Sing Tao Newspapers Ltd v. Hong Hua Machinery Works Ltd

CACV000069/1981

Headnote

Arbitration - proceedings abroad stayed until application here is decided and until arbitration is concluded if ordered - whether Hong Kong Court should declare that arbitration should proceed in accordance with submissions. Test of balance of convenience not applicable. The "Maria Gorthon" 1976 2 L1. R. 720, The Eleftheria 1970 P. 94 distinguished, "Steps of a procedural nature" taken in foreign court not a bar to arbitration here. Guiding principle that parties who have made a contract should keep it. Precision of equitable principles. Waiver and election not established. Arbitration ordered to proceed.

Coram: Hon. Leonard, V.P., Cons & Zimmern, JJ.A.

Date of Judgment: 9th December, 1981.

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JUDGMENT

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1. On the 30th July 1980 the appellant ("S.T.") gave notice to the respondent ("H.H.") of determination of three agreements, one of which was called the "sales agreement", one the "printing agreement", and the third the "hiring agreement". Each was dated the 17th April 1978 and the notice alleged that H.H. was in breach of all three and demanded that disputes between the parties be submitted to arbitration in Hong Kong. Both the sales agreement and the printing agreement contained arbitration clauses, each in extremely wide terms and embracing substantially the same matters. With this notice H.H. did not comply and S.T. in consequence requested the Chairman or President of the Law Society here to appoint an arbitrator to resolve the differences arising between the parties.

2. That gentleman on the 15th October 1980 appointed S.V. Gittins, Esq., Q.C., to be the arbitrator in respect of the sales agreement and the printing agreement but declined to make any appointment in respect of the hiring agreement not wishing to decide whether or not it was arbitrable. The subject matters of the agreements, printing presses, were at all relevant times in California in possession of H.H. or of its subsidiary, Newsweb Printing Ltd. of California ("Newsweb").

3. On the 1st August 1980 S.T. and its Californian subsidiary S.T.S.F. commenced proceedings in California in the Superior Court against H.H. and its subsidiary Newsweb for a temporary restraining order and preliminary injunction for the purpose of preventing H.H. and Newsweb from operating or handling the printing presses which were located in premises let by S.T.S.F. to Newsweb in San Francisco (the Little Field premises) while S.T.S.F. sought from Newsweb in the Municipal Court arrears of rent and possession of the Little Field premises. On the 20th August 1980, H.H. and newsweb filed a cross-complaint in the Superior Court against S.T. and S.T.S.F. adding as parties John Fung and Sally Aw Sian (an executive and director of S.T. respectively) and ten unidentified parties ("John Does"). The cross-complaint alleged - that S.T. was in breach

There was also an application for declaratory relief and relief amounting to a claim for rectification. The declaration sought was that monies owed by Newsweb to S.T.S.F. for rent of the Little Field premises should be set off against monies allegedly owed by S.T. to H.H. The "rectification" sought was of the printing agreement which was expressed to be terminable on six months' notice, H.H. contending that the true intention was that it should run for ten years. If this was granted it would have affected the hiring agreement which was for the same term as the printing agreement. S.T. thereupon on the 1st October 1980 filed a notice of motion in the Superior Court -

This motion failed. Thereupon, Mr. Gittins having in the meantime been appointed as arbitrator in Hong Kong, S.T. filed a demurrer to the cross-complaint, coupled with a motion to strike it out alternatively to dismiss it and for an order staying the proceedings on the cross-complaint until S.T.'s application to arbitrate "now pending before the Supreme Court of Hong Kong is determined and until arbitration is held if it is so ordered. This motion paper was not in evidence before the trial judge, it has been placed before us by consent of the parties.

4. The grounds stated in support of the application to dismiss may be summarised as a claim that the matter should go to arbitration. The demurrer is expressly made on a separate and alternative grounds "expressly reserving all rights ...... to submit to arbitration". It attacks H.H.'s legal capacity to sue for failure to comply with requirements of the Californian Corporation Code; it attacks the cross-complaint by making a number of what may be called pleading points. Finally the grounds in support of the motion to stay refer to the relevant section of the Code of the Civil Procedure and claim that the issues raised by the cross-complaint are "controversies to be arbitrated pursuant to the application for arbitration in Hong Kong". All reliefs sought by this document are procedural. By it S.T. sought to terminate or halt the proceedings in California and to enforce the arbitration agreement. In the event the only relief obtained by S.T. was a stay. The other claims do not appear to have been dealt with but the application for a stay was granted "till the cross-defendant's Sing Tao Newspaper Ltd.'s application to arbitrate now pending before the Supreme Court of Hong Kong is decided and until arbitration is concluded if ordered therein". This order was made on the 5th November 1980 and the proceedings in California have been stayed since that date. In my view it is vital to keep this fact in mind. The cross-complaint is not proceeding in California. If arbitration had been granted by the trial judge, or if it is granted as a result of this appeal, no question of contemporaneous conflicting decisions would arise. For I have no reason to suppose that if the matter goes to arbitration and the conflicts that have arisen are decided by Mr. Gittins his findings and his award would not be accepted by the Californian Courts.

5. The trial judge has pointed out that there is no direct authority on the test which our Courts should adopt in determining whether to declare that arbitration should proceed but that when considering whether or not an injunction should be granted to restrain a party from foreign litigation in favour of domestic arbitration, the test of the balance of convenience was applied, and he finds support for this test in the "Maria Gorthon". The cardinal distinction between the facts in the Maria Gorthon and our case is that in the Maria Gorthon when proceedings had been commenced in Maryland, an application to stay in that jurisdiction was refused; in our case a similar application was granted. The facts in the Maria Gorthon were complicated but Mr. Litton has demonstrated other distinctions between it and our case; thus the shipowners, whose position is to be compared with the appellants here, originally expressed doubt as to whether there was a valid arbitration clause, did not at first start proceedings for arbitration, filed a defence in Maryland after being refused a stay, joined others as third parties, counterclaimed and claimed damages against third parties in another suit so that even if they "were to abandon their position as claimants or counter-claimants or claimants for contribution they would still not be able to extricate themselves from them". (Per Mocatta, J. at page 726).

6. I will refer to the case again when considering waiver; at present I would only note that it led the trial judge to adopt the lest of "the balance of convenience" and to consider whether or not H.H. had shown "strong cause why it would be convenient to deprive S.T. of its contractual expectations". I do not think it pedantic to query the use of the words "convenient" and "expectations". I would concede that he might have easily used the words "just and "rights" respectively instead but I am not satisfied that that would have expressed the test he had in mind. I consider that the test which the trial judge should have adopted was to require H.H. to show strong cause why it would be just to deprive Sing Tao of its contractual rights. In considering whether H.H. have done so he might well have looked to similar matters as those which he did consider for a contractual right to arbitration may be over ridden by the Court.

7. A. The actual steps taken by S.T. On this topic after noting that Harris v. Taylor⁽¹⁾ and Henry v. Geopresco International Ltd.⁽²⁾ were cases concerned with the problem of the enforcement of foreign judgments he concluded, because of the Maria Gorthon, that "the principle they embody" could be of wider application and that "having sought the benefit of verdicts in its favour" by the steps it took in the cross-complaint S.T. can "hardly expect equity to smile with favour on its present application". He further observed "once Sing Tao embarked on steps in the cross-complaint no matter what internal mental reservations it made, it conducted itself in a way which would disincline equity from bringing about a stay of the litigation". He went on "whether the steps Sing Tao took in the cross-complaint were by themselves sufficient to lead to refusal of the declaration does not call for decision on the facts of the present case, suffice it to say that the steps taken by Sing Tao in the cross-complaint started the balance tilting in Hong Hua's way". There are a number of observations which I feel compelled to make about this passage and the context in which it arises. Firstly S.T. was not seeking equitable relief, it was seeking a declaration which is admittedly a matter of discretion but it was seeking a declaration as to its legal rights under the agreements to arbitrate. Secondly I do not understand his use of the expression "does not call for decision". If the steps taken by S.T. were sufficient to lead to a refusal of the declaration that was an end of the matter. Clearly the trial judge did not consider that the steps were so sufficient. Thirdly it would be noticed that the trial judge has continued the test of the balance of convenience and considered the decision as to whether a declaration should be granted as something which could be tilted one way or the other. My main comment on the quotation, however, is that no question of equity "bringing about a stay of the litigation" arose. The litigation had been stayed. The question arising from the steps taken by S.T. might I think be restated by enquiring whether those steps by themselves or in conjunction with other matters enabled H.H. to show that it would be unjust to grant a declaration of S.T.'s contractual rights. It clearly would be if those contractual rights had been waived or if there had been an election as to the forum in which those rights were to be litigated or if the other party shows that undue hardship would result from enforcement of the contractual rights, but not, I think, otherwise. I do not consider the cases dealing with enforcement of the foreign judgments can be of assistance to me here. The facts in Henry v. Geopresco International Ltd. are not similar to those here. There the plaintiff sued in Canada for wrongful dismissal, having entered into an agreement arbitrable in England. In Canada he was met by, inter alia, an application for a stay, but this application was refused. He proceeded to judgment and the question at issue was whether that judgment was enforceable in England. In our case the application for a stay was successful and H.H. has nothing from the Californian Courts on which it can rely. It is also note worthy that in the Maria Gorthon there was no stay, the proceedings in Baltimore were continuing. The proceedings sought to be stayed in England were proceedings to restrain the continuance of the action in Baltimore.

8. As to the "steps by S.T. in California" I have already outlined them. Each of them was an attempt to halt the proceedings in California on procedural grounds. None, as far as I can see, would, if successful, have enabled S.T. to plead res judicata here. The merits were never contested. It is to be noticed that proceedings here and in California were in part contemporaneous. The cross-complaint was filed in California on the 20th August 1980. This originating summons was taken out 17 days later. The motion to quash service and to dismiss and for inconvenient forum is dated the 17th September. It was denied on the 7th October 1980. The notice of hearing and demurrer, motion to strike out, motion to dismiss and motion to stay proceedings are contained in one document and this is dated the 22nd October 1980. The stay was granted on or about the 5th November 1980. Mr. Swaine has argued that the essential reason S.T. sought the declaration rather than an injunction was the absence of H.H. from the jurisdiction, that the same principles should be applied as if equitable relief had been sought and that the relief sought was in any event discretionary and hence that the basis of the approach of the trial judge was correct when he required H.H. to show strong cause on the balance of convenience why arbitration should not proceed. He suggested that such cause was shown by steps taken by S.T. in the American proceedings "underpinned", as he put it, by some "equitable principle". He does not suggest, as I understand him, that by the original approach to the California Courts for the protection of the subject matter of the dispute was a "step" had been taken by S.T. It is rather to S.T.'s actions in reply to the cross-complaint that he points with the suggestion that these amounted to a waiver of the arbitration agreement. S.T., he suggests, waived the right to arbitration by embracing the Californian proceedings. In the respondent's notice filed with leave in the course of argument he gives particulars of "steps taken amounting to waiver and/or election". As I see it on the facts before as if he is to succeed he must establish either waiver or election. They are quite different concepts.

9. In Banning v. Wright(3) Lord Simon dealing at page 990 with the phrase "waive the term" regarded it as meaning "relinquish the rights accruing to the promisee by reason of the relevant term of the contract ..... the rights may be either the primary ones conferred by the contract (i.e. to performance of its promises) or the secondary ones conferred by law for breach of the contractual promises (i.e. to withhold performance of reciprocal promises)" "'waive the term' is also apt to include relinquishment of the right to performance of a condition precedent". In the same case Lord Morris equates waiver with abandonment while Lord Reid had this to say in enlargement of the general explanation of the word (and deprecation of its use) given by Lord Wright in Ross T. Smith & Co. Ltd. v. Bailey, Son & Co.⁽⁴⁾ -

"So it is clear the word is not a term of art. It always, I think, involves the giving up or abandoning some right or rule. But more often than not such abandonment is only for a time. One may speak of waiving formalities on some occasion; that does not mean that the formalities or rules are changed but only that they need not be observed on that occasion. They will govern the next occasion unless they are again waived."

10. I cannot, on the papers before us, see that S.T. ever abandoned anything, they have taken objection throughout on purely procedural grounds against H.H. carrying on with the action in California. They have taken steps in the action to stop H.H. continuing it. By doing so they have undoubtedly submitted to the jurisdiction of the Californian Court and indeed they had done so when they first went there for the preservation injunction but that is not to say that they have abandoned their right to arbitration. On the contrary, the papers suggest to me that they were insisting on it throughout. In so far as it is contended that S.T. have elected by the steps they took in the Californian action not to proceed with the arbitration again I cannot find warrant for this in the evidence. The following passage from the judgment of Lord Aitken in United Australian Ltd. v. Barclays Bank makes clear what must be established -

"On the other hand, if a man is entitled to one or two inconsistent rights it is fitting that when with full knowledge he has done an unequivocal act showing that he has chosen the one he cannot afterwards pursue the other, which after the first choice is by reason of the inconsistency no longer his to choose. Instances are the right of a principal dealing with an agent for an undisclosed principal to choose the liability of the agent or the principal; the right of a landlord where forfeiture of a lease has been committed to exact the forfeiture or to treat the former tenant as still tenant and the like. To those cases the statement of Lord Blackburn in Scarf v. Jardine⁽⁵⁾ applies -

'where a man has an option to choose one or other of two inconsistent things when once he has made his election it cannot be retracted.'

In a later passage Lord Blackburn speaks of a man choosing between two remedies but it is plain that he is peaking of remedies in respect of the inconsistent things as stated above. The case was one where the plaintiff has a right to recourse against two partners or against two new partners; but obviously not against both. Lord Blackburn quotes Dumpor's case which was a plain case of inconsistent rights, the question of waiver of a forfeiture. I therefore think that on the question of alternative remedies no question of election arisen until one or other claim has been brought to judgment. Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other but he can take judgment only for the one and his cause of action on both will then be merged in the one".

11. Later he expresses disagreement with the dictum of A.L. Smith L.J. in Rice v. Reed⁽⁶⁾ when he said that to bring an action for money had and received waives the tort -

"He founded himself upon words used by Bovill C.J. in Smith v. Baker. The dictum was unnecessary for in that case the plaintiff had obtained an order from the Court of Bankruptcy to handle with the proceeds of a conversion and had been paid the money. The dictum of Bovill C.J. is, in my opinion, incorrect".

12. I cannot see that the appellant in our case chose by unequivocal act to litigate in the Californian Courts on the merits. Rather he sought to avoid doing so and eventually he succeeded by obtaining a stay. I do not consider that any question of election arises.

13. B. The risk of inconsistent findings on common issues of law and of fact. The second matter weighing with the trial judge is the risk of inconsistent findings. He observed -

"I find the prospect of conflict between the findings of the arbitrator in one jurisdiction and the Courts in another jurisdiction almost equally uninviting". (As the prospect of conflicting decisions between arbitrators and the Courts within the same jurisdiction).

"The way to avoid that undesirable type of situation - and surely the likeliest way of achieving justice will generally be to forego the arbitration".

14. I cannot agree with this as a general proposition for to forego the arbitration against the wishes of one entitled to it, at the behest of one who has agreed to it, is to ignore the former's contractual rights. My principal difficulty in accepting the judge's findings under this head however is that I cannot see how the prospect of the conflict feared by the judge arises. The Californian proceedings in so far as they relate to the printing agreement and the sales agreement have been stayed; if the declaration sought is given they will remain stayed. At present there is no litigation on the hiring agreement. In due course the arbitrators' award will presumably be produced to the Californian Courts. If it is in order presumably it will be accepted by the Californian Court and there will be no danger of conflict. The trial judge envisages conflict on the question of title to the presses. This appears to me on the evidence available to us which consists of Mr. Strabala's affidavit (which we are told was not opened to the judge) to present little difficulty because the document which he exhibits to demonstrate the possibility of conflict on title creates no more than a floating charge. There is no grant of any interest in the presses to the bank. The property charged consisting of "inventory, furniture, fixtures, equipment and machinery now presently owned and hereinafter acquired located at 215 Little Field Avenue". It is correct that there might hereafter be a dispute between the bank and S.T. as to the ownership of the presses but the bank is not a party to either set of proceedings. The arbitrator can admittedly come to the conclusion that the property in the presses had not passed to S.T. but there is at present no litigation on the hiring agreement and any conclusion to which the arbitrator might come could not involve the bank who are not at present parties to any litigation. To say that "the stage is set for conflicting decisions on the arbitrable printing agreement and the justiceable hiring agreement" is to assume conflicting proceedings. There are at present none. It is further argued that H.H. seeks rectification of the printing agreement which would in turn affect the duration of the hiring agreement. I cannot see that this assists H.H. for there is no litigation in being affecting the latter so there is no question of "splitting the proceedings" as the trial judge thought. Again we have had sight of translations of the document i.e. "the Chinese agreement" on which H.H. relies to support its claim for rectification. I have been forced to the conclusion that any claim based on it is flimsy in the extreme for the following reasons.

15. Strictly speaking no claim for rectification has been made but in the cross-complaint it is contended that -

"The printing agreement has a term of ten years beginning 9th November, 1978".

"This agreement shall commence on the 9th November, 1978 and shall continue for a period of ten years subject to either party giving to the other of not less than six calendar months' notice in writing expiring at the end of a calendar month provided that if the printer (H.H.) terminates this agreement prior to the 31st day of December 1980 the owner ...." shall have certain right".

16. The suggestion that this clause should be rectified is contained in the affidavit of Ai Ti Chu, President of H.H., who holds 99% of the issued capital of Newsweb Printing International Ltd. (a Hong Kong Company) but he avers "That company has no other connection with Hong Hua". In paragraph 5 of his affidavit Mr. Ai Ti Chu says -

"The negotiations between Sing Tao and Hong Hua were concluded in Hong Kong in April 1978 and reduced to writing. The writing was in Chinese and therefore fully understood by the negotiating parties. The people concerned principally in the said negotiation were myself on behalf of Hong Hua and Sally Aw Sian on behalf of Sing Tao. The agreements in Chinese were subsequently translated into English and were meant to be faithful, fair, and true translation thereof. Hong Hua accepted them in good faith as such. It has since transpired however that they do not accurately reflect the original Chinese version and there is now a dispute between the parties, inter alia, as to the true translation thereof."

17. We have had produced to us uncertified translations of the Chinese agreement to which Mr. Chu refers. It attracts these comments. Firstly it does not purport to be an agreement between H.H. and S.T. It purports to be an agreement between S.T. and Newsweb Printing International Ltd., the Hong Kong company which Mr. Chu says has no relationship with H.H. beyond the fact that Mr. Chu has 99% of its shares. Secondly its relevant clause as to duration is translated to read -

"This contract shall be valid for ten years from the 1st September 1978 to the 31st August 1988. If any of the parties shall close its business during the term of the contract it has to notify the other party six months in advance, otherwise it shall amount to a breach".

18. As I understand it, the only dispute as to translation turns on the meaning of the phrase translated as "close its business". This document could not possibly in itself support a claim for rectification on the lines suggested. It is not made between the same parties, the date from which the period of ten years has to run is quite different, and it is not as exhaustive in its terms as the printing agreement and the sales agreement although it deals with matters common to each. It seems highly likely that the agreements in English superceded this. Certainly any claim for rectification to be successful would need to be supported by other evidence.

19. I turn to the matters dealt with in the judgment under the heading C. General Considerations. The trial judge finds that he can be assisted in exercising his discretion by the "not unrelated situation in the Eleftheria". I must confess I find the situation in the Eleftheria quite unrelated to the situation here. In our case the applicant was seeking to uphold his contractual rights to have differences settled by arbitration having obtained a stay abroad. In the Eleftheria the plaintiffs were suing in England in breach of their contractual obligations and opposing a stay. They might have been allowed to continue in England if they had established good cause why they should not be held to their agreement. The entirety of the passage from which the trial judge quotes renders the distinction clear -

"The principles established by the authorities can, I think, be summarised as follows -

20. The trial judge was not asked to grant a stay. He was asked to make a declaration in assistance of contractual rights; that is to do no more in so far as the first declaration sought is concerned than H.H. had agreed to. I would agree with the trial judge that evidence on issues of fact would almost certainly be more readily available in California. I do not completely understand what he means when he says "arbitration in Hong Kong is not merely alternative to litigation in California but is instead additional to it with both sets of proceedings covering parts of the same ground". I can only conclude that he has momentarily overlooked that the litigation in California is stayed.

21. In the final part of his judgment, in which he refers to the "splitting proceedings" and the undesirableness of multiplicity and duplication of effort concluding that the court in California would in due course find itself performing a similar task, he appears to me again to overlook the stay. For there is no reason of which I am aware why the Court of California would not have regard, as our courts do, to the sanctity of contract and prevent litigation before it of issues already decided by an arbitrator whose function had been agreed on by some of the parties to the litigation. The findings and award of the arbitrator would not, of course, bind those not party to the arbitration. It could not bind Newsweb but Newseb's connection with and interest in the stayed litigation (as distinct from the litigation concerning the Little Field premises which is not stayed) is marginal. The award could not bind the bank, for example, if the bank sought to assert title to the printing presses but neihter could the stayed litigation if the same were let continue as at present constituted.

22. All this, however, is to a large extent peripheral and such considerations are for a court from whom a stay is sought rather than for me. I appreciate that the stay granted is limited in its terms and duration but clearly the Californian Court when granting it did so because of the contractual obligations and rights of the principal parties before it. Such matters as "steps" taking before the Californian Court might bar the right to a stay in California rather than affect the discretion of our Court to grant a declaration as to an admitted contractual right. I do not regard the concept of "balance of convenience" as appropriate to the exercise of the discretion to grant declaration of relief in aid of a contractual right. The test is appropriate when considering whether or not an interlocutory injunction should be granted. It might have some relevance when the grant of a stay is under consideration. Again it might have had relevance at the time that the summons in this matter was issued for on that day no stay had been granted. Until the stay was granted the remedy by way of declaration might be regarded as similar to an injunction but once a stay was granted these considerations do not apply. It was to the state of affairs pertaining at the hearing that the judge should have directed his attention not the state of affairs pertaining when the summons was issued.

23. I would, for these reasons, allow the appeal and declare that all disputes between S.T. and H.H. arising out of the Sales Agreement and Printing Agreement should be arbitrated in Hong Kong in accordance with the Laws of Hong Kong.

Cons, J.A. :

24. I agree with the order proposed by my Lord. I think with respect that the Judge below was misled into approaching the matter as though it were an application for an injunction to restrain foreign proceedings. It was not. The foreign proceedings had already been restrained. The Californian Superior Court had considered the question and it is clear from the order made on the 7th November that that Court took the view that arbitration should proceed here in Hong Kong, unless for some reason the Court here should order otherwise. To my mind that was an important consideration. Possibly as a result of the approach adopted it is a consideration that seems to have been completely overlooked.

25. A second error of approach was to found the decision on the "balance of convenience". That concept has its uses with regard to temporary measures. I am reluctant however to see it invoked to deprive a party permanently of contractual benefits. The Judge below thought it had been adopted as a test by Mocatta, J. in the "Maria Gorthon"⁽¹⁾. For myself I doubt whether that was really so. Acquiescence and waiver seem to have played a more important part in the judgment.

26. The Judge below extended the test which he applied to "strong cause on a balance of convenience". I appreciate the emphasis he sought to attain with the additional words, but in my view they are insufficient to dispel the inherent influence of the remainder, an influence which can, I think, be detected in the Judge's subsequent reasoning.

27. In my view, a voluntarily negotiated arbitration agreement, like any other agreement, confers a contractual benefit upon the parties to it. It is true that the particular nature of the agreement leaves the Court with a discretion, if the Court thinks fit, to deprive a party of that benefit. Even so, the Court should not merely look to what would be "more convenient". Justice requires something of a much higher degree before the Court may take that course. There are many ways to express the appropriate standard. The one that commends itself to me at the moment is that the Court should require very good reason.

28. The reasons put forward in the present instance are grouped by the Judge under three heads. The first is "The active steps taken by Sing Tao". I do not find these of much importance. Although Sing Tao attempted to bring proceedings in California to an end, there was no question of seeking a decision on the merits of the dispute, and the desire for arbitration was made clear throughout. Whatever view might have been taken of those steps in a Hong Kong or English Court with regard to Section 6 or 6(A) of the Arbitration Ordinance or its equivalent, or in relation to the enforcement of a foreign judgment, the steps were obviously acceptable in the jurisdiction in which they were taken. Otherwise no stay would have been granted.

29. The second head is put as "The Risk of Inconsistent Findings on Common Issues of Law or Fact in the Litigation and the Arbitration". This covers three matters. The first is the possible rectification of the Printing Agreement, which in its turn would affect the duration of the Hiring Agreement. The hiring agreement is not subject to arbitration.

30. My Lord The Vice-President has already pointed out the extreme unlikelihood that a claim for rectification would succeed. However if by chance it should I see no reason to think that it would be ignored by the Californian Court. It is argued, upon the authority of Printing Machinery Co. Ltd. v. Linotype and Machinery Ltd.⁽²⁾, that rectification does not come within the ambit of an arbitration clause. However, as I read that case, it lays down no general principle but rather turns upon the wording of the particular clause in question.

31. The second matter within this head is a claim by Sing Tao that Hong Hua failed to employ competent personnel to work the printing presses. If the claim is well founded Hong Hua are in breach of both the Printing Agreement and the Hiring Agreement. It would be possible for Sing Tao to proceed under both, that is within the arbitration proceedings and by action in a Court. There seems to me no practical possibility that it would.

32. The third matter upon which the Judge thought there might be conflicting decisions is in regard to the title to the printing presses. It was a point apparently taken by himself, for Mr. Swaine cannot remember having argued it. It assumes litigation involving a third party, that is the bank which has lent money to Newsweb upon the security of the presses. That, of course, is a possibility but the continuance of the present litigation in California would not in any event affect the bank.

33. Under his further head of "General considerations" the Judge mentions several factors, most of which he derives from an application of the principles laid down by Brandon J. in the Eleftheria ⁽³⁾. My Lord has already pointed out the difference between that case and this. In addition to these factors there was what the Judge called "the inadvisibility of splitting proceedings and the undesirability of multiplicity of proceedings". For my part I am not persuaded there would be substantially either.

34. I find in all these no good reason why the arbitration should not proceed here. I think it should.

Zimmern, J.A. :

35. I have had the advantage and benefit of reading the draft of my Lord the learned Vice-President's judgment and I respectfully agree with it and only wish to deal with two matters.

36. In this case, using the same initials for the parties used by the Vice-President, S.T. under the provisions of an arbitration clause contained in each of two related contracts between the parties caused to be appointed regularly an Arbitrator to settle the disputes which have arisen between them. H.H. the other party refused to participate in those proceedings and S.T. issued an Originating Summons in the High Court asking for a declaration, inter alia, that all questions of difference and/or dispute arising out of the agreements be arbitrated in Hong Kong. There was no suggestion at the hearing that the Summons was in any way irregular or that in principle such a declaration ought not to be given and none was made before us. The trial Judge hearing the matter and deciding the matter on its merits dismissed the application with costs very broadly on the grounds that the parties were in litigation over the same contracts in the Courts in California and he went into the details and consequences of such litigation. S.T. now appeals.

37. The first question which must be asked is how enforceable, is S.T.'s right to go to Arbitration. I find the following passage in the judgment of Scrutton L.J. in Metropolitan Tunnel and Public Works v. London Electric Ry. Co. ⁽⁴⁾. illuminating and helpful.

"It is becoming increasingly the practice to insert in contracts for the sale of goods, contracts for the charter of ships, contracts for insurance of all sorts, building contracts, and engineering contracts of all sorts, a clause by which the parties agree to refer all their disputes, or a certain class of them, to an arbitrator. It is also a very common practice for a party who has agreed to refer all his disputes to an arbitrator to say, when a question arises, that he would rather not do so, and to bring an action in the King's Courts. There usually follows, both in the Chancery Division and in the King's Bench Division, an application by the other party to the contract to stay the action on the ground that the parties have agreed to refer their disputes to a private arbitrator, and the decision to be come to by the Courts is often a matter of very considerable difficulty. It is still more difficult to lay down principles on which the Courts should proceed. On the one hand, it is eminently desirable, in all business matters, that parties who have made a contract should keep it. Business could not satisfactorily go on if persons were to be at liberty to disregard contracts they had made, but one cannot lay too much stress on that, because - I commend the observations to Mr. Dighton Pollock the next time he cites Lord Selborne - it has been pointed out by Lord Moulton in Aird's case, ⁽²⁾ that inasmuch as everybody who makes such a contract now knows that it is subject to the possibility of being controlled by the Courts, he cannot be said to break his contract because he insists, in the cases in which the Courts do not think otherwise, that the case should be heard in Court. But undoubtedly a guiding principle on one side, and a very natural and proper one, is that parties who have made a contract should keep it. On the other hand, the Courts have always firmly adhered to the principle that their jurisdiction is not to be ousted by agreement between the parties, and that in cases where the Courts think it better that the dispute should be decided by the Courts, rather than by a private arbitrator, they will not be fettered in their decision by the fact that the parties have agreed to oust the jurisdiction of the King's Court. I do not state the matter in any more detail, because it has always seemed to me, that Lord Moulton in his judgment in Aird's case ⁽³⁾ has said everything that could be said on the principles that should actuate the Courts in dealing with an application by one party to a contract to stay an action in the Courts on a matter which the parties have agreed should be referred to a private arbitrator."

38. Here there is no question of ousting the jurisdiction of the Queen's Courts in Hong Kong for H.H. has not initiated any proceedings here. Should the Court here then consider the matter of ousting of the jurisdiction of the California Courts bearing in mind that though both the contracts were made and executed in Hong Kong and stipulated to be governed by the law of Hong Kong yet substantial performance of the contracts would take place in California? The question does not call for an answer because the California Court has stayed all proceedings on the application of S.T. grounded on the Arbitration clauses. Accordingly I am of the opinion that H.H. would have to advance very cogent reasons to the Court before it will not declare to H.H. that you have made a contract and you should keep it.

39. The learned judge made two fundamental mistakes.

40. First, having set out the terms of the Order of the California Court staying the proceeding he gave no effect to it at all in his reasoning.

41. Second, in dealing with the active steps taken by S.T. in California he said:-

"If Sing Tao can be seen to have taken active steps in the litigation set in motion by Hong Hua's Cross-Complaint, this court might then incline to the view that Sing Tao's conduct had brought about a situation where it would no longer be equitable for Sing Tao to insist on arbitration. Precisely what label should be attached to the equitable doctrine is not important. A range of concepts such as waiver, acquiescence, election, or the maxims of Equity like the one about not being able to approbate and reprobate at the same time, spring to mind. All of them share the characteristic that Equity does not approve of a party appearing to adopt one course, with all its incidental advantages, and then wanting to switch to another."

42. With respects none of the steps taken by S.T. in California went to the merits of the dispute, they were all procedural and protective. Further I am not pursuaded that there is such an unspecified equitable disentitlement. Mr. Litton relied on the observation of Harman L.J. in Campbell Discount Co. Ltd. ⁽⁴⁾ wherein he said:-

"Equitable principles are, I think, perhaps rather too often bandied about in common law courts as though the Chancellor still had only the length of his own foot to measure when coming to a conclusion. Since the time of Lord Eldon the system of equity for good or evil has been a very precise one, and equitable jurisdiction is exercised only on well-known principles. There are some who would have it otherwise, but as at present advised I am of opinion that, at any rate in the instant case, there is no equitable principle that can be called in aid."

43. Though on appeal the decision of the Court of Appeal was reversed by the upper house ⁽⁵⁾ Lord Radcliffe appears to have supported Harmon L.J.'s observation when at p.626 he said:-

" 'Unconscionable' must not be taken to be a panacea for adjusting any contract between competent persons when it shows a rough edge to one side or the other, and equity lawyers are, I notice, sometimes both surprised and discomfited by the plenitude of jurisdiction, and the imprecision of rules that are attributed to 'equity' by their more enthusiastic colleagues. Since the courts of equity never undertook to serve as a general adjuster of men's bargains, it was inevitable that they should in course of time evolve definite rules as to the circumstances in which, and the conditions under which, relief would be given, and I do not think that it would be at all an easy task, and I am not certain that it would be a desirable achievement to try to reconcile all the rules under some simple general formula. Even such masters of equity as Lord Eldon and Sir George Jessel, it must be remembered, were highly sceptical of the court's duty to apply the epithet 'unconscionable' or its consequences to contracts made between persons of full age in circumstances that did not fall within the familiar categories of fraud, surprise, accident, etc., even though such contracts involved the payment of a larger sum of money on breach of an obligation to pay a smaller sum."

44. Mr. Swaine sought to uphold that part of the judgment by arguing that such a general equity could be underpinned by specific rules or principles of equity and he relied on waiver and election. My Lord has dealt with these rules in detail and I have expressed my respectful agreement, and wish only add to that there is no equitable principle that H.H. can call in aid.

45. The contracts entered into between the parties are ordinary commercial contracts and the disputes between the parties arise under the two contracts with the arbitration clauses. I cannot and do not agree with the learned judge that H.H. has discharged its burden and I would allow the appeal with costs and grant the declaration sought.

Representation:

Mr. H. Litton Q.C. & Mr. H.L. Wong (Stevenson, Low & Co.) for Appellant.

Mr. J. Swaine Q.C. & Mr. W. Poon (Johnson, Stokes & Master) for Respondent.

(1) [1976] 2 Lloyds Reports 720

(1) (1915) 2 K.B. 580

(2) (1976) 1 Q.B. 726

(3) (1972) W.L.R. 972

(4) (1940) 164 L.T. 102, 106.

(5) (1882) 7 A.C. 345, 369

(6) (1900) 1 Q.B. 65

(2) [1912] 1 Ch., 566 at 572

(3) The Eleftheria [1970] P. 94

(4) [1926] 1 Ch. at pp. 388/389

(2) [1913] A.C. 241, 258.

(3) [1913] A.C. 241.

(4) [1961] 1 Q.B. at p. 459

(5) [1962] A.C. 600