Kenworth Engineering Ltd v. Nishimatsu Construction Co Ltd

HCCT000033/2004

HCCT 33/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO. 33 OF 2004

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Coram: Hon Reyes J in Chambers

Date of Hearing: 25 May 2004

Date of Judgment: 25 May 2004

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J U D G M E N T

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1.By Notice of Motion ("the Notice") dated 4 May 2004 the Applicant ("Kenworth") applies for relief in respect of the 8th Interim Award ("the 8th Award") dated 19 April 2004 of Mr James Findlay OBE QC ("the Arbitrator"). Kenworth seeks the removal of the Arbitrator for misconduct or, alternatively, that the 8th Award be set aside or varied or remitted to the Arbitrator for reconsideration. The background to the underlying arbitration is summarised in §§2-4 of my Judgment ("the previous Judgment") dated 15 May 2004 in Construction and Arbitration List Action No. 25 of 2004, involving Kenworth and the Respondent ("Nishimatsu").

2.The 1st ground in the Notice is that the Arbitrator failed properly to consider Kenworth's application that there be an oral hearing in relation to the matters which became the subject of the 8th Award. In rejecting Kenworth's application for an oral hearing by a letter dated 7 April 2004, the Arbitrator (normally based in South Africa) stated:-

"I have given anxious consideration for your request for an oral hearing to reconsider the timetable for this matter. You have in that letter [of 2 April 2004] given reasons why you say there should be an oral hearing.

You say that it is reasonable to ask for such a hearing for any important matter, that it would be convenient to deal with each step in the timetable at such a hearing and that an oral hearing would enable me to clarify matters when I am in doubt. It may be reasonable to ask and there may be some advantages in having a oral hearing, but I have to consider whether the costs of and delay involved in such a hearing are factors that outweigh these possible advantages. I do not consider the possible advantages are sufficient. The matter is purely procedural with no substantive rights being affected. I see no difficulty in fixing each step of the timetable if it is to be adjusted. And you need not be concerned about me being in doubt. If I am, I will ask for clarification.

There is no, or very little, law involved in the matter that would benefit from argument by senior counsel.

What advantages there are would arise mostly from a 'live' hearing, and I cannot come to Hong Kong this month, having business here in Cape Town. These possible advantages fade when one considers a video conference. But even a video conference would take time to arrange. As I see the present position, any substantial delay now would put the scheduled dates in jeopardy. Your senior practitioners are away until about this time next week. It would take more time to arrange a video conference and I would need time to consider my decision. That would mean that a change in the timetable would become inevitable before I had even decided whether or not there should be such a change.

In the result, I am totally unconvinced that an oral hearing would be worth the delay and cost, and that application is refused."

3.In my view, far from being obviously or seriously wrong, the Arbitrator's reasoning seems impeccable. I do not see that his commonsense, practical decision gives rise to any unfairness or constitutes any misconduct, whether technical or otherwise.

4.The 2nd ground in the Notice is that, having found that there were many factual allegations of which some were disputed, the Arbitrator should have directed that there be an oral hearing in relation to those disputed fact in order that "[t]he parties should have the opportunity of addressing the arbitrator on the manner in which the matter should be dealt". In the 8th Award, the Arbitrator said this:-

"As far as the List A documents at Tsuen Wan are concerned, there are many factual allegations, some of which are disputed. I cannot resolve these factual issues entirely satisfactorily, but I must do the best I can with what is available to me."

List A listed relevant documents, while List B set out documents which Nishimatsu did not regard as relevant but which were nonetheless disclosed and made available for Kenworth's inspection in the event that Kenworth thought that the same were relevant. Kenworth alleged that List A documents were made available for inspection in unsatisfactory and dangerous premises at Tsuen Wan. Nishimatsu disputed Kenworth's allegations. The Arbitrator was provided with photographs and extensive correspondence from both sides on why various aspects of the Tsuen Wan premises were or were not dangerous, unsatisfactory or inconvenient. The correspondence included plans of the routes from the containers in which the documents were stored to the rooms in which the same could be inspected, along with analyses as to why the routes to and from such places were or were not unduly long or hazardous. There were also extensive written submissions on the pagination and bundling or lack of such in respect of the documents discovered by Nishimatsu.

5.Again it seems to me that the Arbitrator's approach was impeccable. He did not see how further oral submissions from the parties' lawyers, over and above the extensive correspondence with which he had already been provided, would resolve any factual disputes noticed by him. In those circumstances, he thought it better (no doubt in the interest of saving time and cost) to "do the best I can with what is available to me". Again I do not see how his decision can be said to be obviously or seriously wrong or unfair, much less a ground for misconduct.

6.The 3rd ground in the Notice is that the Arbitrator based his decision on considerations which had not been advanced by Kenworth. Mr Harris (appearing for Kenworth) did not press this ground. In arguing a case for varying the existing timetable, Kenworth had not relied on submissions that the time allocated for the trial may be insufficient or that Kenworth had changed solicitors late in the day. Nonetheless, the Arbitrator considered such matters and rejected them as grounds for variation.

7.I do not see how in mentioning and rejecting such grounds the Arbitrator can be said to have been obviously or seriously wrong. Nor do I see how the same can be a ground for misconduct. As Mr Whitehead SC (appearing for Nishimatsu) submits, the fact that the Arbitrator took account of 2 additional heads could not have caused any harm to Kenworth's interests. The grounds were 2 extra arguments which, if successful, could have lent weight to Kenworth's case. In the event, the arguments raised by the Arbitrator were rejected. Considering additional arguments and rejecting them can hardly constitute taking into account irrelevant factors.

8.The 4th ground in the Notice is as follows:-

"Having determined that the requirement in his directions [in his 4th Interim Award] was that the documents [to be discovered by both parties] 'should be [in] paginated [bundles] in such a way as to give each page a distinct identifying number', [the Arbitrator] misunderstood the evidence and/or decided in a manner in which he would not have decided had he held an oral hearing whether in person or by video conference or by telephone conference call and/or decided against the weight of the evidence that 'the documents are already paginated in this way by the Respondent's filing system'."

9.Mr Harris submits the following in support of this ground:-

(1) Nishimatsu ought to have disclosed relevant documents, each of which were to be paginated and contained in a bundle.

(2) Nishimatsu disclosed some 600,000 pages of documents. A large number of documents disclosed by Nishimatsu are irrelevant. It did not paginate every page in the documents disclosed. Instead it listed each document by a unique reference number. Although a document might have its own internal page numbering (apart from the first page which would typically only bear the reference number assigned), attachments to the document usually would not. Many of the documents were not in bundles but were collected in loose file holders. Nishimatsu says that it would take some 800 man hours to paginate all documents disclosed.

(3) The Arbitrator does not appear to have appreciated that the documents which Kenworth had to go through included a considerable quantity of irrelevant documents.

(4) The Arbitrator appears to have wrongly assumed that all documents had been paginated. If Kenworth wanted a copy document, it had to put a flag on it. It would have been easier to identify a document by a page reference. It would certainly have made checking by Kenworth whether all copies sought from Nishimatsu had been provided.

(5) If the Arbitrator had allowed Kenworth to present its case orally, these types of mistakes could have been avoided or minimised. Contrary to what he had said in his 7 April 2004 letter quoted above, the Arbitrator made a decision with important consequences to Kenworth on the basis of misapprehensions. This means that "Kenworth's task in inspecting documents [is] more onerous and time consuming that it would have been if the [discovery] order [in the 4th Interim Award] had been complied with".

10.Mr Whitehead responds to the Arbitrator's alleged mistakes identified by Mr Harris as follows:-

(1) Even if (which is not accepted) there had been mistakes, that would amount to no more than mistakes of fact. That could not justify intervention by the Court.

(2) Nishimatsu does not accept that a significant quantity of irrelevant documents have been disclosed. The Arbitrator's order for discovery was far-ranging. Given the nature of the action, there was bound to be substantial discovery on Nishimatsu's part. Although it is likely that within 600,000 pages of discovery there turn out to be irrelevant documents, this cannot be surprising.

(3) The large bulk of documents were paginated. Some 300 disclosed files (held at the office of Messrs Masons ("Masons") (Nishimatsu's solicitors)) have every page numbered. All other incoming and outgoing correspondence was given a unique reference number at the time of sending or receipt. These numbers are listed on a searchable CD-ROM database provided to Kenworth. Thus, every document is numbered, although not otherwise paginated by Masons. Most documents of more than one page have been separately numbered. Most (but not all) attachments were numbered. Other documents (such as progress reports) have their separate bundle numbers and usually (but not invariably) their own pagination. There has accordingly been substantive compliance, as the Arbitrator held by the 8th Award.

(4) Some 5% of documents are not in files. These are typically bulky documents which cannot conveniently be placed in lever arch files. These have instead been put in magazine racks or boxes.

11.In relation to paginated bundles, the 8th Award stated:-

“That leaves the complaint that the List A documents at Tsuen Wan were not in 'paginated bundles'. This requirement in my direction is not that the documents must be numbered consecutively from 1 to, say, 678,435. The requirement is that they be paginated in such a way as to give each page a distinct identifying number. Now, if the documents are already paginated in this way by the Respondent's filing system, there is, in my view, no need for the Respondent's solicitor to go through all these documents and give them some other unique identifying number. That would be patent nonsense.

The Respondent says that each document concerned is numbered in accordance with the Respondent's own searchable database. The numbers are those given to the documents at the time they were written. Each page also has a number given at this time. The Claimant does not challenge this, but argues that this system is not in accordance with my discovery order. If pages were to be renumbered, the searchable database, which I would have thought very useful, would be rendered purposeless. I am not saying that the Respondent disclosure is perfect, and it may be, as the Claimant says, that some of the documents in List A at Tsuen Wan are not as they should be. But I am not here concerned to see if the Respondent's discovery is immaculate. There never was such a thing. I am concerned to judge whether the Respondent's discovery was substantially in accordance with my order. I think it was."

12.In my view the Arbitrator cannot be faulted for his conclusion that there has been substantial compliance. Nor do I see how further submission by the parties' legal advisers could have significantly helped him to resolve the dispute, especially given that there had already been extensive correspondence from the parties to him on the pagination of the bundles (among other aspects). In light of the copious material before him, it seems to me that the Arbitrator was entitled to come to the conclusion that there had been substantial compliance by Nishimatsu and the pagination and bundling of Nishimatsu's discovery was not a sufficient basis to vary the timetable. I do not think that the Arbitrator was procedurally unfair. The decision may have been robust from Kenworth's point of view. Other arbitrators in a similar position might have come to a different conclusion. But I cannot say that the Arbitrator's approach here was unreasonable in the circumstances. I do not think that there is ground here for misconduct.

13.Kenworth say that it has lost confidence in the Arbitrator's ability by reason of his conduct in relation to his 7th Interim Award ("the 7th Award") and the 8th Award. In the previous Judgment I rejected an application by Kenworth to remove the Arbitrator for alleged misconduct in connection with the 7th Award. I did not think that the errors identified in the previous Judgment warranted a conclusion of misconduct. In light of my views on the 4 grounds advanced in the Notice, there is no material arising out of the 8th Award that merits the Arbitrator's removal. The Arbitrator's conduct of the 7th and 8th Awards, even taken cumulatively, does not amount to conduct which might reasonably be regarded as casting doubt on the Arbitrator's ability to come to a fair and just conclusion in the arbitration. Nor is there any material that would justify a variation or setting aside of the 8th Award or its remittance back to the Arbitrator for reconsideration.

14.Accordingly, the Notice is dismissed.

Representation:

Mr Jonathan Harris, instructed by Messrs Deacons, for the Applicant

Mr Robert Whitehead SC, instructed by Messrs Masons, for the Respondent