Chan Man Yiu and Another v. Kiu Nam Investment Corporation Ltd. and Another
Read the full judgment text of HCCT 110/2000 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 15 December 2000 before Hon Burrell J.
Arbitration — Removal of Arbitrator due to Conflict of Interest — Costs — Arbitration Ordinance (Cap.341) — Court of First Instance This case involves an application to remove an arbitrator, Mr Hubert Woo, under an arbitration agreement due to his undisclosed close personal and professional relationship with the respondents’ representative and expert witness, Mr B.W. Choy. The applicants were unaware of this relationship when agreeing to Mr Woo's appointment. Upon discovery, a court application was made resulting in the removal of Mr Woo and continuation of arbitration with a new arbitrator appointed by consent or nomination. The court held that the costs arising from the wasted arbitration expenses due to the removal must be borne by the respondents, but since the parties agreed to adopt prior pleadings and procedural steps, such costs would be limited. As to the costs of the originating motion, the court apportioned costs, awarding the applicants costs incurred before 20 October 2000 and ordering the respondents to bear half of the applicants’ costs thereafter, reasoning that a conditional offer by the arbitrator to step down was not accepted and a realistic part of the motion was properly abandoned at hearing. The court emphasized the importance of perceived impartiality of an arbitrator and rejected setting aside the arbitration agreement itself, limiting relief to removal of the conflicted arbitrator. The arbitration will proceed with a newly appointed arbitrator and prior procedural steps preserved.
Legal issues: Costs Liability for Arbitration Costs Thrown Away · Costs Liability for Originating Motion
Outcome: Arbitrator Mr Hubert Woo removed; arbitration to continue with a new arbitrator appointed by consent or nomination. Costs orders made with respondents liable for arbitration costs thrown away and partial costs of the originating motion.
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HCCT000110/2000 HCCT 110/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS ---------------------
--------------------- Coram: Hon Burrell J in Court Date of Hearing: 12 December 2000 Date of Judgment: 15 December 2000 ------------------------ J U D G M E N T ------------------------ 1. On 13 October 1999, these parties agreed to refer a dispute which existed between them to arbitration. The preliminary stages of the arbitration took their normal course, including the appointment of the arbitrator, Mr Hubert Woo ("Mr Woo"). 2. It later transpired that Mr Woo was a very close friend of Mr B.W. Choy ("Mr Choy") who was the authorized representative and expert witness for the respondents. Mr Choy had been the person responsible for the works which were the subject matter of the dispute, on behalf of the respondents. The closeness of the relationship is illustrated by the facts, (not challenged) that Mr Woo, a barrister, had represented Mr Choy in litigation on a number of occasions in the last eight years, they had known each other for 25 years and had lunched together on a very regular basis. These facts were not known to the applicants at the time of Mr Woo's appointment. 3. Mr Woo had been formally appointed on 26 January 2000. The facts which caused the applicants concern only came to light in August and September 2000. After an exchange of correspondence, the applicants found it necessary to take out this originating motion on 16 October 2000. The motion seeks the following relief :
4. At the beginning of the hearing, all matters, except costs, were settled on the following terms :
5. As a result, the arbitration will continue with a new arbitrator to be agreed by both parties. 6. On the unresolved question of costs, there are two issues :
Costs thrown away in the arbitration 7. I have no doubt the respondents should bear these costs. However, I do not expect they will be particularly high. The parties have very sensibly agreed that pleadings etc. already prepared should stand in the new arbitration. The only costs "thrown away", therefore, will be those incurred in the appointment of Mr Woo and the ensuing correspondence concerning the appropriateness of his role as the arbitrator. Should any disagreements arise as to whether an item of costs falls under this heading or not, it will be for the newly appointed arbitrator to resolve in the arbitration. In principle, my order as to costs in the arbitration is that - those costs thrown away be to the applicants. Costs of the originating motion 8. Mr Simon Yip, counsel for the respondents, relies on the letter from the arbitrator dated 20 October in which he said :
9. This is clearly an offer by the arbitrator to step down. Mr Yip's submission is that it should have been accepted and the applicants should have abandoned their claim that the arbitration agreement shall cease to have effect. If this had been done, it may have been unnecessary to come to court. The settlement on the day of the hearing is, effectively in such terms. 10. Mr Patrick Fung SC, for the applicants, makes three points :
11. I have no doubt that Mr Woo should have declined the appointment from the outset. Had the applicants known of the relationship between him and Mr Choy, they would obviously not have agreed to his appointment. Any suggestion that Mr Woo could have remained as the arbitrator is unrealistic. Even if there had been no actual bias, the perception of possible bias is overwhelming. 12. On 16 October, the only option open to the applicants was to take out the motion. For the reasons relied on above ((i)-(iii)), I will make an order for costs in the applicants' favour, but for the two reasons which follow, I will not allow them all their costs -
13. My costs order in the originating motion is as follows :
Representation: Mr Patrick Fung, SC leading Mr James Cheng, instructed by Messrs Johnnie Yam, Jacky Lee & Co., for the Applicants Mr Simon Yip, instructed by Messrs Ho, Lo & Yeung, for the 1st and 2nd Respondents |