Hong Kong: Construction Arbitration in Hong Kong

Last Updated: 15 October 2002

Two recent decisions of the Hong Kong courts have looked at important aspects of the law of arbitration. The first decision concerned the scope of an arbitration clause and the second when a party can appeal against an arbitrator’s award.

The Scope of the Clause

On 22 June 2002 the Court of Appeal gave its decision in Lui Man Wai & Another v Chevalier (Hong Kong) Ltd. The court had been asked to decide whether a contract between Lui Man Wai and Chevalier provided for arbitration of a dispute arising out of variations.

Lui Man Wai had started court proceedings suing for, amongst other things, HK$3,176,540 for variations. However, the contract contained a clause providing for arbitration in the following circumstances:

"If the said variations and/or additional works result in an increase or decrease in the contract price, the difference in price shall be adjusted with reference to and on the basis of the Schedule of unit rates as stipulated in clause 39 to be agreed between the Company and the Contractor and failing which the difference shall be submitted to arbitration…"

Chevalier asked for a stay of the court proceedings so that the dispute could be referred to arbitration. However, the court agreed with Lui Man Wai that the contract only provided for arbitration of disputes on the value of variations and/or additional works where the parties had failed to agree an adjustment of the contract price. As Lui Man Wai claimed that the parties had agreed the value of the works, that claim did not fall within the arbitration clause. Consequently, Chevalier’s application for a stay of the action was dismissed.

Analysis – Scope

This decision is one of many where the court has been required to consider the scope of an arbitration clause. The parties to construction contracts often assume that including any arbitration clause will mean that all disputes must go to arbitration. That assumption is wrong. Before the court will stay litigation proceedings it must be satisfied that the particular dispute which has arisen falls within the scope of the clause. In this case, Chevalier could have avoided litigation if the arbitration clause had been drafted differently. Simply put, if you want all disputes on a project to go to arbitration, it is important to ensure that your contract says this.

Appealing against an arbitrator’s decision

The second decision considered here, Mak’s Construction Co Ltd v. Sun Fook Kong (Civil) Ltd, concerned a dispute on an arbitration award where the unsuccessful claimant, Mak’s Construction, asked for the court’s permission to appeal against the award.

Although the grounds for an appeal against an arbitration award are limited, an appeal can be made under the Arbitration Ordinance on a question of law where the question substantially affects the rights of one or more of the parties.

The court explained, however, that there is "a presumption of finality in arbitrations…. Where a one-off event or clause is involved, the applicant for leave must demonstrate quickly and easily that the arbitrator was plainly or obviously wrong. Where, on the other hand, the event or clause is not one-off or … the case has important repercussions, all that needs to be demonstrated is that the arbitrator was arguably wrong or that the point on appeal is capable of a serious argument".

Was the clause or event in question a one-off? The dispute related to the proper method of measurement for pipes laid by Mak’s Construction under a sub-contract. Mak’s Construction argued that although the contract was not a standard form of sub-contract published by a professional body, it Construction arbitration was nevertheless commonly used by Sun Fook Kong in many Government sub-contracts. They also argued that, as Sun Fook Kong was a related company of Great Eagle Company Limited, this form of sub-contract might well be used in numerous sub-contracts in Hong Kong and as a consequence it was not a one-off. In reply, Sun Fook Kong argued that the form was a one-off as:

  1. the form was one of a number of forms used by them;
  2. that since commencement of the arbitration the wording of the relevant clause had been amended to put its meaning beyond doubt; and
  3. that existing contracts had been amended accordingly.

The court agreed that the claim related to a one-off term. Therefore, the court would only allow Mak’s Construction to appeal the award if they could show that the arbitrator was plainly or obviously wrong. They could not do so and the court refused leave to appeal.

Analysis – Appeal

There is a sliding scale from unique contracts and events to the commonplace. In unique cases, the Court will not grant leave to appeal against an award unless it is readily apparent that the arbitrator was wrong. In cases on the construction of standard forms, leave to appeal is more likely to be granted. However, the simple fact that a major contractor has used the form in question does not mean that the case sits at the commonplace end of the scale.

© Herbert Smith 2002

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions