The Incorporated Owners of Tak Tai Building v. Leung Yau Building Ltd

CACV 230/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 230 OF 2004

(ON APPEAL FROM HCCT 24 OF 2004)

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BETWEEN

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Before : Hon Tang JA and Sakhrani J in Court

Date of Hearing : 22 February 2005

Date of Decision : 22 February 2005

Date of Reasons for Decision : 9 March 2005

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REASONS  FOR  DECISION

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Hon Tang JA (giving the Reasons for Decision of the Court):

1.In the arbitration, the plea that the arbitrator had no jurisdiction was raised in the defence and counterclaim dated 30 October 2003.

2.By letter dated 4 December 2003, Francis Kong and Peter Lau, solicitors for the respondent, proposed that failing the applicant’s confirmation of his agreement to arbitrate, “an application shall be made to the arbitral tribunal to determine as a preliminary issue, whether the arbitral tribunal has jurisdiction over this dispute”.

3.By letter dated 29 December 2003, Messrs Bough & Co., solicitors for the appellant, asked that the arbitration be stayed on ground that there was no agreement to arbitrate.

4.By Arbitrator’s Order for Directions No.9 dated 2 January 2004, the arbitrator gave directions for submissions to enable him to decide this issue.

5.By an interim award dated 17 February 2004, the arbitrator decided that he had jurisdiction.

6.In the interim award, the arbitrator referred to section 13B of the Arbitration Ordinance and article 16(3) of the UNCITRAL Model Law.

7.By originating motion dated 10 March 2004, the applicant applied for leave pursuant to section 23(2) to appeal the arbitrator’s decision.

8.Deputy Judge Poon refused to set aside the arbitrator’s decision on jurisdiction.

9.This is the applicant’s appeal.

10.The applicant’s primary contention is that article 16(3) does not apply because the arbitrator had issued an interim award. 

11.Article 16(3) provides:

“The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits.  If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within 30 days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.”

12.Mr Rimsky Yuen, SC referred us to “The Arbitration Ordinance of Hong Kong, a Commentary” by Robert Morgan at S5.16.06 (page 544), where this was said about article 16:

“… this provision expressly empowers the tribunal to make an initial ruling as to its jurisdiction, which is binding and final save only to the extent that a party may challenge the ruling in court under para (3) below or under Sch 5 art 34 below.  A ruling by the tribunal, and the means of challenging it, may take one of three forms:
1.	a ruling on a preliminary question of jurisdiction, incorporated, for example, within an order for directions.  This may be challenged immediately in the High Court under para (3) below;
2.	an interim or partial award on the merits.  This may also be challenged immediately in the High Court, but under Sch 5 art 34(2)(a)(i) or (iii) or arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within 30 days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.
3.	a final award on the merits. …”

13..Whilst Mr Yuen emphasised that the arbitrator’s decision took the form of an interim award, we believe what is critical is whether it was an interim award on the merits.  As article 16(3) makes clear the arbitrator may rule on jurisdiction either as a preliminary question or in an award on the merits. 

14..In Fung Sang Trading Ltd v. Kai Sun Sea Products & Food Co. Ltd [1992] 1 HKLR 40, Kaplan J said in relation to article 16 at 53:

“… The Tribunal may rule on this point as a preliminary issue or as part of an award on merits.  If done by way of preliminary question and if in favour of the plaintiffs the defendants will then have 30 days in which to invite this court to decide the question.  Such decision of this court is final.  It should be noted that the arbitration can continue whilst a request is pending to the court.  In Hong Kong this will not be as an important provision as elsewhere because of the speed with which parties will be able to come before this court.

If the Tribunal makes an award on the merits, which clearly would encompass a finding that they had jurisdiction to do so, then the defendants will have an opportunity to apply to set the award aside under Article 34 if they can establish that the agreement is not valid under Hong Kong law.” ;

15.Mr Yuen has referred us to Robert Morgan’s work at S5.16.16 and S5.16.21 which suggested the contrary.

16.In Weltime Hong Kong Limited & Anor v. Ken Forward Engineering Ltd [2001] 1 HKC 458 at 460, Burrell J said:

“… A ruling on jurisdiction, by its very nature, is a preliminary ruling which much precede an award on the merits.  The fact that it may be titled an ‘award’ or an ‘interim award’ does not mean it ceases to be a preliminary ruling on jurisdiction, which it plainly was.”

17.We respectfully agree.  We are concerned with substance not form.  The question is whether the arbitrator had made an award interim or otherwise, on the merits.

18.It is clear that the arbitrator made a preliminary ruling on jurisdiction.  There was no decision on the merits at all.

19.Under article 16, the applicant may request the court specified in article 6 to decide the matter within 30 days of the receipt of the notice of ruling.  That court is the Court of First Instance. 

20.Mr Rimsky Yuen SC submitted that even so, section 23 applies to any application to the court for a decision.  We do not believe section 23 applies.  An application under section 23 requires leave, see section 23(3).  Leave is not required under article 16(3).  That is clear from the language of article 16(3).  It is also supported by the Law Reform Commission Report on the adoption of the UNCITRAL rule.  Furthermore, there is no right of appeal under article 16(3) so section 23(7) cannot apply.

21.Here, the application took the form of an application for leave pursuant to section 23(2).  It was misconceived.

22.Even if one treats the originating motion as having been made under article 16(3), the judge’s decision was final.   

23.For the above reasons, the appeal was dismissed with costs. 

Mr Rimsky Yuen, SC and Ms Gekko Lan, instructed by Messrs Bough & Co., for the Applicant (Respondent in Arbitration)

Ms Gladys Li, SC leading Mr Victor Dawes, instructed by Messrs Peter Lau & Co., for the Respondent (Claimant in Arbitration)