P v M

Judgment Date24 July 2019
Neutral Citation[2019] HKCFI 1864
Judgement NumberHCCT6/2019
Subject MatterConstruction and Arbitration Proceedings
CourtCourt of First Instance (Hong Kong)
HCCT6/2019 P v. M

HCCT 6/2019

[2019] HKCFI 1864





NO 6 OF 2019


IN THE MATTER of the Arbitration Ordinance (Cap 609)
IN THE MATTER of an Arbitration


P Plaintiff
(Respondent in the Arbitration)
M Defendant
(Claimant in the Arbitration)


Before: Hon Coleman J in Chambers

Date of Hearing: 24 July 2019

Date of Decision: 24 July 2019





1. This is the second time that matters arising from the underlying two consolidated arbitration proceedings (“Arbitration”) have come before the Court. As on the previous occasion, P is represented by Ian Pennicott SC, instructed by Mayer Brown, and M is represented by Julian Cohen, instructed by Hogan Lovells.

2. The Arbitration came about as follows. P had engaged M as its main contractor to carry out construction works. The parties entered into a construction contract (“Contract”), which incorporated an arbitration agreement which provided for domestic arbitration. Accordingly, Schedule 2 of the Arbitration Ordinance Cap 609 (“Ordinance”) applied to the arbitration agreement.

3. Disputes arose under the Contract, and M as claimant commenced the Arbitration against P as respondent. The claims made by M were for its financial entitlements under the Contract, including claims for loss and expense. After a hearing in November 2017, an Interim Award was published dated 11 April 2018 (“First Award”), whereby the tribunal ordered P to pay to M a total sum of HK$6,246,535.16 for loss and expense, plus interest. This amount has been paid into court.

4. P disputed parts of the First Award, which relate to a sum of HK$4,002,919.58 representing M’s site expenses and overheads for the period from 1 October 2013 to 8 March 2014, and a sum of HK$1,628,926.38 representing M’s extended CAR and EC insurance costs for the period from 1 October 2013 to 8 March 2014, making a total sum of HK$5,631,845.96 (“Disputed Amount”).

5. The matter first came before the Court when P made an application to challenge parts of the First Award, on the ground of serious irregularity, under section 4 (2) (b) and/or 4 (2) (c) and 4 (3) (c) of Schedule 2 of the Ordinance, alternatively under Article 34(2)(ii) of the Model Law. The application was heard by Mimmie Chan J.

6. The application succeeded, in that a serious irregularity was found to have occurred. Mimmie Chan J was not satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration, so ordered the matters to be remitted for reconsideration. Paragraphs 169, 170, 172, 174 and 175 of the First Award were declared to be of no effect pending until further order of the tribunal, after hearing and considering the directed submissions from the parties. Though headed as a Decision I shall adopt the definition used by the parties and refer to it as the “Judgment”.

7. Subsequently, the Arbitrator directed various further submissions and then made his Second Interim Award dated 27 December 2018 (“Second Award”). In the Second Award, the Arbitrator maintained his conclusion as to the Disputed Amount, but for reasons differing from those provided in the First Award.

8. By Originating Summons dated 25 January 2019, P makes an application to challenge parts of the Second Award, also on the ground of serious irregularity, under section 4 (2) (b) and/or 4 (2) (c) and 4 (3) (c) of Schedule 2 of the Ordinance, alternatively under Article 34(2)(ii) of the Model Law.

9. Following various directions made, the substantive hearing of the Originating Summons has come on for hearing before me this morning.

The First Challenge

10. In the challenge to the First Award, P sought an order to set aside the challenged parts of the First Award, or an order declaring those parts of the Award to be of no effect. The grounds relied upon were that the arbitral tribunal had exceeded its powers, or alternatively had failed to conduct the arbitral proceedings in accordance with the procedure agreed by the parties. The alternative order to set aside the First Award under Article 34(2)(ii) of the Model Law was on the ground that P had been denied a reasonable opportunity to present its case in the arbitration.

11. P claimed that the tribunal exceeded its powers and/or failed to conduct the arbitration in accordance with the procedure agreed by the parties, by finding in the First Award that M’s letter of 30 September 2013 (“September Letter”) and its email dated 20 November 2013 attaching a breakdown of costs (“November Breakdown”) constituted notification of M’s claims for site overheads and insurance costs, pursuant to and as required by GCC clauses 27 and 28 of the Contract (“GCC 27 and 28”), so as to entitle M to claim for and recover the Disputed Amount.

12. P’s complaint was that the tribunal made such finding, notwithstanding the fact that M had never claimed in the Arbitration that any notice of claim had ever been given, or was relied upon by M.

13. In its Statement of Defence and Counterclaim served in the Arbitration, P had pleaded that M had failed to give any notice of its loss and expense claim, as required under GCC 27 and 28, that such notice was a condition precedent under the Contract, and that M’s claim for its loss and expense was deemed to be waived under the express provisions of GCC 27 and 28. This pleading was denied in M’s Statement of Reply and Defence to Counterclaim, but with only an averment that P had waived and/or was estopped from relying upon any notice provisions in respect of its entitlements for direct loss and expense because of the delay and disruption to the Works.

14. In various submissions by its Counsel at the arbitration hearing, M confirmed its case was that: (a) M is not required, pursuant to GCC 28.1(2), to give notices either for its claims for the cost of extended insurance, or for the site and head office overheads, as these were instructed as a variation; and (b) only in the alternative that, if notice was required, P had waived any requirement to give notices under GCC 28, or is estopped from asserting M’s failure to give such notices. M neither corrected nor addressed P’s particular submission which highlighted that M had not given any notice pursuant to GCC 28, and P’s emphasis that M itself did not allege that it had done so.

15. In the Judgment, Mimmie Chan J thought it pertinent that in the First Award, the tribunal made it clear that it rejected M’s claim of waiver and estoppel, in the absence of any satisfactory evidence of representation by P and reliance by M. She also noted that: (a) the tribunal did not accept M’s claim that the contractual machinery for claims submission and certification had broken down, so that it was not possible for M to give notification of its claims; and (b) the tribunal did not accept that M’s loss and expense claim was a valuation of a variation claim, to fall within GCC 28 (2). Instead, the tribunal had found that GCC 27 clearly applies to M’s claim for loss and expense arising from the prolongation of the project, and the tribunal in fact rejected M’s claim for head office overheads and profit, for lack of proper notification pursuant to GCC 27 and 28.

16. Nevertheless, the tribunal had allowed the Disputed Amount representing M’s costs of insurance and its site overheads and expenses for the extended period of work, by finding that the September Letter and November Breakdown constituted M’s notification of claim under GCC 27 and 28.

17. From her review of the relevant extracts of the pleadings, Opening Submissions, and Closing Submissions served in the Arbitration, Mimmie Chan J noted that the submissions made on behalf of P were on the content and effect of GCC 28, the necessity for notice to be served thereunder in relation to the claims made by M, and whether representations had been made for waiver or estoppel to be applicable. As M had unequivocally pleaded in its Statement of Reply, and maintained in its Opening and Closing submissions, that no notice was either required or served, P did not address the tribunal on whether the September Letter, the November Breakdown, or any document relied upon by M constituted adequate and sufficient notice as required under GCC 28. She did not accept M’s argument that there was no need for any averment of a positive case that M had given notice as an adequate answer to P’s complaint, not least against the previous procedural directions given in the Arbitration and the applicable Rules.

18. Mimmie Chan J held that if it had been made clear to P, either by M in the course of the hearing of the Arbitration, or by the tribunal prior to its publication of the Award, that the September Letter and/or the November Breakdown was to be relied upon or considered to be a notification of claim as required under GCC 27 and 28, P would have addressed the tribunal as to whether these letters were compliant with the contractual provisions and could be relied upon. In the absence of such notice, she considered that P had been deprived of the fair opportunity to present its case and to make submissions to the tribunal on the effect and adequacy of the September Letter and November Breakdown as proper notices under the Contract. She thought it possible that the tribunal might have reached a different decision on M’s claim for the Disputed Amount, after hearing submissions from P.

19. I interject at this point that I read her reference to “P [having] been deprived of the fair opportunity to present its case and to make submissions to the tribunal on the effect and adequacy...

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