由此
A A
B HCSA 16/2003 B
C IN THE HIGH COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
COURT OF FIRST INSTANCE
E SMALL CLAIMS TRIBUNAL APPEAL NO. 16 OF 2003 E
(ON APPEAL FROM SMALL CLAIMS TRIBUNAL CLAIM
F F
NO. SCTC 30184/2002)
G ____________ G
H BETWEEN H
C.Y. TSUN INVESTMENT COMPANY LIMITED Claimant
I I
(Appellant)
J and J
K THE INCORPORATED OWNERS OF HOI TO Defendant K
COURT (Respondent)
L L
M
____________ M
N N
Before: Hon A Cheung J in Court
O Date of hearing: 8 June 2004 O
Date of Judgment: 2 July 2004
P P
Q _______________ Q
JUDGMENT
R R
_______________
S S
T T
U U
V V
由此
-2-
A A
1. In the tribunal below, the Claimant, a co-owner in a multi-
B B
storey building known as Hoi To Court in Gloucester Road, Hong Kong,
C sued the incorporated owners of the building for loss and damage arising C
from water damage to the Claimant’s ground floor shop premises. The
D D
Claimant alleged that the incorporated owners were negligent in
E maintaining the common passage and corridor on the 1st floor of the E
building from where allegedly leaking water flowed downward into the
F F
ground floor shop premises of the Claimant.
G G
2. The claim was commenced in the Small Claims Tribunal on
H H
22 May 2002. The Claimant claimed damages in the total sum of
I $41,660.00. I
J J
3. In response to the claim, a statement of defence, setting out
K the reasons of opposition to the claim, was filed by the incorporated K
owners. Although the statement was not dated, it was filed for the purpose
L L
of a hearing on 17 July 2002. One can therefore safely assume that the
M statement was filed on or before 17 July 2002. In the statement, the M
incorporated owners set out a number of reasons based on which the
N N
incorporated owners denied liability and put the Claimant to proof as to
O quantum. O
P P
4. Thereafter both sides put in witness statements and documents
Q in support of their respective cases. Q
R R
5. Eventually, the case came up for trial before the tribunal on 5
S S
December 2002. The Presiding Officer pointed out for the first time to
T T
U U
V V
由此
-3-
A A
both parties that the deed of mutual covenant (“DMC”) governing the
B B
building contains an arbitration clause (clause 16) which reads:
C “16. All disputes and questions which shall hereafter arise C
between the parties hereto touching these presents or the
construction or adjudication hereof or whether these presents are
D D
still subsisting or not or touching any account or calculation to be
made hereunder or as to any act deed or omission by any of the
E parties hereto or as to any other matter in any way relating to E
these presents or the rights duties or liabilities of any person
hereunder shall be referred to a single arbitrator in case the
F parties agree upon one otherwise to two arbitrator one to be F
appointed by each party to the difference and their umpire in
G accordance with and subject to the provisions of the (Supreme
G
Court Rules) Order XXV and the decision of the arbitrator or
umpire as the case may be one any of the matters and things
H aforesaid shall be final and absolutely binding upon all the H
parties hereto.”
I I
6. That notwithstanding, the trial proceeded, and evidence was
J J
heard. The hearing was however adjourned part-heard to accommodate
K the parties’ wish to negotiate, if possible, for a settlement. K
L L
7. However, no settlement could be reached, and the parties
M appeared before the Presiding Officer again on 11 December 2002. The M
tribunal directed the Defendant’s representative to produce a written
N N
resolution of the incorporated owners to the effect that they would waive
O their right to arbitration provided under clause 16 of the DMC. At that O
P
time, the impression given by the Defendant’s representative to the
P
tribunal and to the Claimant was that such a resolution would be
Q Q
forthcoming.
R R
8. However, that was not to be. On or about 18 January 2003,
S S
the Defendant by a letter to the tribunal asked for the reference of the case
T to arbitration. T
U U
V V
由此
-4-
A A
9. The adjourned hearing resumed on 21 January 2003. The
B B
question of referring the dispute to arbitration occupied the tribunal’s as
C well as the parties’ attention. The following is the relevant extract from C
the transcript of the hearing on that day (pp. 5I – 6O):
D D
「申索人代表：就以而家呢個 case 咁樣情形，你閣下可唔可
以判？
E E
官：嗯？
F F
申索人代表：即係可唔可以照番原底咁判？
G
官：呢度就會牽涉到一個好複雜嘅法律問題，一般嚟講， G
就係話若果有一個仲裁條款，而雙方是但有一方面
H 唔肯放棄嘅話，法庭就冇一個權，除非一啲好特別 H
嘅情況，有例外，但係嗰個例外唔適用嘅話，法庭
I 就冇一個權限去處理呢件事，呢個亦都係有法例去 I
講 咗 ， 香 港 有 一 個 仲 裁 條 例 （ Arbitration
Ordinance）。呢個就即係仲裁條款嘅一個效力，即
J J
係個合約你哋雙方同意咗之後，法庭個觀點就係法
庭要尊重你哋雙方個合約精神，公契當係一個合約
K 嘅話。 K
L 面亦都有例外，有一啲例外，就係話若果雙
L
方已經喺一個- - 當然，所謂放棄個仲裁嘅權利可以
係明文放棄，亦都可以話係做一個行為法律上面視
M M
為已經放棄咗嘅仲裁權利。一般嚟講，若果一個訴
訟雙方開始咗，亦都做到某一個階段，咁法庭就會
N 比較傾向覺得已經開始咗做到 - - 甚至話已經審緊， N
咁就好難去視作任何一方已經放棄嗰個仲裁。任何
O 一方仲可以堅持嗰個仲裁嘅權利。 O
但係呢個案就比較特別，好坦白講，呢個案若
P
果喺地方 法院或 者高院 上面審嘅 話，去 到呢 個階 P
段，任何一方已經係做咗咁多嘢，法庭可能覺得任
Q 何一方都已經喺行為上面放棄咗嗰個仲裁嘅權利。 Q
但係呢個 比較特 別，就 係咩嘢呢 ？就特 別在 幾樣
R 嘢，第一樣嘢就係被告人係一個法團，代表緊全部 R
嘅業主，佢有冇權代表業主，冇經一個手續，譬如
一個決議案去放棄個權利呢？呢度有一個好深嘅法
S S
律問題。
T T
U U
V V
由此
-5-
A A
譬如話個別嘅業主走 - - 若果話放棄嘅，個別
B 嘅業主走出嚟反對，法團點樣處理呢？因為法團代 B
表業主行使權利係要通過決議，所以我一路要追朱
先生攞個決議，雖然朱先生一路畀我個訊息 - - 呢度
C C
我有啲失望，因為朱先生一路畀我訊息就冇問題，
我可以處嚟件案，若果唔係有呢個訊息，我喺上一
D 堂或者再上一堂我唔會聽咁多證供。朱先生一路畀 D
我個感覺就話冇問題，呢一個手續嚟嘅者，咁樣，
E 但係而家我睇咗呢一份咁嘅文件，我都有啲意外， E
即係法團話要堅持佢嗰個仲裁嘅權利，咁變咗我感
F 覺就係朱先生雖然喺呢度係話佢代表法團做緊呢樣
F
嘢，佢可能冇一個適當嘅授權都唔定，因為睇番個
決議就係話，呢度牽涉到好複雜嘅問題，你睇到，
G G
呢個第一樣嘢。
H 咁變咗我就覺得若果係想息事嘅話，當然你可 H
以考慮，我就覺得喺呢個階段若果你係斟酌落去嘅
I
話，牽涉落嚟嗰個法律觀點仲更複雜，愈搞可能愈
I
複雜。因為譬如話我勉强畀咗個判決出嚟，個理由
惟有我就係 - - 若果我話法團已經做咗咁多嘢，已經
J J
視為放棄咗個權利，勉强畀個判決出嚟，法團可能
有個意見，因為佢出咗個決議，佢亦都係係代表一
K 個團體去做嘢，佢呢度要澄清嘅話，可能要上高院 K
做個澄清。又或協成幢大廈任何一位業主唔滿意呢
L 個做法，認為佢有個仲裁權利，佢亦都可以透過上 L
高院去解決呢件事。對你嚟講可能好麻煩，因為成
座一廈，你難保有任何一位業主唔滿意，你明唔明
M M
白？
N 所以 - - 即係我講緊你，即係若果你話你以為 N
即刻勉强 做個判 決出嚟 會解決呢 件事， 我就 話未
O 心，因為法團或者任何一位業主有質疑嘅話，都會
O
上 - - 呢個法律問題上高院去解決，係咪法團可以堅
持佢仲裁嘅權利。所以就係雖然係走咗啲冤枉路，
P P
但係我覺得不如你自己諗下，就係話有啲嘢都唔好
走捷徑， 都係諗 下不如 話仲裁， 上去做 仲裁 ，係
Q 咪？有冇好大嘅意見？ Q
R
申索人代表：冇問題，冇。
R
官：若果冇，我跟審頭先個講法，即係你明白個難處？
S S
申索人代表：係。
T T
U U
V V
由此
-6-
A A
官：明白個難處。咁我就喺 - - 當係雙方同意喇，喺雙方
B 同意下面，我將呢個案件無限期押後，你哋會收到 B
我個命令個蓋印副本。個仲裁嘅情況就我建議申請
人你書面即刻做封信，就畀 - - 建議 咋，即係呢個
C C
絕對唔係指令，就畀被告人法團嗰度，就要求雙方 -
- 你就直情可以畀個建議，你話建議個仲裁跟番呢個
D 條款，同埋佢哋個決議案，你有副本喇，咁你話就 D
呢個仲裁嘅程序，你建議委任幾多位嘅仲裁員，同
E 埋可以委 任邊一 啲仲裁 員，直情 書面寫 個建 議出 E
去，同埋就希望佢哋幾多日之內畀個答覆你咁樣。
F 你亦都可以直情即刻過去 Hong Kong I.A.C. 度，同
F
佢哋去諮詢下個程序，佢哋會有啲表格，直情有啲
樣本嘅信件畀你參考。就係咁，兩位走得。好有浪
G G
費，朱先生，我知道你都唔想。」
H H
10. It was thus that by a “consent order”, the hearing of the claim
I I
was adjourned sine die with liberty to restore.
J J
11. From that consent order, the Claimant now appeals to this
K K
Court. In short, the Claimant argues that the arbitration clause has no
L application to the dispute between the parties, the Defendant’s request for L
reference to arbitration does not fall within the provisions of section 6 of
M M
the Arbitration Ordinance (Cap. 341) and article 8 of the UNCITRAL
N Model Law on International Commercial Arbitration (“Model Law”), and N
in any event the Defendant has waived the right to arbitration. In those
O O
circumstances, the Claimant argues that the so-called consent order was
P agreed to by the Claimant and made by the tribunal under a mistake. P
Q Q
12. It is quite unnecessary to deal with all the arguments relied on
R by the Claimant in this appeal. For it is quite plain to me that in the R
present case, there is no question of the Defendant being entitled to ask the
S S
tribunal to stay the Claimant’s claim before the tribunal in favour of
T arbitration. T
U U
V V
由此
-7-
A A
13. Section 6 of the Ordinance and article 8 of the Model Law
B B
read as follows respectively:
C “6. Court to refer matter to arbitration in certain cases C
(1) Subject to subsections (2) and (3), article 8 of the
D UNCITRAL Model Law (Arbitration agreement and substantive D
claim before court) applies to a matter that is the subject of a
E domestic arbitration agreement in the same way as it applies to a E
matter that is the subject of an international arbitration agreement.
F (2) Subject to subsection (3), if a party to an arbitration F
agreement that provides for the arbitration of a dispute involving
a claim or other matter that is within the jurisdiction of the
G G
Labour Tribunal or a person claiming through or under such a
party, commences legal proceedings in any court against any
H other party to the agreement or any person claiming through or H
under that other party, in respect of any matter agreed to be
referred, and any party to those legal proceedings applies to that
I court after appearance and before delivering any pleadings or I
taking any other step in the proceedings, to stay the proceedings,
J the court or a judge of that court may make an order staying the
J
proceedings, if satisfied that ―
K (a) there is no sufficient reason why the matter should not K
be referred in accordance with the agreement; and
L L
(b) the applicant was ready and willing at the time the
proceedings were commenced to do all things necessary
M for the proper conduct of the arbitration, and remains so. M
(3) Subsections (1) and (2) have effect subject to section 15
N of the Control of Exemption Clauses Ordinance (Cap. 71).” N
O “Article 8. Arbitration agreement and substantive claim O
before court
P (1) A court before which an action is brought in a matter P
which is the subject of an arbitration agreement shall, if a party
so requests not later than when submitting his first statement on
Q Q
the substance of the dispute, refer the parties to arbitration unless
it finds that the agreement is null and void, inoperative or
R incapable of being performed. R
(2) Where an action referred to in paragraph (1) of this
S article has been brought, arbitral proceedings may nevertheless S
be commenced or continued, and an award may be made, while
T the issue is pending before the court.”
T
U U
V V
由此
-8-
A A
14. As has been outlined above, the claim was commenced in the
B B
tribunal on 22 May 2002, and the incorporated owners put in a statement
C of defence setting out the various grounds that they relied on in defence of C
the claim on or before 17 July 2002. Further documents and witness
D D
statements were filed with the tribunal thereafter. The Defendant’s request
E to the tribunal for referring the case to arbitration came much later on or E
about 18 January 2003.
F F
G 15. In other words, the request to the tribunal to refer the parties to G
arbitration was made later than the Defendant’s submission of its first
H H
statement on the substance of dispute.
I I
16. In those circumstances, the provisions in article 8(1) have not
J J
been complied with by the Defendant, and there is therefore no question of
K the tribunal being entitled to refer the parties to arbitration pursuant to the K
Defendant’s request.
L L
M 17. Miss Po, doing her best as counsel on behalf of the Defendant, M
argues that the application of article 8(1) of the Model Law in the context
N N
of the Small Claims Tribunal must take into account the informal nature of
O proceedings in the tribunal (section 16(1) of the Small Claims Tribunal O
Ordinance, Cap. 338), the tribunal’s duty of inquiry (section 16(3)) and the
P P
lack of legal representation at hearings before the tribunal (section 19). In
Q short, Miss Po asks this Court to adopt a construction to the effect that Q
where a dispute is before the Small Claims Tribunal, nothing submitted by
R R
a party should be regard as a “statement on the substance of the dispute”
S S
for the purpose of article 8(1) unless and until his right to arbitration has
T
been pointed out and explained by the tribunal to the parties.
T
U U
V V
由此
-9-
A A
18. I do not accept the argument. The matter is essentially a
B B
matter of construction. As a matter of principle, there cannot be one law or
C construction of article 8(1) for disputes pending before the ordinary courts C
and tribunals save and accept the Small Claims Tribunal, and another law
D D
or construction of article 8(1) for disputes pending before the Small Claims
E Tribunal. E
F F
19. Moreover, it must be remembered that the Small Claims
G Tribunal has been set up to deal with claims involving a relatively small G
amount of money (the present jurisdictional limit is $50,000.00), in an
H H
informal, expeditious and inexpensive manner. Based on that rationale, we
I have provisions like sections 16 and 19 of the Ordinance, which Miss Po I
has referred this Court to.
J J
K 20. It must also be remembered that arbitrations can be expensive. K
For one, the parties will have to pay for the arbitrator, whereas subject to
L L
minor exceptions, they need not pay for the service of the court or the
M tribunal. The contrast is even greater when one is talking about the Small M
Claims Tribunal here. The procedure of the tribunal is informal and is
N N
designed to deal with disputes expeditiously and inexpensively.
O O
21. Another non-monetary consideration is the fact that whereas
P P
hearings before the tribunal do not permit legal representation, there is no
Q such restriction as regards arbitrations. Q
R R
22. For all these reasons, even if one should, as Miss Po has
S S
submitted, take into account the peculiar nature or context of a dispute
T
pending before the Small Claims Tribunal, the underlying rationale for the
T
U U
V V
由此
- 10 -
A A
establishment of the tribunal would go against the construction put forward
B B
by Miss Po, for the simple reason that arbitration does not really stand well
C with the rationale that cases involving small amounts in dispute should be C
proceeded with and adjudicated upon in an informal and inexpensive
D D
manner.
E E
23. Thus analysed, I fail to see why any special treatment should
F F
be meted out to a party to a case before the tribunal who wants to insist on
G arbitration. Nor do I see any justification for a special construction of G
article 8(1) to cater for cases pending before the tribunal.
H H
I 24. As to the knowledge of the parties of their right to arbitration, I
the reference to section 19 of the Ordinance prohibiting legal
J J
representation at hearings before the tribunal is misplaced. The prohibition
K relates to hearings before the tribunal. It does not prevent either party from K
seeking legal advice on the subject matter of dispute. In those
L L
circumstances, I fail to see how it can be said that a party to a case before
M the tribunal, who wishes to rely on an arbitration clause, is in a more M
disadvantageous position when compared with all other litigants with a
N N
similar intention, who are parties to cases before the ordinary courts and
O other tribunals in Hong Kong. I do not see this as justification for a special O
construction of article 8(1).
P P
Q 25. In passing, I should note that section 6(2) of the Arbitration Q
Ordinance makes special provisions for cases pending before the Labour
R R
Tribunal or falling within its exclusive jurisdiction. The very existence of
S S
subsection (2) in section 6 supports my view that if the legislature had
T
wished to make any special provisions or create any exception regarding
T
U U
V V
由此
- 11 -
A A
cases pending before the Small Claims Tribunal, it would have done so,
B B
like in the case of the Labour Tribunal.
C C
26. Furthermore, I note that section 6(2) gives the Labour
D D
Tribunal (or the court in which proceedings were commenced) a discretion
E not to refer the parties to arbitration even if article 8(1) has been fully E
complied with. Given the background and rationale behind the
F F
establishment of the Labour Tribunal, it is not difficult to understand why.
G The tribunal has been established to deal with labour cases informally, G
inexpensively and expeditiously. It sits as a specialist tribunal. The case
H H
against an unqualified right to an automatic stay in favour of arbitration is
I apparent, and thus section 6(2). I
J J
27. As I have tried to explain above, broadly similar
K considerations apply to the Small Claims Tribunal, and that is why no K
special treatment should be given or special construction of the relevant
L L
provisions (in favour of arbitration) adopted for cases pending before the
M Small Claims Tribunal. M
N N
28. In conclusion, in my view, the tribunal was in error when it
O thought and thus explained to the parties at the hearing on 21 January 2003 O
that the arbitration clause in question would require the claim to be stayed
P P
in favour of arbitration, or put at the lowest, that there was such a real
Q possibility. In my judgment, there was no such possibility at all. There Q
was no question of the tribunal, on a correct application of the law,
R R
referring the subject claim to arbitration.
S S
T T
U U
V V
由此
- 12 -
A A
29. And apart from arbitration, there was no legitimate reason
B B
whatsoever for the tribunal not to proceed with completing the hearing of
C the case (which had been partly heard). There was no basis whatsoever for C
adjourning the hearing sine die, notwithstanding the general powers given
D D
to the tribunal under section 26 regarding adjournments and under section
E 37 regarding procedure generally. The powers conferred under those E
sections must be exercised judicially.
F F
G 30. All this brings me to the last hurdle facing the Claimant in this G
appeal. The order under appeal is a so-called consent order made with the
H H
agreement of both parties. Consent orders, generally speaking, may be
I divided into two types, namely those that embody or evidence a contract I
between the parties, and those which were made by the parties without
J J
objection, in order to save time and costs. See generally The Supreme
K Court Practice 1999, vol. 2, para. 17A–24; Siebe Gorman and Co. Ltd v. K
Pneupac Ltd [1982] 1 WLR 185; Wing Han Trading Co. Ltd v Tang Yan-
L L
kit [1991] 1 HKLR 494, 495F to H; c.f. Tsang Iu Hung v. Tsang Tak Wah
M [1993] 2 HKC 471. M
N N
31. In relation to the first type of consent orders, since the order
O embodies or evidences a contract made by the parties to settle or O
compromise their dispute in a case or on a particular point, it can only be
P P
disturbed (whether on appeal or otherwise) if there exists one or more of
Q the recognised vitiating factors that would allow a party to disturb a Q
contract, such as fraud, illegality, mistake or misrepresentation.
R R
S S
32. On the other hand, in relation to the second type of consent
T
orders, despite the label “consent”, it is merely an order of the court, which
T
U U
V V
由此
- 13 -
A A
can be disturbed (whether on appeal or otherwise) according to normal
B B
principles.
C C
33. In the present case, judging from the development of the case
D D
at the various hearings before the tribunal, and judging from the transcript
E as a whole, I am of the view that the eventual order made by the tribunal E
was merely an order not objected to by the parties, so as to save time and
F F
costs, rather than an order which embodied or evidenced any genuine
G contract between the parties. The parties, as well as the tribunal, simply G
thought that it was a good way out, in the light of the view of the law
H H
genuinely held by the tribunal and represented by the tribunal to the parties
I (who no doubt believed in the correctness of the tribunal’s view) at the I
hearing.
J J
K 34. For that reason, I see no obstacle to my allowing the appeal K
and setting aside the so-called consent order on the ground that there was
L L
no justification whatsoever for adjourning the hearing of the case.
M M
35. But if I am wrong with my view and the consent order in
N N
question really embodies or evidences a contract between the parties, I
O would still be of the view that the contract is liable to be disturbed given O
the most basic and fundamental mistake of all concerned that the
P P
arbitration clause in question was still applicable or arguably applicable at
Q the time of the hearing – when it was totally not. Q
R R
36. In this regard, I am not daunted by the fact that a mistake of
S S
law, as opposed to a mistake of fact, was involved at the hearing below.
T
As has been pointed out by the learned editors of Chitty on Contract (29th
T
U U
V V
由此
- 14 -
A A
ed.) vol. 1, para. 5-042, both common law and equity have been
B B
developing away from the previous distinction between mistakes as to law
C and those as to fact, as has been demonstrated by the House of Lords C
decision in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349,
D D
a restitution case. See also Foskett, The Law and Practice of Compromise
E (5th ed.) para. 4-231. E
F F
37. In Brennan v Bolt Burdon [2003] EWHC 2493 (QB), a case
G on setting aside a consent order based on a mistake of law, Morland J, G
relying on relevant English and Commonwealth authorities, concluded that
H H
a fundamental mistake of law common to both parties can vitiate a
I compromise and the consent order that evidences it (see paras 35 to 50). I
J J
38. Insofar as may be necessary, I am prepared to hold that a
K mistake of law notwithstanding, the contract evidenced by the consent K
order (assuming that it is a “true” consent order) is vitiated by the
L L
fundamental mistake of law in question. In those circumstances, there is
M no bar to this Court allowing the appeal and setting aside the consent order. M
N N
39. For the above reasons, I order that the appeal be allowed, the
O order below be set aside, and the case be remitted to the tribunal for a re- O
trial before another Presiding Officer. Although the claim has been partly
P P
heard, given the long lapse of time, there is no advantage to be gained by
Q remitting the case to the same Presiding Officer for continuation of the trial. Q
In my view, it would be best to start everything afresh.
R R
S S
T 1
“It is suggested that a mistake of law may now, if sufficiently fundamental to the compromise, T
operate to invalidate the agreement.”
U U
V V
由此
- 15 -
A A
40. As regards costs, having heard counsel’s submissions (on a
B B
provisional basis), I am of the view that costs should follow the event –
C particularly bearing in my mind that this appeal, which arose to a C
significant extent as a result of the Defendant’s misplaced reliance on the
D D
arbitration clause at the hearing below, was strenuously opposed by the
E Defendant. In those circumstances, I order that the costs of this appeal be E
paid by the Defendant to the Claimant; such costs are to be taxed if not
F F
agreed.
G G
H H
I I
(Andrew Cheung)
Judge of the Court of First Instance
J J
High Court
K K
Mr Victor K C Lee, instructed by Messrs Raymond T M Lau & Co., for the
L Claimant (Appellant) L
M Ms Po Wing Kay, instructed by Messrs Alfred Lam, Keung & Ko, for the M
Defendant (Respondent)
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
C.Y. TSUN INVESTMENT CO LTD v. THE INCORPORATED OWNERS OF HOI TO COURT
由此
A A
B HCSA 16/2003 B
C IN THE HIGH COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
COURT OF FIRST INSTANCE
E SMALL CLAIMS TRIBUNAL APPEAL NO. 16 OF 2003 E
(ON APPEAL FROM SMALL CLAIMS TRIBUNAL CLAIM
F F
NO. SCTC 30184/2002)
G ____________ G
H BETWEEN H
C.Y. TSUN INVESTMENT COMPANY LIMITED Claimant
I I
(Appellant)
J and J
K THE INCORPORATED OWNERS OF HOI TO Defendant K
COURT (Respondent)
L L
M
____________ M
N N
Before: Hon A Cheung J in Court
O Date of hearing: 8 June 2004 O
Date of Judgment: 2 July 2004
P P
Q _______________ Q
JUDGMENT
R R
_______________
S S
T T
U U
V V
由此
-2-
A A
1. In the tribunal below, the Claimant, a co-owner in a multi-
B B
storey building known as Hoi To Court in Gloucester Road, Hong Kong,
C sued the incorporated owners of the building for loss and damage arising C
from water damage to the Claimant’s ground floor shop premises. The
D D
Claimant alleged that the incorporated owners were negligent in
E maintaining the common passage and corridor on the 1st floor of the E
building from where allegedly leaking water flowed downward into the
F F
ground floor shop premises of the Claimant.
G G
2. The claim was commenced in the Small Claims Tribunal on
H H
22 May 2002. The Claimant claimed damages in the total sum of
I $41,660.00. I
J J
3. In response to the claim, a statement of defence, setting out
K the reasons of opposition to the claim, was filed by the incorporated K
owners. Although the statement was not dated, it was filed for the purpose
L L
of a hearing on 17 July 2002. One can therefore safely assume that the
M statement was filed on or before 17 July 2002. In the statement, the M
incorporated owners set out a number of reasons based on which the
N N
incorporated owners denied liability and put the Claimant to proof as to
O quantum. O
P P
4. Thereafter both sides put in witness statements and documents
Q in support of their respective cases. Q
R R
5. Eventually, the case came up for trial before the tribunal on 5
S S
December 2002. The Presiding Officer pointed out for the first time to
T T
U U
V V
由此
-3-
A A
both parties that the deed of mutual covenant (“DMC”) governing the
B B
building contains an arbitration clause (clause 16) which reads:
C “16. All disputes and questions which shall hereafter arise C
between the parties hereto touching these presents or the
construction or adjudication hereof or whether these presents are
D D
still subsisting or not or touching any account or calculation to be
made hereunder or as to any act deed or omission by any of the
E parties hereto or as to any other matter in any way relating to E
these presents or the rights duties or liabilities of any person
hereunder shall be referred to a single arbitrator in case the
F parties agree upon one otherwise to two arbitrator one to be F
appointed by each party to the difference and their umpire in
G accordance with and subject to the provisions of the (Supreme
G
Court Rules) Order XXV and the decision of the arbitrator or
umpire as the case may be one any of the matters and things
H aforesaid shall be final and absolutely binding upon all the H
parties hereto.”
I I
6. That notwithstanding, the trial proceeded, and evidence was
J J
heard. The hearing was however adjourned part-heard to accommodate
K the parties’ wish to negotiate, if possible, for a settlement. K
L L
7. However, no settlement could be reached, and the parties
M appeared before the Presiding Officer again on 11 December 2002. The M
tribunal directed the Defendant’s representative to produce a written
N N
resolution of the incorporated owners to the effect that they would waive
O their right to arbitration provided under clause 16 of the DMC. At that O
P
time, the impression given by the Defendant’s representative to the
P
tribunal and to the Claimant was that such a resolution would be
Q Q
forthcoming.
R R
8. However, that was not to be. On or about 18 January 2003,
S S
the Defendant by a letter to the tribunal asked for the reference of the case
T to arbitration. T
U U
V V
由此
-4-
A A
9. The adjourned hearing resumed on 21 January 2003. The
B B
question of referring the dispute to arbitration occupied the tribunal’s as
C well as the parties’ attention. The following is the relevant extract from C
the transcript of the hearing on that day (pp. 5I – 6O):
D D
「申索人代表：就以而家呢個 case 咁樣情形，你閣下可唔可
以判？
E E
官：嗯？
F F
申索人代表：即係可唔可以照番原底咁判？
G
官：呢度就會牽涉到一個好複雜嘅法律問題，一般嚟講， G
就係話若果有一個仲裁條款，而雙方是但有一方面
H 唔肯放棄嘅話，法庭就冇一個權，除非一啲好特別 H
嘅情況，有例外，但係嗰個例外唔適用嘅話，法庭
I 就冇一個權限去處理呢件事，呢個亦都係有法例去 I
講 咗 ， 香 港 有 一 個 仲 裁 條 例 （ Arbitration
Ordinance）。呢個就即係仲裁條款嘅一個效力，即
J J
係個合約你哋雙方同意咗之後，法庭個觀點就係法
庭要尊重你哋雙方個合約精神，公契當係一個合約
K 嘅話。 K
L 面亦都有例外，有一啲例外，就係話若果雙
L
方已經喺一個- - 當然，所謂放棄個仲裁嘅權利可以
係明文放棄，亦都可以話係做一個行為法律上面視
M M
為已經放棄咗嘅仲裁權利。一般嚟講，若果一個訴
訟雙方開始咗，亦都做到某一個階段，咁法庭就會
N 比較傾向覺得已經開始咗做到 - - 甚至話已經審緊， N
咁就好難去視作任何一方已經放棄嗰個仲裁。任何
O 一方仲可以堅持嗰個仲裁嘅權利。 O
但係呢個案就比較特別，好坦白講，呢個案若
P
果喺地方 法院或 者高院 上面審嘅 話，去 到呢 個階 P
段，任何一方已經係做咗咁多嘢，法庭可能覺得任
Q 何一方都已經喺行為上面放棄咗嗰個仲裁嘅權利。 Q
但係呢個 比較特 別，就 係咩嘢呢 ？就特 別在 幾樣
R 嘢，第一樣嘢就係被告人係一個法團，代表緊全部 R
嘅業主，佢有冇權代表業主，冇經一個手續，譬如
一個決議案去放棄個權利呢？呢度有一個好深嘅法
S S
律問題。
T T
U U
V V
由此
-5-
A A
譬如話個別嘅業主走 - - 若果話放棄嘅，個別
B 嘅業主走出嚟反對，法團點樣處理呢？因為法團代 B
表業主行使權利係要通過決議，所以我一路要追朱
先生攞個決議，雖然朱先生一路畀我個訊息 - - 呢度
C C
我有啲失望，因為朱先生一路畀我訊息就冇問題，
我可以處嚟件案，若果唔係有呢個訊息，我喺上一
D 堂或者再上一堂我唔會聽咁多證供。朱先生一路畀 D
我個感覺就話冇問題，呢一個手續嚟嘅者，咁樣，
E 但係而家我睇咗呢一份咁嘅文件，我都有啲意外， E
即係法團話要堅持佢嗰個仲裁嘅權利，咁變咗我感
F 覺就係朱先生雖然喺呢度係話佢代表法團做緊呢樣
F
嘢，佢可能冇一個適當嘅授權都唔定，因為睇番個
決議就係話，呢度牽涉到好複雜嘅問題，你睇到，
G G
呢個第一樣嘢。
H 咁變咗我就覺得若果係想息事嘅話，當然你可 H
以考慮，我就覺得喺呢個階段若果你係斟酌落去嘅
I
話，牽涉落嚟嗰個法律觀點仲更複雜，愈搞可能愈
I
複雜。因為譬如話我勉强畀咗個判決出嚟，個理由
惟有我就係 - - 若果我話法團已經做咗咁多嘢，已經
J J
視為放棄咗個權利，勉强畀個判決出嚟，法團可能
有個意見，因為佢出咗個決議，佢亦都係係代表一
K 個團體去做嘢，佢呢度要澄清嘅話，可能要上高院 K
做個澄清。又或協成幢大廈任何一位業主唔滿意呢
L 個做法，認為佢有個仲裁權利，佢亦都可以透過上 L
高院去解決呢件事。對你嚟講可能好麻煩，因為成
座一廈，你難保有任何一位業主唔滿意，你明唔明
M M
白？
N 所以 - - 即係我講緊你，即係若果你話你以為 N
即刻勉强 做個判 決出嚟 會解決呢 件事， 我就 話未
O 心，因為法團或者任何一位業主有質疑嘅話，都會
O
上 - - 呢個法律問題上高院去解決，係咪法團可以堅
持佢仲裁嘅權利。所以就係雖然係走咗啲冤枉路，
P P
但係我覺得不如你自己諗下，就係話有啲嘢都唔好
走捷徑， 都係諗 下不如 話仲裁， 上去做 仲裁 ，係
Q 咪？有冇好大嘅意見？ Q
R
申索人代表：冇問題，冇。
R
官：若果冇，我跟審頭先個講法，即係你明白個難處？
S S
申索人代表：係。
T T
U U
V V
由此
-6-
A A
官：明白個難處。咁我就喺 - - 當係雙方同意喇，喺雙方
B 同意下面，我將呢個案件無限期押後，你哋會收到 B
我個命令個蓋印副本。個仲裁嘅情況就我建議申請
人你書面即刻做封信，就畀 - - 建議 咋，即係呢個
C C
絕對唔係指令，就畀被告人法團嗰度，就要求雙方 -
- 你就直情可以畀個建議，你話建議個仲裁跟番呢個
D 條款，同埋佢哋個決議案，你有副本喇，咁你話就 D
呢個仲裁嘅程序，你建議委任幾多位嘅仲裁員，同
E 埋可以委 任邊一 啲仲裁 員，直情 書面寫 個建 議出 E
去，同埋就希望佢哋幾多日之內畀個答覆你咁樣。
F 你亦都可以直情即刻過去 Hong Kong I.A.C. 度，同
F
佢哋去諮詢下個程序，佢哋會有啲表格，直情有啲
樣本嘅信件畀你參考。就係咁，兩位走得。好有浪
G G
費，朱先生，我知道你都唔想。」
H H
10. It was thus that by a “consent order”, the hearing of the claim
I I
was adjourned sine die with liberty to restore.
J J
11. From that consent order, the Claimant now appeals to this
K K
Court. In short, the Claimant argues that the arbitration clause has no
L application to the dispute between the parties, the Defendant’s request for L
reference to arbitration does not fall within the provisions of section 6 of
M M
the Arbitration Ordinance (Cap. 341) and article 8 of the UNCITRAL
N Model Law on International Commercial Arbitration (“Model Law”), and N
in any event the Defendant has waived the right to arbitration. In those
O O
circumstances, the Claimant argues that the so-called consent order was
P agreed to by the Claimant and made by the tribunal under a mistake. P
Q Q
12. It is quite unnecessary to deal with all the arguments relied on
R by the Claimant in this appeal. For it is quite plain to me that in the R
present case, there is no question of the Defendant being entitled to ask the
S S
tribunal to stay the Claimant’s claim before the tribunal in favour of
T arbitration. T
U U
V V
由此
-7-
A A
13. Section 6 of the Ordinance and article 8 of the Model Law
B B
read as follows respectively:
C “6. Court to refer matter to arbitration in certain cases C
(1) Subject to subsections (2) and (3), article 8 of the
D UNCITRAL Model Law (Arbitration agreement and substantive D
claim before court) applies to a matter that is the subject of a
E domestic arbitration agreement in the same way as it applies to a E
matter that is the subject of an international arbitration agreement.
F (2) Subject to subsection (3), if a party to an arbitration F
agreement that provides for the arbitration of a dispute involving
a claim or other matter that is within the jurisdiction of the
G G
Labour Tribunal or a person claiming through or under such a
party, commences legal proceedings in any court against any
H other party to the agreement or any person claiming through or H
under that other party, in respect of any matter agreed to be
referred, and any party to those legal proceedings applies to that
I court after appearance and before delivering any pleadings or I
taking any other step in the proceedings, to stay the proceedings,
J the court or a judge of that court may make an order staying the
J
proceedings, if satisfied that ―
K (a) there is no sufficient reason why the matter should not K
be referred in accordance with the agreement; and
L L
(b) the applicant was ready and willing at the time the
proceedings were commenced to do all things necessary
M for the proper conduct of the arbitration, and remains so. M
(3) Subsections (1) and (2) have effect subject to section 15
N of the Control of Exemption Clauses Ordinance (Cap. 71).” N
O “Article 8. Arbitration agreement and substantive claim O
before court
P (1) A court before which an action is brought in a matter P
which is the subject of an arbitration agreement shall, if a party
so requests not later than when submitting his first statement on
Q Q
the substance of the dispute, refer the parties to arbitration unless
it finds that the agreement is null and void, inoperative or
R incapable of being performed. R
(2) Where an action referred to in paragraph (1) of this
S article has been brought, arbitral proceedings may nevertheless S
be commenced or continued, and an award may be made, while
T the issue is pending before the court.”
T
U U
V V
由此
-8-
A A
14. As has been outlined above, the claim was commenced in the
B B
tribunal on 22 May 2002, and the incorporated owners put in a statement
C of defence setting out the various grounds that they relied on in defence of C
the claim on or before 17 July 2002. Further documents and witness
D D
statements were filed with the tribunal thereafter. The Defendant’s request
E to the tribunal for referring the case to arbitration came much later on or E
about 18 January 2003.
F F
G 15. In other words, the request to the tribunal to refer the parties to G
arbitration was made later than the Defendant’s submission of its first
H H
statement on the substance of dispute.
I I
16. In those circumstances, the provisions in article 8(1) have not
J J
been complied with by the Defendant, and there is therefore no question of
K the tribunal being entitled to refer the parties to arbitration pursuant to the K
Defendant’s request.
L L
M 17. Miss Po, doing her best as counsel on behalf of the Defendant, M
argues that the application of article 8(1) of the Model Law in the context
N N
of the Small Claims Tribunal must take into account the informal nature of
O proceedings in the tribunal (section 16(1) of the Small Claims Tribunal O
Ordinance, Cap. 338), the tribunal’s duty of inquiry (section 16(3)) and the
P P
lack of legal representation at hearings before the tribunal (section 19). In
Q short, Miss Po asks this Court to adopt a construction to the effect that Q
where a dispute is before the Small Claims Tribunal, nothing submitted by
R R
a party should be regard as a “statement on the substance of the dispute”
S S
for the purpose of article 8(1) unless and until his right to arbitration has
T
been pointed out and explained by the tribunal to the parties.
T
U U
V V
由此
-9-
A A
18. I do not accept the argument. The matter is essentially a
B B
matter of construction. As a matter of principle, there cannot be one law or
C construction of article 8(1) for disputes pending before the ordinary courts C
and tribunals save and accept the Small Claims Tribunal, and another law
D D
or construction of article 8(1) for disputes pending before the Small Claims
E Tribunal. E
F F
19. Moreover, it must be remembered that the Small Claims
G Tribunal has been set up to deal with claims involving a relatively small G
amount of money (the present jurisdictional limit is $50,000.00), in an
H H
informal, expeditious and inexpensive manner. Based on that rationale, we
I have provisions like sections 16 and 19 of the Ordinance, which Miss Po I
has referred this Court to.
J J
K 20. It must also be remembered that arbitrations can be expensive. K
For one, the parties will have to pay for the arbitrator, whereas subject to
L L
minor exceptions, they need not pay for the service of the court or the
M tribunal. The contrast is even greater when one is talking about the Small M
Claims Tribunal here. The procedure of the tribunal is informal and is
N N
designed to deal with disputes expeditiously and inexpensively.
O O
21. Another non-monetary consideration is the fact that whereas
P P
hearings before the tribunal do not permit legal representation, there is no
Q such restriction as regards arbitrations. Q
R R
22. For all these reasons, even if one should, as Miss Po has
S S
submitted, take into account the peculiar nature or context of a dispute
T
pending before the Small Claims Tribunal, the underlying rationale for the
T
U U
V V
由此
- 10 -
A A
establishment of the tribunal would go against the construction put forward
B B
by Miss Po, for the simple reason that arbitration does not really stand well
C with the rationale that cases involving small amounts in dispute should be C
proceeded with and adjudicated upon in an informal and inexpensive
D D
manner.
E E
23. Thus analysed, I fail to see why any special treatment should
F F
be meted out to a party to a case before the tribunal who wants to insist on
G arbitration. Nor do I see any justification for a special construction of G
article 8(1) to cater for cases pending before the tribunal.
H H
I 24. As to the knowledge of the parties of their right to arbitration, I
the reference to section 19 of the Ordinance prohibiting legal
J J
representation at hearings before the tribunal is misplaced. The prohibition
K relates to hearings before the tribunal. It does not prevent either party from K
seeking legal advice on the subject matter of dispute. In those
L L
circumstances, I fail to see how it can be said that a party to a case before
M the tribunal, who wishes to rely on an arbitration clause, is in a more M
disadvantageous position when compared with all other litigants with a
N N
similar intention, who are parties to cases before the ordinary courts and
O other tribunals in Hong Kong. I do not see this as justification for a special O
construction of article 8(1).
P P
Q 25. In passing, I should note that section 6(2) of the Arbitration Q
Ordinance makes special provisions for cases pending before the Labour
R R
Tribunal or falling within its exclusive jurisdiction. The very existence of
S S
subsection (2) in section 6 supports my view that if the legislature had
T
wished to make any special provisions or create any exception regarding
T
U U
V V
由此
- 11 -
A A
cases pending before the Small Claims Tribunal, it would have done so,
B B
like in the case of the Labour Tribunal.
C C
26. Furthermore, I note that section 6(2) gives the Labour
D D
Tribunal (or the court in which proceedings were commenced) a discretion
E not to refer the parties to arbitration even if article 8(1) has been fully E
complied with. Given the background and rationale behind the
F F
establishment of the Labour Tribunal, it is not difficult to understand why.
G The tribunal has been established to deal with labour cases informally, G
inexpensively and expeditiously. It sits as a specialist tribunal. The case
H H
against an unqualified right to an automatic stay in favour of arbitration is
I apparent, and thus section 6(2). I
J J
27. As I have tried to explain above, broadly similar
K considerations apply to the Small Claims Tribunal, and that is why no K
special treatment should be given or special construction of the relevant
L L
provisions (in favour of arbitration) adopted for cases pending before the
M Small Claims Tribunal. M
N N
28. In conclusion, in my view, the tribunal was in error when it
O thought and thus explained to the parties at the hearing on 21 January 2003 O
that the arbitration clause in question would require the claim to be stayed
P P
in favour of arbitration, or put at the lowest, that there was such a real
Q possibility. In my judgment, there was no such possibility at all. There Q
was no question of the tribunal, on a correct application of the law,
R R
referring the subject claim to arbitration.
S S
T T
U U
V V
由此
- 12 -
A A
29. And apart from arbitration, there was no legitimate reason
B B
whatsoever for the tribunal not to proceed with completing the hearing of
C the case (which had been partly heard). There was no basis whatsoever for C
adjourning the hearing sine die, notwithstanding the general powers given
D D
to the tribunal under section 26 regarding adjournments and under section
E 37 regarding procedure generally. The powers conferred under those E
sections must be exercised judicially.
F F
G 30. All this brings me to the last hurdle facing the Claimant in this G
appeal. The order under appeal is a so-called consent order made with the
H H
agreement of both parties. Consent orders, generally speaking, may be
I divided into two types, namely those that embody or evidence a contract I
between the parties, and those which were made by the parties without
J J
objection, in order to save time and costs. See generally The Supreme
K Court Practice 1999, vol. 2, para. 17A–24; Siebe Gorman and Co. Ltd v. K
Pneupac Ltd [1982] 1 WLR 185; Wing Han Trading Co. Ltd v Tang Yan-
L L
kit [1991] 1 HKLR 494, 495F to H; c.f. Tsang Iu Hung v. Tsang Tak Wah
M [1993] 2 HKC 471. M
N N
31. In relation to the first type of consent orders, since the order
O embodies or evidences a contract made by the parties to settle or O
compromise their dispute in a case or on a particular point, it can only be
P P
disturbed (whether on appeal or otherwise) if there exists one or more of
Q the recognised vitiating factors that would allow a party to disturb a Q
contract, such as fraud, illegality, mistake or misrepresentation.
R R
S S
32. On the other hand, in relation to the second type of consent
T
orders, despite the label “consent”, it is merely an order of the court, which
T
U U
V V
由此
- 13 -
A A
can be disturbed (whether on appeal or otherwise) according to normal
B B
principles.
C C
33. In the present case, judging from the development of the case
D D
at the various hearings before the tribunal, and judging from the transcript
E as a whole, I am of the view that the eventual order made by the tribunal E
was merely an order not objected to by the parties, so as to save time and
F F
costs, rather than an order which embodied or evidenced any genuine
G contract between the parties. The parties, as well as the tribunal, simply G
thought that it was a good way out, in the light of the view of the law
H H
genuinely held by the tribunal and represented by the tribunal to the parties
I (who no doubt believed in the correctness of the tribunal’s view) at the I
hearing.
J J
K 34. For that reason, I see no obstacle to my allowing the appeal K
and setting aside the so-called consent order on the ground that there was
L L
no justification whatsoever for adjourning the hearing of the case.
M M
35. But if I am wrong with my view and the consent order in
N N
question really embodies or evidences a contract between the parties, I
O would still be of the view that the contract is liable to be disturbed given O
the most basic and fundamental mistake of all concerned that the
P P
arbitration clause in question was still applicable or arguably applicable at
Q the time of the hearing – when it was totally not. Q
R R
36. In this regard, I am not daunted by the fact that a mistake of
S S
law, as opposed to a mistake of fact, was involved at the hearing below.
T
As has been pointed out by the learned editors of Chitty on Contract (29th
T
U U
V V
由此
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A A
ed.) vol. 1, para. 5-042, both common law and equity have been
B B
developing away from the previous distinction between mistakes as to law
C and those as to fact, as has been demonstrated by the House of Lords C
decision in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349,
D D
a restitution case. See also Foskett, The Law and Practice of Compromise
E (5th ed.) para. 4-231. E
F F
37. In Brennan v Bolt Burdon [2003] EWHC 2493 (QB), a case
G on setting aside a consent order based on a mistake of law, Morland J, G
relying on relevant English and Commonwealth authorities, concluded that
H H
a fundamental mistake of law common to both parties can vitiate a
I compromise and the consent order that evidences it (see paras 35 to 50). I
J J
38. Insofar as may be necessary, I am prepared to hold that a
K mistake of law notwithstanding, the contract evidenced by the consent K
order (assuming that it is a “true” consent order) is vitiated by the
L L
fundamental mistake of law in question. In those circumstances, there is
M no bar to this Court allowing the appeal and setting aside the consent order. M
N N
39. For the above reasons, I order that the appeal be allowed, the
O order below be set aside, and the case be remitted to the tribunal for a re- O
trial before another Presiding Officer. Although the claim has been partly
P P
heard, given the long lapse of time, there is no advantage to be gained by
Q remitting the case to the same Presiding Officer for continuation of the trial. Q
In my view, it would be best to start everything afresh.
R R
S S
T 1
“It is suggested that a mistake of law may now, if sufficiently fundamental to the compromise, T
operate to invalidate the agreement.”
U U
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由此
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A A
40. As regards costs, having heard counsel’s submissions (on a
B B
provisional basis), I am of the view that costs should follow the event –
C particularly bearing in my mind that this appeal, which arose to a C
significant extent as a result of the Defendant’s misplaced reliance on the
D D
arbitration clause at the hearing below, was strenuously opposed by the
E Defendant. In those circumstances, I order that the costs of this appeal be E
paid by the Defendant to the Claimant; such costs are to be taxed if not
F F
agreed.
G G
H H
I I
(Andrew Cheung)
Judge of the Court of First Instance
J J
High Court
K K
Mr Victor K C Lee, instructed by Messrs Raymond T M Lau & Co., for the
L Claimant (Appellant) L
M Ms Po Wing Kay, instructed by Messrs Alfred Lam, Keung & Ko, for the M
Defendant (Respondent)
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
HCSA16/2003 C.Y. TSUN INVESTMENT CO LTD v. THE INCORPORATED OWNERS OF HOI TO COURT - LawHero