Fai Tak Engineering Co Ltd v. Sui Chong Construction & Engineering Co Ltd
Read the full judgment text of DCCJ 305/2009 on BabelCite. This District Court judgment.
1. In these proceedings, Fai Tak claims that a sum of $843,891.56 is due and owing from Sui Chong, under and by virtue of an agreement between them (" Sub-Contract ") for Fai Tak to carry out fire services equipment installation work as Sui Chong's subcontractor for works carried out at the United Christian Hospital.
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DCCJ 305/2009 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 305 OF 2009 ----------------------
---------------------- Coram : Her Honour Judge Mimmie Chan in Chambers (open to public) Date of hearing & delivery of Decision : 16 June, 2009 Date of handing down Reasons for Decision : 22 June, 2009 -------------------------------------- REASONS FOR DECISION -------------------------------------- Background 1.In these proceedings, Fai Tak claims that a sum of $843,891.56 is due and owing from Sui Chong, under and by virtue of an agreement between them ("Sub-Contract") for Fai Tak to carry out fire services equipment installation work as Sui Chong's subcontractor for works carried out at the United Christian Hospital. 2.On 11 March 2009, Sui Chong applied by Summons for a stay of these proceedings ("Summons"), on the ground that the parties had agreed to submit to arbitration any dispute or difference arising under the Sub-Contract. The application for leave to file further evidence 3.The Summons was fixed on 28 April 2009 for hearing on 16 June 2009. On 5 June 2009, Fai Tak issued a separate summons for leave to file the 2nd Affirmation of Andy Shiu affirmed on 3 June 2009. A copy of the 2nd Affirmation of Andy Shiu was sent to Sui Chong on the same day. The 2nd Affirmation of Andy Shiu was sought to be filed in answer to the evidence filed on behalf of Sui Chong earlier, on 22 May 2009. 4.When directions for the hearing of the Summons were given by Master Lee on 13 March 2009, it was directed that Fai Tak was to file evidence in opposition to Sui Chong's application for stay by 3 April 2009, and that Sui Chong’s evidence in reply had to be filed by 17 April 2009, with no further evidence to be filed by the parties without the leave of the Court. 5.Fai Tak was late in compliance with the time schedule set by the Master. On 6 May 2009, the parties applied by consent for extension of time for the filing of evidence. It was agreed that Fai Tak should be given leave to file the affirmation of Andy Shiu dated 27 April 2009 out of time, with leave to Sui Chong to filed evidence in reply within 21 days, by 18 May 2009. Again, the parties agreed that no further evidence should be filed without the leave of the Court. 6.The affirmation of Andy Shiu dated 27 April 2009 had been filed on the same day, and on 22 May 2009, Sui Chong filed the 2nd Affidavit of Mr. Lau and an affirmation of Mr. Wong in reply. 7.No explanation has been furnished by Fai Tak as to why it now seeks leave to file further evidence after the affirmation of Andy Shiu, when Fai Tak had consented to an order on 6 May 2009 that no further evidence would be filed. Fai Tak seeks to say that the further affirmation of Andy Shiu was required to reply to untrue and misleading matters contained in the affidavit of Mr. Lau and the affirmation of Mr. Wong, relating to whether accounts had been agreed between Fai Tak and Sui Chong. I see no reason why these matters could not have been stated in full in Andy Shiu's original affirmation of 27 April 2009, when he was already deposing to the fact that the Final Account between the parties and the amounts now claimed by Fai Tak in these proceedings had been agreed. These were matters which were within Mr. Shiu's knowledge at all material times. He is Fai Tak's quantity surveyor and a witness within Fai Tak's control. The documents now sought to be produced in Mr. Shiu's second affirmation were available for production at the time when Mr. Shiu made his first affirmation. 8.Court orders are made for compliance, and time laid down under court orders should be adhered to. This has always been the case even before the Civil Justice Reforms. After the Reforms, the Court simply seeks to enforce the rules of Court more rigidly in order to meet the underlying objectives of the rules. Before a timetable is laid down or agreed to by the parties, the parties should give realistic estimates. If a party permits time to lapse without doing anything, the case should move on to the next step, without disturbing any hearing date or milestone date. 9.Under the Civil Justice Reforms, the Court has to ensure that cases are dealt with as expeditiously as is reasonably practicable, and of course to ensure fairness between the parties. Taking into consideration the matters I have already referred to, namely, that the original timetable for the filing of evidence was laid down by the consent of the parties; the absence of any or any satisfactory explanation from Fai Tak as to why the further evidence from Andy Shiu is required despite Fai Tak's agreement to the original timetable and that no further evidence was required; and particularly, the limited value of the new evidence sought to be introduced, bearing in mind that the issue in dispute between the parties in relation to the Summons can be resolved by taking into account the matters already set out in the evidence filed on behalf of Sui Chong on the one hand, and the affirmation of Andy Shiu filed on 27 April 2009 on the other hand, I see no reason why, at the eleventh hour, leave should be granted to Fai Tak to file the 2nd Affirmation of Andy Shiu. 10.I therefore refused leave to Fai Tak at the commencement of the hearing on 16 June 2009 to file the further evidence. I considered that there was no need to waste further time by recourse to any additional evidence, for the purpose only of deciding whether or not there is a "dispute or difference" which has arisen between the parties in connection with the Sub-Contract and the amounts payable thereunder. Legal principles 11.The legal principles applicable to determination of the Summons are not seriously in dispute. In considering an application to stay proceedings in favor of arbitration, the proper test is whether there is a prima facie case that the parties were bound by an arbitration clause. The onus is on the applicant for stay to demonstrate this. Unless the point is clear, the court should not attempt to resolve the issue and the matter should be stayed for arbitration (PCCW Global Ltd. v. Interactive Communications Service Ltd. [2007] 1 HKLRD 309; Private Company "Triple V" Inc. v. Star (Universal) Co. Ltd. & Another [1995] 3 HKC 129). When there is a dispute as to whether there was an arbitration agreement or clause, the onus on the applicant has been explained to mean that the applicant has to prove that there is a good prima facie or plainly arguable case, predicated on cogent, and not dubious or fanciful, evidence that an arbitration clause or agreement existed (Pacific Crown Engineering Ltd. v. Hyundai Engineering & Construction Co. Ltd [2003] 3 HKC 659). 12.In Tommy CP Sze & Co. v. Li & Fung (Trading) Ltd. [2003] 1 HKC 418, Ma J (as he then was) set out the approach of the Court in dealing with an application for stay. There are four questions which a court must generally deal with: (i) Is there an arbitration agreement between the parties? (ii) Is the clause in question capable of being performed ? (iii) Is there in reality a dispute or difference between the parties? (iv) Is the dispute or difference between the parties within the ambit of the arbitration agreement? 13.In the present case, Fai Tak takes issue with the first and third of the questions raised in paragraph 12 above. Is there an arbitration agreement between the parties? 14.Counsel for Fai Tak argues that Fai Tak had never accepted any agreement to arbitrate, or to be bound by any arbitration agreement. 15.In dealing with the question of whether there is an arbitration agreement between the parties, the starting point must be s.2AC of the Arbitration Ordinance ("Ordinance"). Section 2AC of the Ordinance provides that an arbitration agreement has to be in writing. Under s.2AC (3) of the Ordinance, a reference in an agreement to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement. 16.Sui Chong is the Main Contractor of works carried out for the Hospital Authority ("Authority") in relation to the United Christian Hospital. The conditions of tender for the Main Contract include Special Conditions of Tender paragraph 8, which provides as follows:
17.Fire services installation works were designated in Special Conditions of Tender paragraph 8 as one of the Specialist Sub-Contract works. 18.In about November 2004, Sui Chong invited Fai Tak to submit tenders for fire services installation work ("Works") to be carried out under the project, based on the tender documents and drawings issued by the Authority. On 13 December 2004, Fai Tak submitted a tender to Sui Chong for the Works, under cover of a letter dated 13 December 2004 bearing reference number "IQ-3245F/A/004" ("Tender"). The Tender was for a price of $772,995 (later revised to $971,995) for carrying out the Works. 19.On the same day, Fai Tak issued a letter bearing reference number "IQ-3245F/A/026" which provides as follows :
20.Also on 13 December 2004, Fai Tak issued another letter to Sui Chong bearing reference number "IQ-3245F/A/025". It provides as follows:
21.Thus far, it is apparent that the procedures set out in Special Conditions of Tender paragraph 8 have been followed, with Fai Tak’s submission of the 2 letters of 13 December 2004 bearing reference numbers "026" and "025", by way of undertaking from the proposed specialist sub-contractor to carry out the Works for Sui Chong as tenderer for the Main Contract. 22.It is also apparent from Fai Tak's letters themselves that Fai Tak had referred to its letter of 13 December 2004 with reference "026" as the "Letter of Intent", and its letter of 13 December 2004 bearing reference "025" as "Undertaking Letter". 23.On 18 May 2005, Sui Chong wrote to Fai Tak with reference to the Tender, to confirm acceptance of the quoted price of $967,000. The acceptance was expressed to be subject to Fai Tak's agreement to the terms and conditions set out in Sui Chong's letter of 18 May 2005 ("18 May 2005 Letter"). These terms and conditions include the following :
24.The 18 May 2005 Letter ends thus:
25.It is not disputed between the parties that the 18 May 2005 Letter was not countersigned by Fai Tak. 26.Notwithstanding the fact that the 18 May 2005 Letter was not countersigned by Fai Tak, Fai Tak did commence work under the Sub-Contract. On 20 May 2005, Fai Tak submitted samples in respect of the Works for Sui Chong's "comment and approval". 27.On 24 May 2005, Fai Tak wrote to Sui Chong ("24 May 2005 Letter”), in reply to the 18 May 2005 Letter, referring to it as "the Draft Letter of Intent". In the 24 May 2005 Letter, Fai Tak offered comments on paragraphs 3, 6, 9, 10 and 15 of the terms and conditions set out in the 18 May 2005 Letter. 28.There is no evidence of any reply from Sui Chong to the 24 May 2005 Letter. There is, however, no dispute that work was thereafter carried out by Fai Tak under the Sub-Contract, in respect of which invoices were issued by Fai Tak and interim payments made by Sui Chong. 29.There is evidence that on 21 November 2006, after Fai Tak had commenced work, Sui Chong wrote to inform Fai Tak that the formal Sub-Contract was available for collection and signing. It was never collected nor signed. 30.Counsel for Fai Tak argues that because the 18 May 2005 Letter was never signed by Fai Tak, the terms and conditions therein set out were not accepted, as is evidenced by the 24 May Letter which, on Fai Tak's argument, constitutes a counter-offer in respect of Fai Tak's agreement to carry out the Works under the Sub-Contract. According to Counsel for Fai Tak, the counter-offer contained in the 24 May Letter was never accepted by Sui Chong either. 31.I bear in mind that the correspondence between Fai Tak and Sui Chong was exchanged against the background of both companies being in the construction and building business, well knowing that the parties were tendering for construction work to be carried out for the Government. Fai Tak is on the Government's list of Approved Specialist Sub-contractors. There can be no doubt that when Fai Tak was tendering for the Sub-Contract, it was aware of the conditions of tender. 32.On the evidence, it is clear that the Tender constituted Fai Tak's offer to carry out the Works at the price of $971,995. By its letter of 13 December 2004 bearing reference "026" which it labeled Letter of Intent, Fai Tak undertook to execute the Works based on the terms and conditions of the Tender "and in accordance with the Tender Document and Specification". 33.Fai Tak's offer was accepted by Sui Chong's 18 May 2005 Letter. The acceptance was stated to be subject to Fai Tak's agreement to the terms and conditions set out in the 18 May 2005 Letter, which include the condition that the Standard Form of Domestic Subcontract published by the Hong Kong Construction Association should be used. The 18 May 2005 Letter states that "unless and until a formal contract is signed”, the 18 May 2005 Letter, countersigned by Fai Tak, shall be deemed to be a binding contract. No formal contract was signed, and the 18 May 2005 Letter was not countersigned. It is however arguable that Fai Tak had by conduct, in carrying out the Works, accepted the terms set out in the 18 May 2005 Letter. 34.Although Fai Tak claims that its 24 May 2005 Letter constitutes a counter-offer to the terms and conditions set out in the 18 May 2005 Letter, it is abundantly clear that the 24 May 2005 Letter only contains minor amendments and variations to only a part of the 34 conditions of the 18 May 2005 Letter, namely paragraphs 3, 6, 9, 10 and 15 thereof. No objection or other comments were made to paragraph 2 and the other terms of the 18 May 2005 Letter. If the 24 May 2005 Letter should constitute a counter-offer, it is only in respect of paragraphs 3, 6, 9, 10 and 15 of the terms of the 18 May 2005 Letter, and nothing in the 24 May 2005 Letter nor in Fai Tak’s conduct after the 24 May 2005 Letter shows Fai Tak’s rejection of the terms set out in the 18 May 2005 Letter in respect of the carrying out of the Works. 35.To the contrary, and notwithstanding the 24 May 2005 Letter, both Fai Tak and Sui Chong performed under the Sub-Contract, Fai Tak in carrying out the Works and Sui Chong in permitting Fai Tak to do so and in making or procuring interim payments to be made to Fai Tak for the Works. By their conduct, and so far as the current state of the evidence reveals, Sui Chong had obviously accepted any counter-offer made in the 24 May 2005 Letter. 36.A contract was thus concluded between Fai Tak and Sui Chong for Fai Tak's execution of the Works either on the terms and conditions set out in the 18 May 2005 Letter, or on such terms as varied by the 24 May 2005 Letter. These terms include the condition that the Standard Form of Domestic Subcontract published by Hong Kong Construction Association would be used. On the evidence, this Standard Form incorporates an arbitration clause, namely clause 18. 37.Under s.2AC (3) of the Ordinance, a reference in an agreement to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement. 38.Article 7(2) of the Model Law contains a similar provision :
39.The meaning of "a document containing an arbitration clause" as used in Article 7 (2) of the Model Law and in s.2AC(3) of the Ordinance has been held to be not limited to a document signed by the parties to the arbitration, but to include a contract made between one party and a third party, a contract between two strangers to the arbitration, or to an unsigned standard form of contract (Astel-Peiniger Joint Venture v. Argos Engineering & Heavy Industries Co. Ltd. [1994] 3 HKC 328, applied in Hercules Data Comm. Co. Ltd. v. Koywa Communications Ltd. HCA 4627/2000, 23 October 2000). 40.Whether there has been incorporation by reference is a question of construction, namely, a task to ascertain the parties' intention when they entered into the contract by reference to the words used (Astel-Peiniger JV v. Argos Engineering & Heavy Industries Co Ltd. [1994] 3 HKC 328, at 339). 41.A contract must be interpreted objectively (Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1977] A.C. 749). In attempting to reach a conclusion as to the presumed intention of the parties, the court will generally consider what would have been the intention of reasonable persons in the position of the actual parties to the contract. 42.The 18 May 2005 Letter refers to the Standard Form of Domestic Subcontract, and in fact makes it a term of the Sub-Contract that the Standard Form be used. The words in paragraph 2 of the 18 May 2005 Letter are clear and unambiguous and has the effect of incorporating all the terms of the Standard Form Domestic Subcontract, including the arbitration clause. 43.Construing the correspondence exchanged between the parties against the relevant background in this case, and giving the relevant documents the meaning which would reasonably have been understood by a reasonable man to mean, I am satisfied that Fai Tak and Sui Chong have agreed to incorporate clause 18 of the Standard Form of Domestic Subcontract into the Sub-Contract made between them for the carrying out of the Works. 44.As stated by Lord Devlin in McCutcheon v. Macbrayne (David) Ltd. [1964] 1 WLR 125 at 134 :
45.Having submitted the Tender expressed to be in accordance with the tender documents and conditions, and having agreed to use and be bound by the Standard Form of Domestic Subcontract, it is not open to Fai Tak to say that it had not read the detailed terms and conditions of the tender documents, or the Standard Form of Subcontract, or the arbitration clause contained in the said Standard Form, and that for such reason it should not be bound thereby. 46.Since the arbitral tribunal may, by virtue of Article 16 (1) of the Model Law, rule on its own jurisdiction including any objections with respect to the existence or validity of the arbitration agreement, and the onus on Sui Chong is simply to demonstrate a good prima facie or plainly arguable case that an arbitration clause exists between the parties, I am satisfied that Sui Chong has amply discharged this onus. Is there in reality a dispute or difference between the parties? 47.Counsel for Fai Tak seeks to argue that Sui Chong had admitted not only its liability to make payment to Fai Tak, but also the amount claimed in these proceedings. Fai Tak seeks to rely on a Final Account issued by Sui Chong in November 2008, from which it can be seen that there is reference to a sum of $1,371,175, as the adjustment for variation works carried out by Fai Tak. It is alleged that the sum of $843,891.56 claimed in these proceedings is the balance of the amount of $1,371,175, after taking into account part payments made by Sui Chong. For this reason, Fai Tak claims that there is in fact no dispute between Fai Tak and Sui Chong. 48."Dispute" has been widely defined in all the authorities. In Tai Hing Cotton Mill Ltd. v. Glencore Grain Rotterdam BV [1996] 1 HKC 363, Bokhary JA (as he then was) stated :
49.In Tai and Halki Shipping Corp. v. Sopex Oils Ltd. [1998] 1 WLR 727, it was held that:
50.In F & D Building Services Engineering Co. Ltd. v. Chevalier (E & M Contracting) Ltd. [2001] 3 HKC 403, it was emphasized that an unequivocal admission as to both liability and quantum is required before a stay is refused. If there is a "dispute", a stay to arbitration is mandatory and the law leans heavily in favor of stays pending arbitration. 51.The Final Account relied upon by Fai Tak was not signed by either Sui Chong or Fai Tak. Although it was prepared by Sui Chong, Sui Chong claims that it was only a draft account, yet to be agreed, as the assessment of the variation orders under both the Main Contract and the Sub-Contract were still in progress when the alleged Final Account was issued. Sui Chong disputes the valuation of the variation works for which payment of $1,371,175 is sought by Fai Tak. 52.Although Sui Chong admits that they had made payment of a sum of $450,000 to Fai Tak, it claims that this was in the nature of an interim payment made on account under and in the course of the Sub-Contract, as evidenced by the interim payment certificates, and were subject to final valuation and adjustments to be made at the completion of works under the Main Contract and the Sub-Contract. 53.Sui Chong's claim of interim payments made subject to final adjustments is supported by the invoice issued by Fai Tak on 19 November 2008. This is stated to be an invoice for interim payment No. 12, for the sum of $450,000, after deduction of retention money, pursuant to which Sui Chong's payment was made. 54.Fai Tak's allegation that the variation work had been agreed and certified at $527,283.44 is also inconsistent with the fact that even in the Payment Certificate No. 13 itself relied upon by Fai Tak, the amount of $527,283.44 is stated to be for "estimated" variations only. The "Final Sub-contract Sum" of $1,450,180.86 is likewise stated in Payment Certificate No. 13 to be "estimated". From the evidence produced and relied upon by Fai Tak, it cannot be clearly seen that the amounts claimed and paid were final and agreed between the parties, as Fai Tak alleges. 55.Further, although Fai Tak claims that the unsigned Final Account was final and agreed, in its own letter dated 15 December 2008 which was sent in response to Sui Chong's letter enclosing the unsigned Final Account, Fai Tak referred to Sui Chong's "proposed Final Account" (my emphasis). Fai Tak also sought by the same letter to confirm its acceptance of the proposed Final Account but on conditions, namely, that there should be no further claim or deduction by either party to the amounts stated in the account. There is no evidence of any reply or acceptance from Sui Chong to these conditions, let alone any evidence of Sui Chong's unequivocal admission or acceptance of the Final Account as being indeed final and agreed. 56.The cases cited by Counsel for Fai Tak are not authorities that the submission of a Final Account by itself constitutes an admission of liability and quantum. Wai Yip Electrical Engineering Co. Ltd. v. Chevalier (Envirotech) Ltd. HCCT 47/2004, 25 October 2004 and Bader Ahmed Al-Khorafi v. Biwater Schellabear Ltd., 8 October 1986 were decided on their own facts, the court accepting in each case that there was evidence to support a finding that the defendant had acknowledged and admitted its liability for the sum claimed by the plaintiff. 57.On the evidence in this case, it is simply not possible to conclude that there is no dispute between the parties as to the amount claimed by Fai Tak. 58.As for the argument of estoppel raised by Counsel for Fai Tak, this goes to the merits of Sui Chong's defence to Fai Tak's claims. Counsel argued that if Sui Chong's admission in respect of the Final Account is not sufficiently unequivocal, then Sui Chong is estopped from deny that it is indebted to Fai Tak. I agree with Counsel for Sui Chong that if there is no unequivocal admission, then there is a dispute between the parties, and the mandatory stay of proceedings follows. Whether or not Sui Chong has any defence to Fai Tak's claim is a matter for the arbitral tribunal. Is the clause in question capable of being performed & Is the dispute or difference between the parties within the ambit of the arbitration agreement? 59.There is no issue raised by Fai Chong that Clause 18 of the Standard Form Domestic Subcontract is incapable of being performed. Clause 18 provides for "any dispute or difference" arising between the subcontractor and the contractor "in connection with" the Sub-Contract to be referred to arbitration. It is certainly wide enough to include the current dispute between Sui Chong and Fai Tak as to the amount claimed to be due and payable to Fai Tak in respect of the variation work and any other Works carried out under the Sub-Contract. Conclusion 60.For the above reasons, I am satisfied that a stay of proceedings is justified, and accordingly made an order on 16 June 2009 in terms of paragraph 1 of the Summons, with costs to Sui Chong, with certificate for Counsel. The costs of the Summons, together with the costs of the dismissed application for leave to adduce further evidence, were summarily assessed and allowed at $93,000.
Mr. Alan Kwong, instructed by Messrs. Chris H.M. Yuen & Co., for the Plaintiff Miss Liza Jane Cruden, instructed by Messrs. Wong & Fok, for the Defendant |
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