Hyundai Engineering and Construction Co Ltd v. Vigour Ltd
Read the full judgment text of HCCT 100/2003 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 14 April 2004 before Hon Reyes J.
Construction contracts involving Hyundai Engineering and Vigour Limited under the KCRC 5Ha Site project led to disputes over extensions of time and liquidated damages. The parties entered into a March Agreement whereby they agreed not to pursue arbitration or court action and to negotiate or mediate to resolve differences. The court considered the interpretation and effect of the March Agreement including whether it settled all disputes, whether it revoked arbitration rights, the meaning of 'managing directors of the ultimate shareholder group of the highest level,' and whether it barred court access. The court found the March Agreement did not constitute a full settlement nor revoke arbitration agreements but only temporarily restrained exercising rights. Mr Kim was accepted as the managing director of the highest level. The Agreement postponed litigation but did not oust court jurisdiction permanently. The validity and enforceability of the March Agreement were upheld against public policy and uncertainty challenges; obligations to negotiate and mediate in good faith were enforceable. Vigour was found to have repudiated the Agreement by obstructing mediation; Hyundai accepted repudiation, terminating the Agreement and reviving the right to arbitrate. Estoppel by convention did not apply as the March Agreement was valid. The interim injunction restraining arbitration was discharged. Directions were given for further pleadings and costs were awarded to Hyundai. The judgment clarifies the limits of agreements to forebear from arbitration or litigation pending negotiation and the enforceability of good faith negotiation and mediation clauses. Appeal by Vigour dismissed (CACV128/2004).
Legal issues: Construction and effect of the March Agreement on arbitration rights · Meaning of 'managing directors of the ultimate shareholder group of the highest level' · Effect of the March Agreement on the parties' rights to access courts · Validity and enforceability of the March Agreement against public policy and uncertainty challenges · Whether Vigour repudiated the March Agreement · Effect of repudiation on March Agreement and arbitration rights · Estoppel by convention based on the March Agreement
Outcome: March Agreement does not bar court recourse; arbitration rights under Clause 86 remain; Vigour repudiated March Agreement; repudiation accepted by Hyundai terminates March Agreement releasing Hyundai to pursue arbitration; no estoppel by convention arises; Interim Injunction discharged.
Cited by 11 cases
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HCCT 100/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS ____________
____________ Coram: Hon Reyes J in Court Date of Hearing: 19 March 2004 Date of Judgment: 14 April 2004 _______________ J U D G M E N T _______________ I. Background 1.By 3 building contracts the Defendant ("Vigour") as Employer engaged the Plaintiff ("Hyundai") as Main Contractor for construction work in connection with the "KCRC 5Ha Site Topside Development -- Hotel & Office Project" ("the Project"). The parties also entered into supplementary agreements. The building contracts and supplementary agreements between the parties were respectively known as Contracts A, B and SA and the Supplementary Agreements for Contracts A and B and Retail Area RAC (collectively, "the Contracts"). Under the Contracts substantial liquidated damages were payable for delay in completion. The Project was carried out under the supervision of Ronald Lu & Partners as Architect and Davis Langdon & Seah Hong Kong Limited as Quantity Surveyor. 2.The Contracts stipulated a mechanism for resolving disputes between the parties. In particular, Clause 86 ("Clause 86") of the Contracts provided:-
3.There was delay in completing the Project and a dispute arose between Hyundai and Vigour over whether the Architect had correctly assessed the Plaintiff's entitlement to extensions of time. Hyundai thought that greater extensions should have been granted, Vigour that the Architect had been too generous. Hyundai believed that Vigour owed Hyundai over $900 million, while Vigour believed that Hyundai owed Vigour some $200 million in liquidated damages. In respect of its claim against Hyundai, Vigour was entitled to call on a performance bond ("the Bond") for Contract B in the sum of $60 million. But such right had to be exercised by 31 March 2003. 4.Mr Kim Sun-Kyu ("Mr Kim"), Hyundai's Managing Director, was keen to resolve the differences between Hyundai and Vigour by negotiations if possible. Discussions in February 2003 among Mr S L Chung ("Mr Chung") (Senior Project Manager), Mr William Ng ("Mr Ng") (General Manager, Contracts) on behalf of Hyundai and Mr Anthony Kwan ("Mr Kwan") (Chief Manager, Building Cost and Contract Department) and Ms Grace Shen ("Ms Shen") (Senior Project Manager) on behalf of Vigour having made no progress, on 5 March 2003 Mr Kim wrote to Mr Victor Li ("Mr Li") (Managing Director and Deputy Chairman of the Cheung Kong Group ("the Group") to which Vigour belonged). In his letter Mr Kim pointed out that, despite major differences between Hyundai and the Group, a Final Account had recently been agreed between them in the Hok Un Phase II Redevelopment, "due to the attitude of a more fair and reasonable approach being adopted by both parties, and probably more important, on the basis of reciprocal commercial good faith". Mr Kim proposed that he meet with Mr Li in a similar spirit of cooperation in order amicably to resolve the parties' differences in relation to the Project. 5.By letter dated 8 March 2003 Mr Li suggested that "the appropriate time for us to meet and discuss the matter may be right after my staff have completed their review on all the documents tabled to date". Mr Li stressed that the Group "has always been fair and reasonable in all our dealings, so please rest assured that we will be the same with you on this matter, and look forward to meeting with you in the near future". 6.Although Vigour had accepted his suggestion for negotiations, Mr Kim was aware of the deadline imposed by Article 86 on the reference of any dispute to arbitration. Accordingly, by 2 letters dated 12 March 2003 Hyundai invited Vigour to agree to the extension of the time allowed by Clause 86 for referring a dispute concerning 2 decisions of the Architect made on 18 and 26 February 2003 respectively. 7.Vigour having refused the request for extensions, Hyundai issued Notices of Arbitration ("the March Notices") in relation to Contracts A and B on 18 and 25 March 2003 respectively. It later issued a Notice of Arbitration ("the November Notice") in relation to Contract SA on 18 November 2003. Vigour took the position in March 2003 that the March Notices were time-barred under Clause 86 since the Architect had already ruled on identical matters previously and no appeal had been lodged against those earlier rulings. 8.Mr Kim regarded the March Notices as merely protective steps. Hyundai wrote to Vigour and the Group on 18 and 25 March 2003 respectively to emphasise that the March Notices were merely intended to preserve Hyundai's rights under Clause 86. In its 25 March 2003 letter to Group (marked for the attention of Mr Li), Mr Kim stated:-
Mr Kim reiterated the sentiments expressed in his 25 March 2003 letter at a meeting 2 days later with Mr Kwan and Ms Shen. Mr Kim also expressed concern over Vigour's apparent intention to call the Bond. 9.Following the latter meeting, late in the afternoon of 27 March 2003, Mr Li telephoned Mr Kim. Mr Li said that he too was prepared to negotiate a commercial settlement of the disputes between Hyundai and Vigour but he would not do so with "a gun against his head". By the latter expression Mr Li explained that he was referring to the March Notices. Mr Li said that, as a pre-condition for commercial settlement negotiations, Hyundai had to decide whether it wanted to "fight or talk". If Hyundai wished "to talk" then it had to give up the right to sue or arbitrate, regardless of the outcome of negotiation. On the other hand, if Hyundai wished "to fight", Vigour would "fight" to the end and there would be no possibility of negotiation once the parties went down that path. If Hyundai's decision was "to talk", Mr Li asked Hyundai to sign an agreement whereby it agreed to remove the threat of arbitration. Mr Kim confirmed that Hyundai would sign such an agreement and Mr Li said that he would instruct Vigour to meet Hyundai on the next day to discuss and agree on the terms of the agreement. 10.The parties met on 28 March 2003. Mr Kim, Mr Chung and Mr Ng attended for Hyundai and Mr Kwan and Ms Shen for Vigour. Ms Shen prepared a handwritten draft for comment. That read:-
Amendments were proposed. Mr Kim suggested deleting the words "and ever" after "forever", joking that otherwise the agreement would sound too much like a marriage vow. Mr Ng, wondering what would happen if discussions failed to have a concrete result, proposed that there be third-party mediation by way of a fallback position. He suggested the insertion of the words "provided failing an ultimate agreement then both parties shall agree and submit to third party mediation procedure which shall be conducted and completed as soon as possible" after "highest level". Ms Shen left the room to obtain advice from Ms Amy Wong ("Ms Wong") (an in-house counsel of the Group) on the nature of mediation and instructions from Mr Li on Mr Ng's amendment. Ms Wong , who briefly joined the meeting, thought that the words "and in any case no party will exercise the right to sue against each other" immediately after the words "as soon as possible" proposed by Mr Ng. 11.Finally, Mr Kim, Mr Chung, Mr Ng, Mr Kwan and Ms Shen all signed an agreement ("the March Agreement") in the following terms:-
12.By letter dated 29 March 2003 to Hyundai Ms Shen enclosed a copy of the handwritten minute of the March Agreement and stated:-
13.Vigour did not call on the Bond which expired at the end of March 2003. 14.On 7 April 2003 Mr Kim wrote to Vigour, pursuant to the March Agreement, seeking "to speed up the necessary process, for the objective of achieving an amicable resolution in the nearest future". Mr Kim stated:-
15.Mr Li responded on 8 April 2003 as follows:-
16.On 3 July 2003 a meeting ("the July Meeting") took place between Mr Li and Mr Kim. Mr Kim tabled a document entitled "Proposed Commercial Settlement" as a basis for discussion. But no progress was made in narrowing the gap between the parties' positions. 17.By letter dated 17 July 2003 (marked for Mr Kwan's attention) Mr Kim followed up on the topics discussed at the July Meeting. Mr Kim stated that, although the July Meeting had been "favourably amicable and constructive", there persisted "substantial differences ... especially regarding the EOT hence LDs issues". Mr Kim noted from the July Meeting that "Mr Li might have certain concern that Mediation may not be able to bring about the desired result for a full and final settlement". Mr Kim wished to allay such concern. He proposed that as a practical next step the parties consider agreeing on a mediation procedure and engaging a mediator who could recommend settlement terms. An alternative to this (Mr Kim indicated) might be expert determination. On either mode of proceeding:-
Mr Kim concluded his letter by stressing how imperative it was for matters to be sorted out as soon as possible, in light of financial pressures facing Hyundai as well claims from nominated sub-contractors. Upon Vigour's confirmation of a preferred mode of further process, Hyundai would be "happy to take the imitative of drafting an agreement for [Vigour's] kind approval or counter-suggestion". 18.In a letter to Mr Li dated 26 July 2003 Mr Kim again suggested that the parties initiate mediation at that stage. Mr Kim pointed out that in the Hok Un Redevelopment mediation gave rise to a settlement "notwithstanding our certain difficulties in convincing the Head Office to accept the rather conservative assessment". Accordingly:-
19.It was not until 18 August 2003 that Vigour (through Mr Kwan) replied to Hyundai's letters. Vigour's response was cryptic:-
20.By answer dated 22 August 2003 Hyundai explained the benefits of mediation, including the potential saving in time and cost which the process might bring. Hyundai also enclosed a draft mediation agreement prepared with reference to the HKIAC Mediation Rules for Vigour's consideration. Hyundai's proposal was for the mediation to cover "all major disputes between us including extension of time, loss and expense, LADs, major unresolved variations and measurement issues, etc., for the various Contracts in question, with a view to bring about an overall acceptable resolution". Hyundai concluded its letter as follows:-
21.Vigour's reply came on 4 September 2000. It was brief:-
22.On 5 September 2003 Hyundai asked for clarification. How precisely had its letter of 22 August 2003 been "contrary to" the March Agreement? Vigour's answer came on 10 September:-
23.Hyundai came back on 18 September 2003 as follows:-
24.There being no response from Vigour, Hyundai chased up on 23 September 2003 stating:-
25.On 27 September 2003 Vigour wrote as follows:-
26.By letter dated 30 September 2003 Mr Chung replied for Hyundai as follows:-
27.Again there was no response from Vigour. Hyundai therefore wrote on 8 October 2003:-
28.By letter dated 16 October Hyundai's solicitors Messrs Masons ("Masons") proposed Mr Colin Wall as sole arbitrator in connection with the March Notices and sought Vigour's views on the appointment. 29.Vigour responded on 16 October 2003 as follows:-
30.Masons replied on 17 October 2003 ("the October Letter"), denying the contents of Vigour's letter of 16 October. Among other things, Masons stated the following:-
31.By an Originating Summons dated 11 November 2003 Hyundai sought declarations to the effect that:-
32.By a Summons dated 17 February 2004 Vigour applied for other issues to be dealt with in the substantive hearing of the Originating Summons. In particular, Vigour sought the following reliefs:-
33.The alleged misrepresentation for which Vigour seeks damages is described in Vigour's Summons as follows:-
34.At the hearing of Vigour's Summons on 20 February 2004, I granted an interim injunction ("the Interim Injunction") restraining Hyundai until 19 March 2004 (the date when the Originating Summons was to be heard substantively) or further order from proceeding with the arbitrations invoked by the March and November Notices (including appointing any arbitrator in respect thereof) or commencing any other arbitration proceedings in connection with the Contracts. I also directed that Vigour file a Counterclaim under the Originating Summons setting out the facts and matters upon which Vigour relied in support of its claim against Hyundai for misrepresentation. I ordered that Hyundai file a defence within 14 days of Vigour's filing its Counterclaim2. I further suggested to the parties (and the parties by their counsel agreed) that the hearing of the Originating Summons on 19 March 2004 be devoted to the determination of the parties' entitlement to the declarations sought by them with Vigour's Counterclaim being heard at a later date. 35.For the Court's convenience, I had on 20 February 2004 invited the parties to sharpen the issues between them by framing discrete questions, preferably in "yes-or-no" or "multiple-choice" format, of the matters on which they required the Court's ruling. Ultimately, the parties could not agree the precise wording of any questions. But, through the efforts of both sides' counsel (Mr Michael Thomas SC for Hyundai and Mr Robert Kotewall SC and Ms Katrina Lam for Vigour), the issues raised by the Originating Summons were sufficiently evident to enable the matter to be heard expeditiously on 19 March 2004. II. Discussion A. Issues of construction 36.In his opening, Mr Thomas identified 4 issues of construction arising out of the March Agreement. It is convenient to start with those 4 issues. They are:-
A. 1 Was the March Agreement a compromise or settlement? 37.Mr Kotewall's case is that the peremptory language of the March Agreement's opening words (for example, "The parties ... will not bring any arbitration or court action forever"; "any right to sue ... will not be exercised any more mutually"; "in any case no party will exercise the right to sue against each other"; and "[t]o demonstrate this private settlement is in place,...") must mean that the parties fully intended to compromise their differences by the document. Mr Kotewall submits that the effect of the March Agreement is that, '[u]nless the parties agree some other solution by negotiation or mediation, the architect's certificates become final and binding". 38.I disagree with Mr Kotewall's construction. It is difficult to see how the parties could have regarded the March Agreement as a settlement along the lines proposed by Mr Kotewall, where (as far as Hyundai was concerned) Vigour owed it over $900 million and (as far as Vigour was concerned) Hyundai owed it over $200 million. In the absence of clear words to the effect that each party was giving up its claims and settling on the status quo as exemplified by the Architect's certificates already issued, I cannot read into the March Agreement an agreement between the parties to give up their very substantive claims against each other in the event that negotiation and mediation should fail. At the time of signing the March Agreement, I think that the parties would be surprised by such a suggestion. 39.Seen in the factual matrix which I have set out in Section I of this Judgment, the March Agreement was plainly intended by both sides to provide no more than a mechanism whereby their considerable differences might ultimately be resolved with a significant saving of time, cost and antagonism. However, agreeing a mechanism to resolve disputes is just a first step towards resolution of those disputes. It is not in itself (and must not be confused with) the actual resolution or settlement of such disputes. 40.One might, especially as a layman, legitimately describe an agreement to resolve differences by recourse to a particular process (for instance, negotiation or mediation) as a "settlement". But that does not mean that there has a been a full and final settlement of all differences. Only a method of proceeding has been "settled". That is all. Thus, I do not think that the reference to a "private settlement" in the last sentence of the March Agreement supports Mr Kotewall's argument. A. 2 Did the March Agreement revoke the arbitration agreements in Clause 86? 41.Mr Kotewall suggests the words "the parties will not continue arbitration and will not bring any arbitration" should be taken to mean that the parties have agreed not to invoke Clause 86. He states in his Reply Submissions (at §9):-
42.Mr Thomas points out that there is a world of difference between agreeing not to exercise rights under an arbitration agreement to arbitrate and an agreement to revoke the submission to arbitration contained in the arbitration agreement. In the first case one merely agrees to refrain from exercising rights, while in the second instance one agrees not just to refrain from exercising rights but to forego such rights altogether and treat the underlying arbitration agreement as discharged. 43.The language of the March Agreement suggests that the parties only agreed to refrain from exercising rights under Clause 86 and the March Agreement did not have the effect of revoking the submission to arbitration under Clause 86. Thus, the March Agreement says the parties "will not bring any arbitration ... forever", indicating an agreement not to exercise a right to bring an arbitration even though such right remains available under Clause 86. More tellingly, the March Agreement states that "any right to sue each other will not be exercised any more mutually" and "in any case no party will exercise the right to sue against each other". In both sets of expression the emphasis is on a permanent restraint in the exercise of a right to arbitrate, as opposed to the abrogation of such right (including its source in Clause 86). 44.If Mr Kotewall only means that the parties have agreed not to arbitrate while the March Agreement is in effect, I would agree. If Mr Kotewall means to go further and suggest that, since (potentially at least) the negotiation and mediation mechanism implemented by the March Agreement could completely resolve the differences between Hyundai and Vigour, both parties must have agreed not just to restrain the exercise of their rights but to give up those rights altogether, I would disagree. In the absence of clear words to that effect, there is nothing in the factual matrix or the March Agreement to warrant such a construction. Undoubtedly, the parties thought that the March Agreement would preclude the need to exercise any rights of arbitration "forever". But that does not logically mean that the parties in fact surrendered the right to arbitrate arising from Clause 86 if the March Agreement should somehow be (or become) void, inoperative or ineffective. A. 3 What is meant by the reference to "managing director"? 45.This issue can be disposed of shortly. The words "managing directors of the ultimate shareholder group of the highest level" mean exactly what they say. 46.In Hyundai's case, there is no further shareholding company behind Hyundai exerting a higher level of command. Hyundai is a South Korean company which is registered under the Companies Ordinance (Cap.32) to carry on business in Hong Kong. The company had gone bankrupt in October 2000. It was restructured in 2001 and became disaffiliated from the Hyundai Group in August 2001. Its major shareholders are 4 banks: Korea Development Bank (9.88%), Korea Exchange Bank (7.34%), Woori Bank (6.14%) and Kookmin Bank (10.82%). Mr Kim is Hyundai's managing director who since at least 3 May 2002 has had full power to act as the company's representative in Hong Kong, Macau and the Mainland ("the Region") and to execute all contractual and legal documents necessary "in relation to every respective authority for all prospects and business activities in the Region". 47.In light of those undisputed facts, I do not see how Mr Kim can be anything other than Hyundai's managing director at the highest level of corporate command. 48.Mr Kotewall points out that Hyundai has a President and Chief Executive Officer (Mr Shim Hyun-Young) and that previously there had been dealings between Mr Li and Mr M S Ro, an Executive Vice-President of Hyundai. That may well be the case. But merely because Hyundai happens to have a President and CEO and at least one Executive Vice-President does not render Mr Kim any less a managing director at Hyundai's highest level. The March Agreement specified a "managing director" at the highest corporate shareholding level and that is exactly what Hyundai put forward in the presence of Mr Kim. 49.In my view, there is no substance to Vigour's assertion that, in proffering Mr Kim and no higher officer for negotiations with Mr Li, Hyundai went outside the terms of the March Agreement. A. 4 Does the March Agreement rule out any or some recourse to the Courts? 50.Mr Kotewall says that the March Agreement does not completely bar the parties from resorting to the Court. For example, Mr Kotewall agrees that the March Agreement did not preclude Hyundai from bringing the present Originating Summons for the purpose of construing the parties' rights and obligation under the March Agreement. In his Reply Submissions (at §19) Mr Kotewall further states:-
51.Nevertheless, if Hyundai commences Court proceedings which are not merely ancillary to the enforcement of the March Agreement or which do not wholly relate to questions of the fraud or vires of (say) the Architect's certifications, Vigour (Mr Kotewall suggests) could apply to the Court:-
Thus, Hyundai may be free to invoke the Court's jurisdiction. But, by reason of the March Agreement, I understand Mr Kotewall to be submitting that Hyundai would not get far before the Court in any substantive action as Vigour would apply to the Court to enforce the terms of the March Agreement. 52.On arbitration, Mr Kotewall's position is that all rights under Clause 86 ceased to be effective as a result of the March Agreement. This means that, if Hyundai continues with the March and November Notices or commences fresh arbitrations, Vigour could apply to the Court for a permanent injunction restraining Hyundai. Again, by reason of the March Agreement, Mr Kotewall submits that Hyundai would not get far along the arbitration route. 53.I have earlier concluded that the March Agreement does not constitute a final settlement of the parties' differences as contended by Mr Kotewall. It follows that, whatever its jurisdiction to grant a stay based on the March Agreement, the Court would not strike out any action by Hyundai on an alleged basis that there has been a full and final compromise with which any cause of action under the contracts has merged. 54.I have also concluded that the March Agreement did not revoke the submission to arbitration under Clause 86. The parties merely agreed that, so long as the March Agreement remained operative, neither party would exercise its rights to arbitrate under Clause 86. Consequently, whether or not the Court would enjoin arbitration proceedings depends on the validity of the negotiation and mediation provisions in the March Agreement. If those provisions are unenforceable or have somehow become inoperative, the continued existence of Clause 86 means that the Court should allow Hyundai to arbitrate to the extent that relevant disputes fall within the ambit of Clause 86. 55.In reality then it seems to me that Mr Kotewall's case on the effect of the March Agreement on the Court's jurisdiction reduces itself to 2 propositions:-
Both propositions focus on the validity of the March Agreement, a subject to which I shall turn in the ensuing section of this Judgment. Strictly, the 2 propositions do not involve the interpretation of the March Agreement at all. 56.In my view, by the March Agreement, properly construed, the parties essentially bound themselves to forebear from suing each other while negotiations and mediation were taking place and the dispute resolution regime established by the document remained operative. I do not think the March Agreement went beyond this. On this interpretation, the words "not bring any ... court action forever" and "in any case no party will exercise the right to sue against each other" merely reflectd the parties' belief (now seen, with the benefit of hindsight, to have been over-optimistic) that the March Agreement provided a mechanism whereby their differences would definitely be resolved such that there would never need to be recourse to litigation. 57.Much was made by both Mr Thomas and Mr Kotewall of Mr Li's comment that Hyundai had to choose whether "to fight" or "to talk". Even if such remark formed part of the factual matrix, I do not think that the reading in §56 above is affected in any way. Insofar as Hyundai agreed to forebear from suing Vigour in arbitration or Court proceedings pending negotiations and mediation, Hyundai was plainly agreeing "to talk" rather than "to fight". Insofar as the negotiation or mediation arrived at a final settlement, Hyundai undertook to be bound by such result (whatever it might be) and not subsequently "to fight" for some better deal. I do not believe that the admonition "to talk" or "to fight" can be taken further as precluding Hyundai's right to arbitrate or sue even if there occurred what the parties probably regarded as unlikely at the time of the March Agreement and negotiations coupled with mediation failed. 58.I disagree with a wider construction of the March Agreement as entailing the parties surrendering their right to litigate in Court in respect of the Contracts. Purely, as a matter of construction and ignoring the public policy implications of a surrender of rights of suit, it would require far clearer words than those in the March Agreement before the Court could find that a person has given up his right to sue in Court in respect of any matter. No person would readily surrender such a fundamental right and in my judgment neither Hyundai nor Vigour can be taken to have done so here. B. The validity and enforceability of the March Agreement 59.Mr Thomas identified 4 main issues in respect of the validity or enforceability of the March Agreement. The issues may be summarised thus:-
B. 1 Whether the March Agreement is contrary to public policy 60.The Court jealously protects its jurisdiction. It will not enforce an agreement wherein 2 persons bind themselves not to sue each other in any circumstance. Treitel, The Law of Contract (11th ed.), p.446 states:- "A contract is at common law contrary to public policy if it purports to deprive the courts of a jurisdiction which they would otherwise have. For example, a clause in an insurance policy which provides that the policy is in certain events to become 'incontestable' does not prevent the court from deciding whether the insured had any insurable interest. Such agreements are contrary to public policy because they would, if valid, make it possible to evade or contravene many peremptory rules of law. It follows that they are invalid only so far as they purport to exclude the jurisdiction of the courts on a point of law. An agreement is not invalid to the extent that it gives a non-judicial body power to make final and binding decision on questions of fact. Such a provision does not, moreover, normally rule out the possibility of a legal challenge to the decision on the ground of 'unfairness, bad faith or perversion', so that the provision does not wholly exclude the jurisdiction of the courts even on the question of fact." 61.Mr Thomas submits that the March Agreement constitutes a contract not to sue in Court and must therefore be illegal. 62.On the reading of the March Agreement which I have suggested in Section II A4 of this Judgment, the issue of public policy does not arise. If all that the parties agreed was that while negotiations and mediation were afoot, each would forebear from suing the other in arbitration or Court proceedings, no question of ouster of jurisdiction arises. The parties have not purported to bar the Court from adjudicating on their differences, but have only postponed the time when the Court's jurisdiction may be invoked by either side pending negotiations and mediation. Although the hope may have been that the Court would never have to be seised of the matter, there has been no ouster. 63.Given the foregoing, it is unnecessary to me to consider the validity of the March Agreement if the parties bound themselves thereby never to sue each other on the Contracts even if negotiations or mediation proved abortive. But, in deference to Mr Thomas' submissions, I briefly set out below what my views on the March Agreement would have been if (contrary to my conclusion) it prohibited one party from suing the other. 64.On that hypothesis, the agreement not to sue would be contrary to public policy. The March Agreement being then partly legal and partly unlawful, it would be unenforceable as a whole if the illegal part could not be severed from the body of the agreement. Words ousting the Court's jurisdiction are normally assumed to be severable (see Treitel at p.507, citing Re Davstone Estate Ltd's Leases [1969] 2 Ch 378). Therefore, as a matter of first impression, only that portion of the March Agreement barring the bringing of suits in Court should be struck down. 65.However, Mr Thomas has stressed that there are 2 components to the March Agreement. A negative component whereby the parties agreed not "to fight" (that is, not to sue each other in arbitration or Court proceedings) and a positive component whereby the parties agreed "to talk" (that is, to negotiate or mediate). Mr Thomas invited me to infer from Mr Li's observation on "fighting" and "talking" that the 2 components comprise a "package deal". To sever one (the stricture against "fighting") from the other (the promotion of "talking") would so alter the nature of the parties' bargain that the Court would be re-writing the March Agreement and enforcing something to which the parties had not agreed. Severance according to Mr Thomas should accordingly be ruled out. 66.I disagree with Mr Thomas' submission. It does not follow from a severance of the provision against going to Court that the parties would immediately be able "to fight" in contravention of Mr Li's admonition. Deleting the relevant words would not (for example) prevent Vigour from applying to the Court to hold Hyundai to any enforceable dispute resolution procedure agreed under the March Agreement. It is true that as a 2nd limb of argument Hyundai claims that the negotiation and mediation procedures in the March Agreement are inadequate and unenforceable. That is a separate matter. The immediate question is whether striking out the offending words from the March Agreement would by itself, without more, negate any legally effective mechanisms for the promotion of "talk" contained in the March Agreement. I do not think that it would. 67.To recapitulate, for the reasons which I have explained, I do not believe that, properly construed, the provision against going to Court in the March Agreement is contrary to public policy. If I am wrong in my construction, I would only have severed the relevant words and would not have found the whole of the March Agreement to be unenforceable. B.2 Is the agreement to negotiate or mediate enforceable? 68.Mr Thomas contends that the agreement to negotiate and mediate in the March Agreement is unenforceable. That part of the March Agreement is no more than an agreement to agree. Further, Mr Thomas submits that the agreement to negotiate and mediate is void for uncertainty. This is because it does not identify any specific procedure or time frame for the proposed negotiations or mediation. 69.In Courtney & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd and another [1975] 1 WLR 297 Lord Denning MR (with whom Lord Diplock and Lawton LJ agreed) stated (at 301D - 302B):-
70.The enforceability of agreements to agree was subsequently discussed by the Privy Council in The Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyds Rep 205. The company agreed to supply coal to the board for 15 years. The tariff for the initial 5 years would follow a base scale and variation provisions. The latter were subject to review upon request by either party. After 5 years the base scale would continue to apply but new variation provisions were to be agreed. The agreement included an arbitration clause. The board sought a declaration that the agreement was uncertain beyond the first 5 year period as there was only an agreement to agree new variation provisions. 71.Sir Robin Cooke (delivering the opinion of the Privy Council) stated (at 210 (col.1)):-
72.Sir Robin Cooke points out that the Court is slow to conclude that any agreement reached after arm's length dealings between the parties is void for uncertainty3 . It is apparent from Queensland that not every agreement to agree should automatically be held to be unenforceable. In Queensland, for example, the Privy Council found that the contract was sufficiently certain because it was possible in all the circumstances of that case to imply 3 obligations:-
But it is unclear from Queensland whether the Privy Council would have held that an obligation (express or implied) to use reasonable endeavours to agree a price structure was certain enough on its own to be enforceable as a contract. 73.In Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1, the New South Wales Court of Appeal reviewed the law relating to agreements to agree in some detail. The relevant agreement stipulated that the parties would "proceed in good faith to consult together upon the formulation of a more comprehensive and detailed Joint Venture Agreement". 74.Kirby P (with whom Waddell AJA agreed, Handley JA dissenting) concluded (at 26D - 27F):-
75.Coal Cliff moves on from Queensland in tentatively suggesting practical tests for assessing whether a particular agreement to negotiate in good faith was or was not enforceable. In Coal Cliff negotiations over the running of a mining development had broken down after protracted negotiations. Among other questions, the Court was asked to decide whether there had been a breach of a contractual duty to negotiate and (if so) what the damages for such breach should be. As Kirby P pointed out, in such situation there were far too many possibilities as to what the parties may or may not have agreed in the course of good faith negotiations, that the Court could not objectively conclude what a reasonable outcome might be. The Court was consequently in no position to enforce the agreement. 76.Consider the very different question arising out of a situation where (say) Party X has not even attempted to negotiate but initiates a claim in Court and Party Y is seeking to hold Party X to his agreement to enter into good faith negotiations as a first attempt towards resolving a dispute. In that simple case, provided there has been consideration for the promise to negotiate in good faith, the Court may be prepared on the basis of Coal Cliff to hold Party X to his word by staying proceedings unless and until good faith negotiations have failed. 77.What Coal Cliff suggests is that there can be no blanket rule which automatically deems all agreements to agree as unenforceable. A nuanced approach is required. The Court's view may have to depend on the terms of the specific arrangement (construed in light of its factual matrix), the type of relief sought by the party wishing to enforce the negotiation arrangement and the subsequent behaviour of the parties following agreement (for example, have there been abortive negotiations?). 78.Next in the chronology of relevant cases is a brief, but often-quoted reference to Courtney in Steyn J's judgment in Paul Smith Ltd v H & S International Holding Inc. [1991] 2 Lloyds Rep 127, at 131 (col.1):-
I do not think that the reference takes the debate on the enforceability of agreements to negotiate much further. The question was conceded and not argued. It also seems that the authorities to which I have just referred were not cited to Steyn J. 79.The House of Lords most recently considered the correctness of Courtney in Walford v Miles [1992] 1 WLR 174. The defendants there orally agreed to terminate negotiations with a third party for the sale of a company and property and instead to deal exclusively with the plaintiffs for such sale. In breach of that agreement the defendants resumed negotiations with, and eventually sold their company and property to, the third party. The trial judge (among other things) treated the promise not to negotiate as a collateral representation and awarded ￡700 as damages for misrepresentation. The Court of Appeal by a majority allowed the defendants' appeal on the basis that the oral agreement alleged was no more than a contract to negotiate and so unenforceable. But the appeal against damages of ￡700 for misrepresentation was dismissed. The plaintiffs appealed. 80.Lord Ackner (with whom the other Lords agreed) stated (at 181C - 182A):-
81.I have some difficulty with Lord Ackner's reasoning. For example, continental European legal systems have long applied the concept of "good faith" in the adjudication of commercial disputes without apparent problem. Similarly, the English Court in its equitable jurisdiction is constantly concerned to ensure that fiduciaries have not acted in bad faith towards beneficiaries. In light of such legal experience, it is difficult to see why an English or Hong Kong Court should have any real difficulty in assessing whether parties have objectively acted in a spirit of cooperation and good faith. (It is unclear why Lord Ackner should stress the word "subjectively" in his dictum when English civil law normally confines itself to objective evaluations of conduct.) 82.Lord Ackner equates negotiations in good faith with purely adversarial negotiations. Because commercial parties can act in whatever manner they perceive to be in their interest under the latter type of negotiations, it follows (Lord Ackner reasons) that there can be no objective criteria by which good or bad faith in the conduct of commercial negotiations can be determined. But the validity of that conclusion assumes that "negotiation in good faith" is the same as conventional adversarial negotiations and that in neither type of negotiation does the law impose an obligation of fairness on a party or an obligation to take account of the other side's reasonable concerns. I am not sure that the 2 concepts are synonymous. 83.Lord Ackner distinguishes between an agreement to negotiate in good faith and an agreement to use best endeavours to agree. He suggests that his conclusion on agreements to negotiate "does not apply to an agreement to use best endeavours". But then how does one distinguish between:-
Why is the Court able to assess whether "best endeavours" have been used to reach a final agreement, but not whether negotiations have been conducted "in good faith" towards final agreement? I doubt that there is any conceptual difficulty (as opposed to the usual problems of proof or evidence which would exist in any case) with the objective assessment of either category of negotiations. At heart, the Court must pose the same question which it regularly asks, namely, whether applying an objective standard the parties have acted reasonably in all the circumstances in carrying out a mutually agreed activity. 84.I turn to 3 cases decided after Walford where the enforceability of mediation clauses was specifically considered. These are Halifax Financial Services Ltd v Intuitive Systems Ltd [1999] 1 All ER (Comm) 303; Kenon Engineering Limited v Nippon Kokan Koji Kabushiki Kaisha, HCA No.3492 of 2002, HCA No.3973 of 2002 and HCCT No.21 of 2003, 2 July 2003; and Cable & Wireless Plc v IBM United Kingdom [2003] BLR 89. 85.Halifax concerned a contract for the supply of software design services. Clause 33 of the agreement provided for the resolution of disputes by the following process:-
The plaintiff commenced proceedings. The defendant applied to strike out the claim. Alternatively, the defendant sought a stay under the Court's inherent jurisdiction to enable the parties to pursue the process stipulated by Clause 33. 86.McKinnon J held as follows (at 310-11):-
87.McKinnon J treated Walford as authority against the enforcement of agreements to engage in good faith negotiations. But he does not appear to have been referred to Queensland or Coal Cliff. Nor does the judgment mention Lord Ackner's suggestion in Walford that an obligation to use best endeavours to negotiate or agree may be enforceable. Further, in suggesting that with non-determinative procedures there was "no obligation to resolve the dispute in that way," McKinnon J fails to put weight, in my view, on the parties agreement to use their "good faith" in negotiations to achieve a final resolution of their differences. The obligation to use "good faith" appears to me to import some obligation to resolve a dispute through the agreed means. While even with the best will in the world good faith negotiations cannot be guaranteed finally to determine the parties' differences, that does not mean that there is "no obligation" whatsoever such that the likelihood of resolution can be written off as negligible. 88.On the facts of Halifax, I agree with McKinnon J's refusal to exercise any discretion. There is no point in forcing parties to negotiate when they have genuinely tried and failed to reach settlement. But, for the reasons mentioned in the previous paragraph, I am uncomfortable with his reasoning that to the effect that the Court will not enforce "non-determinative" procedures in all instances. I do not believe that the authorities (including Walford) go so far as to support such wide proposition. 89.In Kenon Clause 21.1 provided for any dispute to be "settled by the Mediation Procedure under the laws of Hong Kong - SAR of PRC" with "[t]he award rendered by the mediation procedure shall be final and binding". Negotiations failed. Kenon proposed mediation. Mediators were appointed. Kenon then demanded various sums and threatened legal proceedings. The parties could not agree on the terms of mediation, the extent of matters to be mediated and the time frame for mediation. Kenon issued a writ. Nippon issued a notice to arbitrate. 90.Deputy High Court Judge Muttrie first had to determine whether Clause 21.1 was an arbitration agreement. He held that it was not. He then had to decide whether the Court should exercise its inherent jurisdiction to stay the action to mediation in accordance with Clause 21.1. On a stay he held (at §34):-
91.The judge was primarily concerned with the question whether Clause 21.1 was an arbitration agreement which was Nippon's main contention. In light of the judge's finding that Clause 21.1 was not an arbitration agreement and given that the parties had tried negotiation but failed and that the parties had proceeded along the road to mediation (even appointing 2 mediators) but could not resolve procedural differences, it is not surprising that the judge refused a stay. However, as a guide to the enforceability of agreements to mediate as a question of law, Kenon is (I think) limited. For example, the judge's attention was apparently not drawn to Queensland or Coal Cliff. Indeed, there is no mention in Kenon of Courtney or Walford, so that it is unclear whether in deciding against a stay the judge (apart from the specific facts before him) had those cases in mind as opposed to only a general view that parties can always opt out of an agreed mediation. Further, had the then recent case of Cable & Wireless (discussed below) been mentioned to the judge, he may have formed a different view on opting out of mediation agreements. I say "may have formed" because in any event there would have remained the obscurity as to what the parties intended by the expression "Mediation Procedures under the laws of Hong Kong - SAR". 92.In Cable & Wireless the defendant agreed to provide information technology services to the plaintiff. Clause 41 of the agreement provided that disputes should be resolved by negotiation and if that were unsuccessful the parties should attempt in good faith to resolve their differences through Alternative Dispute Resolution ("ADR") as recommended by the Centre for Dispute Resolution ("CEDR"). A dispute arose and the plaintiff commenced litigation in Court. The defendant sought a stay to enable the parties first to refer the dispute to ADR pursuant to Clause 41. 93.Referring to Courtney, Colman J stated (at 94-96):-
94.I broadly agree with Colman J's views. He did not believe that his conclusion was out of line with Courtney. Neither do I. Nor do I think that Colman J's reasoning contradicts Walford (which Colman J does not mention in his judgment), especially given Lord Ackner's remarks in relation to best endeavour negotiations. On the enforcement of agreements to negotiate or mediate as a matter of principle, I prefer the legal approach set out in Cable & Wireless to that in Halifax. Indeed, although it is strictly unnecessary for me to (and I expressly do not) come to any firm conclusion on the point, I would be prepared to go one step further than Cable & Wireless. This is because it seems to me that there is a potential difficulty in Cable & Wireless. 95.Colman J suggests that a duty to negotiate in good faith is always unenforceable for uncertainty. In contrast he believes that an agreement to negotiate on the basis of clearly identified procedures such as CEDR mediation rules is reasonably certain to be enforced by the Court. He expresses the obiter view that even "an unqualified reference to ADR" entails a "sufficiently certain and definable duty" to be enforceable. He concedes that the distinction between a duty to negotiate "in good faith" and a duty to negotiate in accordance with a defined procedure (or a procedure capable of definition) may be "slender". 96.My difficulty precisely lies in distinguishing between the 2 processes of negotiation differentiated by Colman J. What is the practical distinction between negotiation pursuant to an identified mediation procedure on the one hand and either negotiation "in good faith" or negotiation in accordance with such mediation procedure as the parties acting in good faith might reasonably agree on the other hand? If the Court can enforce the former (for example, a mediation process as agreed in Cable & Wireless), it should be able in principle to enforce either of the latter 2 processes. A negotiation procedure might not be identified, but if the parties are under a duty to act reasonably or in good faith, the exercise of identifying and arriving at a reasonable mediation procedure should be no more or less difficult than that involved in (say) determining a procedure where the parties simply agree "to arbitrate all disputes". 97.There will inevitably be situations such as that in Coal Cliff where the Court is unable to enforce an agreement to negotiate or mediate. It may be difficult to award damages by reference to a final commercial position which a plaintiff alleges that the parties ought to have attained in some complex undertaking if the parties had negotiated or mediated in good faith. It may be easier for the Court to order a brief stay in favour of a defendant for the purposes of an agreed mediation. As already mentioned, each situation may have to be assessed as to enforceability on a case-by-case basis depending, not just on the terms and factual background of the agreement, but possibly also on the remedy sought and the subsequent conduct (for example, where negotiations have been tried and failed) of the parties. 98.My survey of cases suggests that, even accepting Courtney and Walford as correct, there is probably no hard and fast rule that agreements to negotiate or mediate in good faith are per se unenforceable. The Court must instead look at each situation and ask whether it is possible to frame objective criteria against which a party's reasonable compliance or non-compliance with a particular obligation can be assessed. Or, to put it in another way, is the Court able to frame objective criteria whereby it can decide whether or not there has been a breach of a particular agreement? If it is not possible, then the contract cannot be enforced. Otherwise, the agreement should be sustained and as much as possible the parties required to adhere to their bargain. 99.In the present case, it is apparent from the constant references to sincerity, cooperation and good faith in the correspondence from both sides leading up to the March Agreement, that the parties envisaged the March Agreement as giving rise to an implied obligation of cooperation and good faith. The parties would negotiate and mediate not just for the purposes of obtaining a tactical advantage, but with due regard for what is fair and reasonable in all the circumstances. 100.It seems to me that the position here is not altogether different from that in Cable & Wireless. Although no specific mediation procedure has been identified by the March Agreement, the parties came under a duty to act reasonably to ensure that mediation took place in the event that good faith negotiations broke down. A minimum step that one might expect would be (say) the appointment of a mediator or mediators who could then guide the parties towards an procedure which was appropriate to their needs and which might best resolve their differences within a reasonable time frame. I do not see the failure to identify a procedure or a time frame as fatal to the enforceability of the obligation to mediate. Here as in Cable & Wireless, it is possible objectively to assess whether or not a party has acted in accordance with the agreement by taking or failing to take certain obvious minimum steps within a reasonable time in the circumstances. Nor, given an agreement to mediate in good faith, do I see that a party can simply opt out of mediation as it sees fit. 101.Mr Kotewall has drawn my attention to the recommendations of the Final Report of the Chief Justice's Working Party on Civil Justice Reform (March 2004) ("the Final Report"). Recommendation 143 states:-
The Final Report refers to the success of mediation in bring about the speedy and cost-effective resolution of disputes. It observes (at §788):-
It quotes (at §791) the CEDR as pointing out:-
The foregoing matters in the Final Report fortify the view which I have reached on the enforceability of the March Agreement in respect of good faith negotiation and mediation. 102.Where in order to save the time and expense of litigation parties agree to mediate in good faith, it seems odd and contrary to commonsense expectation for the law to say that, if one side deliberately flaunts the agreement by not participating in mediation at all, the bargain cannot be enforced and the time and expense which both parties sought to minimise by agreeing to mediation cannot be avoided. The party flaunting the agreement should be required to make a genuine effort to mediate and see whether time and expense can be saved in the way which both parties hoped and agreed. 103.It would be equally strange for the Court to say that in all cases an agreement to mediate freely arrived at between the parties after arm's length negotiation is unenforceable, while the Court reserves to itself a power to penalise a party in costs for failing to mediate when reasonable so to do. In the first case, the Court refuses to enforce an agreement to mediate on the ground that it cannot objectively determine whether a party has acted reasonably. In the second case, the Court imposes a cost because it believes that a party has acted unreasonably in failing to mediate and, had the party embarked on good faith mediation, there was a reasonable prospect of time and cost being saved and a final resolution of the parties' differences being attained. The practical distinctions between the 2 positions are so fine, that I doubt whether the Court can maintain both positions without contradiction. 104.Accordingly, I conclude that the part of the March Agreement which provided for negotiation and mediation was neither unenforceable nor uncertain. B. 3 Whether there has been repudiation of the March Agreement 105.Mr Thomas submits that Vigour "stonewalled" the carrying out of the March Agreement. The July Meeting was the only meeting that ever took place between Mr Lim and Mr Kim. Hyundai respectfully wrote to Vigour to arrange further meetings and to move on to mediation. Vigour failed to reply promptly to Hyundai's suggestions. Whenever it did reply, Vigour was unhelpful, essentially contenting itself with a laconic assertion that Hyundai was acting contrary to the March Agreement. This went on for months. It was not until 16 October 2003 that Vigour claimed that the March Agreement had not been put in effect because Mr Kim was not a senior enough managing director within the terms of the March Agreement. That (Mr Thomas said) was a bad, quibbling point which had never been raised hitherto. It had no substance. Vigour was clearly not acting in good faith. Its conduct in failing to implement mediation under the March Agreement as soon as possible at Hyundai's invitation amounted to a repudiatory breach. Hyundai accepted that breach by the October letter. 106.Mr Kotewall contends that Vigour's letters clearly indicated that the first step under the March Agreement (namely, negotiation between "managing directors of the ultimate shareholder group of the highest level") had not yet taken place. It was premature even to embark on mediation. He submits that there has consequently been no breach. 107.In my judgment, Mr Thomas is right. I have summarised the correspondence between Hyundai and Vigour in Section I of this Judgment. Vigour's replies seem to me to have been uncooperative, even obstructive. Hyundai on the other hand made every effort to ascertain Vigour's views and accommodate them. I do not see how Vigour's correspondence prior to 16 October 2003 can be read as even remotely indicating that, as far as Vigour was concerned, there had not been a meeting of "managing directors of the ultimate shareholder group of the highest level". In any event, as I concluded above, Mr Kim fits that description as a matter of construction of the March Agreement. So it cannot be said that the first step envisaged in the March Agreement had not been implemented. 108.In failing to reply in any helpful way to Hyundai's letters and advance the negotiations or mediation in a timely fashion, Vigour in my view committed a repudiatory breach of the March Agreement. Hyundai gave Vigour ample warning that, in the absence of any positive action by Vigour to carry out the terms of the March Agreement, Hyundai would have no alternative but to consider the March Agreement as terminated and pursue its remedy by arbitration pursuant to the Notices. Vigour took no positive initiative. Instead it suddenly complained, in my judgment wrongly, that Hyundai had failed to negotiate by an appropriate officer. Hyundai then unambiguously accepted Vigour's repudiation by the October Letter. 109.What effect did the acceptance of Vigour's repudiation have? Where a party accepts a repudiation and thereby terminates a contract, the agreement is not void ab initio. All obligations of the parties under the agreement which remain unperformed under the contract are discharged. In terms of the agreement not to arbitrate, I have already concluded that on a proper construction of the March Agreement the submission to arbitrate under Clause 86 continued. Hyundai had merely promised not to exercise such right pending the continuation of the March Agreement. With the discharge of the March Agreement, it must be that Hyundai was released from its promise to forebear from pursuing arbitration, including arbitration under the March and November Notices. Hyundai as a result became entitled to revive the March and November Notices and pursue its claims through that route. 110.My conclusion should not be taken as in any way deciding the validity of the claims raised by Hyundai in the March or November Notices. Vigour has contended that the Notices are out of time under Clause 86. That question (among others) is something that may have to be determined by the arbitrator. All I am deciding is that, having been terminated upon acceptance of Vigour's repudiation, the March Agreement no longer bars Hyundai from pursuing arbitration under Clause 86, whatever the merits of the March and November Notices. B. 4 Estoppel by convention 111.Mr Kotewall says that the parties acted upon the mutual assumption that the March Agreement was valid and enforceable. In reliance on that assumption, Vigour suffered detriment by not calling upon the Bond and protecting its financial interest. It follows (Mr Kotewall submits) that, whether or not the March Agreement was enforceable, Hyundai is now estopped from denying the document's effectiveness under the doctrine of estoppel by convention. 112.In light of my views the question of estoppel does not arise. I have held that the March Agreement was neither illegal nor unenforceable. There is thus no need to determine whether Hyundai is estopped from claiming that the March Agreement was illegal or unenforceable. 113.Nevertheless, I should briefly state that, if I had concluded differently on the validity of the terms of the March Agreement, I would have held that there could not have been an estoppel by convention as Mr Kotewall contends. 114.If a contract is illegal because it is contrary to public policy or unenforceable because it is too uncertain, I do not see how estoppel by convention can turn that contract into something that is legal or certain. An assumption of legality among the parties cannot have the result that the Court must enforce what it believes to be against the law. By the same token if a term is unenforceable because the Court can form no objective criteria to assess whether or not there has been compliance with the term, an assumption of certainty among the parties cannot lend definition to what cannot be defined. 115.Both parties referred to the "The AMAZONIA" [1990] 1 Lloyds Rep 236 in support of their contentions. In that case a charterparty expressly provided that the Australian Sea-Carriage of Goods Act 1924 ("the 1924 Act") would govern its terms and provisions. The charterparty included a clause providing for London Arbitration. The same clause stipulated that the charter was to be construed by English law. The parties had appointed an English arbitrator on the assumption that the arbitration clause was valid. However, under the 1924 Act the arbitration clause was invalid. The Court of Appeal held that the provision implementing the 1924 Act overrode the arbitration clause. Nonetheless, since the parties had acted on a shared assumption that the arbitration clause was valid, the plaintiffs were estopped from avoiding the arbitration clause. Such estoppel was not defeated by illegality under the 1924 Act. 116.The case is different from the present. Staughton LJ stated (at 247 (cols.1-2)):-
117.Here the "communings" between the parties over the March Agreement took place in Hong Kong. The proper law of the estoppel would be Hong Kong law. Insofar as the "convention" was that the March Agreement was legal (when in fact it was illegal) and certain (when it was in fact uncertain and unenforceable), the question whether the "convention" could be enforced would be a matter of Hong Kong law. Insofar as (on the present hypothesis) the March Agreement was illegal, so would the convention be under Hong Kong law. Insofar as the March Agreement was unenforceable, so would be the convention which would simply mirror the terms of the March Agreement. There would therefore have been no substance in the claim of an estoppel by convention if I had concluded that the March Agreement was illegal, unenforceable and uncertain. III. Conclusion 118.I make the following declarations:-
The parties are to have liberty to apply in respect of the wording of the foregoing declarations and as to any other declarations which one or other party might deem appropriate in light of this Judgment. 119.The Interim Injunction is discharged as from the date of the Judgment herein. 120.I make the following directions on an Order Nisi basis:-
121.Hyundai has substantially succeeded. I make an Order Nisi that Vigour is to pay Hyundai's costs of the Originating Summons up to the date of the Judgment herein, including any costs of the previous hearings before me which have not already been awarded, with costs to be taxed if not agreed. I do not order that costs be "in any event" since the hearing of the Originating Summons on 19 March 2004 appears to me to have been the relevant event and I do not think it would be appropriate for Hyundai to await final disposal of outstanding matters in this Originating Summons before proceeding to taxation.
Representation: Mr Michael Thomas SC, instructed by Masons, for the Plaintiff Mr Robert Kotewall SC and M Katrina Lam, instructed by Messrs Woo Kwan Lee & Lo, for the Defendant 1 Hyundai's sentence read: "As regards the next step we respectfully note from the previous meeting that Mr Li might have certain concern that Mediation may not be able to bring about the desired result for a full and final settlement." 2 Vigour filed a Statement of Counterclaim on 10 March 2004. 3 This principle is sometimes referred to by the maxim "ut res magis valeat quam pereat". 4 Proposal 67 stated: "Rules should be adopted making it clear that where ADR is voluntary, an unreasonable refusal of ADR or uncooperativeness during the ADR process places the party guilty of the unreasonable conduct at risk of a costs sanction." Remarks: Appeal by the Defendant to Court of Appeal. Appeal dismissed. Please refer to the appeal judgment of CACv128/2004. Remarks: Appeal by the Defendant to Court of Appeal. Appeal dismissed. Please refer to the appeal judgment of CACV128/2004. |
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Further hearings and rulings under HCCT 100/2003