Chee Cheung Hing & Co Ltd v Zhong Rong International (Group) Ltd

HCA 1454/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1454 OF 2015

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REASONS FOR DECISION

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1. This is the Defendant’s application under s 20 of the Arbitration Ordinance (“Ordinance”) for a stay of these proceedings instituted by the Plaintiff, and for the dispute between the parties to be referred to arbitration. At the conclusion of the hearing on 2 March 2016, I granted the stay sought in terms of its application. The following are my reasons for the decision.

2. The Plaintiff commenced proceedings against the Defendant, claiming that it had submitted a tender for works to be carried out (“Works”) at a development in Lantau Island (“Tender”), for the price of approximately HK$57 million. The Tender price was subsequently reduced to HK$51.6 million. The Plaintiff claims that despite the Defendant’s issue of a letter of intent dated 5 April 2012 (“Letter of Intent”), and despite the reference in the Tender to the Main Contract to be entered between the Plaintiff and the Defendant for the Plaintiff’s execution of the Works, no contract had been signed by the Defendant. The Plaintiff therefore seeks in these proceedings a declaration that the parties had not entered into any contract for the execution of the Works, and that the Plaintiff is entitled to payment of a sum of HK$55.8 million (instead of the revised Tender price of HK$51.6 million), as the reasonable value of the Works actually carried out by the Plaintiff in respect of the development.

3. The Defendant claims that the Tender had been accepted by the Defendant, as evidenced by the parties’ signing of the Letter of Intent, and that the parties’ conduct and the Plaintiff’s execution of the Works affirmed and evidenced the existence of a binding contract between the parties, on the terms of the Agreement and Schedule of Conditions of Building Contract referred to in the conditions of the Tender, which terms include an arbitration clause. On the basis of there being a binding contract and a binding arbitration agreement made between the parties, the Defendant seeks a stay of this action under s 20 of the Ordinance.

4. Under s 20 (1) of the Ordinance, Article 8 of the Model Law has effect and Article 8 (1) provides :

“A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer to the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

5. The approach to be taken by the Court in dealing with an application for stay has been clearly set out in Tommy CP Sze & Co v Li & Fung (Trading) Ltd. There are 4 questions for the court. (1) Is there an arbitration agreement between the parties? (2) Is the clause in question capable of being performed? (3) Is there in reality a dispute or difference between the parties? (4) Is the dispute or difference between the parties within the ambit of the arbitration agreement?

6. The authorities are clear that the onus on the applicant for stay is only to demonstrate that there is a prima facie case that the parties were bound by an arbitration clause. Unless the point is clear, the Court should not attempt to resolve the issue and the matter should be stayed in favor of arbitration (PCCW Global Ltd v Interactive Communications Service Ltd [2007] 1 HKLRD 309). When there is a dispute as to whether there was an arbitration agreement or clause, the onus on the applicant for stay is 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).

7. In this case, the issue in dispute between the parties is whether the Tender had been accepted by the Defendant, and whether a binding agreement existed between the parties for the Defendant’s execution of the Works on the terms and conditions set out in the Tender, which provide for the Agreement and Schedule of Conditions of Building Contract with its Appendix issued by the Hong Kong Institute of Architects (“Agreement and Schedule”) to apply.

8. There is no dispute as to the form and terms of the Tender. These expressly provide:

“Unless and until a formal agreement is prepared and executed this tender together with the written acceptance thereof by the (Defendant) subject to the provisions of Clause 3 hereof shall constitute a binding contract.”

9. The Plaintiff’s case is premised on the fact that the Letter of Intent signed by the Plaintiff and...