Chun Wo Construction & Engineering Co Ltd v Hong Kong Housing Authority
Court of Appeal
Civil Appeal Nos 338 and 431 of 2018
Lam V-P, Cheung and Yuen JJA
5, 27 March 2019

Arbitration — appeal — leave to appeal — arbitral award — application for leave to appeal on point of law against arbitral award — not appropriate to rely on strong prima facie case approach for “serious doubt” test — one-off contract — construction of contract — application of “obviously wrong” test by judge not plainly wrong — leave granted to appeal against initial leave decision — no provision for appeal against further leave decision — Arbitration Ordinance (Cap. 609) Sch. 2 s. 6(4)(c)(i), s. 6(4)(c)(ii)

D managed various housing estates and entered into 21 contracts with Ps requiring Ps to carry out maintenance improvement and refurbishment works to the estates. D would issue Work Orders from time to time instructing Ps to carry out specific tasks. Some Work Orders were for the replacement of sliding window hinges which were used to affix aluminium window sashes to the window frames of flats in the estates (the “Relevant Works”). The contracts contained a Schedule of Rates (the “SOR”) for which the Work Orders would be valued. Ps contended that they should be valued by five specific rates in the SOR (“Rates 1 to 5”). D considered that only Rates 1–3 were applicable. In arbitration proceedings, the Arbitrator made an arbitral award (the “Award”) in favour of D. Ps sought leave under s. 6(1)(b) of Sch. 2 of the Arbitration Ordinance (Cap. 609) to appeal on a point of law against the Award, namely, on a proper construction of the SOR, the applicable rates for the Relevant Works. The Judge refused to grant leave (the “Refusal Decision”). The Judge then granted Ps leave to appeal against the Refusal Decision (the “Leave Decision”). D appealed against the Leave Decision. Ps argued that the Judge erred in applying the test for leave to appeal under s. 6(4)(c)(i) of Sch. 2 of the Ordinance, namely, that “the decision of the arbitral tribunal … is obviously wrong” (the “obviously wrong test”), rather than that under s. 6(4)(c)(ii) of Sch. 2, namely, that the “question is one of general importance and the decision of the arbitral tribunal was at least open to serious doubt” (the “serious doubt test”); and in respect of the latter, the Judge adopted the wrong approach by requiring a strong prima facie case. Ps’ further argued, inter alia, that the Judge failed to apply the correct principles for contractual interpretation in construing the Rates and consequently erred in refusing leave.

Held, dismissing Ps’ and D’s appeal, that:

Ps’ appeal

(1) It was no longer appropriate to rely on the strong prima facie case approach for the “serious doubt” test in s. 6(4)(c)(ii) of Sch. 2 to the Ordinance. However, the Court still needed to consider whether the Judge’s decision was plainly wrong. The assessment of the “serious doubt” test could be quite subjective and different judges could reasonably come to different views. In dealing with a decision to grant leave, the Court of Appeal should not intervene unless it could readily be demonstrated that the judge had been plainly wrong in coming to the conclusion that the criterion had been satisfied. Here, the Judge had not been plainly wrong on the result of the “serious doubt” test (CMA CGM SA v Beteiligungs-KG MS “Northern Pioneer” Schiffahrtsgesellschaft mbH & Co (The Northern Pioneer) [2003] 1 WLR 1015, Maeda Kensetsu Kogyo Kabushiki Kaisha (also known as Maeda Corporation) v Bauer Hong Kong Ltd (HCMP 1342/2017, [2017] HKEC 1909) applied). (See paras. 8.3–8.4.)

2) The present case was a “one-off” situation. The relevant contractual provisions did not possess an already established meaning of which each party was entitled to assume the other knew when he entered into the contract. It was also unlikely to be used in future by other parties because the relevant provisions had been changed in early 2014 and thereafter, the Award did not have any relevance to this specific type of contract. While the Arbitrator recognised that there might be a larger monetary value implication, this was only pertinent to the first criterion of s. 6(4)(a) of Sch. 2, namely, that it “will substantially affect the rights of one or more of the parties” which was not an issue in dispute. Further, the Arbitrator’s interpretation was only applicable to the replacement of aluminium window hinges and did not have a wider industrial application. Thus, the applicable test was the “obviously wrong” test (Swire Properties Ltd v Secretary for Justice (2003) 6 HKCFAR 236 applied). (See paras. 8.9–8.10.)

3) How a judge conducted the iterative process of contractual interpretation must be considered in the context of the case. The Judge had the benefit of the analysis of a very experienced arbitrator and was entitled to give weight to the Arbitrator’s analysis. As for the argument that the Arbitrator ignored a relevant component, namely the monetary value, Ps did not rely on the monetary value as a relevant part of their argument at the hearing of the arbitration. The Judge also rejected the notion that it would not make commercial sense if Ps were only to be paid under Rates 1–3 because the core issue was whether the Relevant Works comprised replacement and not repair (Swire Properties Ltd v Secretary for Justice (2003) 6 HKCFAR 236 applied). (See paras. 8.14–8.20.)

D’s appeal

(4) D did not obtain leave to appeal against the Leave Decision which was an interlocutory judgment. Further, s. 6 of Sch. 2 was the comprehensive provision on granting leave to appeal against an arbitral award on a question of law. There was no provision for an appeal against the further leave decision made in respect of the earlier decision of granting or refusing leave to appeal against the arbitral award. In the absence of any express statutory provision, there was no jurisdictional basis for D’s appeal to be lodged (B + B Construction Ltd v Sun Alliance & London Insurance (2000) 3 HKCFAR 503, Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222, Bright Shipping Ltd v Changhong Group (HK) Ltd [2019] 2 HKLRD 220 applied). (See paras. 9.4–9.6.)

Appeals

This was an appeal by the plaintiffs against the refusal of leave by Mimmie Chan J to appeal against an arbitral award and an appeal by the defendant against the grant of leave to appeal against the refusal decision. The facts are set out in the judgment.

Jurisdictions: 

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