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Kenworth Engineering Limited v Nishimatsu Construction Company Limited
15 May 2004

Procedural decisions of Arbitrators are rarely the subject of appeal to the court. In this case, the court considered the Arbitrator's decision to prevent Kenworth from advancing certain claims because they had been inadequately particularised. The court also reviewed the principles governing the removal of an Arbitrator for misconduct.

Kenworth applied for permission to appeal against the decision of an Arbitrator who had been appointed to decide a dispute arising from alleged breaches of a sub-contract entered into between the parties relating to building works for the Ground Transportation Centre at Chep Lap Kok Airport. Kenworth alleged that Nishimatsu had wrongfully terminated the sub-contract and evicted it from the site. Nishimatsu, not satisfied that the case against it had been properly pleaded, applied to the Arbitrator for an order that more detailed particulars of the claim be provided. The Arbitrator made the award sought with the sanction that if such details were not forthcoming, Kenworth would be barred from putting forward its case on those aspects. The Arbitrator found that Kenworth's amended Statement of Claim did not provide the particulars sought and, accordingly, ordered that Kenworth could not present a case on these specific claims. Kenworth sought to appeal this award.

Nishimatsu argued that the Question of whether a party has adequately pleaded his case is one of fact only. Had Nishimatsu been correct, the application would have necessarily failed since leave to appeal can only be granted to an applicant on a point of law. The court did not accept Nishimatsu's characterisation. Rather it said that adequacy of particulars is to be gauged by reference to:

  1. whether the particulars are sufficient (if proved by evidence) to establish the material elements of a claimant’s action; and
  2. whether the particulars are sufficiently precise to enable a respondent to know the case which he has to meet.

These involved matters of law and were therefore capable of being appealed to the court. Since this was a "one off" case rather than a matter of general public importance, following Swire Properties v Secretary for Justice, Kenworth had to show that the Arbitrator was obviously wrong on the relevant Question of law. The court found that the Arbitrator had been obviously wrong to disallow Kenworth from presenting its case.

The court was less amenable to Kenworth's application to remove the Arbitrator for misconduct. Although it was clear on the facts that the Arbitrator had made mistakes, the court took the view that the Arbitrator, who was formerly the Hong Kong Judge in charge of the Construction and Arbitration List, would remain "perfectly able to carry the arbitration to a successful conclusion once his mistakes have been pointed out ... any error by the Arbitrator in gauging the sufficiency of Kenworth's particulars did not demonstrate incompetence or careless disregard of Kenworth's rights". Misconduct was not found.

Confirming that an Arbitrator's decision on procedural matters is subject to appeal in these circumstances may well prove to be a powerful tool in the armoury of a dissatisfied party. The decision also shows that the courts will not remove an Arbitrator for misconduct unless it can be shown that "the arbitration simply cannot be allowed to continue with the particular Arbitrator in office - either because he has shown actual or potential bias or because his conduct has given serious ground for destroying the confidence of one or both parties in his ability to conduct the dispute judicially or competently. "

Herbert Smith, Construction Update
November 2004

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