung Harbour'. Payment of the price was to be by an immediate payment as a deposit and by three 'irrevocable, confirmed, letters of credit ...... for sight draft without recourse, valid for 90 days for Adri XV ...... terms according to this Memorandum of Agreement'. It was further provided:

'Each L/C is to be opened by the Purchasers immediately after they been informed of each vessel's readiness of delivery and to be fully paid in Hong Kong or NewYork in free transferrable U.S. Dollars within three days from and including the day of the Vendors giving notice of the vessel's safely arrival at Kaohsiung approved by Lloyds agent or harbour master Kaohsiung for delivery in accordance with this Memorandum of Agreement in favour of Prompt Shipping Corporation Ltd., Hong Kong, against mainly the following documents:

	(a)	Bill of sale issued by Verna Navigation Company S.A. in favour of the Purchasers or their nominee specifying free from all encumbrances and duly attested by a notary public.
	(b)	Signed commercial invoice in quadruplicate.
	(c)	Certificate of deletion from Indonesia Registery.
	(d)	Signed particular of the vessel(s).

Any expenses incurred due to payment by L/C are to be for Purchasers' account. But negatiating bank's charges, if any, are for account of Vendors.' (sic)

	The letter of credit for the balance of the price of the Adri XV was not opened and the Respondents rescinded the contract. The Applicant contended that there was no ground for rescission and both sides claimed damages. These claims were submitted to arbitration pursuant to Clause (7) of the Memorandum of Agreement.
	The Arbitrators held a preliminary meeting, at which they gave directions for the hearing on 25th January 1972 of oral evidence limited to two aspects of the case, namely:

	(a)	the intention of the parties as to when the Letter of Credit was to be opened, under the Agreement ...... and;
	(b)	the procedure which was formerly adopted in the sale by the Defendants to the Plaintiffs of the vessels 'Adri XI' and 'Adri XIII'.'

It was ordered by consent that one witness should be called by each side and the Arbitrators 'indicated that once they had reached a decision on liability they would request further documentation from the successful party on the question of damages to which no objection was taken'. On 7th February the Arbitrators called upon the Respondents to produce specified documents. It is apparent that by that date they had come to the conclusion that the question of liability must be decided in favour of the Respondents and the documents they called for were to enable them to assess the damages payable by the Applicant. On 11th April 1972 they signed their Award and notice thereof was received by the parties on 15th May, although the Award was not actually delivered to the solicitors for the Respondents until 19th May."

2. By that Award the arbitrators dismissed the plaintiffs' claim and awarded to the defendants damages in the sum of $114,418.36 on their Counterclaim. The plaintiffs were also ordered to bear the costs of the reference and Award.

3. The learned judge in the court below declined to set aside the Award or to order that the agreement to refer the dispute to arbitration should cease to have effect; nor did he accede to the alternative requests to remove the arbitrators or to remit the Award for reconsideration. What the judge did do was to remit the Award to the arbitrators for them to hear the applicant and, if desired, the respondents upon the effect of documents submitted by the respondents in regard to the assessment of quantum of damages, and to reconsider that part of the Award relating to quantum.

4. The appeal to this Court is against that decision of the learned judge and seeks to obtain from this Court one or other of the wider reliefs sought in the court below.

5. The point was taken in the court below on behalf of the applicant that the respondents (who are also the respondents in this Court) had been guilty of fraud so that the court had bower, under s.26(2) of the Arbitration Ordinance, Cap. 341, to order that the agreement to refer the dispute to arbitration should cease to have effect. The learned judge considered that, as pleaded before the arbitrators, no question of fraud arose at all.

6. The applicant in the court below also sought to adduce fresh evidence to show that a certificate of seaworthiness was not issued for the passage of the Adri XV from Djkarta to Kaohsiung until the 19th January 1971, a date more than a month later than the notification by the respondents to the applicant that the ship was "ready of delivery". The learned judge considered that there was no sufficient reason for allowing the applicant to adduce further evidence.

7. When analysed, the six grounds of appeal set out in the Supplementary Notice of Appeal, amount to complaints that the judge in the court below erred in declining to allow the appellants to adduce fresh evidence and failed to consider whether, having found that the arbitrators acted in breach of natural justice in failing to allow the appellants to be heard on the question of quantum, the arbitrators should be removed and/or their whole Award set aside for that reason.

8. In pursuance of these arguments, Mr. Ching, with the aid of hypothetical brackets which did not appear in the original Clause 2(c), devised an ingenious construction of that clause designed to show that the phrase "readiness of delivery" meant readiness in Kaohsiung. With the greatest respect to counsel's efforts, the construction so sought for appears to us to do further violence to a clause the original composition of which already suffered from natal malformations of a most serious character, by reason of the fact that the draftsman was palpably neither versed in law nor possessed of English as a native language.

9. We are far from persuaded that Mr. Ching's interpretation, which he himself describes as tortuous, is the correct one. There was uncontradicted evidence on affidavit before the judge in the court below to the effect that the purchase of these three ships was to be financed by means of back-to-back L/Cs, the respondents relying upon the opening of a L/C by the applicant in order that they, in turn, could open one in favour of the Indonesian Government from whom they were buying the ships. In the light of that evidence it is difficult to put any other than its face interpretation upon the ineptly drafted Clause 2(C) of the Memorandum of Agreement which must have meant what it said, namely, that the applicant was to open a L/C in respect of the purchase price of each ship immediately upon "notification" of "readiness of delivery". Whilst we cannot say with complete certainty that this is the interpretation which the arbitrators placed upon Clause 2(C) (for the reason that, as they were entitled to do, they gave no reasons for their Award) the strong probability is that such was their interpretation and we are far from persuaded that this interpretation, consistent with the previous conduct of the parties in regard to the earlier sales of the Adri XI and Adri XIII respectively, is incorrect.

10. In his argument to the effect that the arbitrators should have been removed by the learned judge in the court below; and/or their whole Award set aside, Mr. Ching drew our attention to a number of cases in which relatively minor acts of misconduct on the part of arbitrators had led to the setting aside of the whole Award. Persuasive as these cases are in their own contexts, especially if one fails to keep in mind the discretion, expressly conferred by s.24 of the Arbitration Ordinance, to remit for the reconsideration of the arbitrators, the matters referred or any of them, we do not consider that they can be said to have any real relation to the facts of the present case because, so far from there being any question of fraud on the part of the appellants, the date of the delivery to them, of the Adri XV, from the Indonesian Authorities, was before the arbitrators, at any rate at the stage at which they came to consider the quantum of damages due from the appellants. It is for this reason also that we consider the learned judge in the court below to have been right in refusing to admit "fresh" evidence for that evidence was not "fresh". It was before the arbitrators and we are no more justified in assuming that they were unaware of its implications (if any), than was the learned judge in the court below. Even assuming that the arbitrators had remained blind to the date of delivery to the respondents, would it have made any difference to their determination of the issue of liability had their eyes been opened? Having regard to the back-to-back L/C method of financing these transactions, we cannot conceive that it would. It was manifestly within the contemplation of the parties that the respondents could not have opened their L/C in favour of the Indonesian Authorities until the appellants had opened their own L/C in favour of the respondents and neither side could reasonably have expected delivery of the vessel from the Indonesian Authorities to the respondents until that former L/C had been opened.

11. For this reason we consider that to remit the issue of liability to these or any other arbitrators, would be an exercise in futility, and we consider that the learned judge was right to divorce the issues of liability and quantum in his reference back to the arbitrators.

12. We do not wish to appear to state our reasons for our decision in any laconic fashion. On the other hand we are anxious not to dilate too freely upon all the matters canvassed before us, since the Award is to be referred back to the arbitrators - if only upon the question of quantum. Much was argued - and argued very persuasively on both sides - before us: but the essence of the appellants' complaint regarding liability was that the vessel could not have been ready for delivery at the date of notification of "readiness of delivery" since it was not then in the hands of the respondents and was not then yet the subject of a certificate of seaworthiness for the voyage to Taiwan. With this argument, we trust we have sufficiently dealt.

13. The appeal is dismissed with costs.

Representation:

C. Ching (Deacons) for Appellant

R. Mills-Owens (Johnson Stokes & Master) for Respondent.