Kong Kee Brothers Construction Co Ltd v. Attorney General

HCMP002712/1985

1985 No. MP 2712

HEADNOTE

On an Application under Section 24 of the Arbitration Ordinance to remit for further consideration the award of an Arbitrator held

1.	After a review of authority, that the Court should normally exercise its power to remit only in cases of misconduct, admitted (or perhaps very obvious) mistake or fresh evidence.
2.	Technical misconduct or mishandling included uncertainties in the operative part of the award : excess of jurisdiction : incompleteness and breach of the rules of natural justice.
3.	No such misconduct was made out.
4.	Prior leave of the Court was required before a subpoena ad testificandum was served upon an Arbitrator in relation to an Application to remit, and would rarely be granted.
5.	Application refused.

1985 No. MP 2712

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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BETWEEN

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Coram: Hon. Hunter, J. in Court

Date of hearing: 27 - 31 January 1986 & 3 February 1986

Date of delivery of judgment: 27 February 1986

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JUDGMENT

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1. I have before me a motion to remit for further consideration an award of Mr. Peter Scott Caldwell (the Arbitrator) made and published on 23rd October 1985 on a reference to him of three disputes arising between the plaintiff as claimant and Hong Kong Government as respondent under a PWD Contract No. 528/80. One of the disputes so referred concerned the plaintiff’s entitlement to receive payment for manual transportation. The motion asks for two aspects of this claim to be remitted. In relation to these the plaintiff contends that the award is incomplete, or uncertain, or made in excess of jurisdiction or without providing the plaintiff with a proper opportunity to lead evidence and argument. The plaintiff further submits that the award should be remitted pursuant to the Court's alleged general discretionary power, or because there has been a "procedural mishap" or because the Arbitrator has been guilty of technical misconduct. The Crown challenges these propositions in principle.

2. It is therefore necessary at the outset to attempt to ascertain and define the ambit of the Court's powers under the two relevant sections in the Ordinance. They read as follows.

3. On its face section 24 gives the Court an unfettered discretion. Its terms are identical to its predecessor in England, section 22 of the Arbitration Act 1950, about which Donaldson, M. R. has said :

"It is in terms wholly discretionary, but that discretion has to be exercised in accordance with established principles".

Moran v Lloyds ⁽¹⁾. It is these which have to be identified. Section 25, also like its identical predecessor, draws a distinction between "himself" and "the proceedings". The first alternative covers areas like bias or conflict of interest and can well involve personal turpitude. Not so the second. In the words of Atkin, J. (as he then was) in Williams v Wallis and Cox⁽²⁾:

"The term does not really amount to much more than such mishandling of the arbitration as is likely to amount to some substantial miscarriage of justice".

The use of one word to describe such widely differing situations has long been regretted, but the Commercial Court Committee Report on Arbitration in England which suggested the use of a word "which reflects the idea of irregularity "⁽³⁾ was not taken up there or later here. This has left us with imprecise euphemisms like "technical misconduct" and "procedural mishap".

4. There is no authority in Hong Kong; no guidance to the practitioner as how this Court might act. Having first noted any legislative or practical differences between England and Hong Kong, we must look for guidance to the practice in England, both before and since the passage of the Arbitration Act 1979, and attempt to gauge what "established principles" appear to be recognised there, and how far these are applicable to Hong Kong. This was the task undertaken by Counsel in argument and I am much indebted to them both for the care they took.

5. The 1982 amendments to our Ordinance were substantially based upon the Arbitration Act 1979. Both provisions abolish the Court's principal supervisory powers : the power to direct the statement of a special case : and the jurisdiction "to set aside or remit an award ... on the ground of errors of fact or law on the face of the award" in the words of section 23(1). There was substituted a limited right of appeal on law alone. The proper exercise of the Court's jurisdiction in granting leave to appeal has been narrowly circumscribed in the UK in The Nema⁽⁴⁾ and The Antaios⁽⁵⁾. The proper approach in Hong Kong was considered by the Court of Appeal in Attorney General v Technic Construction Co Ltd. (not yet reported)⁽⁶⁾. That Court cited from Lord Diplock's reference in the Nema to:

"..... several indications in the Act itself of a Parliamentary intention to give effect to the turn of the tide in favour of finality in arbitration awards".

It went on :

"We therefore conclude, as did Lord Diplock, that it is proper to assume that those who resort to arbitration in Hong Kong do not wish also to be involved in subsidiary litigation in the Courts, save where it is abundantly clear that the Arbitrator has made serious errors of law" p.8.

An important question here is whether the same holds true of serious errors of procedure.

6. In material respects the Hong Kong Ordinance went further than the UK Act in two different directions which have collective significance. On the one hand it gave additional powers to the Court to intervene in support of arbitrators during the course of the arbitration, e.g. by ordering consolidation under section 6B or by dealing with delay under section 29A. On the other hand, it gave the parties complete freedom to enter into exclusion agreements and thus exclude all the Court's appellate powers, section 23B. The amendments collectively have brought about a radical alteration in the setting in which sections 24 and 25 are now to be found.

7. There is a further difference between the two jurisdictions in relation to reasoned awards. The statutory powers are the same. Both Courts have power to direct the giving of reasons, curiously only in the context of an application to appeal, section 23(5). But the practice varies. Hong Kong arbitrators, I believe, share the view on reasons expressed by the same Commercial Court Committee, namely

"the making of an award is or should be a rational process. Formulating and recording the reasons tends to accentuate its rationality. Furthermore unsuccessful parties will often, and not unreasonably, wish to know why they have been unsuccessful" (3) para.26.

Mr. Caldwell certainly takes this view for he has provided the parties with a fully reasoned award. For my part I would be minded to go further and say that now that the deterrents to the giving of reasons have been removed, a Hong Kong arbitrator who is the judge of fact, and either the or nearly the judge of law, would be failing in his duty if he could not and did not set out his reasons in his award.

8. In England, however, habit appears to have died hard. Before 1979 a practice developed of keeping any reasons given separate from and off "the face" of the award. This satisfied the parties' curiosity but left the award and, the reasoning safe from attack. This practice of separating reasons and making them confidential has survived, at least amongst the Marine Arbitrators, and to an extent has been upheld by the Court: The Montan⁽⁷⁾. I sympathize with Sir Roger Ormrod's difficulty in giving a contractual basis to this, p.198, but it is sufficient to say that I am not aware of any such practice in Hong Kong. I can see no reason why this Court should not treat a reason, as a reason, wherever it is to be found, and consider it openly. The abolition of the " error on the face of the award" jurisdiction should surely encompass all its procedural side effects, otherwise the old provision will still be ruling us from its grave.

This approach has its problems. They were most clearly expressed by Lloyd, J. (as he then was) in The Achillet⁽⁸⁾ :-

"Applications to set aside for technical misconduct have in the experience of this Court become more frequent since the passing of the 1979 Arbitration Act; not, I suspect, because the amount of misconduct is on the increase, but because such applications provide the unsuccessful party to the arbitration with his last line of defence, where no question of law is involved.   Moreover the 1979 Act has, in one particular respect, made such applications easier to make, if not to sustain; for by obliging arbitrators to give reasons for their award when required, the Act has enabled the unsuccessful party to argue, more frequently than before, that the arbitrators have decided a dispute on a ground which was not in issue, or on which he had no proper opportunity to be heard. It is important that applications to set aside for misconduct should not become a backdoor means of appeal on questions of fact or law. But having said that, the Court still undoubtedly has a duty to intervene in a proper case: The Massalia⁽⁹⁾; Fox v Wellfair⁽¹⁰⁾; and The Vimeira No. 1)⁽¹¹⁾."

These are cases much relied upon by the plaintiff to which I will return more fully hereafter.

9. This is another, the procedural, aspect of what is described in Russell on Arbitration, 20th edn.284 as:

"The never ending war between two irreconcilable principles, the high principle which demands justice though the heavens fall, and the low principle which demands that there should be an end to litigation".

Should the Court encourage or permit the sort of detailed, lengthy analysis of arbitrators' reasons, such as took place in argument, in search of procedural imperfections; or should it apply to both substantive law and to procedure, the more robust approach advocated by the House of Lords and summarized perhaps by Lord Roskill in The Antaios⁽⁵⁾ where he emphasized "the need for circumspection as well as brevity" 209?

10. Having noted these differences I turn to the English practice. In the early years arbitrators' decisions were sacrosant. As Martin, B. put it in Hogge v Burgess⁽¹²⁾:

"The decisions of an arbitrator both upon the law and the facts were conclusive. That rule was broken into in Kent v Elstrob⁽¹³⁾ ".

The ground was error on the face of the award as Gdad, L. C. J. relates in R v Northumberland Tribunal⁽¹⁴⁾. Impetus to intervention was given by the Common Law Procedure Act 1854 which first created the statutory powers, both to remit and to state a case. By the end of the century the matter in the words of Mustill and Boyd, Commercial Arbitration p.492 can be put thus:

"	In 1898 the Court of Appeal was able to accept as correct the proposition that there were only four grounds on which a matter could be remitted to the arbitrator for reconsideration, namely:-
	(1)	Where the award was bad on the face of it;
	(2)	Where there was misconduct on the part of the arbitrator;
	(3)	Where there had been an admitted mistake and the arbitrator himself had asked that the matter be remitted;
	(4)	Where additional evidence had been discovered after the making of the award".

The argument before me has centred upon these grounds and upon two questions, namely:-

1.	Whether, ground 1 having been abolished by statute, the remaining grounds are exclusive; or whether there is what was conveniently called in argument a 5th ground which can variously be labelled as general discretionary power, "procedural mishap" or misunderstanding? and
2.	What now constitutes misconduct?

11. Grounds (3) and (4) were not relied upon but they have been the subject matter of two instructive recent decisions. In The Appollon⁽¹⁵⁾ Webster, J. was concerned especially with ground (3) and whether it was proper to remit only at the request of the arbitrator for an admitted mistake, or whether as dicta of Donaldson, M. R. and Robert Goff, L. J. had suggested in The Montan⁽⁷⁾ this was only a general rule and that in an exceptional but very clear case the Court could remit in the absence of admission. He concluded that he was bound by authority, and I think against his inclination in this respect, to follow the traditional formulation. Should the problem arise in Hong Kong I hope the Court would feel free to follow the dicta in the Court of Appeal, because given a glaring mistake which any sensible arbitrator would readily admit, I would not like the Court to be at the mercy of the obdurate. But this course has its perils. The Court must be careful to protect arbitrators from pressure; a point to which I must return when considering the subpoena ad testificandum which was served on the arbitrator in this case.

12. Of much greater direct significance is Webster, J.'s approach to this problem which the Crown strongly invited me to follow. After a detailed analysis of authority he concluded that the "low principle" had prevailed in the legislature and the Courts; that the power to remit was or ought now to be restricted to the surviving three grounds above set out; and that had he been free from authority I think he would also have denied the existence of any 5th ground.

13. Ground (4), fresh evidence, was considered by Hirst, J. in Vimeira (No. 2)⁽¹⁶⁾. He also had to choose between two views. The first was the narrow view of 19th century authority, especially Anderson v Titmas⁽¹⁷⁾ modified only as to the test of weight by Ladd v Marshall⁽¹⁸⁾. The second was the more liberal view, expressed in earlier decisions this century, that a less stringent test was applicable to arbitrations. In preferring the former, Hirst, J. relied upon the policy of the law since 1979 which he said : "has strongly reflected the special importance in arbitration proceedings of the general principle that litigation should be quickly and finally concluded" P.399.

Is there a 5th ground?

14. Consideration of this has to start with the dictum of Moulton, L. J. in Re An Arbitration Between Baxters v The Midland Railway ⁽¹⁹⁾. In relation to the 19th century authorities he said:

"The jurisdiction of the Court is statutory, and cannot be increased or cut down in that way. The reported decisions of the Court only show the principles which have guided the Court from time to time in exercising its jurisdiction, and though they may afford a valuable guidance they do not either restrict the jurisdiction of the Court in deciding other cases or the duty of the Court to look at the facts in each particular case. When the facts of any particular case before the Court are the same as the facts in the cases cited, no doubt the Court will follow those cases. But it must not be supposed that reported decisions prevent the Court from deciding whether in the interest of justice it ought to send the matter back to the arbitrator".

The relationship between an apparently unqualified discretion and the principles governing its exercise is always delicate. I believe that the law is most clearly and accurately expressed in the judgment of Lord Denning, M.R. giving the judgment of the full Court of Appeal in Ward v James⁽²⁰⁾ where this appears:-

"The cases all show that when a statute gives discretion, the Courts must not fetter it by rigid rules from which a judge is never at liberty to depart. Nevertheless the Court can lay down the considerations which should be borne in mind in exercising the discretion, and point out those considerations which should be ignored. This will normally (my emphasis) determine the way in which the discretion is exercised, and thus ensure some measure of uniformity of decision. From time to time the considerations may change as public policy changes, and so the pattern of decision may change : this is all part of the evolutionary process" p.295.

15. I believe that when Donaldson M.R. referred to "settled principles" in Moran v Lloyds⁽¹⁾ he was referring to this norm. The principles do not exclude the wholly special or exceptional case, though this will be rare. They enable practitioners to give rational advice. They change with policy. The recent arbitration legislation is an obvious example. Section 23 creates another statutory discretion as was pointed out in Attorney General v Technik⁽⁶⁾, when accepting that The Nema⁽⁴⁾ guidelines now constitute the relevant Hong Kong norm. The question therefore here is whether, as the plaintiff argues, the relevant Hong Kong norm under section 24 includes some, and if so what 5th ground, or not.

16. There is undoubtedly a body of authority in England which asserts or assumes that a 5th ground exists. It originated in the context of the special case. For example, if the facts found were insufficient to enable the Court to determine the point of law as it saw it, the matter had to be referred back for further findings. The Court could not otherwise do its duty. "The practice of the Court has been to treat itself as having a discretionary jurisdiction to remit" was how Lord Wright put it in Ben Line Steamers v Compagnie Optorg of Saigon⁽²¹⁾. The first question which arose was how far it could properly be said that the same jurisdiction existed outside this context.

17. This point was considered in Universal Cargo Carriers Corporation v Citati⁽²²⁾ by the Court of Appeal. Parker, L. J., giving the judgment of the Court, concluded that where there was a special case, "the Court must have power to remit of its own volition if justice cannot otherwise be done". But in the case of a simple final award "the discretion", he said, "Will not readily be exercised : and indeed it may well be that its exercise should be strictly confined to specific grounds" meaning the four above-named. P.987.

18. The first of the so-called misunderstanding cases seems to have been Peter Cassidy Seed Co. Ltd. v Osuustukkukauppa I.L.⁽²³⁾ where McNair, J. remitted a special case because of an evidential misunderstanding between the parties. This was apparently within the special case discretion, although one must doubt whether a Court would so readily have granted a retrial. In Franz Haniel AG v Sabre Shipping Corporation⁽²⁴⁾ the same judge, obiter, expressed his willingness to prefer the dicta of Moulton, L. J. to those of Parker, L. J. and to act similarly in the case of a final award. In Compagnie Financiere Pour le Commerce Exterieur SA v O. Y. Vehna A. B. ⁽²⁵⁾ Megaw, J. remitted a final award, not for misconduct which he rejected, but in "an exercise of the supervisory discretion in this Court to ensure that there is no possibility of an inadvertent injustice being done". Donaldson, J. (as he then was) relied upon this general discretionary power, in the absence of misconduct, to remit two awards in 1975, first in Centrala Morska v Companhia Nacional de Navegacal⁽²⁶⁾, and secondly in the Aristides Xilas ⁽²⁷⁾

19. The matter was considered again, in the special case context, by the Court of Appeal in G. K. N. v Matbro⁽²⁸⁾, where the Court emphasized an arbitrator's exclusive jurisdiction over fact, and attempted to stem the flood of special cases. Stephenson, L. J. cited the judgment of Parker, L. J. in Citati⁽²²⁾ with approval and criticised Donaldson, J.'s approach as too wide. Bridge, L. J. however seemed to give approval to the suggestion of Mr. Christopher Staughton, Q. C. in argument that the authorities above referred to "provide a discretion in the Court to remedy injustice resulting from what he aptly called 'procedural mishap"' p.581. This label stuck. Upon the authority of that dictum Brandon, J. (as he then was) in the Aros⁽²⁹⁾ expressed the view that the Court could remit "where, without any fault of the Arbitration Tribunal, something has gone wrong with the procedural side of the arbitration which has or may have caused injustice to one of the parties" p.463.

20. So by 1979 it can be seen that in the face of conflicting dicta in the Court of Appeal, and what Mustill and Boyd assert to be weightier authority against, p.493, there existed a not inconsiderable line of authority at first instance in favour of a general supervisory discretion which could properly be exercised where the parties, without any fault on the part of the arbitrator, had got themselves into a procedural muddle. "Procedural mishap" was more of a description of the circumstances which might justify the exercise of this jurisdiction than a definition. The aim was the avoidance of a serious risk of injustice. The Court seemed thereby to have been prepared to afford greater indulgence to parties who allowed themselves to get into procedural disarray before an arbitrator, than I am minded to think many would receive who made the same error before a Court of law. It seems to savour of a kind of benevolent paternalism.

21. The present position in England is unclear, but the pointers would appear to be against the continued existence of any such general discretion. The decisions in The Nema⁽⁴⁾ and The Antaios⁽⁵⁾ show that the full impact of the new legislation took some time to be appreciated. It was during this period that Staughton, J. in the Ross Isle v Ariel⁽³⁰⁾ accepted the existence of a jurisdiction "to set aside or remit where there has been a procedural mishap which has led to the risk of injustice". More recent authority is hostile. In the Vimeira the references to procedural mishap were enigmatic or neutral per Lloyd, J.⁽³¹⁾ and per Robert Goff, L. J.⁽¹¹⁾ p.469. But in the Montan⁽⁷⁾ Sir Roger Ormrod spoke of the Court's discretion to set aside being limited "by the overriding importance of preserving finality in all but the most exceptional cases" p.198. Webster, J. was clearly of the same opinion in the Appollon⁽¹⁵⁾; and the same thinking lay behind the decision of Hirst, J. in the Vimeira No. 2⁽¹⁶⁾.

22. I have to consider the slightly different position in Hong Kong. Here I cannot accept that this Court now enjoys any such general discretionary power, or that some 5th ground would appear in any description of "the norm" or of current "settled principles" in this jurisdiction. So long as the Court possessed real and substantial supervisory powers, more especially through the case stated, it was both understandable and inevitable for it to remit upon wider principles than those developed by the 19th century judges. Further, it was a short step to extend this supervisory role, first to procedures beyond those concerning special cases; and then to cases where there was muddle and a risk of injustice but to which the misconduct label could not be attached. But such an approach, a readiness to grant what is tantamount to a retrial, is the antithesis of finality, and runs directly counter to the theme and message of the new legislation and authority thereunder. The concept of finality applies no less to questions of procedure than it does to questions of substantive fact or law. Sir Roger Ormrod's dictum seems to me directly applicable. We should be acting in this respect with both "circumspection" and "brevity", in the language of Lord Roskill, reading arbitrator's reasons with an eye for the sort of error which leaps from the page not for elaborate consideration or minutes dissection of the detail.

23. Nor do I feel any very strong pull the other way from the call of justice. As Mustill and Boyd point out:

"The most obvious injustice a party can suffer is for an arbitrator to arrive at the wrong conclusion on fact or law. The Courts have always been insistent that a mistake of this kind gives no reason for the Court to intervene, and it is strange that the position should be different where the mistake is that of the party himself" P.502.

In Hong Kong, where the Court's jurisdiction can be totally excluded, such a result would be more than strange. It would be wholly illogical and unacceptable. It would also, in my view, be inconsistent with Hong Kong's aspirations to become a Centre for International Arbitration.

24. It is not without significance in this jurisdiction to note that this conclusion is in line with the position, as it appears to me, in the United States. There, arbitrator's decisions on fact and law are unchallengable, subject only to the debated question of 'manifest disregard' Mustill and Boyd appendix 4 P.704. Procedurally any challenge has to be founded upon the Federal Arbitration Act 9 USCA section 10, where the stated grounds are to English eyes all types of misconduct. There is no 5th ground. Judicial Review under this Act, it is said "has been thus restricted in order to further the objective of arbitration, which is to enable parties to resolve disputes promptly and inexpensively without resort to litigation", Office of Supply, Government of the Republic of Korea v New York Navigation Co. Inc.⁽³²⁾.

Technical Misconduct

25. Misconduct is, and has long been, a statutory ground for setting aside, and a fortiori for remitting, an award. But the new statutory framework compels a reconsideration of the breadth of this concept and of old practice and authority. At the outset here I emphasize that I am not concerned with what the layman might call real misconduct or moral turpitude, but what can more simply and accurately be called "mishandling" (per Atkin, J.)⁽²⁾ or procedural "irregularity"⁽³⁾.

26. I am minded to think that Donaldson, M. R. has marked out the two extremities of this jurisdiction in Moran v Lloyds⁽¹⁾ and the Montan⁽⁷⁾. First, as he said in Moran's case, neither section "is available as a backdoor method of circumventing the restriction upon the Court's power to intervene in arbitral proceedings" p.550. He gave an example. It might be right to remit an award for ambiguity or inconsistency in its operative parts which could place enforcement in doubt; but not for like deficiencies in the reasoning which may only constitute errors in law. In the Montan⁽⁷⁾ he pointed out that unless leave to appeal was granted; "the parties, having chosen their tribunal, have to accept it 'with all faults'".

27. Secondly, in both cases he drew attention to the Court's powers relating to enforcement of awards, domestic and foreign, and compared the Court's functions on enforcement with its functions under these two sections. I respectfully agree. The legislature cannot have expected the Court to give greater finality to awards than that which is afforded under international convention to foreign, e.g. convention awards. The grounds of opposition to enforcement of a convention award are contained in section 44. They permit the opponent to assert (inter alia) :-

1.	That he was "otherwise unable to present his case" s.44(2)(c);
2.	That the award "contains decisions on matters beyond the scope of the submission to arbitration"  s.44(2)(d);
3.	That "the arbitral procedure was not in accordance with the agreement of the parties" s.44(2)(e);
4.	That enforcement "would be contrary to public policy" s, 44(3).

28. Heads 1 & 2 are readily recognizable as heads of Technical Misconduct. The same will normally be true of Head 3, because the usual implied duty to act fairly is seldom excluded, Faure Fairclough v Premier Oil & Cake Mills⁽³³⁾. The English Courts have scarcely started to consider the ambit of public policy, but in London Export Corporation Ltd. v Jubilee Coffee Co. Ltd. ⁽³⁴⁾. Diplock, J. (as he then was) said : "I apprehend that an award obtained in violation of the rules of natural justice, even where there was no breach of the agreed procedure, would be set aside on grounds of public policy". Useful guidance may be obtainable from the United States where it is said that the equivalent statutory provision : "is to be construed narrowly to be applied only where enforcement would violate the forum state's most basic notions of morality and justice" : Andros Compania Maritime v Marc Rich & Co. Ag⁽³⁵⁾. See also Mustill and Boyd pps.245-248.

29. For the purposes of this motion, it is sufficient to say that the first three heads of technical misconduct, relied upon by the plaintiff, readily fit the present statutory context. In each the Court is in effect invited to intervene in support of the arbitration agreement : to give arbitrators a necessary opportunity to reconsider and correct their own procedural mistakes. These heads are :-

1.	Ambiguities or uncertainties in the operative parts of the award, but not necessarily in the reasoning, Moran v Lloyds(1). The same would apply to a failure to express the award in enforceable terms.

2.

Excess of jurisdiction. This may well go beyond misconduct and render the award void in whole or in part and not simply voidable. But it is a comparatively narrow concept governed primary by the terms of reference or submission, cp s.44(2)(d), not necessarily by the documentation that may come into existence thereafter in development of the party's contentions. This is well shown by The Massalia(9) where a demurrage dispute was referred. The arguments, oral and documentary, turned on whether the proper sum to award to owners was £829 or £1878. The umpire awarded nothing to owners; and instead awarded £160 to charterers by way of dispatch money. He was held to have had jurisdiction to make his nil demurrage award however unexpected; but to have no jurisdiction to award dispatch money which had never been claimed.

3.

Incompleteness - a failure by an arbitrator in his award to deal with some matter within the terms of reference : e.g. because of a failure to appreciate that the matter was within the reference, Lambent & Krzysiak Ltd. v British Commercial Overseas Co. Ltd.(36) or perhaps because of some mistaken belief that it was unnecessary, Orion Compania Espanola De Seguros v Belfort Matts(37).

30. There is also no doubt that the forth head, Breach of the Rules of Natural Justice, is an available head of Technical Misconduct, c p. Section 44 (2)(d) and (e) and 44 (3). This was recognized in the Achillet⁽⁸⁾ and in the authorities there cited. In the first, the Massalia⁽⁹⁾ the breach was a failure by the umpire to make clear to the parties that he was proposing to take a totally fresh line of his own, and not to accept the starting line they had both accepted for years i.e. a minimum demurrage liability of £829. The second was Fox v Wellfair⁽¹⁰⁾ where an architect arbitrator substantially rejected, of his own motion, the claimant's expert evidence without at any time revealing or putting his views to those witnesses. The third was the Vimeira⁽¹¹⁾ where the arbitrators decided the case upon a matter never pleaded nor canvassed at all by either party. In parenthesis, I would note that no Hong Kong lawyer can read the saga of the Vimeira litigation without a sign of relief that our Court possesses a power to consolidate in Section 6B, the lack of which in England led to untold confusion and expense.

31. In this last case, Robert Goff LJ. summed up his view in this way :-

"In truth, we are simply talking about fairness. It is not fair to decide a case against a party on an issue which has never been raised in the case, without drawing the point to his attention, so that he may have an opportunity of dealing with it, either by calling further evidence or by addressing argument on the facts or the law to the Tribunal. "

32. This use of the word "fairness" reflects similar formulations in other contexts, see the authorities collected in de Smith Judicial Review of Administrative Action, 4th edition 238.

33. In all these cases, there had been a hearing : informal in the first : formal in the second and third. Robert Goff LJ's formulation was directed to that situation. Although the concept of fairness may be absolute, the rules, the means by which fairness is to be achieved, vary enormously in accordance with the context. "The assumption that the methods of natural justice are ex necessitate those of Courts of Justice is wholly unfounded" said Lord Shaw of Dunfermline in Local Government Board v Arlridge⁽³⁸⁾ "The requirements of natural justice must depend on the circumstances of the case, the nature of the enquiry, the rules under which the Tribunal is acting, the subject matter being dealt with and so on", said Tucker LJ in Russell v Duke of Norfolk⁽³⁹⁾ and cp. Maxwell v Department of Trade ⁽⁴⁰⁾ per Orr LJ, 538 : Lawton LJ 539.

34. Arbitrations are no exception. Where there is a full hearing, fairness may require something very similar to Court proceedings, see Mustill & Boyd p.263. But for all sorts of reasons, most commonly associated with the saving of time and money, and the use by the chosen arbitrator of his own special knowledge or experience, the parties ask not for a hearing but for a result. A safe working rule may well be that suggested by Lord Goddard C. J. in Mediterannean &. Eastern Exports v Fortress Fabrics⁽⁴¹⁾ that an arbitrator cannot be criticized if he "acts as the parties intended he should act". Thus, in a typical quality arbitration, an arbitrator selected for his experience in the trade is expected and intended to produce a single final ruling : not some interim report which the parties may comment upon or challenge with evidence. Likewise in a pure documents only arbitration, fairness may extend no further than ensuring that all parties see and have the opportunity of commenting upon all the documents submitted.

The Facts

35. I turn to apply these principles to the facts. Three disputes were referred which were described as follows in a document entitled "Matters in dispute" :-

"	(a)	Payment for transportation of materials by sea to the outlying islands;
	(b)	Payment for manual transportation;
	(c)	Payment for transporters. "

36. This document, which was prepared by the plaintiff, was the first of two documents directed to stand as pleadings in the arbitrators' directions of 1st March 1985. They also provided for the giving by each party of "evidence in chief" by affirmation; and for the lodging of written submissions. They also enabled either party to call for a hearing, if it wished, on a given date : and the arbitrator to convene a hearing "if he considers it necessary". No one called for a hearing and none took place.

37. Claim (a) entailed investigating the availability of a wide range of building materials on the outlying islands, Lantau, Cheung Chau, Ping Chau and Lama, during the contractual period 1980/March 1983. Accompanied by the parties, the arbitrator conducted this investigation himself in a purely inquisitorial role. He spoke to suppliers and expressed his conclusions in his award. Neither party may agree with all his conclusions, but no criticism whatever has been directed at his methods. The point illustrates the flexibility of arbitration procedures. This arbitration was in part inquisitorial and in part documents only. The arbitrator was invited to reach his own conclusions at the islands and on the documents, without any hearing or further elucidation from the parties. It was a minimum cost arbitration intended to exploit to the full the arbitrator's engineering experience. It was a procedure which could not and would not have been attempted by any Court or Judicial Arbitrator.

38. Claim (b) arose in this way. There were two relevant rates in the contract which I shall call A and B. A, if applicable, was the basic contract rate : B was a special difficult locations rate. For almost the whole contract, the plaintiff's work was measured and paid for at rate A. Then Government changed its mind and said that the applicable rate was not A but B. At some date said to be between November 1982 and March 1983, the plaintiff's work was re-measured. Work to the value (in round figures) of $1.1m on rate A, was reassessed at $0.45m on rate B, and the difference of $0.66m was sought to be recovered by Government. The main issue between the parties arose on the true construction of the contract : whether as the plaintiff argued, rate A was the basic applicable rate with rate B payable as an addition for difficult locations : or whether as Government argued rate B was basic. Detailed written arguments were developed in support of each view : and even more detailed arguments, supported at some length by legal authority, were marshalled for and against an estoppel relied upon by the plaintiff.  The underlying facts received more perfunctory and in the event inadequate attention.

39. Under the rubric "agreed facts" in "matters in dispute" there appeared :-

"30.         In November 1982, Mr. Chan Ching Wai (for the plaintiff) was informed by Mr. Felix Leung (for government) that this method of measurement (rate A) would not be adopted in future. From November 1982, Kong Kee were not paid the rates for manual transportation of materials. "

40. This passage deals expressly with measurement and payment not with performance. The respondent's answer was : "subject to confirmation by Mr. Leung this is accepted". Such confirmation does not seem to have been forthcoming.

41. The inadequacy and insufficiency of paragraph 30 was exposed by a schedule, prepared by a Mr. Ho, and put before the arbitrator, which gave the details of the Government reassessment. It is from this that the figures above-quoted were derived. This showed that a not inconsiderable number of items of work were placed after November 1982 and up to March 1983, the final contract month. This, the arbitrator apprehended. But there was no way on the material before him, from which he could have inferred what I was told at the hearing was the true position, not by evidence but by counsel. This was that up till March 1983 manual work done on the mainland part of the claimant's territory (which was "New Territories East") was included in this schedule, but not such manual work as was said to have been performed at the end of the contractual period on the outlying islands.

42. The questions posed for the arbitrator in para.36 of "Matters in Dispute" were as follows :-

"	36             Is Kong Kee entitled :-
	(i)	to retain the sum of approximately HK$0.702m deducted by government, or any other sum", under rate A. It seems that this figure should have been $0.66m.
"	(ii)	to be paid the rates for manual transport of work carried out after November 1982; and
	(iii)	to be paid the increased rates for work on difficult locations" under rate B?

43. In relation to these questions, the arbitrator's reasoning shows his conclusions to have been :-

1.	the plaintiff was right on construction. A was the basic contract rate which the plaintiff was entitled to receive for all work done.
2.	In addition, he found that rate B was payable not as a matter of course but where any location was in fact difficult. He concluded that this issue of fact was not before him, and left the parties to resolve that matter on the basis of his finding on construction.
3.	In respect of the sum due under rate A, the arbitrator relied upon the Ho schedule and concluded that $1.1m was due.
4.	Having noted that the schedule went up to March 1983, he said (quite correctly) that he had received no evidence that any manual transportation work had been done beyond that set out in this schedule.
5.	He therefore awarded $1.1m in full and final satisfaction, subject to such further sums as were found due under rate B on an investigation of the location facts.

44. By its amended notice of motion, the plaintiff makes two complaints about these conclusions.

45. First, it was said that the arbitrator should have awarded the sum of $0.45m shown on the Ho schedule for difficult slopes. The true figure was said to be larger than this and the contention was that the arbitrator should have awarded "at least" this sum. No evidence had been put before him by either party appropriate to his construction that rate A was the basic rate, and rate B was payable, not as a matter of course which the Government argument suggested, but only when it was justified on the facts. The arbitrator's conclusion therefore was sensible and correct. The plaintiff is fully protected by a clear finding on construction which is equivalent to a declaration. When I expressed this view point to the plaintiff, the Crown not dissenting, this complaint was not pressed further.

46. The second and main attack was on the award of $1.1m. This was said to be unjust because it did not take account of the work said at the hearing to have been performed on the islands. In the plaintiff's written submissions, the arbitrator was invited to grant the plaintiff a declaration, which, it is said, was why no evidence was led. The arbitrator failed to appreciate this. His award is therefore contrary to the pleadings. he should have convened a hearing and had the matter properly investigated and in failing so to do, he has acted unfairly.

47. The suggestion that this award is uncertain, incomplete or made in excess of jurisdiction seems to me quite without foundation. The reasoning is admirably clear, and shows how carefully and conscientiously this arbitrator applied his mind to the wide range of problems presented to him. His conclusion, in contradiction to any apparent assertion in para.30, that there was no evidence of work done after November 1982 beyond that shown in the schedule, was right. Indeed performance of such work was never clearly alleged. His answer to the second question was that his award of the contract rate under question 1 covered all known work. This finding was beyond doubt open on the documentation put before him, and was equally clearly within his jurisdiction under issue (b). If error there was, it was not his.

48. Then it is said that there was a misunderstanding or procedural mishap. The arbitrator should have realized the possible inadequacies of the evidence and then in performance of his duty to act fairly, he should have convened a hearing. I think this is asking a great deal too much of this arbitrator. It would have been easier to argue for a hearing to enable him to report on his preliminary island "findings". This arbitrator did exactly what he was asked to do. Considerable burdens were laid upon him in his investigation of the island markets and in his consideration of lengthy documentary arguments. He produced a careful, reasoned award at minimum cost. I can see no trace of unfairness in anything he did.

49. In these circumstances, in my judgment, this motion fails and must be dismissed.

50. There are two further observations I must make. First, the arbitrator's conclusion on the applicability of rate B, compels an investigation of the locations at which manual transportation took place. If this reveals that any work was done late in the contract on the islands which has not yet attracted payment at rate A, I would expect Government, as an honourable employer, to wish to rectify this omission.

51. Secondly, I must revert to the subpoena ad testificandum served by the plaintiff on the arbitrator. Its apparent purpose was twofold. First, to save time if the Court wished to follow the procedure adopted in Poliakoff v Stromwall⁽⁴²⁾. Secondly, to ask the arbitrator questions as to his reading of the documents in the hope of revealing some alleged mistake.

52. In answer to my enquiry at the outset of the hearing, the plaintiff disclaimed any intention of calling the arbitrator, who thereafter attended out of interest, not compulsion. There was therefore no need to set the subpoena aside. But I would have done so without hesitation as in my judgment such procedure is wrong for a number of reasons:

1.	The normal mode of giving evidence on motion is by affidavit or affirmation. Leave of the Court is required for evidence to be given in any other way, for cross-examination on written evidence, or for the issue of any subpoena : 0.32, r2 (3) and Leiserach v Schalit(43). No leave was obtained.
2.	Such leave would never have been given. There was no relevant evidence that the arbitrator probably could give, or at least could be compelled to give. The nature of all the materials put before him appeared from the documents. All that Lord Cairns called "matters of fact" in Duke of Buccleuch v Metropolitan Board of Works(44) about which an arbitrator could properly be asked in an action on the award, were covered by the documents. "But there", Lord Cairns continued, "the right of asking questions of the umpire ceased. The award is a document which must speak for itself, and the evidence of the umpire is not admissible to explain or to add, much less to attempt to contradict ..... what is to be found upon the face of that written instrument. " The practice on admissibility may well have moderated over the years, in that the Commercial Court in particular seems not infrequently to have received evidence from arbitrators explaining or elucidating their awards e.g. The Massalia(9) and cp Rotheray v Bedarida(45). But it is one thing for a Court to receive an arbitrator's explanation : quite another to compell him to submit to questioning. As a general rule, this must be wrong. The position is a fortiori where one apparent purpose of the questioning was to obtain an admission which might have let in the admitted mistake principle considered in the Appollon(15).
3.	The procedure adopted in Poliakoff v Stromwall(42), where the Court invited the arbitrators to elucidate their findings in two respects, was a form of remission. The Court should never have occasion to resort to this where there is a fully reasoned award; and there was no doubt, no ambiguity and no such need here.

Representation:

Ronny Tong instructed by M/s Denton Hall, Burgin and Warrens for Plaintiff

John Burdett, Senior Crown Counsel for Defendant

(1)    1983 QB 542, 549
(2)    1914 2 KB 478, 485
(3)    Cmnd 7284 para.67
(4)    1982 AC 724
(5)    1985 AC 191
(6)    Civil Appeal No. 137 of 1984
(7)    1985 1 Lloyds Rep.189
(8)    1984 2 Lloyds Rep.191, 192
(9)     1959 2 LLR 1
(10)    1981 2 Lloyds Rep. 514
(11)    1984 2 Lloyds Rep. 66
(12)    1858 3 H & N 293, 296
(13)    1802 3 East 18
(14)    1951 1 All E. R. 268, 278
(15)    1985 1 Lloyds Rep.597
(16)    1985 2 Lloyds Rep.377
(17)    1877 36 LT (NS) 711
(18)    1954 1 WLR 1489
(19)    1906 95 LT 20, 23
(20)    1966 1QB 273,295
(21)    1937 42 Com Cas 295, 300
(22)    1957 1 WLR 979
(23)    1955 2 LLR 586
(24)    1962 1 LLR 531
(25)    1963 2 LLR 178
(26)    1975 2 Lloyds Rep. 69, 72
(27)    1975 2 Lloyds Rep. 402, 410
(28)    1976 2 Lloyds Rep. 555
(29)    1978 1 Lloyds Rep. 456
(30)    1982 2 Lloyds Rep.589
(31)    1983 2 Lloyds Rep.424, 429
(32)    469F 2d 377, 379 (1972)
(33)    (1968) 1 Lloyds Rep. 237, 240
(34)    (1958) 1LLR 197
(35)    579F 2d 691, 699n 11 (1978)
(36)    1923 16 LLR 51
(37)    1962 2 LLR 257
(38)    1950 AC 120 138
(39)    1949 1 AHER 109, 118
(40)    1974 QB 523
(41)    1948 81 LLR 401
(42)    1921 8 LLR 388
(43)    1934 2 KB 333
(44)    1872 LR5 HL 418, 462
(45)    1961 LLR 220