P v C

CourtCourt of First Instance (Hong Kong)
Judgment Date29 October 2019
Neutral Citation[2019] HKCFI 2625
Subject MatterConstruction and Arbitration Proceedings
Judgement NumberHCCT27/2019
HCCT27/2019 P v. C

HCCT 27/2019

[2019] HKCFI 2625

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 27 OF 2019

______________

IN THE MATTER OF ARBITRATION ORDINANCE, CAP 609
and
IN THE MATTER OF AN ARBITRATION

________________________

BETWEEN
P Plaintiff
(Respondent in the Arbitration)
and
C Defendant
(Claimant in the Arbitration)

________________________

Before: Hon Mimmie Chan J in Chambers
Dates of Written Submissions: 12, 19 & 26 July 2019
Date of Decision: 29 October 2019

______________

D E C I S I O N

______________

Background

1. This is an application made by the Plaintiff for leave to appeal against the Interim Award of the Arbitrator published on 10 April 2019 (“Award”), in an arbitration in Hong Kong relating to the renovation and conversion of a building in Wanchai (“Arbitration”). The application is made pursuant to s 6 (1) (b) of Schedule 2 (“Schedule”) to the Arbitration Ordinance (“Ordinance”), and 3 questions of law are identified for the intended appeal. There is no dispute that the Schedule applies, as the agreement between the parties provides for the Arbitration to be domestic, and for the HKIAC Domestic Arbitration Rules to apply to the Arbitration.

2. Under s 6 (3) of the Schedule, the Court “must” determine an application for leave to appeal without a hearing unless it appears to the Court that a hearing is required. Under s 6 (4), leave to appeal is to be granted only if the Court is satisfied that (a) the decision of the question will substantially affect the rights of one or more of the parties; (b) the question is one which the arbitral tribunal was asked to decide; and (c) on the basis of the findings of fact in the award, the decision of the tribunal on the question is “obviously wrong”; or the question is one of general importance and the decision of the tribunal is “at least open to serious doubt”.

3. Pursuant to directions of the Court, written submissions were filed on behalf of the parties in support of and in opposition to the application. The Court further directed that no hearing is required, all in line with the objectives set out in s 3 of the Ordinance.

4. It has to be borne in mind that an application for leave to appeal on a question of law arising out of an award is a filtering process. As highlighted in the decision of Mustill J (as His Lordship then was) in Vinava Shipping Co Ltd v Finelvet AG (The “Chrysalis”) [1983] 1 Lloyd’s LR 503, the court at the first stage, of the application for leave, gives effect to the policy whereby “the interests of finality are placed ahead of the desire to ensure that the arbitrator’s decision is strictly in accordance with the law.” As His Lordship explained:

“Some examination of the merits takes place at this stage, because the stronger the applicant’s case for saying that the arbitrator was wrong, the better his prospect of obtaining leave to appeal. But the examination of the law is summary in nature, and does not lead to any definite conclusion. The exercise is discretionary throughout; the mesh of the filter is fine; and it must, I think, he recognized that some cases will be caught in the filter which would, if the appeal had been allowed to go forward, result in a decision that the award could not stand.”

5. The judgment in The Chrysalis also contains a helpful summary on the 3 stages of an arbitrator’s process of reasoning, with the reminder that only the second stage of the process is the proper subject matter of any appeal on law:

“(1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute.

(2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached.

(3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision.”

6. The Plaintiff and the Defendant in this case had entered into an agreement (“Contract”), whereby the Plaintiff engaged the Defendant as the main contractor to carry out renovation and alteration works (“Works”) for a building in Wanchai, Hong Kong. Commencement of the Works was on 1 November 2012, with a date for completion of 26 September 2013 under the Contract. The Works were significantly delayed and handed over to the Plaintiff on 31 March 2015, at which point the Defendant vacated the site.

7. The disputes referred to arbitration pursuant to the Contract related to the Defendant’s claims of payment for work done and materials supplied under the Contract, extensions of time, and loss and expenses or alternatively damages arising from delay. By way of counterclaim in the Arbitration, the Plaintiff sought damages for defects, contra charges, liquidated damages for the Defendant’s failure to complete the Works within a reasonable time, and to open up and revise an extension of time (“EOT”) granted by the project manager.

8. The questions for which leave to appeal is currently sought, as identified in this application for leave, relate to:

(1) whether the Defendant is entitled to any extension of time for the delay of 105 days in respect of what has been referred to as the “KC Period” (“EOT Question”);

(2) whether the Defendant’s loss and expense claim for 179 days was time-barred for non-compliance with the condition precedent set out in GCC 28.1 and GCC 28.2 of the Contract (“Time Bar Question”); and

(3) whether on the true construction of the relevant provisions of the Contract, the responsibility for the condition of window openings to the Building and their reconstruction are to be borne by the Defendant, or the Plaintiff (“Risk Allocation Question”).

EOT Question

9. Neither party has raised issue as to whether decisions on the questions on which leave to appeal is sought will substantially affect the rights of one or more of the parties, which is one of the conditions to be satisfied under s 6 (4) of the Schedule. As the Award dealt with claims and counterclaims for substantial amounts in the Arbitration, I accept that if the arbitrator is shown to have erred in his decision on the questions, the Award would be reduced by a significant sum, to substantially affect the rights of both parties.

10. The EOT Question is whether the Defendant is entitled to any EOT under the Contract for the relevant period of delay. According to the Plaintiff, the issue on this question is whether there was evidence before the tribunal to support the arbitrator’s findings on the cause of the delay involved, and the fact that the relevant delay was a continuation of the issues afflicting the condition of the brickwork infill panels.

11. First, this issue as framed is a determination on the facts of this case, and is a one-off event dependent on the particular facts. It is not a question of general importance, and under s 6 (4) (c) of the Schedule, leave to appeal will only be granted if, on the basis of the findings of fact in the Award, the decision of the tribunal is “obviously wrong”.

12. The Plaintiff has identified paragraph 656 of the Award, where the arbitrator states his finding “as a matter of fact that the substantial delay within the KC period was a continuation of the issues afflicting the condition of the brickwork infill panels”, and that all the critical delays are the liability of the Plaintiff.

13. In context, the arbitrator stated earlier, from paragraph 655 of the Award, thus:

“655 Inexplicably, for a project in such dire straits and on a short programme, it took a further 68 days to appoint a replacement window specialist i.e. KC, the appointment of which was driven entirely by the Claimant [ie the Defendant]. There then ensured a further delay, according to Mr A, of 105 days due to the slow progress of KC. While Mr A criticizes the performance of KC he does so in only a general manner and identifies no specific points. Occurring contemporaneously with these delays was the overarching delay arising from the mismatch of windows due to the state of the Building. While Mr A has identified a period of 212 days I consider it occurred concurrently with other matters such that it is not appropriate to ascribe any specific period to the activity. Both Mr A and Mr B agree that a delay of at least 391 days arose from the windows activity. This was a matter which was intended to take a matter of months but in fact took almost 2½ years to complete.

656 I also find that due to the preponderance of the earlier (four) delaying events that it is inappropriate to try to single out anything within the KC period as being a culpable delay. Nothing occurring within this period had any effect upon the existing “massive and persistent” delay to the windows trade albeit there were some other, concurrently occurring, delaying events...”

14. The Plaintiff has emphasized that it is not challenging the arbitrator’s findings of fact. It only claims that there was no evidence to support the findings of the arbitrator, that the work of removing the loose brickwork infill panels and the work of repairing the window surrounds (“Repairs”) were proceeding concurrently with the installation of windows, and that the Repairs caused critical delays.

15. The Plaintiff highlighted the fact that the event of the Repairs being a concurrent and critical delay was not so asserted by the Defendant. The Plaintiff further claims that there was no evidence adduced to support the arbitrator’s findings that the Repairs were continuing and critical until 14 August 2014, when KC was in delay in the window...

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1 firm's commentaries
  • HK Court confirmed high threshold for challenging arbitral awards on questions of law
    • Hong Kong
    • JD Supra Hong Kong
    • 23 April 2020
    ...opted into Schedule 2 to the Arbitration Ordinance, which allows challenges to be made on questions of law. Introduction The case P v C [2019] HKCFI 2625 (HCCT 27/2019) concerned an arbitration in Hong Kong relating to the renovation and conversion of a building in Wanchai into a serviced a......

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