Ever Rise Engineering Ltd. v. Dah Chong Hong (Engineering) Ltd.
Read the full judgment text of HCCT 63/2000 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 17 November 2000 before Hon Burrell J in Chambers.
Construction and Arbitration — Contract dispute involving supply and installation of MVAC services — Plaintiff claiming outstanding balance from agreed final account — Defendant disputes amount and existence of final account, citing contra charges — Existence of a 'dispute' held to be established for stay application — Arbitration clause construction limits arbitration to disputes arising from variations to contract works — Letter dated 21 February 2000 held to be evidence of admission of debt, not a separate contract or waiver of arbitration rights — Court refused stay of proceedings pending arbitration as dispute over contra charges fell outside clause 4(b) arbitration clause — Defendant’s defence adequate to defeat summary judgment; conditional leave to defend granted upon payment into court within 14 days — Costs orders accordingly made.
Legal issues: Existence of a dispute for stay application · Scope of arbitration clause in contract · Character of the letter dated 21 February 2000 · Whether defendant’s defence is a triable issue for summary judgment
Outcome: Stay application refused; conditional leave to defend granted subject to payment of full claim into court within 14 days
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HCCT000063/2000 HCCT 63/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS -------------
------------- Coram: Hon Burrell J in Chambers Date of Hearing: 13 November 2000 Date of Decision: 17 November 2000 ------------------------ D E C I S I O N ------------------------ 1. This is a defence summons to stay proceedings pending arbitration. There is also before the court a plaintiff's Order 14 summons. The plaintiff was the defendant's sub-contractor engaged to supply and instal MVAC services in the Bank of China Currency Operation Centre. The plaintiff's claim is for $2,680,828.91 being the outstanding balance of monies due to them, $24,287,110.03 having already been paid out of an agreed final account sum of $26,967,938.94. 2. The defendant says :
The plaintiff submits:
Is there a dispute? 3. Given the very wide definition given to the word "dispute" in stay applications, I have come to the conclusion that a dispute does exist. 4. Both counsel, Mr A. Bell for the defendant and Ms T. Cheng, SC, for the plaintiff, have referred the court to the contractual background of the case which preceded a letter written by the defendant to the plaintiff on 21 February 2000, in the following terms :
It was signed by both parties. 5. Ms Cheng points out that this was the conclusion of commercial negotiations between the parties and it amounts to an admission by the defendant that this sum is due. The final paragraph does not affect the situation because there has been no revision of payment received from the main contractor. 6. The defendant's primary submission is that this letter takes no account of deductions in the contract price due to contra charges as provided for by clause 1(b) of the contract. Clause 1(b) states :
7. According to the defendant, they made purchase orders which have not yet been accounted for. The quantum of such contra charges has yet to be calculated. Whatever it is, they were not accounted for nor referred to in the letter of 21 February 2000 nor were they included in the negotiations which preceded it. 8. Ms Cheng, with some force, submits that such potential reductions in the sum due to them from the defendant have been taken into account. At this stage in the litigation, it can be said she appears to have a strong case. However, I am not able to say that there is no dispute. I think it would be wrong to construe the letter of 21 February 2000 as an unequivocal admission which acts as a bar to the right to arbitrate. The only additional item specifically referred to in the letter is variation works. It does not waive the defendant's right to set-off. Is this dispute covered by the arbitration clause? 9. The plaintiff makes two points :
(i) Separate agreement? 10. As to the submission that the 21 February letter amounts to a self contained and entirely separate contract, I do not think it accords with either the reality of the situation or the facts. I do not think it can be said that the parties intended to enter into a different and separate contract when negotiating a final price for the contract works. It is evidence of an admission and no more. It is not pleaded as a separate agreement giving rise to separate contractual obligations, rather it is pleaded as evidence of an admission that works to the value of $26,967,938.94 were carried out by the plaintiff. (ii) Arbitration clause does not cover this dispute? 11. To deal with this issue, I set out the whole of the relevant clause (clause 4) :
12. Each counsel has invited the court to put a different meaning on the words underlined. Mr Bell submits they mean that any dispute about variations of the contract price shall be referred to arbitration. Ms Cheng submits that only disputes concerning increases or decreases in the contract price occasioned by variations to the contract are referable. Accordingly, increases or decreases in the contract price due to a dispute over contra-charges would not be covered. 13. Clause 4 only has these two sub-clauses, (a) and (b). It is logical to consider them together in order to determine their true meaning and effect. Clause 4(a) provides specifically for amendments to the contract price as a result of variations to the contract works. If there is no agreement on the difference in price, it shall be submitted to arbitration as provided by clause 4(b). Clause 4(b) then says that if there is a dispute (i.e. a failure to agree about matters referred to in clause 4(a)), it shall be referred to arbitration. The words "the increase or decrease in the contract price occasioned by the variation thereof" (my emphasis) mean only such increases or decreases which have resulted from variations to the contract works are covered. Had it been intended to cover all alterations to the contract price, however caused, it would plainly have used words such as "any dispute in respect of an increase or decrease in the contract price" and no more. The addition of the words "occasioned by the variation thereof" are not merely repetitive words, as submitted by Mr Bell, but are restrictive words which are intended to narrow the scope of what may be arbitrated to matters arising under clause 4(a). 14. The question now arises, even if a dispute over contra charges is not covered by clause 4(b), is there any other dispute between the parties which is covered. Mr Bell submits that the issue of clause 1(b) deductions is not the only area of dispute. The reality is, in my judgment, that any other dispute, if any, is too vague to be worthy of consideration in this context. In short, I find there to be no adequate evidence of a dispute which is covered by clause 4(b). Accordingly, I refuse the application for a stay solely on the ground that the dispute which does exist is not a clause 4(b) dispute. Order 14 15. The result of my ruling thus far is that HCCT 63/2000 continues. I must therefore consider the plaintiff's Order 14 application. 16. It must be recognized at the outset that the test to establish "a dispute" for a stay application and the test to establish a triable issue in Order 14 proceedings is different. The test is more difficult for the defendant in the Order 14 proceedings. Nonetheless, the court's observations already made in the context of the "dispute" argument are still relevant. In my judgment, the issues raised by the defendant are more than "mere moonshine". I have found that it is arguable that the letter of 21 February 2000 is not a final, binding, unequivocal statement of what is due. It is arguable that it is a statement of the final calculation of what the original contract price was plus the agreed value of the variations carried out, and no more. 17. Having said that, the letter of 21 February will present a substantial obstacle for the defence. I have also considered with care the contents of the two opposing affirmations. Whilst the court should avoid a trial on the affirmations, it is nonetheless appropriate to consider their overall contents when deciding the relative strengths of each party's case, if it is thought that it may be a proper case for conditional leave being granted. 18. In my judgment, this is such a case. The fact that the defence case depends on their contention that contra charges were simply ignored when settlement negotiations were under way put the defence in the "shadowy" category, as per Lord Denning in Van Lynn Developments v. Pelias Construction Co [1968] 3 AER 824. 19. For these reasons, I grant leave to defend conditional upon the full amount of the claim being paid into court within 14 days. In the event of the payment not being made in time, the plaintiff may immediately enter judgment. 20. On the stay application, I make an order for costs against the defendant. On the Order 14 summons, costs will be in the cause if the payment in is made in time, if not, the costs will be to the plaintiff.
Representation: Miss Teresa Cheng, SC, instructed by Messrs Kwok & Chu, for the Plaintiff Mr Adrian Bell, instructed by Messrs Robertsons, for the Defendant |