K. H. Foundations Ltd v. Sze Fung Engineering Ltd

CAMP 222/2020

[2021] HKCA 970

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 222 OF 2020

(ON AN INTENDED APPEAL FROM HCCT NO 8 OF 2020)

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Before: Hon Kwan VP and G Lam JA in Chambers

Dates of Written Submissions: 27 November and 11 December 2020

Date of Decision: 7 July2021

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D E C I S I O N

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Hon G Lam JA (giving the Decision of the Court):

Introduction

1.The plaintiff, K. H. Foundations Ltd (“KH”), was the foundations contractor and engaged the defendant, Sze Fung Engineering Ltd (“SF”), as the foundations subcontractor in respect of two residential development projects.  There were all together five subcontracts, designated A to E.  Subcontracts A to C concerned one of the projects and Subcontracts D and E concerned the other.  Disputes arose between the parties in relation to all five subcontracts and SF, as claimant, referred them to arbitration in Hong Kong with KH as respondent.

2.On 11 February 2020, the sole arbitrator issued an interim award on liability (“Award”), holding KH liable to SF, with quantum to be assessed at a later stage.  By originating summons, KH applied to the Court of First Instance for leave to appeal against the Award on questions of law.  The application concerned only Subcontracts A to C.  In a decision dated 31 August 2020, Mimmie Chan J dismissed that application (“Refusal Decision”).[1]  On 13 November 2020, the judge dismissed KH’s application for leaveto appeal against the Refusal Decision to this court.[2]  By summons dated 27 November 2020, KH applies again to this court for leave to appeal against the Refusal Decision.  For the reasons explained below, we dismiss the application.

Appeal on question of law arising out of arbitral award

3.A prominent theme of the Arbitration Ordinance (Cap 609) (“Ordinance”), which came into effect in June 2011, is that the court’s interference with arbitral awards is strictly circumscribed. There is no general right of appeal to the court from arbitral awards, but a limited regime for appeal on questions of law arising out of arbitral awards is preserved in Schedule 2 to the Ordinance (“Schedule 2”), which may apply by the parties’ choice or automatically in certain specified cases.[3]  It applies in the present case. 

4.Section 5 of Schedule 2 provides that, subject to section 6, a party to arbitral proceedings may appeal to the Court of First Instance on a question of law arising out of an award.  The fundamental requirement, therefore, is that the question put forward must be a question of law, not of fact.  There are other provisions that emphasise this requirement and the distinction between questions of law and fact.  Thus where leave to appeal has been granted, section 5(3) states that the court must decide “the question of law … on the basis of the findings of fact in the award”.  Under section 6(4)(c), what the applicant needs to show to be erroneous in order to obtain leave is “the decision of the arbitral tribunal on the question”, “on the basis of the findings of fact in the award”. 

5.Some questions are easy to classify.  The correct scope and content of a specific legal rule is obviously a question of law.  Traditionally, the interpretation of contracts has been regarded as a question of law.[4]  In less straightforward cases, Mustill J’s analysis in Vinava Shipping Co Ltd v Finelvet AG (The “Chrysalis”) [1983] 1 WLR 1469 at 1475, dividing an arbitrator’s process of reasoning into three stages, may be of assistance:

“ (1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute. (2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached. (3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision.

In some cases, stage (3) will be purely mechanical. Once the law is correctly ascertained, the decision follows inevitably from the application of it to the facts found. In other instances, however, the third stage involves an element of judgment on the part of the arbitrator. There is no uniquely ‘right’ answer to be derived from marrying the facts and the law, merely a choice of answers, none of which can be described as wrong.

Stage (2) of the process is the proper subject matter of an appeal under the 1979 Act. In some cases an error of law can be demonstrated by studying the way in which the arbitrator has stated the law in his reasons. It is, however, also possible to infer an error of law in those cases where a correct application of the law to the facts found would lead inevitably to one answer, whereas the arbitrator has arrived at another: and this can be so even if the arbitrator has stated the law in his reasons in a manner which appears to be correct — for the Court is then driven to assume that he did not properly understand the principles which he had stated.

Whether stage (3) can ever be the proper subject of an appeal, in those cases where the making of the decision does not follow automatically from the ascertainment of the facts and the law, is not a matter upon which it is necessary to express a view in the present case.  … [W]here the issue is one of commercial frustration, the Court will not intervene, save only to the extent that it will have to form its own view, in order to see whether the arbitrator’s decision is out of conformity with the only correct answer or (as the case may be) lies outside the range of correct answers.  This is part of the process of investigating whether the arbitrator has gone wrong at the second stage.  But once the Court has concluded that a tribunal which correctly understood the law could have arrived at the same answer as the one reached by the arbitrator, the fact that the individual judge himself would have come to a different conclusion is no ground for disturbing the award.”

6.This suggests that whilst generally only the second stage of the process described above is the proper subject of an appeal on law, a question of law may arise in the third stage if the decision is such as to be necessarily inconsistent with a correct understanding or application of the law.

7.The application for leave to appeal must identify the question of law: section 6(2)(a). This is not just a formality, but a requirement of some importance since the question of law is central to the application.  The failure to identify a clear, crisp and correct question of law may result in the application being rejected on that ground alone.  The judge may tweak and adapt a convoluted, overbroad or misfocused question or allow the applicant an opportunity to do so either in writing or if necessary by calling for a hearing, but is under no duty to grant such indulgence.

8.Section 6(4) provides that leave to appeal is to be granted only if the court is satisfied of three conditions.  First, the decision of the question will substantially affect the rights of one or more of the parties: section 6(4)(a).  This is a condition transposed from section 23(4) of the former Arbitration Ordinance (Cap 341).  It requires that the question must be a “point of practical importance — not an academic point — nor a minor point”: Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1980] QB 547, 564.

9.Secondly, the question is one which the arbitral tribunal was asked to decide.  This provision is not found in the former Arbitration Ordinance (Cap 341), but is derived from section 69(3)(b) of the (UK) Arbitration Act 1996.  It will evidently exclude any appeal on a new point of law which was not before the arbitral tribunal.[5] But it also means that not all errors of law that an applicant alleges to have been made by the arbitrator necessarily give rise to admissible questions of law for an appeal to the court.  Simply posing the question whether the arbitrator may in law properly take a certain course does not mean it is therefore a question of law arising out of the award which the arbitrator was asked to determine.

10.The third condition has two alternatives: the first is that on the basis of the findings of fact in the award, the decision of the arbitral tribunal on the question is obviously wrong.  This is a very high hurdle, clearly derived from the Nema guidelines (Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724) which applied under the previous legislative scheme in section 23 of the former Arbitration Ordinance (Cap 341).  The stringency of the standard can be seen from the following passage in Lord Diplock’s speech in that case (at p 742H):

“ Where, as in the instant case, a question of law involved is the construction of a ‘one‑off’ clause the application of which to the particular facts of the case is an issue in the arbitration, leave should not normally be given unless it is apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument, that the meaning ascribed to the clause by the arbitrator is obviously wrong. But if on such perusal it appears to the judge that it is possible that argument might persuade him, despite first impression to the contrary, that the arbitrator might be right, he should not grant leave; the parties should be left to accept, for better or for worse, the decision of the tribunal that they had chosen to decide the matter in the first instance.”

11.This passage was quoted with approval by the Court of Final Appeal in Swire Properties Ltd & others v Secretary for Justice (2003) 6 HKCFAR 236 at §31 as the applicable approach under section 23, and continues to guide the application of the now statutory phrase “obviously wrong” in section 6(4)(c)(i) of Schedule 2: see A & others v Housing Authority [2018] HKCFI 147 §§8-9 and, on appeal, Chun Wo Construction & Engineering Co Ltd v Hong Kong Housing Authority [2019] HKCA 369.

12.The alternative third condition is that on the basis of the findings of fact in the award, the question is one of general importance and the decision of the arbitral tribunal is at least open to serious doubt.  The phrase “open to serious doubt” represents a lower threshold than “a strong prima facie case”: Chun Wo Construction & Engineering Co Ltd v Hong Kong Housing Authority [2019] HKCA 369 at §8.3.

Leave to appeal

13.Once the Court of First Instance has made a decision to grant or refuse leave to appeal on the question of law arising out of the award, an appeal may lie from that decision but only with leave of the Court of First Instance or the Court of Appeal: section 6(5).[6]

14.As held in Maeda Kensetsu Kogyo Kabushiki Kaisha (also known as Maeda Corporation) & another v Bauer Hong Kong Ltd (HCMP 1342/2017; 4 September 2017) at §15, section 14AA of the High Court Ordinance (Cap 4) is applicable to such an application so that leave to appeal from a grant or refusal of leave to appeal against an arbitral award should not be granted unless (a) the appeal has a reasonable prospect of success, or (b) there is some other reason in the interests of justice why the appeal should be heard: section 14AA(4).

15.But a reasonable prospect of success is not enough.  By virtue of section 6(6) of Schedule 2, leave to appeal against such decision must not be granted unless “(a) the question is one of general importance; or (b) the question is one which, for some other special reason, should be considered by the Court”.[7]

16.Further, in Maeda, supra, at §18, the Court of Appeal held that where the Court of First Instance has granted leave to appeal from an award on the basis that the arbitral decision is at least open to serious doubt, since the assessment of that criterion can be quite subjective and different judges can reasonably come to different views, the Court of Appeal should not intervene unless it can readily be demonstrated that the judge was “plainly wrong” in coming to that conclusion.  In Chun Wo, at §8.3, the same approach was applied by the Court of Appeal in a case where the judge below took the view that the arbitrator’s decision was not open to serious doubt.  In the present case, whilst the Judge considered the applicable test was “obviously wrong” rather than “at least open to serious doubt”, KH has proceeded on the footing that it has to demonstrate that the Refusal Decision was plainly wrong, and we see no reason to apply any lower standard.  As the Court of Final Appeal said in Swire Properties Ltd, it is to be expected that the refusal of leave at first instance in a “one‑off” case “would normally prove difficult to upset on appeal”.[8]  We nevertheless bear in mind the different consequences (in terms of access to court) of an application for leave to appeal from a grant, as opposed to a refusal, of leave to appeal from an award, as pointed out in Maeda at §12.

The present case

17.Having regard to the provision of section 6(3) of Schedule 2 requiring the Court of First Instance to determine an application for leave to appeal from an award without a hearing unless one is required, we consider it appropriate to determine the present application on the basis of the written materials only.

Rock Socket Length Question

18.Of the various claims and issues raised in the arbitration, only two are relevant here and in the court below.  The first issue, which has been called the “Rock Socket Length Question”, arose in this way.  The subcontracts were re-measurement contracts, which means that SF was to be remunerated based on the work done and measured, valued at agreed rates set out in the relevant Schedule of Rates (“SOR”).  One of the items of work required was the drilling of various “rock sockets” for different types of piles.  SF was provided with drawings and specifications, which contained specified “minimum” rock socket lengths.  (For certain temporary piles the penetration is measured by “embedment length”, but for simplicity we shall only refer to rock socket lengths.)  In many instances, SF drilled beyond the specified length.  A dispute arose as to whether SF should be paid by reference to the rock socket length actually drilled, as it contended, or the rock socket length as shown on the drawings, as KH contended.

19.In its statement of claim in the arbitration, SF simply claimed an entitlement to payment compendiously without going into the issue.[9] In its defence and counterclaim, KH alleged that SF had breached the subcontracts in failing to carry out the drilling works in accordance with the drawings or design requirements and in over‑drilling beyond the level required by the subcontracts, causing wastage of the additional beams and casings used.[10]  In its reply, SF pleaded that it had carried out the works in accordance with the subcontracts and instructions from the Engineer or its representative, and that each pipe was subjected to the directions of the Engineer or its representative for drilling to the final level.[11]  As particulars of such directions, SF stated that when the Engineer’s representative was dissatisfied with the founding level during inspection, SF would be directed to undertake further drilling as necessary until the representative was satisfied.[12] 

20.KH says that SF’s director said in evidence that if over‑drilling was due to SF’s own fault/reasons, SF should not be remunerated, and that SF’s foreman testified it was KH’s representatives who ordered the further drilling and that he only attended about 30% of the inspection of piles.  On this basis, KH contended that since there was no evidence to substantiate SF’s plea that the further drilling was directed by the Engineer or its representative, SF’s case collapsed and that should be the end of the matter.

21.In the Award, the arbitrator referred to SF’s averment of how the actual founding level of each pile was reached and to KH’s contention that in the absence of any variation order from the Engineer or instruction from KH, SF must drill only to the level shown in the drawings. Disagreeing with KH’s case, he considered that the rock socket lengths shown in the drawings were “minimum” and did not mean piling work should stop there.  He said:

“ … it is beyond dispute that by the very nature of piling work, it would be plainly impossible that the piling works could just stop at the ‘minimum’ rock socket length and embedment length. Quite to the contrary, it is quite commonly found that the piling works go beyond the specified minimum so that the acceptance criteria (sound rock of depth more than the minimum required length) would have been met.”

22.He also rejected KH’s argument that it would be absurd for KH to be obliged to pay for whatever rock socket lengths drilled beyond those specified in the drawings:

“ If the Respondent’s contention (namely, that the as‑built should be the rock socket lengths and the embedment lengths per the minimum requirements) were correct, this should have been stated in the BQ or Preambles. However, they were not. Instead, the BQ stated that the length of piles should be measured to the founding level (not the designed or intended founding level), the natural and ordinary meaning of which should be the actual founding level.”

23.The arbitrator rejected KH’s submission that the levels shown in the drawings should be used for measurement unless SF’s case for the excess was proved.  He considered that there could be many good reasons for the drilling to proceed further, including the rock quality and geological features of the bedrock.  SF was under the supervision of KH and the Engineer’s representative on site.  Prior to the arbitration, there was no record showing KH had ever complained about over‑drilling.  If SF should stop at the minimum, KH should ask SF to do so.  It would be unconscionable for SF to be allowed to drill beyond the minimum and then not get paid for that work.  He concluded that the founding level for the computation of the pile length in the BQ or SOR was the actual founding level.

24.In its originating summons, KH poses the following two questions in connection with the Rock Socket Length Question:

Question 1 — To what extent an arbitral tribunal may depart from the parties’ pleaded case under the HKIAC Short Form Arbitration Rules within the framework of the Ordinance in the determination of the parties’ dispute?

Question 2 — Whether on the proper construction of Subcontract C, proof of the following alone would of itself be sufficient to give rise to an entitlement to payment for over‑drilling: (a) compliance by SF with the directions of the Engineer or its Representative; or (b) failure on the part of KH to stop drilling beyond the minimum rock socket length.

Question 1

25.Question 1 is framed as a general question with reference to the HKIAC Short Form Arbitration Rules, but it relates to an objection based on pleadings which does not seem to have been debated before the arbitrator.  In fact, KH’s very complaint is that it was taken by surprise in that the arbitrator did not inform the parties during the arbitration that he might rely on the fact that KH had not stopped SF from further drilling as a basis to award payment to SF.[13]  But this seems to us to be a complaint of an irregularity, which is catered for in Schedule 2 by a challenge of an award on that ground pursuant to section 4, rather than an appeal on a question of law (and one which the arbitrator was asked to determine) pursuant to section 5.[14]

26.Question 1 presupposes the arbitrator departed from the parties’ pleaded cases.  The fact that this question was not debated in the arbitration means that there was no discussion and no determination at all by the arbitrator with regard to the scope of the pleadings, possibly augmented, elucidated or modified by the parties’ oral and written submissions.  An application for leave to appeal on a question of law is hardly an appropriate exercise in which to require the judge to trawl through the record of proceedings in the arbitration to ascertain what was or was not a departure or the extent of departure from the cases run in the arbitration.  Nor is such issue a question of law.

27.In any event, in the present case the judge considered the pleadings and rejected the contention that the arbitrator had departed from the parties’ pleaded case.[15] She considered the arbitrator’s conclusion was within the ambit of SF’s general averment.  It seems to us that although SF pleaded it was instructed by the Engineer or its representative to conduct further drilling, it did not plead that it was entitled to payment only if it had been so instructed.  We do not think that KH has come near the threshold for impugning the judge’s conclusion.

28.KH criticises the Refusal Decision on the ground that the judge failed to determine Question 1.  What happened was that the judge found the originating summons “not particularly helpful” in identifying the questions of law properly,[16] and she tried to express the real questions of law raised in the way she understood them which would involve consideration of the questions put forward by KH.[17]  As will be apparent from our decision herein, we share the view that the questions put forward are highly unsatisfactory, at least as far as Questions 1 and 3 are concerned.  There was no basis for giving leave to appeal to this Court.

Question 2

29.Question 2, as an issue of interpretation of contract, is a question of law.  The judge approached it as the question whether, on the proper construction of Subcontract C, SF was entitled to payment for drilling beyond the rock socket length shown in the drawings.[18]  This adaptation does not alter the substance of the question posed.  The judge found it a “one‑off” question rather than one of general importance,[19] and KH does not seek to controvert this.[20] Its assertion that Question 2 is “part and parcel” of Question 1 does not make the former a question of general interest to the industry.  The arbitrator held that the BQ stated that the length of piles should be measured to the founding level, the natural and ordinary meaning of which was the actual founding level.[21]

30.There being no general importance in the question or any other special reason as required by section 6(6), the judge’s Refusal Decision must be treated as final.  In any event, KH has failed to demonstrate that the judge was plainly wrong in holding that the arbitrator’s construction was not obviously wrong.

EO Rock Drilling Question

31.The second question, which has been called the “EO Rock Drilling Question”, concerns the payment of work for rock drilling in relation to three categories of work: (1) 34 additional Soldier Piles (SP1‑34); (2) 84 King Posts (KP1‑84); and (3) Socketed H‑Piles.  There is no dispute that SF was entitled to be paid for these drilling works.  The issue was by reference to which item or items in the SOR in which subcontract or subcontracts should these works be valued.

Question 3

32.Both the Schedule of Rates in Subcontracts A and B contained an item for drilling vertical holes for Soldier Piles from the ground level to the founding level.  For example, the item BQ/5/9/D in Subcontract A was as follows:

“ Drill vertical hole by method approved by the Architect or the Contract Administrator with permanent steel pipes (supply to be measured separately) into bed rock as varies socket length by approved method etc; with and including excavating and removal of any underground obstructions during driving including rock, boulders and whatsoever; or necessary welding works by qualified welders, connection works, cutting off steel pipes to the required level etc, steel pipe and pipe shoes to be supplied by the Sub‑contractor; all in accordance with Drawings and Specific age and is; measured from existing ground level top level to founding level.”

Item BQ/5/9/F in Subcontract A and item B/9/F in Subcontract B were in similar terms.  For each of these items, SF had inserted the same rate of $1,800/m.

33.In contrast, the SOR in Subcontract C contained two items, namely, SOR4/B and SOR4/C, that were potentially relevant:

Item	Description	Qty	Unit	Rate
	Drill 610mm diameter holes by approved method with temporary steel casings into bedrock as varies socket length commencing at existing ground level say +65.0, including extracting steel casings upon completion, excavating and removal of any underground obstructions during driving including rocks, boulders and whatsoever, casings and steel shoes, cutting off steel casing to the required level, steel to be supplied by the Sub‑contractor, all in accordance with Drawings and Specifications
B	For vertical socketed steel H piling (in 215 nos.)		m	1,800
	Extra over 550mm diameter for Rock drilling
C	For vertical socketed steel H piling (in 215 nos.)		m	1,800

34.In relation to SP1‑34 and KP1‑84, which were temporary piles driven prior to excavation additional to the 365 Soldier Piles originally required under Subcontracts A and B, KH contends that SF made no submissions at the arbitration as to why these piles should be paid for under Subcontract C, which concerned Socketed H‑Piles, rather than under Subcontracts A and B.  KH says that in the Award, the arbitrator made no specific determination whether there should be an additional item for “extra over” in relation to SP1‑34 and KP1‑84, and gave no consideration to KH’s case that there was no basis to use the SOR in Subcontract C for these items and that the single items in Subcontract A and B should be used instead.  But the effect of the arbitrator’s acceptance of SF’s quantification as stated in the (corrected) Redfern Schedule is that SF was taken as entitled to an “extra over” item for rock drilling in accordance with SOR4/C.  KH complains that the arbitrator has not dealt with its case and arguments on the valuation of these items.

35.On this basis, KH poses an identical question in respect of SP1‑34 and KP1‑84 respectively:

Question 3 — To what extent an arbitral tribunal may ignore a party’s valuation and the contractual argument therefor in the determination of a valuation dispute under a construction contract?

36.The wording of this question is contrived, presumably framed in this way to assume an air of generality.  As formulated it was a loaded question and not one the arbitrator was asked to determine.  The fact that the arbitrator did not in the Award deal expressly with each and every point taken by KH can hardly give rise to the question of law put forward.  The judge did not expressly deal with Question 3 in the form raised,[22] no doubt because she did not find its formulation helpful.  Nevertheless, she substantively addressed the gist of KH’s complaint.  Thus the judge pointed out that the arbitrator had, during closing submissions, directed for Redfern Schedules to be submitted by the parties in respect of the parameters to be determined,[23] on the basis of which he was clearly aware of the differences between them in relation to the application of different rates to the disputed works.  KH had notice of the disputed issues and of SF’s case.[24] 

37.In particular, the judge noted that KH pleaded to SP1‑34 and KP1‑84 as variation works under Subcontract C.[25]  This was supported by the affidavit of SF in the court below, exhibiting the relevant appendix  to KH’s statement of defence and counterclaim in the arbitration.[26]  KH pleaded to the works based on the rates in Subcontract C, although it contended that the quantity for the “extra over” item should be nil; KH also relied on other clauses in Subcontract C.

38.The judge was plainly correct not to consider the real question to be of general importance.[27] Given the evidence on how the case was fought below, she was fully entitled to take the view that there was nothing obviously wrong for the arbitrator to value SP1‑34 and KP1‑84 under the SOR in Subcontract C.  There is neither general importance nor special reason under section 6(6) for leave to be given to appeal from the Refusal Decision. 

Question 4

39.In relation to Socketed H‑Piles, there was no dispute at the arbitration that the SOR in Subcontract C applied.  The debate was whether only item SOR/4B should be used to value the drilling work for these piles (as KH contended), or whether in addition to item SOR/4B, item SOR/4C should also be used in respect of rock drilling (as SF contended).  This is a matter of the construction of Subcontract C.  In the Award, the arbitrator set out relevant passages from the cases on the principles of contractual interpretation including Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, Arnold v Britton [2015] UKSC 36, and Wood v Capita Insurance Services Ltd [2017] UKSC 24.  He discussed both parties’ arguments and the meanings they contended for, and concluded in favour of SF that if rock was encountered during drilling for Socketed H‑Piles, there should be an extra item SOR/4C in addition to item SOR/4B.

40.In respect of this holding in the Award, KH seeks leave to appeal on the following question:

The Socketed H‑Piles Issue

Question 4 — What is the correct approach to contractual interpretation of “extra over” items in a re‑measurement contract or subcontract using schedule of rates?

41.There is undoubtedly a question of ascertaining the correct meaning of the contract here, which is a question of law.  But Question 4 as formulated is not the correct question to ask.  There is no issue of law over the “approach to contractual interpretation”; there is no dispute that the passages from the cases quoted by the arbitrator set out the proper legal approach and principles of contractual construction.  KH contends that the arbitrator failed to apply the principles — in particular, that he failed to undertake a unitary but iterative process, checking the rival interpretations against the commercial context, purpose and consequences.  But this does not give rise to any appealable error of law if the interpretation he arrived at is correct.  The true question is: on the proper construction of Subcontract C, whether drilling for Socketed H‑Piles, where rock drilling is involved, is to be measured and paid under only item SOR/4B or under both items SOR/4B and SOR/4C.

42.The judge considered the question was not one of general importance to the industry, and therefore the “obviously wrong” test applied, though she also considered the arbitrator’s decision was not open to serious doubt.[28]

43.We agree that the question is not of general importance.  The proper meaning turns on the content of the subcontract in question.  There is no suggestion that the relevant parts of the subcontract consisted of standard terms prevalent in the industry.  KH submits that guidance is needed on the question of whether the scope of an SOR item may be reduced or limited in light of another SOR item dealing with the same subject of work.  But questions such as this depend on the content of the contract concerned and cannot usefully be answered in the abstract at this level of generality. We can see no other special reason why the question posed should be considered by the Court of First Instance on an appeal from the Award.  This being the case, by virtue of section 6(6), leave to appeal from the Refusal Decision simply cannot be given.

Conclusion

44.For these reasons, KH’s application for leave is dismissed with costs on an indemnity basis.  The sum of $209,200 claimed in SF’s statement of costs is in our view excessive having regard to the work involved.  We assess the costs payable in the sum of $145,000.

Written Submissions by Mr Eric Chung, instructed by Deacons, for the Plaintiff (Respondent in the Arbitration)

Written Submissions by Mr Ivan Cheung, instructed by Khoo & Co, for the Defendant (Claimant in the Arbitration)

[1] [2020] HKCFI 2213.

[2] [2020] HKCFI 2893.

[3] See sections 99 to 103 of the Ordinance.

[4] See Chun Wo Construction & Engineering Co Ltd v Hong Kong Housing Authority [2019] HKCA 369, §4.3.

[5] The practice as regards an application for leave to appeal based on a new question of law not argued before the arbitral tribunal discussed in Swire Properties Ltd & others v Secretary for Justice (2003) 6 HKCFAR 236 at §50 was the practice under the old law.

[6] Under section 69 of the (UK) Arbitration Act 1996, leave can only be granted by the lower court.  It has been held in the UK that under that section, the judge should only grant leave to appeal to the Court of Appeal in cases where the guidelines on the giving of leave to appeal from arbitral awards required amplification, elucidation or adaptation to changing practices: CMA CGM SA v Beteiligungs‑KG MS “Northern Pioneer” Schiffahrtsgesellschaft mbH & Co & others (‘The Northern Pioneer’) [2003] 1 WLR 1015, at §§12-13; The Antaios [1985] AC 191, 205.  We have not received submissions whether the same limitation should apply under section 6(5) & (6) of Schedule 2 and do not express a view on it.

[7] It may be queried whether these conditions are apt in respect of an application for leave to appeal against the Court of First Instance’s grant of leave to appeal against an arbitral award, but we need not go into that question for present purposes.

[8] Swire Properties Ltd & others v Secretary for Justice, at §46.

[9] §§13-14.

[10] §16(1)(a), (d), (e).

[11] §§11 & 14.

[12] Page 2 of SF’s Answer to Request for Further and Better Particulars of the Claimant’s Statement of Reply and Defence to Counterclaim.

[13] See §4 of the draft Notice of Appeal annexed to the summons for leave to appeal before this court; and §9 of KH’s Written Statement in support of its Application for Leave to Appeal.

[14] See also Refusal Decision, §37.

[15] Refusal Decision, §33.

[16] Refusal Decision, §5.

[17] Refusal Decision, §§8-10.

[18] Refusal Decision, §8(1).

[19] Refusal Decision, §§21 & 36.

[20] KH’s contention is that Questions 1, 3 and 4 are of general importance: see KH’s Written Statement in support of the Application for Leave to Appeal, §3.

[21] Award, §109.

[22] Refusal Decision, §39.

[23] Award, §§40-42.

[24] Refusal Decision, §§46-49, 57-59.

[25] Refusal Decision, §§48-49.

[26] Affidavit of Lee Ping Cheong filed on 25 May 2020, to which KH filed the 2^nd affirmation of Yeung Sau Ming Boris in reply on 8 June 2020.

[27] Refusal Decision, §56.

[28] Refusal Decision, §56.