Arbitration analysis: The plaintiff (T) made a loan to the defendant (W) pursuant to a loan agreement which contained an arbitration clause. W provided a cheque in part payment of the loan, however, it was dishonoured, T brought an action against W on the cheque in the Hong Kong court. W applied to stay the court action in favour of arbitration under section 20(1) of the Hong Kong Arbitration Ordinance (Cap 609) (which incorporates article 8 of the United Nations Commission on International Trade Law (the “Model Law”). The Hong Kong Court of Appeal upheld the first instance decision to refuse the stay. The Hong Kong Court of Appeal applied the principle set out in CA Pacific Forex Ltd v Lei Kuan Leong that an arbitration clause contained in an underlying agreement would only apply to a bill of exchange with express wording.
Following that, a supplemental agreement was entered into, in which W undertook to repay the interest in cash on
- As a general rule a cheque or bill of exchange will be considered to be an independent obligation from the underlying agreement.