Case number: 89
Article number: model arbitration law / 8
Thessaurs issue:
Country of decision: United Kingdom
Year of decision: 1994
Type of decision: Judicial decision

Case 89: MAL 8
Hong Kong: High Court of Hong Kong (Kaplan J.) 16 December 1994
York Airconditioning & Refrigeration Inc. v. Lam Kwai Hung Trading as North Sea A/C Elect. Eng. Co.
Original in English
Unpublished

(Abstract prepared by the Secretariat)

The plaintiff, a Hong Kong company, sold to the defendant, a Hong Kong agent of a Chinese company, water cooling
machines that were to be installed in Beijing. The contract contained an arbitration clause for arbitration in Beijing under the
CIETAC Rules. The defendant paid 30% of the price in Hong Kong, and for the balance a bill of exchange was drawn in
Hong Kong on a Hong Kong party and accepted by the defendant. A dispute arose as to the quality of the goods and the
defendant failed to honour the bill of exchange upon presentation. The seller sued in Hong Kong. A stay of court proceedings
requested by the defendant was not granted by the Master of the court and the defendant appealed.

The court held that under the Chinese law applicable to the sales contract (the law of the place of arbitration), the bill of
exchange was to be treated as a separate contract, which was not covered by the arbitration clause contained in the sales
contract. In addition, it was held under the Hong Kong law applicable to the bill of exchange that the bill of exchange was a
separate contract and a claim on the bill was not covered by the arbitration clause contained in the sales contract. The
application for a stay of the court proceedings was dismissed and the claim of the defendant was referred to the appropriate
court.