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DCCJ 6265/2020
[2022] HKDC 1264
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO. 6265 OF 2020
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| BETWEEN |
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YIP CHI WAN
(suing by her attorney, LO CHI ON) |
1st Plaintiff |
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LO CHI ON |
2nd Plaintiff |
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and
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THE INCORPORATED OWNERS OF MERRY COURT, KOWLOON |
Defendant |
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TRANS-WORLD CONSTRUCTION ENGINEERING LIMITED |
Third Party |
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Before: His Honour Judge MK Liu (Paper Disposal)
Dates of Written Submissions: 21 and 31 October 2022 (the Third Party) 28 October 2022 (the Defendant)
Date of Decision: 4 November 2022
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DECISION
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1.On 27 May 2022, the third party herein (“TP”) took out a summons for an order that all further proceedings in respect of the defendant (“D”)’s claim against TP in this action be stayed and referred to arbitration pursuant to s.20(1) of the Arbitration Ordinance (“the AO”) (“the Stay Application”), and costs of the application be paid by D to TP on an indemnity basis. The Stay Application is opposed by D.
2.I have directed that the Stay Application be determined on paper without an oral hearing. TP is represented by Mr Yan Kwok Wing, and D is represented by Mr Damian Wong, both of counsel. Mr Yan and Mr Wong have provided me their respective written submissions, and I have duly considered the same.
Background
3.The background facts are not in dispute.
4.D is the incorporated owners of Merry Court, Kowloon. TP is a building contractor. D and TP have entered into a written agreement dated 10 April 2017, under which TP agreed to carry out certain renovation works for the Merry Court which comprise waterproofing works at the rooftop (“the Agreement”).
5.These proceedings were commenced by the plaintiffs against D on 24 November 2020. On 23 September 2021, D issued a demand letter to TP.
6.TP, through its solicitors’ reply letter dated 25 October 2021, denied liability. TP also said that “any disputes arise under the Agreement for repair and maintenance work should be resolved pursuant to clause 11 therein.”
7.In D’s solicitors’ reply letter dated 29 October 2021, D’s solicitors said that “Clause 11 of the Agreement does not apply.” D’s solicitors then tried to explain why Clause 11.1 of the Agreement should have no application.
8.On 14 December 2021, D issued a third party notice against TP in this case.
9.On 23 December 2021, TP filed an acknowledgment of service of the third party proceedings, in which TP stated that it would contest D’s claim.
10.On 25 April 2022, the court gave directions for the further conduct of these proceedings. Pursuant to the said directions, the time given to TP to file its defence is up to 23 May 2022. However, no defence has been filed by TP. Instead, TP took out the Stay Application on 27 May 2022.
The issues
11.Clause 11 of the Agreement is as follows:
“11.0 糾紛的解決辦法
11.1 協商
因本合約所引起或與本合約有關的任何糾紛或爭議，僱主與承建商須先嘗試以誠意儘速透過協商解決。從履行本合約期間如一旦發現任何糾紛或爭議，僱主與承建商須各自委派一名負責人並賦與其權力處理糾紛事項。而該兩名負責人須至少會面一次及試圖解決糾紛或爭議。任何一方均可以書面提出與對方會面，會面須安排在發出會面通知書起計十天內進行，時間及地點須經雙方同意。但若在會面日起計二十一天內仍無法達成任何辦法解決糾紛或爭議，又或者會面通知書發出日起計二十一天內雙方仍未進行會面，則僱主或承建商均可按照本合約11.2條款將事件提交調停。
11.2 調停
如因本合約引起或與本合約有關的糾紛或爭議未能按本合約11.1條款所規定的時限解決，則僱主或承判人均可要求將有關事項透過調停方[式]解決。調停方式可經雙方同意選定，而當中所涉及之調停費用及支出將由僱主及承建商各負擔總數的一半。
11.3 解決糾紛的責任
按照11.1及11.2條款提出進行的協商及調停可在本合約執行期間提出，無論僱主或承建商均不能以進行協商及調停為理由而免除其繼續履行本合約所規定的責任。
11.4 仲裁
11.4.1 如屬以下所述情況，僱主或承建商可將糾紛或爭議事項提交仲裁。仲裁由一名仲裁員依據在進行仲裁期間生效的[香港國際仲裁中心簡易形式仲裁規例]處理。
11.4.1.1 調停開始之日起計二十八天內仍無法 解決糾紛或爭議；
11.4.1.2 雙方按照本合約11.1條款舉行首次會 面之日起計二十一天內並無提出將事 項交付調停；
11.4.1.3 任何一方已按本合約11.1條款發出會 面通知書，但在通知書發出日起計二 十一天內仍無法安排會面。
11.4.2 仲裁員在無抵觸其一般權力的情況下，有權：
11.4.2.1 將本合約內容修正以使合約能如實反 映僱主與承建商之間的真正協議；
11.4.2.2 在認為合適的情況下，指示進行測量 及/或計算，以便確定僱主及承建商各 自的權利；
11.4.2.3 查確及判定任何證明書、工作指示、 意見、決定、要求或通知中所註明或 包括與上述文件中的任何款額；
11.4.2.4 即使在沒有任何上述證明書、工作指 示、意見、決定、要求或通知的情況 下，仲裁員仍然可對提交的所有糾紛 事項作出決定。
11.4.3 仲裁員的裁定是最終的，對僱主與承建商同樣具有約束力。為要符合仲裁修例2M一節，所有糾紛將按照仲裁修例第II部份為本地的糾紛處理。
11.5 解決糾紛的時限
11.5.1 本合約11.1條款所規定的任何時限均可在僱主及承 建商雙方書面同意下延長。
11.5.2 按照本合約11.1、11.2及11.4條款提出進行協議，調停及仲裁可在本合約執行期間提出，無論僱主或承判人均不得以進行協商，調停及仲裁為理由而免除其繼續履行本合約所規定的責任。”
12.The difference between Mr Yan and Mr Wong is whether Clause 11.4 of the Agreement is an arbitration agreement. Mr Wong also takes a preliminary point that the Stay Application made by TP is out of time.
Whether the Stay Application is out of time?
13.I would deal with the preliminary point taken by Mr Wong first.
14.S. 20(1) of the AO is as follows:
“Article 8 of the UNCITRAL Model Law, the text of which is set out below, has effect—
“Article 8. Arbitration agreement and substantive claim before court
(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
…” (Emphasis added)
15.Mr Wong is relying upon Order 12 rule 8 in support of his preliminary point. Order 12 rule 8 is as follows:
“(1) A defendant who wishes to dispute the jurisdiction of the Court in the proceedings by reason of any such irregularity as is mentioned in rule 7 or on any other ground shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for —
…
(ga) an order staying the proceedings; …
(2) A defendant who wishes to argue that the Court should not exercise its jurisdiction in the proceedings on one or more of the grounds specified in paragraph (2A) or on any other ground shall also give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the Court for—
…
(b) an order staying the proceedings; …
(2A) The grounds specified for the purposes of paragraph (2) are that—
…
(b) the defendant is entitled to rely on an agreement to which the plaintiff is a party, excluding the jurisdiction of the Court; …
(6) A defendant who makes an application under paragraph (1) or (2) shall not be treated as having submitted to the jurisdiction of the Court by reason of his having given notice of intention to defend the action; but if the Court makes no order on the application or dismisses it, the notice shall stand unless otherwise directed by the Court and the defendant shall be treated as having given notice of intention to defend the action.
…
(7) Except where the defendant makes an application in accordance with paragraph (1) or (2), the acknowledgment by a defendant of service of a writ shall, unless the acknowledgment is withdrawn by leave of the Court under Order 21, rule 1, be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings.”
16.Mr Wong’s arguments are as follows:
(1) S.20 of the AO only provides the power to the court to stay proceedings for arbitration. The mode of making the stay application is governed by Order 12 rule 8, which provides a comprehensive and exclusive code for the taking of jurisdictional objection on any ground.
(2) Order 12 rule 8(1) provides that a defendant who wishes to dispute the jurisdiction of the court in the proceedings shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the court for, inter alia, an order staying the proceedings.
(3) Similarly, rule 8(2) provides that a defendant who wishes to argue that the court should not exercise its jurisdiction in the proceedings on one or more of the grounds specified in paragraph (2A) or on any other ground shall also give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the court for an order staying the proceedings.
(4) One of the grounds specified in rule 8(2A) is that the defendant is entitled to rely on an agreement to which the plaintiff is a party, excluding the jurisdiction of the court.
(5) Relying upon the commentary in the Hong Kong Civil Procedure 2023, Volume 1, §12/8/1, Mr Wong submits that an arbitration agreement is an agreement excluding the jurisdiction of the court, and hence a stay application made pursuant to s.20(1) of the AO is subject to the regime in Order 12 rule 8.
(6) Rule 8(6) provides that a defendant who makes an application under paragraph (1) or (2) shall not be treated as having submitted to the jurisdiction of the court by reason of his having given notice of intention to defend the action. However, rule 8(7) further provides that except where the defendant makes an application in accordance with paragraph (1) or (2), the acknowledgment by a defendant of service of a writ shall, unless the acknowledgment is withdrawn by leave of the court, be treated as a submission by the defendant to the jurisdiction of the court in the proceedings.
(7) In other words, if a defendant fails to make an application for stay within the time limited for service of a defence, the acknowledgment of service filed by the defendant shall be treated as a submission by the defendant to the jurisdiction of the court.
(8) There is no dispute that the time limited for TP to file and serve its defence in the third party proceedings expired on 23 May 2022 and no defence was filed by that deadline. Thus, the Stay Application is out of time. There is no application by TP to withdraw the acknowledgment of service or to extend the time for making the Stay Application. In these circumstances, the TP should be regarded as having submitted to the non-exclusive jurisdiction of the court. See clause 16.2 of the Agreement, which provides:
“本合約根本香港法律釋義及受其管轄而合約雙方皆受香港法院的非專有法權管轄”
17.With respect, I am unable to agree with Mr Wong.
18.As submitted by Mr Yan, the reference to Hong Kong Civil Procedure 2023, Volume 1, §12/8/1 in Mr Wong’s submissions is misplaced. The commentary under that paragraph is as follows:
“Notice of intention to defend by disputing court’s jurisdiction ( rr.7 and 8 ) –
The policy underlying rr.7 and 8 is that a defendant should not be regarded as having submitted to the jurisdiction of the court by reason only of the fact that he appeared in the proceedings for the purpose of (1) contesting the jurisdiction of the court, (2) asking the court to dismiss or stay proceedings on the ground that the dispute in question should be submitted to arbitration or to the determination of the courts of another country, or (3) to protect, or obtain the release of, property seized or threatened with seizure in the proceedings … The new r.8(2) enables a defendant to apply to the court for a declaration that in the circumstances of the case the court should not exercise its jurisdiction. The bases for an application under r.8(2) include that, considering the best interests and convenience of the parties and witnesses, the proceedings should be conducted in another court. …”
19.As rightly pointed out by Mr Yan, the commentary there refers to the general position that a defendant should not be regarded as having submitted to the jurisdiction of the court by reason of the only fact that he appeared in the proceedings for the purpose of, inter alia, a stay application for arbitration. It does not say a stay application made under s.20(1) of the AO is governed by Order 12 rule 8.
20.In my view, s.20(1) of the AO has given effect to Article 8 of the Model Law. The meaning of Article 8(1) of the Model Law is clear and unambiguous. Provided that the conditions in Article 8(1) are satisfied, the court does not have any discretion but shall refer the parties to arbitration. The conditions specified in Article 8(1) are (a) “if a party so requests not later than when submitting his first statement on the substance of the dispute”, and (b) there is no finding that “[the arbitration agreement] is null and void, inoperative or incapable of being performed”. The legislature has not said that Article 8(1) of the Model Law is subject to Order 12 rule 8.
21.In my judgment, s 20(1) of the AO is not subject to the regime in Order 12 rule 8. With respect, the preliminary point taken by Mr Wong is untenable. I refuse to accept that point.
Whether Clause 11.4 of the Agreement is prima facie an arbitration agreement?
22.The relevant principles concerning a stay application made under s.20(1) of the AO have been summarized in Truearns Co Ltd v Wealthy Fountain Holdings Inc [2019] HKCFI 1840. In that case, I said:
“13. When faced with a stay application made under section 20 of the Arbitration Ordinance (“the Ordinance”), the court must refer the dispute to arbitration unless one or more of the following is demonstrated (see Dah Chong Hong (Engineering) Ltd v Boldwin Construction Co Ltd (HCA 1291/2002, 11 October 2002), [20(5)]):
(1) There is no arbitration agreement at all;
(2) The arbitration agreement is null and void, inoperative or incapable of being performed;
(3) There is in fact no dispute or difference to be referred to arbitration; or
(4) The relevant dispute is not one that is covered by the arbitration agreement.
14. In considering whether there should be a stay in favour of arbitration, the proper test is whether there is a prima facie case that the parties are bound by an arbitration clause. The onus is on the applicant to demonstrate this. Unless the point is clear, the court should not attempt to resolve the issue and the matter should be stayed for arbitration. (See PCCW Global Ltd v Interactive Communication Service Ltd [2007] 1 HKLRD 309, [49] – [51], [60] and [61])”
23.As stated in the above, the difference between counsel is whether Clause 11.4 of the Agreement is an arbitration agreement.
24.Mr Yan submits:
(1) The word “可” in Clause 11.4 means “may” or “can”. However, this does not detract from the existence of an arbitration agreement between the parties compelling them to refer the disputes or differences between them to arbitration.
(2) The plain meaning of Clause 11.4 is that a party may choose to pursue its claim by arbitration. That clause does not mean that a party is free to choose to go for arbitration or litigation. A party may choose to pursue its claim or not. If the party do intend to pursue its claim, it has to proceed by arbitration. When Clause 11 is read as a whole, the only mechanism for dispute resolution when no settlement can be reached by the parties is arbitration. Clause 11.4.3 further states that the decision of the arbitrator shall be final (“最終”) and binding (“有約束力”).
(3) Furthermore, in interpreting an arbitration agreement, the court has on numerous occasions read permissive words such as “may” or “can” as having the mandatory meaning as “shall” in order to give effect to the parties’ clear intention. See (1) China State Construction Engineering Corporation Guangdong Branch v Madiford Ltd [1992] 1 HKC 320 at 325F-H; (2) Guangdong Agriculture Company Ltd v Conagra International (Far East) Ltd [1993] 1 HKLR 113 at 124 (lines 20-25); (3) Tianjin Medicine & Health Products Import & Export Corporation v J A Moeller (Hong Kong) Ltd (HCA 11228/1993, 27 January 1994) at §6; (4) Polytec Overseas Ltd v Grand Dragon International Holdings Co Ltd [2017] 3 HKLRD 258 at §45; and (5) Kinli Civil Engineering Ltd v Geotech Engineering Ltd [2021] HKCFI 2503 at §§23-27.
(4) In Kinli (supra), Mimmie Chan J emphasized that that there is a strong presumption in favour of arbitrability and the “one-stop” adjudication approach:
“23. As the courts have explained, an arbitration agreement can be held to exist so long as the intention to arbitrate is sufficiently clear (China State Construction; Continental Corporation (No 2) v Vincenzo Fedele [1964] HKLRD 213; Hobbs Padgett v JC Kirkland [1969] 2 Lloyd’s Rep 547). The modern approach to the construction of arbitration agreements is the presumption in favour of arbitrability and the “one-stop” adjudication approach (Fili Shipping Co Ltd and others v Premium Nafta Products Ltd [2007] BUS LR 1719), at least as a useful starting point. In Fili Shipping, Lord Hoffman referred to the construction of an arbitration clause as “starting from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship in which they have entered or purported to enter to be decided by the same tribunal”. There are of course reminders from the courts that the presumption may be rebutted and would not be applicable in particular cases, eg where the parties have entered into different interlinked agreements, relating to different aspects of an overall and often complex commercial transaction, and where they are differently expressed choices of jurisdiction and/or law in different agreements providing for different manner of resolution of disputes.
…
27. In summary, if there is an arbitration clause, bearing in mind the presumption in favour of one-stop adjudication by the same forum, it will not be construed as giving a choice to the parties between arbitration and litigation, unless there is very clear language providing for such.”
(5) Even if Clause 11.4 is to be read as permissive of providing the parties an option for arbitration, it was held in Hermes One Ltd v Everbread Holdings Ltd [2016] 1 WLR 4098 (Privy Council) when one party exercised the option by making an unequivocal request to that effect (e.g. by correspondence) or by applying for a corresponding stay of proceedings, the arbitration shall become mandatory. The decision was cited in Polytech Overseas (supra) at §45 and Kinli (supra) at §§14-16. TP clearly had elected and/or insisted to have the dispute or difference under the Agreement be resolved by arbitration under its solicitors’ letter dated 25 October 2021 or by taking out the Stay Application.
(6) By reason of the aforesaid, there is at least a prima facie arbitration agreement between the parties in the present case.
25.Mr Wong submits:
(1) To understand the parties’ intention, one must read not only Clause 11.4, but also other parts of Clause 11 as well as other clauses of the Agreement.
(2) If one looks at Clause 11 as a whole, one would note that the word “須” is repeatedly used in Clause 11.1 which provides that
“因本合約所引起或與本合約有關的任何糾紛或爭議，僱主與承建商須先嘗試以誠意儘速透過協商解決。從履行本合約期間如一旦發現任何糾紛或爭議，僱主與承建商須各自委派一名負責人並賦與其權力處理糾紛事項。而該兩名負責人須至少會面一次及試圖解決糾紛或爭議。任何一方均可以書面提出與對方會面，會面須安排在發出會面通知書起計十天內舉行，時間及地點須經雙方同意。” (Emphasis added by counsel)
(3) At the same time, the word “可” is also repeatedly used in Clause 11. For instance:-
(a) Clause 11.1 further reads
“但若在會面日起計二十一天内仍無法達成任何辦法解決糾紛或爭議，又或者會面通知書發出日起計二十一天内雙方仍未進行會面，則僱主或承建商均可按照本合約 11.2 條款將事件提交調停。” (Emphasis added by counsel)
(b) Clause 11.2 reads
“如因本合約引起或與本合約有關的糾紛或爭議未能按本合約 11.1條款所規定的時限解決，則僱主或承判人均可要求將有關事項透過調停方[式]解決。調停方式可經雙方同意選定，而當中所涉及之調停費用及支出將由僱主及承建商各負擔總數的一半。” (Emphasis added by counsel)
(c) Clause 11.3 reads
“按照 11.1及 11.2 條款提出進行的協商及調停可在本合約執行期間提出，無論僱主或承建商均不得以進行協商及調停為理由而免除其繼續履行本合約所規定的責任。” (Emphasis added by counsel)
(4) Reading Clause 11 as a whole, it is clear that the parties must have intended to draw a distinction, by using the words “可” and “須”, between what they may do (i.e. mediation and arbitration) and what they must do (i.e. arranging for meeting to negotiate) in the event that disputes arise of the Agreement.
(5) TP argues that Clause 11.4 is for a party to decide whether or not to pursue its claim against the other party, and not on whether to go for arbitration or litigation, and Clause 11 does not refer to other means of dispute resolution except arbitration. However, one must not lose sight of clause 16.2 which provides that “本合約根本香港法律釋義及受其管轄而合約雙方皆受香港法院的非專有法權管轄”. The emphasis on non-exclusivity of the jurisdiction of Hong Kong Court clearly shows that a party may choose to go for either litigation or arbitration.
(6) Clause 11.4 only makes arbitration an option and does not exclude the parties’ right to litigate. In the absence of clear wording to show that the parties have intended that if one party chooses to go to arbitration, it becomes mandatory and the other party is unilaterally deprived of the right to litigate, the court should not construe Clause 11.4 in such way as argued by TP.
(7) In Tommy CP Sze & Co v Li & Fung (Trading) Ltd [2003] 1 HKC 418, Ma J (as he then was) said:-
“18. It is of course crucial in any application for a stay (whether under s 6 of the Ordinance or art 8 of the Model Law) that there exists an arbitration agreement. By this is meant an agreement between the parties by which present or future disputes or differences between them are required to be resolved by the arbitral process. The definition of ‘arbitration agreement’ is contained in s 2 of the Ordinance, which in turn refers to art 7 of the Model Law. An agreement which does not compel parties to have disputes or differences resolved by arbitration is not an arbitration agreement for present purposes. Where, for example, an option is given to the parties to go to arbitration if they so choose but with litigation in the courts being an available option as well, this is not truly an arbitration agreement. There must be its element of compulsion in the agreement between the parties that any disputes or differences must be arbitration.” (Emphasis added by counsel)
(8) By reason of the aforesaid, Clause 11.4 is not an arbitration agreement.
26.In his reply, Mr Yan submits:
(1) Clause 11.4 should be read in light of Clause 11.1 which starts with
“因本合約所引起或與本合約有關的任何糾紛或爭議，僱主與承建商須先嘗試以誠意儘速透過協商解決 …” (Emphasis added by counsel)
The word “須” (i.e. “shall”) means it is imperative or mandatory to resolve the disputes or difference under the Agreement in accordance with the procedures set forth thereunder.
(2) Despite the word “可” (meaning “may” or “can”) is used in remaining part of Clause 11.1 (on mediation), Clause 11.2, Clause 11.3 and Clause 11.4, the word must be construed in light of the mandatory or imperative requirement under Clause 11.1 that the disputes or differences under the Agreement shall be resolved under the overall framework under Clause 11.
(3) The options available to the parties are therefore limited:
(a) Clause 11.1 – The parties can choose to attempt mediation or not. If not, then the parties should go to arbitration under Clause 11.4.
(b) Clause 11.2 – The parties can choose to attempt mediation or not and if so, the parties can decide on how the mediation should be conducted. If not, then the parties should go to arbitration under Clause 11.4.
(c) Clause 11.3 – The parties can initiate the negotiation or mediation during the execution of the Agreement. It does not preclude the parties to initiate the negotiation or mediation at any other time.
(d) Clause 11.4 – The parties can decide to go to arbitration if (i) the negotiation failed and the parties did not elect to attempt mediation; (ii) if the parties elected to go to attempt mediation but no settlement was reached within the specified time; or (iii) if the parties elected to go to attempt mediation but they failed to reach any agreement in the meditation.
27.Mr Yan has drawn my attention to Gurkhas Construction Limited v Craft Façade Tech (Hong Kong) Company Limited (formerly known as Eft-Craft Company Limited) [2021] HKDC 1166, in which DDJ Liza Jane Cruden have discussed the relationship between an arbitration clause and a jurisdiction clause in detail. Mr Yan relies upon the analysis of the learned judge in that case. In that case, the learned judge said:
“74. In cases where there is an arbitration clause and a non-exclusive jurisdiction clause in interrelated agreements, it has been consistently held by the courts that the arbitration clause would be favoured over the non-exclusive jurisdiction clause and would be upheld.
75. In Paul Smith Ltd v H & S international Holdings Inc [1991] 2 Lloyds LR 127, Steyn J held that an English law clause whereby the parties submitted to the exclusive jurisdiction of the English courts, is not inconsistent with the arbitration clause in the same agreement, in that the English law clause specified the law governing the arbitration.
76. In AXA Re v Ace Global Markets Ltd [2006] EWHC 216 (Comm), the claimant sought a declaration that the contract does not, on its true construction, include an arbitration agreement, which was refused. Gloster J held that a clause providing for English law to be the governing law and for any dispute thereunder to be referred to the jurisdiction of the English courts operated in parallel with the arbitration provisions of the agreement by fixing the supervisory court of the arbitration.
77. In Lee Cheong Construction & Building Materials Limited [2012] 2 HKLRD 975, DHCJ Burrell ordered a stay in favour of arbitration, holding that a non-exclusive jurisdiction clause and an arbitration clause are reconcilable and should be reconciled in favour of the latter. The non-exclusive jurisdiction clause was no more than a submission of the parties to the Hong Kong jurisdiction, not their disputes, and it does not impose a positive obligation to resolve all disputes only in Hong Kong Courts: §13.
78. In Bluegold Investments Holdings Limited v Giant Crown Industries Limited & Ors (unrep., HCA 1127/2017, 27 November 2017), Mimmie Chan J ordered a stay finding that the arbitration clause in a Subscription Agreement also applied to the defendant who was a guarantor under a Guarantee which contained a non-exclusive jurisdiction clause of the Hong Kong courts.
79. In Neo Intelligence Holdings Limited v Giant Crown Industries Limited & Ors (unrep., HCA 1127/2017, 27 November 2017), DHCJ Sherrington, there was an arbitration clause in the original June Agreement, clause 8.1. The parties entered into a November Agreement which amended and supplemented the June Agreement which contained a non-exclusive jurisdiction clause of the Hong Kong courts, clause 4.1. The court upheld the arbitration clause and reconciled the arbitration and jurisdiction clauses on the basis that the arbitration clause was a detailed dispute resolution clause specifying procedures including a stepped process of consultation and negotiation first and only if that fails arbitration. Clause 4.1 was a simple jurisdiction clause by which the drafters were merely making it clear beyond peradventure that the November Agreement was also governed by Hong Kong law. Citing AXA Re, there is no presumption against surplusage in commercial agreements and no conclusions can be drawn from the presence of two express choices of English law. The non-exclusive submission to Hong Kong courts could be as the lex arbitri or for the purposes of post arbitral enforcement and did not amount to a sufficiently clear and unequivocal indication of waiver of the arbitration clause in the June Agreement. Absent overwhelming evidence of an unequivocal waiver, a stay in favour of arbitration should be ordered. The wording of the November Agreement did not make it plain that there was an abandonment or waiver of the arbitration agreement.” (Emphasis added by counsel)
28.Mr Yan submits that the existence of an arbitration clause and jurisdiction clause can be reconciled without having the effect to negate the parties’ intention to resolve the disputes or differences by way of arbitration.
29.Having considered the arguments put forward by Mr Yan and Mr Wong respectively, I am inclined to agree with Mr Yan. For the purpose of determining the Stay Application, it would not be necessary for me to reach a definite conclusion that Clause 11.4 is an arbitration agreement. What I need to decide is whether TP has demonstrated a prima facie case that Clause 11.4 is an arbitration agreement. In my view, TP has clearly overcome this hurdle.
30.In my judgment, there should be an order staying the third party proceedings herein in favour of arbitration.
Costs of the Stay Application
31.There is no dispute that costs should follow the event. Mr Yan submits that there should be an order for indemnity costs against D. Mr Wong submits that no indemnity costs should be ordered.
32.In Chimbusco International Petroleum (Singapore) Pte Ltd v Fully Best Trading Ltd [2016] 1 HKLRD 582, Mimmie Chan J said:-
“ 7. This principle of awarding costs on an indemnity basis in the absence of special circumstances has been approved by the Court of Appeal as “a salutary practice”, in Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 2) [2012] 4 HKLRD 569 and in Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRD 627.
…
14. There was no reason to differentiate between unsuccessful attempts to resist enforcement of an arbitral award made under an arbitration agreement, where the general rule was that the unsuccessful party would be ordered to pay indemnity costs unless special circumstances could be shown, and unsuccessful attempts to resist enforcement and recognition of the agreement itself. Parties to an arbitration agreement should expect the Court to recognize and enforce the agreement. If they took the risk of instituting court proceedings in breach of the agreement, they should expect to pay costs on a higher scale if their attempt to impeach the agreement failed.” (Emphasis added)
33.In my view, in the absence of special circumstances, indemnity costs should be ordered against D.
34.Mr Wong submits that there should be no indemnity costs. Mr Wong submits before TP taking out the Stay Application, TP has never told D that TP intends to refer the dispute between the parties to arbitration. In TP’s solicitors’ letter dated 25 October 2021, TP’s solicitors only mentioned Clause 11 of the Agreement. TP’s solicitors have not mentioned arbitration in that letter. In the reply letter dated 29 October 2021, D’s solicitors made no comment on arbitration but merely discussed Clause 11.1 of the Agreement. Coupled with the fact that the Stay Application is out of time, no indemnity costs should be ordered against D.
35.With respect, I am unable to agree with Mr Wong. I have ruled against D on the “out of time” point taken by Mr Wong. Further, it is an indisputable fact that after TP taking out the Stay Application, D has chosen to resist that application at all times, including filing an affirmation in opposition. Eventually, D has failed in its opposition. In these circumstances, I do not see any valid reason why indemnity costs should not be ordered against D.
36.In my judgment, costs of the Stay Application should be paid by D to TP forthwith, with a certificate for counsel. Those costs should be summarily assessed on an indemnity basis.
37.I have considered the bill of costs for summary assessment prepared by TP’s solicitors. Costs as per the said bill are as follows:
(1) Manual work - HK$1,340.
(2) Communication (including conferences, telephone calls and letters) - HK$39,000.
(3) Professional work - HK$46,800.
(4) Counsel’s fees - HK$40,000.
38.Regarding the items claimed by TP in the said bill, D’s comments are as follows:
(1) Manual work – no objection.
(2) Communication (including conferences, telephone calls and letters):
(a) Regarding item C1 on the bill, i.e. attendance on client, TP claims that 9 hours has been spent by the handling solicitor (“the solicitor”, whose hourly rate being HK$2,600) on this matter. D’s view is that this is excessive. In view if the nature of the Stay Application, there should not be so much time spent on attendance on client. D proposes that the time allowed under this item should be 2 hours.
(b) Regarding other items under this head, D has no objection.
(3) Professional work
(a) Regarding item D1, i.e. preparation of documents, TP claims that 10 hours have been spent on this matter by the solicitor. D submits that there are only a few documents in the Stay Application, and the time allowed under this item should be 4 hours.
(b) Regarding item D2, i.e. perusal of documents, TP claims 6 hours. D submits that this is excessive and only 3 hours should be allowed.
(c) Regarding item D3, i.e. preparation for hearing, TP claims 2 hours. D submits that since the Stay Application is disposed on paper, no preparation for hearing by the solicitor is required. Accordingly, this item should be disallowed.
(4) Counsel’s fees – no objection.
39.In my view, there is force in D’s objection. Taxation or summary assessment on an indemnity basis means that all costs are to be allowed, except those unreasonably incurred or of unreasonable amount, the receiving party being given the benefit of any doubt. See Hong Kong Civil Procedure 2023, Volume 1, §62/App/11. Given the simple nature of the Stay Application and only a few documents have been filed in relation to this application, on any view, the amounts claimed under items C1, D1 and D2 are unreasonably high. Those amounts cannot be allowed in full even on an indemnity basis. Under items C1, D1 and D2, the time allowed would be 4 hours, 5 hours and 4 hours respectively. As to item D3, although the Stay Application is determined on paper, I would not say that it would not be necessary for the solicitor to do any work for the purpose of preparing the Stay Application. For example, the solicitor may need to spend time to review the written submissions prepared by counsel, to check whether there is any typo or mistake therein. Bearing in mind that costs are assessed on an indemnity basis and the receiving party would be given the benefit of any doubt, I would allow item D3 in full.
40.Bearing in mind all the above, costs payable by D to TP are therefore summarily assessed at HK$95,940.
Disposition
41.I allow the Stay Application and order that all further proceedings in respect of D’s claim against the TP in this action be stayed and referred to arbitration. I also make the costs order as set out in the above.
42.Lastly, it remains for me to thank Mr Yan and Mr Wong for the helpful assistance rendered to the court.
Mr Damian Wong, instructed by Chan, Lau & Wai, for the defendant
Mr Yan Kwok Wing, instructed by Chan, Wong & Yip, for the third party
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