Ibm World Trade Corporation v. Andrew Jean

Case No.

Court

Date30 Jun 1973

Judge—

Case Document

100%Judiciary

HCA000312A/1973

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.312 OF 1973

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BETWEEN
	IBM WORLD TRADE CORPORATION	Plaintiff
	and
	ANDREW JEAN	Defendant

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Coram: LI, J. in Chambers

Date of Judgment: 30 June 1973

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JUDGMENT

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1. This is an appeal under 0.58 r.l against the Registrar's decision to stay proceedings on the application by the defendant in an action for a sum of money for goods sold and services supplied by the plaintiff. It is to be dealt with by way of an actual rehearing. As such I am in no way bound by the Registrar's decision.

2. On the 18th December 1970 the plaintiff and defendant entered into an agreement (exhibited, marked A and attached to the affidavit of Andrew Jean filed on the 12th April 1973) whereby the plaintiff agreed, inter alia, to supply and service a certain machine in consideration of the rental set out therein (hereinafter referred to as "the agreement"). One of the provisions in the agreement is that:

"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".

The machine was then installed in the defendant's premises and was put in use by the defendant.

3. On the 25th May 1971 the defendant wrote to the plaintiff complaining of the malfunction of the machine and claimed compensation in the form of reduced rental as from the 1st March 1971 (see Exh. JAT 7 attached to the affidavit of J.A. Teele filed 2nd May 1973). To this the plaintiff replied by letter dated 2nd June 1973 (Exh. MGM 1 attached to the affidavit of M.G. Morris filed the 16th May 1973). In this letter the plaintiff explained the cause for the malfunction but did not deal with the claim for a reduction in rental. The matter was never raised again by the parties until the hearing before the Registrar.

4. On the 24th September 1971 the defendant by letter requested the plaintiff to supply certain program in accordance with the agreement. However none appeared to have been supplied up to 15th December, 1971. This is evident in the letter dated the 20th January 1972 by the defendant (attached in a bundle marked JAT 7). By that letter (Exh. AJ 2 attached to the affidavit of A. Jean filed the 30th May 1973) the defendant gave notice to terminate the agreement with immediate effect. As a result of this a dispute arose between the parties as to whether the defendant was entitled to terminate the agreement with immediate effect on the 9th December 1971. Letters were exchanged between solicitors for the parties. The plaintiff's solicitor ...(illegible)wrote on the 7th April 1972 claimed for the machine rental in the sum of US$8,918 for the period between November 1971 and March 1972 (Exh. JAT 3). The defendant's solicitor by a letter of even date (Exh. JAT 4) raised a counterclaim. On the 30th January 1973 the plaintiff issued a writ of summons claiming for this sum of US$8,918. The defendant took no further step than entering an appearance and then proceeded to apply on the 12th April 1973 for a stay of the proceedings with the object that the dispute be referred to arbitration in accordance with the agreement. It is against the Registrar's order to grant a stay of the proceedings that the plaintiff appeals.

5. In support of the appeal Mr. Ching for the plaintiff contends that there is no identification of the dispute for arbitration. He further contends that there has never been any question of malfunction of the machine. Apart from the letter dated the 25th May 1971 in Exh. JAT 7 the defendant never raised this question. In any event the defendant paid the rental up to the end of October 1971 without repeating his original demand for a discount as from the 1st March 1971. The plaintiff's present claim is for rental for the period from 1st November 1971 to March 1972. Nor has the defendant filed any affidavit repeating this complaint of malfunction which is purely vexatious and frivolous. As to the defendant's counterclaim, Mr. Ching contends that it is not made in good faith. He refers to Exh. JAT 8 (attached to J.A. Teele's affidavit of the 2nd May 1973) which shows that despite the non delivery of the program the defendant's usage of the machine had not been substantially reduced in the number of hours. The object in raising a counterclaim is merely to delay the proceedings. It is further contended that the defendant's counterclaim depends on interpretation of the rider of the agreement which reads:-

"	IBM, at its discretion, provides to its customer without charge its education, systems engineering activities and programs. At present, IBM is reviewing its customer assistance policy and may revise this policy. Such revision could result in charges to customers for certain types of education, systems engineering activities and programs.
	In the event of such revision, IBM will give the Customer reasonable notice prior to the date such revision is effective as to the Customer. Upon receipt of such notice, the Customer will have the right to cancel this Agreement at any time prior to the effective date of the revision."

This is a point of law and will have to be referred to the Court.

6. Mr. Mills-Owens for the defendant contends that the dispute can easily be identified. It is a dispute as to the state and extent of indebtedness by the defendant to the plaintiff. Unless the counterclaim is adjudicated upon there is no way to decide whether the defendant is indebted, if at all, to the plaintiff. The counterclaim is based on the plaintiff's failure to supply the Disk and the malfunction of the machine. The fact that the defendant's failure to revive claim on the malfunction of the machine during 1971 does not bar the defendant from renewing his claim now. It is not for the judge to as sume the lack of good faith.

7. In proceedings of this nature where the parties have agreed by contract to refer their disputes to arbitration the normal practice is to grant a stay. The burden is on the plaintiff opposing the application to show cause why a stay of proceedings should not be granted. The Registrar or Judge, adjudicating this issue obviously has a discretion which must be judicially exercised. Looking at the evidence disclosed by the affidavits I am of the opinion that there is a dispute arising from the agreement viz. the extent of the defendant's debt to the plaintiff having regard to the defendant's counterclaim. Referring to the defendant's claim on the malfunction of the machine it is true that the defendant did not pursue the matter and that the defendant has filed no affidavit in support of this contention. However, there is material in Exh. JAT 7 to indicate the defendant's claim. There is no proposition of law to suggest that payment of rental in accordance with the agreement with knowledge of the malfunction of the subject matter of hire operates as a bar or waiver. There is nothing to prevent the defendant in relying on his right (if any) when cordial relationship with the plaintiff has broken down. Whether the malfunction in fact caused damage to the defendant is a matter of fact referrable to the arbitrator. In the circumstances I am of the opinion that a delay in pursuing the defendant's claim does not necessarily show lack of good faith. This is the reason for which the Registrar granted an order to stay the proceedings. I do not find any good reason to interfere with his ruling.

8. This is sufficient to dispose of the appeal. But that is not all. The defendant maintains a counterclaim on another ground viz. the non delivery of the Disk or Program. It is true the agreement provides that the plaintiff provides the Disk at its discretion. However, from the evidence it appears that the defendant's order for Disks in September 1971 was completely ignored. There is not even evidence of an acknowledgment until after the defendant gave notice to terminate the agreement in December 1971. This is not a question of delay or even delay for a reasonable time. It is a matter of complete failure to respond to the defendant's order. The defendant maintains that the non delivery deprived him of the opportunity to make full use of the machine. The plaintiff denies this allegation. Whether there is any substance in this complaint is a matter of fact. Whether the defendant could have made more and better use of the machine had the Disk been delivered is another question of fact. Whether the plaintiff, under the circumstances, is entitled to ignore completely the defendant's order is a question of mixed law and facts. There is no insurmountable difficulty in referring such questions to arbitration. These are not questions of pure law so as to render it impractical to refer them to arbitration.

9. Mr. Ching refers me to a passage in the White Book (Vol.1 para. 14/3-4/12A). That is related to application for summary judgment under 0.14. There, a distinction may be made between a set off and a counterclaim when consideration is given to granting leave to defend. This is an application for a stay of proceedings. The counterclaim here is a dispute arising in connection with the agreement.

"If the parties choose to determine for themselves that they will have a domestic forum instead of resorting to the ordinary courts then.......... a prima facie duty is cast upon the courts to act upon such agreement"

- Willesford v. Watson L.R. 8 Ch. 473 at 480.

10. In the present case the defendant has shown that a dispute is within a valid and subsisting arbitration clause. On the balance of probability the plaintiff has not been able to satisfy me why effect should not be given to the agreement to submit the dispute to arbitration. Accordingly the appeal is dismissed with costs.

	(Simon F.S. Li)
	Puisne Judge.

Representation:

Charles Ching (Wilkinson & Grist) for Plaintiff.

R. Mills-Owens (Deacons) for Defendant.