Lo Pui Fan and Another v. Hongkong United Dockyards Ltd

HCPI 171/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PERSONAL INJURIES ACTION NO. 171 OF 2011

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D E C I S I O N

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1.This is an application by the third party to stay the 3rd party proceedings for arbitration.

Background

2.The plaintiffs are the administratrices of the estate of Hung Tak Ming Raymond, deceased.  Mr Hung was a grit-blasting and painting worker employed by the defendant.  He was on duty on 13 March 2008.  He was fatally injured when fell from an elevated dock arm which suddenly detached from the floating dock on which it was installed. 

3.The plaintiffs by their statement of claim filed on 5 December 2011 sued the defendant for damages under the Law AmendmentAnd Reform (Consolidation) Ordinance, Cap. 23 and the Fatal Accidents Ordinance, Cap. 22.  The grounds of claim are negligence, breach of statutory duties in relation to the provision of a safe working place and working system, breach of occupier’s common duty of care and breach of implied terms of the employment contract or any one or more of them. 

4.The defendant filed a defence on 9 January 2012 and denied liability.  It also issued a third party notice on the same day which was amended on 11 January 2012. 

5.The third party designed and built the floating dock for the defendant pursuant to a contract dated 15 July 1993.  The defendant alleged in the third party notice that the floating dock was built by the third party according to a defective design and with inferior materials. 

6.The defendant therefore claimed in the third party notice a full indemnity against the plaintiff’s claim.  Alternatively, it seeks contribution to the plaintiff’s claim by the third party under the Civil Liability (Contribution) Ordinance, Cap. 377 and/or the common law and also to the employees’ compensation that the defendant had paid the plaintiffs under the said Ordinance and/or the Employees’ Compensation Ordinance, Cap. 282.

Nature of the defendant’s claims against the third party

7.Mr Kwok, counsel for the defendant made it plain that the defendant is not seeking any contractual remedy from the third party but is relying on the two ordinances.  He also submitted that the defendant’s claim for indemnity is not a contractual claim but is overlapping with the claims under the two ordinances.  These claims are based on the third party’s alleged negligence and breach of duty of care owed to the defendant.

The third party’s submissions for stay

8.The defendant issued a summons on 12 September 2012 for directions for the third party proceedings.  The third party, however, issued a summons on 14 September 2012 for an order to stay the third party proceedings for arbitration in London in accordance with clause 14 of the contract between the defendant and the third party dated 15 July 1993.

9.Clause 14 of the contract provided:

CLAUSE 14 - ARBITRATION”

14.1   Any dispute arising under or by virtue of this Contract or any differences of opinion between the parties hereto concerning their rights and obligations under this Contract shall be resolved by arbitration.  Such arbitration proceedings shall take place in London unless the parties hereto agree otherwise.  All arbitration proceedings shall be conducted and governed in accordance with English Law.  Either party may demand arbitration of any such dispute or difference of opinion by giving written notice to the other party.

14.2   … The Arbitration shall be before a single arbitrator who shall, in default of agreement, be appointed by the Institute of Maritime Arbitrators.  The provisions of the Laws of England shall apply to any such arbitration, …

…

14.4   The award of the Arbitrator as to any question so submitted shall be final, binding and conclusive upon the parties hereto and their respective successors and assigns, and each agrees to abide by such decision.

…

14.6   Judgment on award by the Arbitration Board may be entered in any court of competent jurisdiction.

14.7   Each party submits to the non exclusive jurisdiction of the English courts and agrees that all notices whether required in an arbitration or otherwise shall be deemed duly served if sent to the address of the relevant party in Clause 18 hereof.”

10.Mr Hughes, counsel for the third party, submitted that clause 14.1 of the contract is an all-encompassing and valid arbitration agreement.  It provides that any dispute arising under or by virtue of the contract or any differences of opinion between the parties concerning their rights and obligations under the contract shall be resolved by arbitration.  He submitted that there is no doubt that the issue in the amended third party notice falls squarely under the arbitration agreement which covers every eventuality.  The law does not require the arbitration agreement to specify each and every dispute that it covers. The wording is sufficiently broad to cover the statutory claims. 

11.Mr Hughes relied on the English case of Wealands v CLC Contractors Ltd [1999] CLC 1821.  The facts in that case are quite similar to those in this case.  The plaintiff there sued the defendant for damages for the death of her husband who was employed by the defendant as a shot blaster.  The husband suffered fatal injuries when the scaffold on which he was working collapsed.  The plaintiff alleged that the scaffold was defective. The defendant denied it but pleaded in the alternative that it was built negligently by the sub-contractor. 

12.The defendant issued third party notice against the sub-contractor seeking an indemnity or contribution on several grounds under the sub-contract including contractual indemnity clauses, breach of the sub-contract and breach of tortious duties.  One of the claims was under the Civil Liability (Contribution) Act 1978 (“the Contribution Act”).  Clause 18 of the sub-contract was an arbitration clause which provided:

“(1) If any dispute arises between the Contractor and the Sub-Contractor in connection with or arising out of this Sub-Contract or the carrying out of the Sub-Contract Works … it shall, … be referred to the arbitration and final decision of a person agreed between the parties, or failing such agreement, appointed … by the President … of the Institution of Civil Engineers and any such reference to arbitration may be conducted in accordance with the Institution of Civil Engineers’ Arbitration Procedure 1983 …”

The third party obtained an order from Tuckey J to stay the third party proceedings in favour of arbitration and the defendant appealed.

13.The defendant argued in the English Court of Appeal that the arbitration clause did not cover the defendant’s claim for contribution under the Contribution Act.  The defendant submitted that the arbitrator had no jurisdiction to award contribution in accordance with the principles of the Contribution Act. 

14.The Court of Appeal held in paras 19 to 22 of the judgment that even if the arbitrator would lack the power to award contribution, that was the consequence of the parties having agreed to submit their disputes to arbitration as the Contribution Act did not prevent any party to forgo by agreement any right to seek contribution.  The court further held that the arbitrator did have power to award contribution because the submission by the parties to arbitration necessarily gave the arbitrator implied powers to exercise every right and discretionary remedy given to a court of law.

The defendant’s submissions against stay

15.Mr Kwok, counsel for the defendant, on the other hand submitted that clause 14.1 of the arbitration agreement in this case only covers contractual claims and claims connected with the contract between the defendant and the third party.  It does not cover claims brought by the defendant against the third party under s. 3 of the Civil Liability (Contribution) Ordinance or s. 25(1) (b) of the Employees’ Compensation Ordinance.  This is the issue in this application.

16.Mr Kwok then referred to X Ltd. v. Y Ltd. 2005 BLR 341 where Jackson J., after reviewing the authorities, said:

“36. From this review of the authorities, I derive four propositions:

(1) The question whether a dispute falls within the arbitrator’s jurisdiction turns upon the construction of the relevant arbitration clause. This is an objective exercise of contractual interpretation (see Bingham L.J. in Ashville at p.506).

(2) Previous decisions about the proper interpretation of different arbitration clauses may be persuasive but they do not constitute binding precedents (see May L.J. in Ashville at pp.494-495).

(3) There have been cases where courts have held that a dispute concerning one contract falls within the ambit of the arbitration clause of another earlier contract. Each of these decisions turns upon its own particular facts (see Faghirzadeh, A. and B. and El Nasharty).

(4) If an arbitration clause is drafted in appropriate terms, it may encompass a claim for contribution under the Civil Liability (Contribution) Act 1978 (see Wealands).

17.Regarding Wealands, Mr Kwok referred to Russell on Arbitration (23^rd ed) para 6-112 where the authors state the current position

“The current position. It is clear that if the arbitration agreement specifically confers jurisdiction to order a contribution under the 1978 Act then this will be upheld, given the parties’ right to agree on the remedies available. The position is more uncertain in the absence of a clear provision in the arbitration agreement conferring jurisdiction to order a contribution. In Wealands v CLC Contractors Ltd, where a party sought to resist a stay of court proceedings, the court decided that even if an arbitrator would lack power to determine a right of contribution under the 1978 Act that would not be a good reason for refusing a stay, because, by agreeing to arbitration, the parties would be deemed to have agreed to forego any right to that remedy. The court went on to consider, obiter dicta, the existence of the jurisdiction and, relying on the argument that tribunals in England have implied powers to exercise ‘every right and discretionary remedy given to a Court of Law’, the court concluded, somewhat tentatively, that an arbitrator was empowered to order a contribution. In X Ltd v Y Ltd, although it was accepted in principle that an arbitration agreement may be drafted in sufficiently wide terms so as to encompass a claim for contribution under the Civil Liability (Contribution) Act 1978, a provision in that case that ‘all disputes, differences or questions between the parties to the Contract with respect to any matter or thing arising out of or relating to the Contract … shall be referred to the arbitration’ was held not to achieve that result. The safest approach if it is contemplated that a claim for a contribution is to fall within the tribunal’s jurisdiction is to provide for this expressly in the arbitration agreement.”

18.Mr Kwok also referred to Fillite (Runcorn) Ltd v Aqua-Lift (a Firm) 1989 Times 28 February where Slade LJ with the agreement of  Nourse LJ held that the phrase “disputes arising under a contract” was not wide enough to include disputes which did not concern obligations created by and incorporated in that contract.

19.Mr. Kwok then referred to Aggressive Construction Co. Ltd. v Data-form Engineering Ltd. HCA 2143/2008 (unreported decision dated 4 August 2009) where Deputy High Court Judge To (as he then was) held (in paras. 5, 26 and 27) that a statutory claim brought by a contractor under s. 43F of the Employment Ordinance against a sub-contractor for reimbursement of payments paid by the contractor to the sub-contractor’s workers under s. 43C of the same ordinance was a statutory claim and lied outside the scope of an arbitration clause of a timber formwork sub-contractor.  The arbitration clause covered “any dispute in relation to the sub-contract … between the main contractor and the sub-contractor …”

20.Mr Kwok also referred to the arbitration clause in X Ltd. v. Y Ltd.which provided:“Arbitration (English law),…[A]ll disputes, differences or questions between the parties to the Contract with respect to any matter or thing arising out of or relating to the Contract…shall be referred to the arbitration …”.  Jackson J. held that a contribution claim pursuant to section 1 of the Contribution Act did not come within the scope of the clause.  The learned judge said:

“41. I turn now to the “officious bystander” test, which was invoked by Mocatta J. in Faghirzadeh and which is relied upon by Mr. Elliott in the present case. Suppose that an officious bystander had been present on 12th October 1993 when the various contracts were being signed and that he had the temerity to ask the following question: “Excuse me, suppose that corrosion develops in the Plant and that A claims damages against X for breach of Project Contract S. In those circumstances, if X claims a contribution against Y under the Civil Liability (Contribution) Act 1978, on the basis of breaches by Y of the PDS Contract, will that claim for contribution fall within the scope of the arbitration clause in the Implementation Contract?” How would the various participants have responded to such a question from the officious bystander? A number of possible answers spring to mind. These would include the following: “I don't know”, or: “That sounds a bit far fetched”, or: “I am glad you asked that question, we had better think about it”. This situation is far removed from that described by McKinnon L.J. (the author of the “officious bystander” test) in Shirlaw v. Southern Foundries Ltd. [1939] 2 KB 206, 227. The parties would certainly not have testily turned round to the officious bystander and said in unison: “Oh, of course”. I therefore come to the conclusion that the “officious bystander” test which Mr. Elliott has invoked in argument tends to undermine his argument rather than to support it.”

21.Mr Kwok also referred to several other Australian decisions which decided against the stay of statutory claims in favour of arbitration.  I do not think I need to refer to them all as the resolution of this application turns upon the construction of the arbitration clause in this case.

22.Mr Kwok emphasised that the arbitration clause herein only covered: “Any dispute arising under or by virtue of this Contract or any differences of opinion between the parties hereto concerning their rights and obligations under this Contract”.  The clause makes no mention of the defendant’s statutory claims which are brought under Hong Kong laws. 

23.He also referred to the provision in the arbitration clause requiring the arbitration to be conducted in London unless the parties hereto agree otherwise and it should be conducted in accordance with English law.  He submitted that this is an indication that the clause is not intended to include statutory claims brought under Hong Kong laws.

24.Clause 14.2 of the arbitration clause also provided “The Arbitration shall be before a single arbitrator who shall, in default of agreement, be appointed by the Institute of Maritime Arbitrators.”  He submitted that the parties intended that the arbitrator should have maritime expertise.  That would militate against any intention to ask the arbitrator to decide statutory claims brought under Hong Kong laws as one does not expect a maritime expert to be conversant with the laws of Hong Kong. 

25.Mr Kwok also referred to para. 24 of Aggressive Construction where Deputy Judge To gave one of the reasons for excluding the statutory claim from the arbitration clause there and which reason is applicable to this application:

“24. That must be right. The purpose of arbitration is to facilitate the fair and speedy resolution of disputes without unnecessary expense. This objective is usually achieved by having specialist arbitrators to arbitrate on issues in which their expertise is called for. Engineers and architects, for example, are usually appointed as arbitrators to adjudicate on disputes arising from engineering and building contracts. While arbitrators usually have a good general knowledge of the law, that is, nevertheless, not their expertise. It is usually not their function to determine what is the effect of the general law which is not related to the issues for which their expertise is called for. ...”

Decision

26.Having reviewed the arguments and authorities submitted by both sides, I agree with Mr Kwok’s submissions.  Clause 14.1 is an all-encompassing arbitration clause only for any “dispute arising under or by virtue of this Contract or any differences of opinion between the parties hereto concerning their rights and obligations under this Contract”.  It does not cover the statutory claims brought by the defendant under s. 3 of the Civil Liability (Contribution) Ordinance and s. 25(1) (b) of the Employees’ Compensation Ordinance.

27.Mr Kwok also referred to the 15 month delay on the part of the third party in applying for stay.  He submitted that the third party should be held to have waived the right to arbitration, if it should have such a right.  I note that the third party’s application for stay was taken out only two days after the defendant had taken out an application for third party directions.  I do not think the delay is sufficiently serious to amount to a waiver of arbitration on the part of the third party.

28.In the premises, I dismiss the third party’s application to stay.  I also make a costs order nisi that the third party do pay the defendant the costs of this application.