Arbitration - proceedings abroad stayed until application here is decided and until arbitration is concluded if ordered - whether Hong Kong Court should declare that arbitration should proceed in accordance with submissions. Test of balance of convenience not applicable. The "Maria Gorthon" 1976 2 L1. R. 720, The Eleftheria 1970 P. 94 distinguished, "Steps of a procedural nature" taken in foreign court not a bar to arbitration here. Guiding principle that parties who have made a contract should keep it. Precision of equitable principles. Waiver and election not established. Arbitration ordered to proceed.
|IN THE COURT OF APPEAL
|No. 69 of 1981
|Sing Tao Newspapers Ltd.
|Hong Hua Machinery Works Ltd.
Coram: Hon. Leonard, V.P., Cons & Zimmern, JJ.A.
Date of Judgment: 9th December, 1981.
1. On the 30th July 1980 the appellant ("S.T.") gave notice to the respondent ("H.H.") of determination of three agreements, one of which was called the "sales agreement", one the "printing agreement", and the third the "hiring agreement". Each was dated the 17th April 1978 and the notice alleged that H.H. was in breach of all three and demanded that disputes between the parties be submitted to arbitration in Hong Kong. Both the sales agreement and the printing agreement contained arbitration clauses, each in extremely wide terms and embracing substantially the same matters. With this notice H.H. did not comply and S.T. in consequence requested the Chairman or President of the Law Society here to appoint an arbitrator to resolve the differences arising between the parties.
2. That gentleman on the 15th October 1980 appointed S.V. Gittins, Esq., Q.C., to be the arbitrator in respect of the sales agreement and the printing agreement but declined to make any appointment in respect of the hiring agreement not wishing to decide whether or not it was arbitrable. The subject matters of the agreements, printing presses, were at all relevant times in California in possession of H.H. or of its subsidiary, Newsweb Printing Ltd. of California ("Newsweb").
3. On the 1st August 1980 S.T. and its Californian subsidiary S.T.S.F. commenced proceedings in California in the Superior Court against H.H. and its subsidiary Newsweb for a temporary restraining order and preliminary injunction for the purpose of preventing H.H. and Newsweb from operating or handling the printing presses which were located in premises let by S.T.S.F. to Newsweb in San Francisco (the Little Field premises) while S.T.S.F. sought from Newsweb in the Municipal Court arrears of rent and possession of the Little Field premises. On the 20th August 1980, H.H. and newsweb filed a cross-complaint in the Superior Court against S.T. and S.T.S.F. adding as parties John Fung and Sally Aw Sian (an executive and director of S.T. respectively) and ten unidentified parties ("John Does"). The cross-complaint alleged - that S.T. was in breach
||of the sales agreement by failing to pay in full the consideration for the printing press;
||of the printing agreement by failing to pay printing charges; and
||that John Fung, Sally Aw Sian and the ten John Does were guilty of misrepresentation and fraud in relation to the making of all three agreements.
There was also an application for declaratory relief and relief amounting to a claim for rectification. The declaration sought was that monies owed by Newsweb to S.T.S.F. for rent of the Little Field premises should be set off against monies allegedly owed by S.T. to H.H. The "rectification" sought was of the printing agreement which was expressed to be terminable on six months' notice, H.H. contending that the true intention was that it should run for ten years. If this was granted it would have affected the hiring agreement which was for the same term as the printing agreement. S.T. thereupon on the 1st October 1980 filed a notice of motion in the Superior Court -
||to quash service of the cross-complaint;
||to dismiss it on the ground of inconvenient forum maintaining that the matter should be arbitrated in Hong Kong.
This motion failed. Thereupon, Mr. Gittins having in the meantime been appointed as arbitrator in Hong Kong, S.T. filed a demurrer to the cross-complaint, coupled with a motion to strike it out alternatively to dismiss it and for an order staying the proceedings on the cross-complaint until S.T.'s application to arbitrate "now pending before the Supreme Court of Hong Kong is determined and until arbitration is held if it is so ordered. This motion paper was not in evidence before the trial judge, it has been placed before us by consent of the parties.
4. The grounds stated in support of the application to dismiss may be summarised as a claim that the matter should go to arbitration. The demurrer is expressly made on a separate and alternative grounds "expressly reserving all rights ...... to submit to arbitration". It attacks H.H.'s legal capacity to sue for failure to comply with requirements of the Californian Corporation Code; it attacks the cross-complaint by making a number of what may be called pleading points. Finally the grounds in support of the motion to stay refer to the relevant section of the Code of the Civil Procedure and claim that the issues raised by the cross-complaint are "controversies to be arbitrated pursuant to the application for arbitration in Hong Kong". All reliefs sought by this document are procedural. By it S.T. sought to terminate or halt the proceedings in California and to enforce the arbitration agreement. In the event the only relief obtained by S.T. was a stay. The other claims do not appear to have been dealt with but the application for a stay was granted "till the cross-defendant's Sing Tao Newspaper Ltd.'s application to arbitrate now pending before the Supreme Court of Hong Kong is decided and until arbitration is concluded if ordered therein". This order was made on the 5th November 1980 and the proceedings in California have been stayed since that date. In my view it is vital to keep this fact in mind. The cross-complaint is not proceeding in California. If arbitration had been granted by the trial judge, or if it is granted as a result of this appeal, no question of contemporaneous conflicting decisions would arise. For I have no reason to suppose that if the matter goes to arbitration and the conflicts that have arisen are decided by Mr. Gittins his findings and his award would not be accepted by the Californian Courts.
5. The trial judge has pointed out that there is no direct authority on the test which our Courts should adopt in determining whether to declare that arbitration should proceed but that when considering whether or not an injunction should be granted to restrain a party from foreign litigation in favour of domestic arbitration, the test of the balance of convenience was applied, and he finds support for this test in the "Maria Gorthon". The cardinal distinction between the facts in the Maria Gorthon and our case is that in the Maria Gorthon when proceedings had been commenced in Maryland, an application to stay in that jurisdiction was refused; in our case a similar application was granted. The facts in the Maria Gorthon were complicated but Mr. Litton has demonstrated other distinctions between it and our case; thus the shipowners, whose position is to be compared with the appellants here, originally expressed doubt as to whether there was a valid arbitration clause, did not at first start proceedings for arbitration, filed a defence in Maryland after being refused a stay, joined others as third parties, counterclaimed and claimed damages against third parties in another suit so that even if they "were to abandon their position as claimants or counter-claimants or claimants for contribution they would still not be able to extricate themselves from them". (Per Mocatta, J. at page 726).
6. I will refer to the case again when considering waiver; at present I would only note that it led the trial judge to adopt the lest of "the balance of convenience" and to consider whether or not H.H. had shown "strong cause why it would be convenient to deprive S.T. of its contractual expectations". I do not think it pedantic to query the use of the words "convenient" and "expectations". I would concede that he might have easily used the words "just and "rights" respectively instead but I am not satisfied that that would have expressed the test he had in mind. I consider that the test which the trial judge should have adopted was to require H.H. to show strong cause why it would be just to deprive Sing Tao of its contractual rights. In considering whether H.H. have done so he might well have looked to similar matters as those which he did consider for a contractual right to arbitration may be over ridden by the Court.
7. A. The actual steps taken by S.T. On this topic after noting that Harris v. Taylor(1) and Henry v. Geopresco International Ltd.(2) were cases concerned with the problem of the enforcement of foreign judgments he concluded, because of the Maria Gorthon, that "the principle they embody" could be of wider application and that "having sought the benefit of verdicts in its favour" by the steps it took in the cross-complaint S.T. can "hardly expect equity to smile with favour on its present application". He further observed "once Sing Tao embarked on steps in the cross-complaint no matter what internal mental reservations it made, it conducted itself in a way which would disincline equity from bringing about a stay of the litigation". He went on "whether the...