TAIGO LTD v. CHINA MASTER SHIPPING LTD

HCCT 22/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 22 OF 2010

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BETWEEN

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FURTHER REASONS FOR DECISION

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1.  On 9 June 2010, I heard this application for leave to appeal against an award by arbitrators made on 20 March 2010, when, without calling upon counsel for the Respondent to reply, I dismissed the application with reasons to be delivered later. Those reasons were handed down on 17 June 2010.

2.  Shortly thereafter, I was asked by the solicitors for the Applicant to reopen the matter, as they pointed out that I had not dealt with an argument in support of the application for leave to appeal, expressed in the Amended Notice of Originating Summons in the following terms:

“Further, the learned Tribunal erred in not dismissing (China Master’s) counterclaim in the circumstances where the learned Tribunal accepted (Taigo’s) closing submissions that there was no “sufficient details or particulars and evidence in support to make finding” (Reasons §63) and there was no request by either party or order for directions for the hearing to be conducted on a “split” basis (i.e. the issue of quantum to be determined at a subsequent hearing).”

3.  The order made on 9 June 2010, has not yet been perfected.  There is no doubt as to the existence of the jurisdiction to reconsider an order that has not been perfected: see Wong Kam Hong v Triangle Motors Ltd [1998] 2 HKLRD 330.

4.  The argument on the part of the Applicant is an argument which seeks to take advantage of the fact that in the course of the arbitrators, dealing with the matter on the basis of a “documents only” arbitration, China Master did not put any specific evidence before the arbitrators as to the damages it had suffered should Taigo be found to be liable.

5.  It is right that the arbitrators had not ordered a split trial, in the conventional sense, in that prior to the commencement of the arbitration, there had been no directions that the question of liability and the question of damages would be dealt with separately.  Mr Maurellet properly accepts that in the absence of a prior direction the usual rule is that the matters of liability and quantum should be determined in one hearing.

6.  The arbitrators were well aware of the situation.  On 8 December 2009, they ordered China Master to provide Taigo with:

“the information and documents sought in order to properly understand (China Master’s) claim and the effort in mitigation.”

China Master apparently did not then supply any documents.  A further notice was issued by the arbitrators on 5 January 2010, in which they warned China Master that the failure to supply further evidence may jeopardise China Master’s case.

7.  Still no documents or information were supplied.  The matter was the subject of further comment in similar vein by the arbitrators on 14 January 2010.

8.  But when the award was issued it contained these paragraphs:

“62…. we are satisfied with most of the items except the most major item (d) of Loss of Income…. The Tribunal does not have sufficient evidence to accept that the market rate, if any, after repudiation of the T-C/P by TAIGO, is at US$2,000 per day.

63        The Tribunal is satisfied that (China Master) must have suffered substantial damages but we are not able to have sufficient details or particulars, and evidence in support, to make a finding.  Accordingly, the Tribunal exercises its discretion to first published a First Final Award, leaving this Loss of Income to be dealt with in another Final Award in case the parties cannot settle.”

9.  the fact that no split trial was ordered is not a reason to say that it was not open to arbitrators, in the conduct of an arbitration, to determine to issue a notice to liability only, and to consider a question of damages at a later date.  I accept Mr Maurellet’s submission that in the present case the court is dealing with arbitral proceedings which are both intended and designed to confer flexibility.  In the present case the parties where the parties had agreed to a documents only hearing the arbitrators were able, on the basis of the documents to determine liability.  No authority is cited for the proposition that it is not open to the arbitrators of those circumstances to issue an award is to liability and determine quantum later.

10.  I do not see anything either wrong or prejudicial to Taigo in the course that has been followed.  If the arbitrators were unable to determine quantum on the basis of the documents they were perfectly entitled to call for evidence if the parties cannot agree the quantum.  That the arbitrators decided to exercise their discretion in this way, even after having warned China Master that they would proceed to resolve the issue in the absence of evidence, and subsequently, apparently changed their minds, and decided to allow further time, is a matter that was entirely within the discretion of the arbitrators. 

11.  Liability having been determined, Taigo will have an ample opportunity to put any relevant evidence they have before the arbitrators as to the question of damages, as will China Master.  Mr Maurellet correctly says that the procedure accords with common sense and justice and is not prejudicial to Taigo in any sense at all.  Taigo now knows that it has to pay, the only issue is as to how much.

12.  The argument seeks simply to overturn a matter of discretion exercised by the arbitrators in the manner in which they conducted the hearing.  While it would have been perfectly proper for the arbitrators to have found against China Master on the basis was no evidence to support any loss in relation to the counterclaim, I cannot say that it is open to argument that they have acted contrary to principle in allowing further evidence as to quantum to be met.

13.  I am satisfied the course adopted by the arbitrators was quite within their discretion, and does not provide any basis upon which leave to appeal the award might be given.

Ms Chyvette Ip leading Mr Jeffrey Chau, instructed by Messrs Or & Lau, for the Applicant

Mr Jose-Antonio Maurellet, instructed by Messrs Blank Rome, for the Respondent

HCCT 22/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDING

NO. 22 OF 2010

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____________

BETWEEN

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REASONS FOR DECISION

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1.  I heard this application for leave to appeal against an award by arbitrators made on 20 March 2010, 9 June 2010, when, without calling upon the counsel for the Respondent to reply, I dismissed the application with reasons to be delivered later. These are my reasons.

2.  The arbitration was in relation to a dispute arising from a charter-party, made on 1 April 2008, by which the owners, China Master Shipping, chartered the vessel “Hua Wan”, initially, to Guangxi Qinzhou Tago Import & Export Trading Company Ltd.  Subsequently, on 16 October 2008, Guangxi and the applicants, Taigo, entered into a novation agreement, with Taigo stepping in and replacing Guangxi.

3.  The arbitration was conducted by two experienced arbitrators from the Panel of Arbitrators of the Hong Kong International Arbitration Centre.  Both were experienced shipping men.

4.  The principles to be applied when considering an application for leave to appeal against an award are well settled, and are set out in Swire Properties Ltd & Ors v Secretary for Justice (2003) 6 HKCFAR 237, with the essential principles being sent out by Bokhary PJ at para 31.

5.  The arbitration proceeded on the basis of a “documents only” arbitration, by which the arbitrators considered the documents, and witness statements filed by the parties pursuant to directions.  There was no cross‑examination of the parties.

6.  Counsel for the applicant submits that the applicant “reluctantly” agreed to the procedure which the applicant said was undertaken at the respondent’s “insistence”.  Whether the procedure was reluctantly agreed to, or was undertaken at the insistence of one side is entirely irrelevant.  The simple fact is that the applicant agreed to the “documents only” procedure, and took no exception to the directions for witness statements.  Further, on 16 October 2009, the Tribunal reminded the parties that the Tribunal had no power to impose a “documents only” basis on the parties.  Any suggestion that the summary procedure was forced upon the applicant is plainly without foundation.  It is simply not open to the applicant now to complain about the procedure.

7.  Counsel for the applicant submits that a finding made by the Tribunal against the existence of what was described as the 1^st misrepresentation, is be a finding that can be characterised as so bizarre that no arbitrator could have made it, and that there was simply no evidence or reason for the finding to be made.

8.  The allegation before the Tribunal was that the misrepresentation was either negligent or fraudulent.  That is a serious allegation and it was for the applicant to prove to the satisfaction of the Tribunal that such a representation was made.  Mr Maurellet is quite right in his submission that the essence of the complaint by the applicant is that the applicant was found to have failed to establish an allegation on the facts, and now seeks to overturn a factual finding on the part of the Tribunal.

9.  In order to justify leave to appeal, counsel sought to challenge four reasons given by the arbitrators to find that there was no motive on the part of the respondent to offer a guarantee of profit on the charter-party, that finding being central to the conclusion that there was no misrepresentation.  The reasons given by the arbitrators were reasons that were perfectly open to the arbitrators to reach, and I cannot say that the arbitrators were obviously wrong, let alone acting so unreasonably as to have reached a bizarre finding, in giving those reasons.  It is right that arguments may be made the other way, but that is not the test.

10.  In particular the arbitrators were criticised for finding that a profit guarantee representation was “inherently impossible or highly improbable”.  It was said that that was not the proper test.  It is always open to a tribunal judging fact, particularly when giving consideration to alleged oral representations, to measure the likelihood that the representations alleged were made, against the probability that such representations might be made: see Tradepower (Holdings) Ltd v Tradepower (HK) Ltd [2010] 1 HKLRD 675, per Litton NPJ at para 140.  Mr Maurellet is correct when he says that the Tribunal’s statements accord with a layman’s common sense.

11.  The criticism by counsel for the applicant of the format of the respondent’s witness statement is unjustified.  The submission that was no evidence from the respondent is fallacious.  Neither parties’ witness statement was under oath, neither witness statement was in the form of an affidavit.  Neither were required to be either on oath, or in the form of an affidavit.  The parties agreed upon the procedure, and agreed upon the absence of cross-examination, and the applicant cannot now complain about that procedure.

12.  The application amounts to nothing more than a challenge to a factual finding which went against the Applicant.  The basis for to leave to appeal was not established.  The application was dismissed.

13.  In A v R (Arbitration: Enforcement) [2009] 3 HKLRD 389, Reyes J demonstrated that following CJR the usual rule as to costs on an unsuccessful application for leave to appeal against an arbitrators award would be indemnity costs.  In Wing Hong Construction Co Ltd v Tin Wo Engineering Co Ltd, unreported, HCCT 13/2010, 3 June 2010 I agreed with that decision.  So it is not necessary, to justify indemnity costs, for it to be established that the case has special and unusual features.

14.  Counsel for the Applicant puts before me the decision of the Court of Final Appeal in Karaha Bodas Company LLC v Pertamina, unreported, FACV 6/2008, 6 February 2009.  The decision is a ruling on costs in which the plaintiff sought indemnity costs.  The Court of Final Appeal recorded that the plaintiff sought to justify indemnity costs by arguing that the case had special and unusual features.

15.  The decision is a decision prior to CJR, and does not reflect the new approach to be adopted.  For the reasons given in Wing Hong, para 7, I am satisfied that the appropriate rule now in failed applications for leave to appeal an arbitrators award is that costs should be on an indemnity basis.

16.  There will be an order nisi is that the Applicant must pay the Respondent’s costs of and incidental to the application, to be taxed on an indemnity basis.

Ms Chyvette Ip leading Mr Jeffrey Chau, instructed by Messrs Or & Lau, for the Applicant

Mr Jose-Antonio Maurellet, instructed by Messrs Blank Rome, for the Respondent