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2025 Supreme(HK)(HKCFI) 138
Settlement agreements can supersede arbitration clauses in prior contracts when their language expressly indicates a shift to court jurisdiction for disputes.
Headnote:(A) Arbitration Ordinance (Cap 609) - Sections 20 - Stay of proceedings - Defendant sought to stay proceedings for arbitration based on an arbitration clause in a previous contract despite entering into a Settlement Agreement which excluded arbitration. Court found that the claims arose under the Settlement Agreement, not the Contract, and thus arbitration was not applicable. (Paras 19-41)
(B) The court discussed the implications of a settlement agreement nullifying previous arbitration clauses, clarifying that the parties intended to resolve disputes through litigation post-settlement. (Paras 21-40)
Facts of the case:
The Plaintiff and Defendant are construction firms involved in marine sand supply under a contract which later resulted in a settlement addressing disputes arising from alleged breaches.
Findings of Court:
The court determined that the parties are not bound to arbitrate under the Contract due to the Settlement Agreement's language explicitly stating the arbitration clause does not apply.
Issues: The main questions were whether the current proceedings arose under the Contract or the Settlement Agreement and if the court or arbitration should address these disputes.
Ratio Decidendi: The court ruled that claims were under the Settlement Agreement and the arbitration clause from the original contract was disapplied, allowing for court proceedings.
Result: The stay application was denied, and the Defendant was instructed to pay costs.
| Table of Content |
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| 1. defendant's application for a stay in favour of arbitration based on previous contracts is challenged. (Para 1 , 2 , 19) |
| 2. court's approach to determining the applicability of arbitration agreements. (Para 22 , 23 , 24) |
| 3. settlement agreements can challenge previous arbitration clauses effectively. (Para 25 , 26 , 27) |
| 4. dispute resolution clauses in agreements can be interpreted to allow court proceedings instead of arbitration. (Para 38 , 39 , 41) |
J U D G M E N T
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1.
By a summons dated 12 February 2025, the Defendant applies for an order that these proceedings be stayed in favour of arbitration. The application is made pursuant to
2. In gist, the issue between them is as to the effect of a settlement agreement entered into between the parties on 11 November 2024 (the “Settlement Agreement”) on an arbitration clause in a contract entered into by the parties on 13 June 2024 (the “Contract”). The Plaintiff argues that the terms of the Settlement Agreement displace the arbitration clause in the Contract and that the claim in these proceedings is made under the Settlement Agreement and not under the Contract. The Defendant argues that the claim is based on the Contract and not on the Settlement Agreement, and so it falls within the arbitration clause, or at least prima facie falls within the arbitration clause, and hence it is entitled to a stay so that the matter can be determined in an arbitration.
The Contract
3. Both parties are Hong Kong incorporated construction companies.
4. The Contract entered into by the parties on 13 June 2024 is entitled “ Sea-sand transportation and discharge contract ” and is governed by Hong Kong law. Under its terms, the Defendant agreed to pay the Plaintiff to provide marine plant to receive and dispose of sand fill from the Defendant’s construction site at Kwai Chung Town Lot No. 531, New Territories. In turn, the Plaintiff contracted with other contractors to deliver sand. The sand was to be used as infill in connection with the 3 rd runway project at HKIA.
5. Clause 6.1 of the Contract provided:
“Quantity: a total of approximately 180,000 to 300,000 m³. Party B [Defendant] shall supply about 36,000 to 60,000 m³ of sea sand per month. The weekly quantity shall be 9,000 to 15,000 m³, i.e. approximately 1,500 to 2,500 m³ per day. … ”
6. By clause 6.2 of the Contract, the price to be paid by the Defendant was set at HK$ 45/metric tonne of sand disposed of by the Plaintiff.
7. In the event of disputes, clause 12.3 of the Contact provided for mediation in accordance with the rules of the HKIAC, and in the event that this did not resolve the dispute, through arbitration in accordance with the laws of the HKSAR. In agreed translations:
“爭議處理 Dispute Resolution
12.1 因本合同引起或與之相關的任何爭議或分歧，雙方必須首先盡最大努力以合理、公平的方式解決任何爭議。
Any dispute or disagreement arising out of or in connection with this Contract shall first be resolved by both parties using their best efforts in a reasonable and equitable manner.
12.2 除非根據本合同，雙方已解除合同關係，否則在本合同沒有結束前，雙方均不得就合同中發生的爭議提交仲裁。
Unless the parties have terminated the contractual relationship pursuant to this Contract, neither party shall submit any dispute arising under the Contract to arbitration before the Contract has come to an end.
12.3 如雙方未能有效解決有關爭議，則在合同結束或解除後應首先根據香港國際仲裁中心的規則通過調解解決，如果無法解決，則應根據香港特別行政區的相關法律通過仲裁解決。
If both parties are unable to effectively resolve the subje
