Ibm World Trade Corporation v. Andrew Jean

HCA000312/1973

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

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Coram: Mr. Registrar Mayo in Chambers.

Date of Judgment: 10th May 1973.

Mr. A.D. Yap of Deacons, Solicitor for the Defendant.

Mr. Charles Ching, instructed by Messrs. Wilkinson & Grist, Solicitors, for the Plaintiff.

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DECISION

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1. This is an application by the Defendant under the provisions contained in Section 6 of the Arbitration Ordinance Cap. 341 for a stay of proceedings. The application is supported by an affidavit which has been sworn by the Defendant in which he deposes that the subject matter of the claim contained in the Statement of Claim forms part of a dispute arising out of a contract between himself and the Plaintiff dated the 18th December, 1970 (hereinafter referred to as "the said contract") which contains an Arbitration Clause which reads as follows:-

"All disputes arising in connection with the present Agreement shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the Rules."

In a further affidavit sworn on the 30th April 1973, the Defendant gives further particulars of the dispute. In his affidavit the Defendant deposed that the Plaintiff had failed ...(illegible) him with a "SORT/MERGE SUBROUTINE FOR IBM 1130 DISK" (hereinafter referred to as "the DISK").

2. I understood from both parties that the DISK is a programme which assists in processing information and forms part of a system which enables calculations to be computed for the benefit of customers of the Plaintiff but that the DISK is independent of the computer which is leased to customers. Also it could be said that the DISK is an ancillary piece of equipment the effect of which would be to supplement the performance of the computer. In effect its value is as an intellectual commodity. In any event the DISK in question is not referred to in the description of the equipment in the said contract which was leased to the Defendant. Mr. Yap who is representing the Defendant also submitted to me that he was entitled to refer to the affidavits including the exhibits which had been filed by the Plaintiff. In particular he referred to Exhibit JAT 7 which is exhibited to the affidavit or Mr. Teele dated 2nd May 1973 who is the General Manager of the Plaintiff's Hong Kong office. This Exhibit is a letter dated 25th May, 1971 from the Defendant to the Plaintiff which makes reference to the malfunction of the central processing unit of the computer equipment which was leased to the Defendant. Mr. Yap suggested that one reason for the Defendant's delay in effecting payments of rental under the said contract was the fact that the equipment was not functioning efficiently.

3. Counsel for the Plaintiff, Mr. Ching contended that a discretion was vested in me to decide whether or not I should order that there be a stay of proceedings. He also contended that the Defendant's bona fides must be established before I should exercise such a discretion. No authority was cited for either of these propositions. Mr. Ching also contended that before there should be any reference to arbitration it was essential that a dispute should be formulated. He claimed that the Defendant had failed to do this. He also argued that it was necessary for a distinction to be made between questions of Law and questions of fact. The reason he gave for this was that an arbitrator would almost certainly be unable to determine all questions of Law as in all probability he would not have a legal training and his adjudication would be restricted to questions of fact. He suggested that unless the reference was confined to questions of fact, it would be necessary for the Arbitrator to refer the dispute back to the Court for trial which would only result in a waste of time and effort. While I can readily appreciate the logic of this submission I do not think that it is correct in Law. No such distinction is made in the terms of the Arbitration Clause in the said contract, and Section 6 of the Arbitration Ordinance Cap. 341 also does not contain any such provision. However, Mr. Ching's main contention was that in reality the Plaintiff's claim was for arrears of rental which was payable under the said contract and that the Defendant was merely trying to delay matters by applying for a stay of proceedings. He suggested that the Defendant was acting mala fides. He also referred to the fact that it was inconceivable that the Defendant could establish a claim. He referred to the said contract and to the fact that the DISK was not comprised in the equipment described in the said contract and suggested that it was covered by the condition which was endorsed on the said contract. The relevant part of the condition reads as follows:-

"IBM, at its discretion, provides to its customer without charge its education, systems engineering activities and programs. ......"

Mr. Ching emphasized the words "at its discretion". He claimed that it was clear that the Plaintiff was not under any obligation to provide the DISK ...(illegible) accordingly even if there has been a delay in supplying it, this could not be a proper ground for a claim by the Defendant. This argument however does not dispose of the question of the alleged malfunctioning of the equipment. This of itself would be sufficient to justify the dispute being referred to arbitration. Mr. Ching also drew my attention to the evidence which had been filed which showed that the equipment had been extensively used over a considerable period of time. This indicated that the Defendant could not claim that the equipment was useless without the DISK.

4. While I find myself sympathetically disposed towards the arguments which have been most ably advanced by Mr. Ching, I do not think that the ...(illegible) application can be successfully resisted. I do not think that any discretion is vested in me in this matter. I consider that it is necessary for me to have regard to the Law on this subject. The terms of Section 6 of the Arbitration Ordinance do not leave any scope for such a discretion. Also it is necessary for me to have regard to the terms of the Arbitration Clause in the said agreement. It is clear from this Clause that "All disputes arising in connection with the present Agreement" shall be referred to Arbitration. Although the dispute might have been couched in more felicitous terms it is no doubt clear that a dispute has arisen under the said agreement. I realise that inconvenience and delay are likely to be occasioned if this matter is referred to arbitration. It would appear however that this must be an inevitable consequence if Arbitration Clauses are included in agreements and are drafted in wide terms. For the reasons I have given this application must succeed. I will therefore make an order in the terms of the application. Costs shall be to the Defendant in any event.

5. Dated the 10^th day of May 1973.

Representation:

Mr. A.D. Yap of Deacons, Solicitor for the Defendant.

Mr. Charles Ching, instructed by Messrs. Wilkinson & Grist, Solicitors, for the Plaintiff.