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T v B

Judgment Cited authorities 4 Cited in Precedent Map Related
Judgment Date29 December 2021
Neutral Citation[2021] HKCFI 3645
Judgement NumberHCCT13/2021
Citation[2022] 1 HKLRD 279
Year2021
CourtCourt of First Instance (Hong Kong)
HCCT13/2021 T v. B

HCCT 13/2021

[2021] HKCFI 3645

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 13 OF 2021

________________________

IN THE MATTER OF Order 73 Rule 5 of the Rules of High Court (Cap. 4A)

and
IN THE MATTER OF an Arbitration Interim Award dated 30 October 2020 in Case No. HKIAC/20052 made by Mr. Philip V. Boulding QC

and
IN THE MATTER OF Section 81 of the Arbitration Ordinance (Cap. 609) and Article 34 of the UNCITRAL Model Law on International Commercial Arbitration

________________________

BETWEEN
T Plaintiff

and

B Defendant
________________

AND

HCCT 14/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 14 OF 2021

________________________

BETWEEN
T Plaintiff

and

B Defendant
________________
(Heard together)
Before: Hon Coleman J in Chambers (Not Open to Public)
Date of Hearing: 1 December 2021
Date of Judgment: 29 December 2021

_______________

J U D G M E N T

_______________

A. Introduction

1. By contract dated 10 January 2018 (“Main Contract”), the Defendant was engaged by the Hong Kong Government as the main contractor for certain reclamation and advance works. By contract dated 25 April 2018 (“Sub-contract”), the Defendant engaged the Plaintiff as one of the sub-contractors for part of the Main Contract works. As often in construction projects, the Main Contract and Sub-contract were ‘back-to-back’, with the same completion date of 28 July 2024.

2. The Plaintiff says that the Defendant committed various breaches of the Sub-contract (the details of which are irrelevant for the present purpose) from as early as April 2018, ultimately leading to the Plaintiff’s acceptance of repudiation to bring the Sub-contract to an end on 31 May 2019. Substantial monetary damages are claimed by the Plaintiff.

3. The Sub-contract has an arbitration agreement, Clause 31, the material part of which provides (sic, emphasis added):

31 Disputes

31.1 Sub-Contract Disputes shall be settled in accordance with the provisions of this Clause 31.

31.2 For the purposes of this Clauses 31, a Sub-Contract Dispute shall be deemed to arise when either Party serves on the other a notice in writing (herein called a “Notice of Dispute” which in any event shall only be raised after the completion certificate, or where there is more than one certificate, the last completion certificate, issued by the Relevant Persons under the Main Contract) stating the nature of such Sub-Contract Dispute…

31.5 If:

(i) there is no ADR Procedure in the Main Contract; or

(ii) either Party refuses a request for the dispute to be referred to the ADR Procedure under Clause 31.3; or

(iii) the Sub-Contract Dispute is referred to the ADR Procedure in accordance with either Clause 31.3 or 31.4 and the ADR Procedure fails to resolve such Sub-Contract Dispute

then, in the case of the circumstances set out in Clause 31.5(i), within twenty-eight (28) days of the service of the Notice of Dispute, and, in the case of the circumstances set out in Clauses 31.5(ii) or (iii), within a further twenty eight (28) days of such refusal or failure, as the case may be, either Party may refer the Sub-Contract Dispute to arbitration. Provide always that the Notice of Dispute under this Clause 31 shall only be raised after the completion certificate, or where there is more than one certificate, the last completion certificate issued by the Relevant Persons under the Main Contract…

4. The Plaintiff sought to refer the dispute to arbitration, but the Defendant objected on the basis that it was premature because the completion certificate had not been issued (and because the other conditions precedent had not been satisfied).

5. Mr Philip Boulding QC was appointed as arbitrator (“Arbitrator”) in HKIAC/20052, and he was informed by the Plaintiff that the Defendant had “raised a jurisdictional challenge or dispute”. Thereafter, the shorthand phrase “jurisdictional challenge” was also adopted by the Arbitrator, and by the Defendant. By his Procedural Order No. 1, the Arbitrator gave directions to determine by way of a preliminary issue the validity (or otherwise) of the jurisdictional challenge raised, through exchange of written submissions and an oral hearing held on 24 September 2020.

6. By an Interim Award dated 30 October 2020 (“Award”), the Arbitrator ruled that he did not have jurisdiction on the basis that, on the proper construction of Clause 31, the purported commencement of arbitration was premature. The last paragraph of the Award, §85, headed ‘Decision’, provided:

85. It follows from the contents of the Analysis section of this Interim Award immediately above and I HEREBY DECIDE AND DETERMINE THAT:

(i) [the Plaintiff’s] purported institution of the arbitration by Notice of Dispute No.1 and Request for Mediation No.1 was made prematurely having regard to the true meaning and effect of Clause 31 of the Sub-Contract and, in particular, the fact that the Relevant Person under the Main Contract had not issued any completion certificate as referred to therein which is a pre-requisite to the raising of the Notice of Dispute;

(ii) I do not have jurisdiction to deal with the disputes purportedly referred to me for my determination, save for the jurisdictional challenge raised by [the Defendant] and as to which I decide in [the Defendant’s] favour.

7. As the introductory words to §85 show, the earlier parts of the Award identify the parties’ competing arguments and the Arbitrator’s analysis as to the proper construction and effect of Clause 31. It might be thought obvious that §85(i) summarises the Arbitrator’s view of the effect of his construction of Clause 31, and identifies that as the reason why he held at §85(ii) that he had no “jurisdiction”.

8. By originating summons dated 29 January 2021 issued in HCCT 13/2021, the Plaintiff applied to set aside §85(i) of the Award (“Set Aside Application”), under section 81 of the Arbitration Ordinance Cap 609 (“AO”) which gave effect to Article 34 of the UNCITRAL Model Law. It should be noted that the application was limited to one seeking to set aside only §85(i), and not §85(ii), the argument being:

(1) §85(i) is beyond the parties’ scope of submission to arbitration because the Arbitrator was only appointed to determine the jurisdictional challenge, but not to construe Clause 31. Therefore, §85(i) is liable to be set aside under Article 34(2)(a)(iii).

(2) Clause 31 is not valid because, as construed by the Tribunal, Clause 31 precludes the right to have disputes heard and determined within the statutory limitation period and thus liable to be set aside under Article 34(2)(a)(i).

9. By writ and statement of claim dated 2 February 2021 in HCCT 14/2021, the Plaintiff claimed against the Defendant for essentially the same breaches the Plaintiff had sought to have adjudicated by arbitration (“Writ Action”). The basis for the commencement of the Writ Action was that because the Arbitrator ruled that he had no jurisdiction, the consequence dictated by section 34(5) of the AO is that the Court must assume jurisdiction and decide the Sub-contract disputes.

10. By Summons dated 17 February 2019, the Defendant applied to stay the Writ Action in favour of arbitration (“Stay Application”). The Defendant says there is a binding arbitration agreement in Clause 31, which is neither null and void nor inoperative or incapable of being performed. Further, what the Arbitrator decided was actually an ‘admissibility’ issue, rather than a ‘jurisdictional’ issue, and such a decision is not amenable to challenge under section 81 of the AO.

11. The Set Aside Summons and the Stay Summons were, as previously directed, heard together on 1 December 2021. The Plaintiff was represented by Mr Anthony Houghton SC, Mr Vincent Lam, Mr Kurt Ng, and Mr Ben Chan. The Defendant was represented by Mr Charles Manzoni SC.

12. This is my reserved Judgment.

B. Key Threads of the Argument

13. The two key threads of the argument, relevant to the overlapping Set Aside Application and Stay Application are:

(1) the true nature of the challenge determined by the Arbitrator in the Award, namely whether it was the determination of ‘admissibility’ or ‘jurisdiction’; and

(2) the construction and effect of Clause 31, including whether it is contrary to public policy by denying parties their Basic Law rights.

14. It is convenient to deal with those two threads each in turn. The conclusions can then be applied as appropriate to each of the Set Aside Application and the Stay Application.

C. Admissibility or Jurisdiction

15. Mr Houghton emphasizes that it was parties’ mutual agreement to submit the prematurity issue to the Arbitrator as a “jurisdictional challenge”. The Arbitrator seized the issue as such, as shown in the Procedural Order No. 1 and the parties argued the issue as such in the 20 September 2020 hearing. The use of language is not disputed by Mr Manzoni.

16. But Mr Manzoni submits that in reality, and as a matter of law, the objection taken was one of admissibility and not one of jurisdiction. Essentially, the terminology of jurisdiction adopted was incorrect. Mr Manzoni invited the Court to consider academic commentaries and to follow the developments in other jurisdictions which have characterized compliance with pre-arbitration procedural steps as a matter of the admissibility of the claim rather than jurisdiction of the tribunal.

17. On a conceptual level, the distinction between what would normally be considered a jurisdictional...

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