Case number: 38
Article number: model arbitration law / 8
Thessaurs issue:
Country of decision: United Kingdom
Year of decision: 1991
Type of decision: Judicial decision

Case 38: MAL 8
Hong Kong: High Court (Kaplan J.) 2 March 1991
China State Construction Engineering Corporation, Guangdong Branch v. Madiford Limited Published in English: 1992, Hong
Kong Law Digest, C4

(Abstract prepared by Kaplan J.)

The plaintiff agreed to supply to the defendant the services of a number of Chinese construction workers to carry out certain
works in Libya. The defendant admitted that the amount claimed by the plaintiff was correct but contended that it was not
obliged to pay it in full on the basis of a settlement agreement it had reached with the plaintiff.

The plaintiff had obtained a judgement by default and, in accordance with s. 6A of the Arbitration Ordinance (with his
summons the plaintiff invoked article 8 MAL), the defendant applied for a stay of the proceedings, on the ground that the
agreement between the plaintiff and the defendant contained an arbitration clause. The arbitration clause provided that "In case
of any incompleteness of the contract, both parties shall reach settlement ... If settlement cannot be reached ... the matter may
be submitted for arbitration ..." (emphasis added).

The court set aside the judgement by default obtained by the plaintiff as it was satisfied that the defendant had "a reasonable
prospect of success". The court found that MAL was not applicable as the arbitration agreement was entered into before 6
April 1990, namely the commencement date of the Arbitration (Amendment) (No. 2) Ordinance 1989, by which MAL was
made part of the Hong Kong law of arbitration.

The court, applying article 6A of the Arbitration Ordinance, granted the stay of proceedings as it found that there was a valid
arbitration agreement. The word "incompleteness" in the arbitration clause was held to be wide enough to cover a failure to
perform the contract. The words "may be submitted" in effect meant "shall", as once one party had elected to proceed to
arbitration for the resolution of a dispute the other party was obliged to honour the agreement to arbitrate.