China Solar Power (Holdings) Ltd v. Ulvac, Inc

HCMP 1191/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1191 OF 2015

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JUDGMENT
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1.China Solar Power (“CSP”) and ULVAC Inc (“ULVAC”) were the parties to an arbitration arising out of a contract for ULVAC to supply to CSP production lines for the manufacture of Photovoltaic Solar Panels.

2.On 17 February 2015, the sole arbitrator, Mr Neil Kaplan CBE QC SBS (“the Arbitrator”) gave a Partial Award in the arbitration in ULVAC’s favour (“the Partial Award”).

3.CSP now seeks to set aside that award pursuant to Section 34C of the Arbitration Ordinance, Cap 341, Articles 15, 21, 24 and 29 of the UNCITRAL Arbitration Rules (1976)(the "1976 Rules"), and Articles 4, 16, 18 and 34 of the Fifth Schedule to the Arbitration Ordinance (the "Model Law").

Background

4.The background has been well described in the Partial Award and I will only sketch out the background insofar as necessary to understand the issues dealt with in this Judgment.

5.ULVAC is a Japanese corporation which at the material time was involved in the production of solar equipment manufacturing systems.  CSP was a start‑up business in China hoping to capitalize on what was then a growing demand by setting up a factory to manufacture and sell photovoltaic solar cells.

6.In October 2007, the parties entered into a Strategic Alliance Agreement (“SAA”) to declare their intention to cooperate in what it was hoped would be a profitable market for the production of solar cells in China.  This was followed the Turnkey Agreement (“Turnkey Agreement”) in January 2008, by which ULVAC agreed to sell and CSP agreed to buy a turnkey plant containing ULVAC’s production lines.  The Turnkey Agreement provided for CSP to order and ULVAC to supply two production lines which would be up and running 16 and 18 months from the initial purchase orders.

7.Unfortunately, it appears that in late 2008 the global economic crisis hit the solar cell market particularly hard and there was a rapid decrease in demand for the type of solar cells manufactured by CSP.  By that time, Production Line 1 had been installed and Production Line 2 had been ordered and paid for in part.  Eventually CSP canceled the purchase of Line 2 and purported to terminate the Turnkey Agreement on the basis of defects and errors it had discovered in Line 1.

8.ULVAC commenced arbitration against CSP pursuant to the terms of an arbitration clause in the Turnkey Agreement by issuing a Notice of Arbitration on 24 December 2010.  The Arbitrator was appointed on 19 April 2011.  Pleadings were directed and submitted and there were rounds of discovery by Requests to Produce documents, resulting in various Procedural Orders.

9.A substantive hearing was held on 7‑21 October 2013, when the Arbitrator heard from counsel and witnesses.  11 witnesses of fact and six expert witnesses gave evidence at the substantive hearing.  Post hearing briefs were submitted and exchanged by the parties on 10 December 2013 and reply briefs on 7 January 2014.  During the course of the substantive hearing,  ULVAC’s counsel applied for adjournment of all issues relating to Line 2 until after decision on main issues as to liability (on Line 1).  This was refused by the Arbitrator who nevertheless decided that the claim for warehousing charges in respect of Line 2 which was allegedly incurred by ULVAC because of CSP’s wrongful cancellation should be adjourned pending the issue of a Partial Award on the liability issues on Line 1.

10.Even after the reply submissions had been exchanged, there had been further rounds of request for production of documents, which ultimately led to a hearing on 2 April 2014 before the Arbitrator where it appeared that CSP applied for leave to amend its Amended Defence and Counterclaim to plead an entirely new case that Line 2 was not in existence and hence the attempt by ULVAC to charge for Line 2 and warehousing charges was fraudulent and constituted a repudiatory breach of the Turnkey Agreement.

11.The hearing on 2 April 2014 led to Procedural Order No 4 (“PO4”), whereby the parties were ordered to set out their respective cases on the existence or otherwise of Line 2, together with any documents and witness statements.  There would then be a three day hearing to decide the issues.  Although PO4 does not say so, it is accepted by the parties at the hearing before me that it was envisaged at the time PO4 was issued that there would be an evidentiary hearing where inter alia the witnesses in relation to Line 2 would be cross‑examined before the Arbitrator would rule on any proposed amendment.

12.However, when it came to the hearing itself on 20‑21 October 2014, it was suggested by counsel for ULVAC and (after some time for consideration) agreed by counsel for CSP that there would not be an evidentiary hearing, and that the application for amendment to plead the case about the non‑existence of Line 2 would be decided on the papers and submissions alone.

13.On 31 October 2014, the Arbitrator refused CSP’s application for leave to amend its defence and counterclaim, directing supplemental submissions following on from the ruling, and directing that there should be no further submissions without leave.

14.On 11 February 2015, the Arbitrator declared the proceedings closed in accordance with Article 27 of the HKIAC Administered Arbitration Rules 2008.

15.On 17 February 2015, the Arbitrator issued the Partial Award, directing that CSP pay ULVAC balance of the purchase price for Line 1 (JPY1,700,425,000) and cancellation penalties for Line 2 (JPY1,700,000,000).

16.On 12 March 2015, ULVAC submitted an application to withdraw its warehousing claim charges in respect of Line 2. This was opposed but after exchanges of written submissions and correspondence, the Arbitrator issued Procedural Order No 5 allowing ULVAC to withdraw its claim for warehousing charges in respect of Line 2.

17.On 23 July 2015, the Arbitrator issued the Final Award which in light of Procedural Order No 5 was only limited to interest and costs.

Legal Principles

18.The Arbitration was commenced before the coming into force of the present Arbitration Ordinance Cap 609. The parties are in agreement that the previous Arbitration Ordinance Cap 341(“the Ordinance”) applies.

19.As the Arbitration was an international arbitration, s 34C of the Ordinance applies.S 34C applies the UNCITRAL Model Law. (“Model Law”). The relevant provisions for the purpose of this judgment are set out below :

“(1) Art. 16(2) of the Model Law provides :

A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

(2) Art. 18 of the Model Law provides :

The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.

(3) Art. 34 of the Model Law provides :

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

(2) An arbitral award may be set aside by the court specified in article 6 only if:

(a) the party making the application furnishes proof that:

(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or

(b) the court finds that:

(i) the subject‑matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.”

20.UNCITRAL Arbitration Rules applied by virtue of the Arbitration Clause (Clause 18.1 of the Turnkey Agreement).

21.The principles to be applied on an application for enforcement of an arbitral award were helpfully summarized by Mimmie Chan J in KB v S ,unreported, HCCT 13/2015 :

(1) The primary aim of the court is to facilitate the arbitral process and to assist with enforcement of arbitral awards.

(2) Under the Arbitration Ordinance (“Ordinance”), the court should interfere in the arbitration of the dispute only as expressly provided for in the Ordinance.

(3) Subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how their dispute should be resolved.

(4) Enforcement of arbitral awards should be “almost a matter of administrative procedure” and the courts should be “as mechanistic as possible” (Re PetroChina International (Hong Kong) Corp Ltd [2011] 4 HKLRD 604).

(5) The courts are prepared to enforce awards except where complaints of substance can be made good.  The party opposing enforcement has to show a real risk of prejudice and that its rights are shown to have been violated in a material way (Grand Pacific Holdings Ltd v Pacific China Holdings Ltd [2012] 4 HKLRD 1 (CA)).

(6) In dealing with applications to set aside an arbitral award, or to refuse enforcement of an award, whether on the ground of not having been given notice of the arbitral proceedings, inability to present one’s case, or that the composition of the tribunal or the arbitral procedure was not in accordance with the parties’ agreement, the court is concerned with the structural integrity of the arbitration proceedings.  In this regard, the conduct complained of “must be serious, even egregious”, before the court would find that there was an error sufficiently serious so as to have undermined due process (Grand Pacific Holdings Ltd v Pacific China Holdings Ltd [2012] 4 HKLRD 1 (CA)).

(7) In considering whether or not to refuse the enforcement of the award, the court does not look into the merits or at the underlying transaction (Xiamen Xingjingdi Group Ltd v Eton Properties Limited [2009] 4 HKLRD 353 (CA)). 

(8) Failure to make prompt objection to the Tribunal or the supervisory court may constitute estoppel or want of bona fide (Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 111).

(9) Even if sufficient grounds are made out either to refuse enforcement or to set aside an arbitral award, the court has a residual discretion and may nevertheless enforce the award despite the proven existence of a valid ground (Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 111, 136A‑B).

(10) The Court of Final Appeal clearly recognized in Hebei Import & Export Corp v Polytek Engineering Co Ltd that parties to the arbitration have a duty of good faith, or to act bona fide (p 120I and p 137B of the judgment).

The same principles would apply to an application for setting aside an arbitral award, it being the other side of the coin.

Grounds for Setting Aside

22.The Originating Summons sought to justify setting aside the Partial Award on three grounds, with the 2^nd ground being divided into three sub‑grounds.  In CSP’s written submissions before me, they were divided into six grounds.  Nothing turns on this division and I will for convenience’s sake deal with the grounds in the order set out in and as described in ULVAC’s submissions.

23.The 5 grounds are as follows :

(1) The Arbitrator’s own decision to decline jurisdiction regarding disputes arising in respect of the SAA;

(2) CSP was unable to present its case on the solar cell acceptance tests under the Turnkey Agreement;

(3) CSP was unable to present its case on the existence and disposal of Line 2;

(4) CSP was unable to present its case on the warehousing of Line 2; and

(5) The Arbitrator’s declaration closing the hearing was invalid.

24.In oral submissions before me, both parties agreed that grounds 3 & 4 could be considered together and submissions were made on that basis.

Ground 1 – Jurisdiction in Respect of the SAA

25.This arises because the Arbitrator in the Partial Award found that he had jurisdiction to consider whether his jurisdiction extends to the part of CSP’s counterclaim based on the SAA alone, and that having considered such, he decided he had no jurisdiction to deal with the counterclaim.[1]  His reasons are as follows :

(1) For the reasons [elaborated upon in the Partial Award], and in particular given my duty to publish an enforceable award and given my absolute discretion to allow or disallow arguments to be made, I have jurisdiction to consider whether my jurisdiction extends to that part of the counterclaim which is based on the SAA;

(2) The detailed technical terms relating to PV Production Lines and their purchase, as well as the Parties’ respective obligations in relation to that purchase, were negotiated at length and included in the Turnkey Agreement.  The Turnkey Agreement purchase terms replaced those contained in the SAA, in particular in Clause 6 of the SAA. Given the special circumstances of this case, the Parties could not have intended that Clause 6 of the SAA would carry any performance obligations for ULVAC; and

(3) It was never intended that the performance terms of the SAA in relation to a PV Production Line to be purchased would continue to apply once the terms of the Turnkey Agreement were concluded, which itself contained detailed performance obligations.

26.The SAA did not itself contain an arbitration clause.  CSP however did plead in its Amended Reply and Defence to Counterclaim (“ADCC”) that “CSP's claims herein made in respect of ULVAC's breach of the SAA constitute disputes, controversies or claims relating to the Turnkey Agreement or its breach of termination, and as such are within the ambit of the said arbitration agreement.” CSP argued that ULVAC in its Amended Reply and Defence to Counterclaim (“ARDCC”) did not dispute jurisdiction but instead pleaded that it was “irrelevant” to the issues and it was an agreement to agree and so did not constitute a valid and binding contract.

27.CSP argued that by not disputing jurisdiction and joining issue on the SAA, ULVAC was agreeing that the issues in relation to the SAA, namely misrepresentation by ULVAC leading to CSP entering into the SAA and thereby incurring wasted expenditure in setting up the plant in Yantai, should also be decided by the Arbitrator. Arbitration being a consensual process, once the parties have joined issue on this matter, the Arbitrator should also decide this as being one of the issues in the Arbitration.

28.CSP further argued that any dispute as to jurisdiction had to be pleaded not later than in the ARDCC, relying on Art 16(2) of the Model Law that “A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence”.

29.ULVAC’s position was that the word “plea” in Art 16(2) is not synonymous with “pleading”. A plea can simply be an issue raised in the course of the arbitration, and in this case, the objection was raised in both the written and oral submissions in the Arbitration. Art 16(2) further provided that “The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.” which is what the Arbitrator did.

30.Whilst I accept that the word “plea” is not synonymous with “pleading” and may, depending on the context, encompass argument raised in submissions, I am not persuaded by ULVAC’s argument. Although there is wide latitude given to an arbitrator to adopt procedures suitable to the dispute, where the arbitration has been conducted on written pleadings which serve to define the issues, significant issues cannot simply be raised by submissions. So the pleadings themselves had been subject to amendment, and CSP had in fact been trying to re‑amend its ADCC.  Further, objection had been taken by CSP’s counsel to raising an objection to jurisdiction by submissions only. In the circumstances, but for the reasons in the following paragraphs, I am satisfied that the Arbitrator had not afforded CSP the opportunity to present its case in that the issue as to lack of jurisdiction had not been properly pleaded so it could be dealt with by the parties, in the context where full pleadings had been directions and such directions had in other respects been complied with.

31.That, however, is not the end of the matter on jurisdiction.  The Arbitrator did not rule that he had no jurisdiction on the usual ground that there was no arbitration clause in the SAA, or that the parties had not agreed to submit the SAA to arbitration, or that any arbitration clause was not wide enough to cover the dispute in question. The Arbitrator’s findings on jurisdiction are at paragraphs 152 and 153 of the Partial Award, which I set out below :

“152. In my judgment, because the Turnkey Agreement was the latest in time, was foreshadowed in the SAA, and the detailed terms and conditions were set out in the Turnkey Agreement, I find it hard to accept that the Parties could have intended from any commercial viewpoint, that Clause 6 of the SAA would be in any way referable to the terms and conditions negotiated and set out in some detail in the Turnkey Agreement nor that the SAA would govern once the Turnkey Agreement was executed.

153. The fact that one finds different dispute resolution provisions in the SAA and the Turnkey Agreement is a strong indication that the latter was to replace the former.  As between these Parties, it was the Turnkey Agreement that contained the various obligations of the parties that had been negotiated after the SAA had been executed.”

32.This is in my view not so much a finding as to the existence or extent of an arbitration clause, but rather a finding that the SAA (or at least those relevant provisions) had been superseded by the Turnkey Agreement. It is analogous to a sale and purchase of real property where a provisional sale and purchase agreement will be superseded by a formal sale and purchase agreement. In that context, the plea by ULVAC that the SAA is irrelevant[2] foreshadows such an argument. The pleaded case for ULVAC is that it was a framework for further agreements, not itself intended to be legally binding and was not legally binding, and no steps were carried out under the SAA. The finding of the Arbitrator, although not directly applying the reasons relied on by ULVAC as to why it was alleged that the SAA was irrelevant, was in effect a finding that the SAA was irrelevant because it had been a framework for further agreement which had in the end been superseded by the Turnkey Agreement.

33.CSP was thus put on notice that the relevance and binding effect of the SAA was in issue. This, coupled with the closing submissions both oral and in writing, is sufficient in my view to justify the Arbitrator allowing the “plea” which had been foreshadowed by the pleading to be made. CSP thus had the opportunity to present its case on this issue.

34.However, even if I am wrong on this, I would in any event not set aside the Partial Award in the exercise of my discretion, which discretion is provided for in the use of the word “may” in Art 16(2). The reason for such exercise of discretion is that the Arbitrator having ruled on his jurisdiction in the Partial Award, went on to consider what his findings would be if he did have jurisdiction. After such consideration, he found that the SAA was intended to be a binding agreement by itself, but was superseded by the Turnkey Agreement, and in any event the relevant clause[3] of the SAA relied on by CSP as being the basis for the claim in respect of the SAA alone was never intended to be a contractual warranty, being a “mere puff”, and in any event was not relied on by CSP.[4]

35.Mr Kwok for CSP conceded that the Arbitrator had dealt with the elements of misrepresentation in the Partial Award, so that CSP did in fact have the opportunity to present its case on these issues, although he maintained that the Partial Award did not deal adequately with them.  I am satisfied that the Arbitrator had thoroughly considered the arguments of CSP which had been accorded the opportunity of presenting its case.  He had given reasons for his conclusions, supported by authority and a careful analysis of the facts and relevant provisions of the SAA and the Turnkey Agreement.

36.The end result would therefore have been the same even if the Arbitrator had not ruled that he had no jurisdiction to decide on the issues pertaining to the SAA. Hence I am not persuaded that the Partial Award should be set aside on this ground.

Ground 2 – Solar Cell Acceptance Tests

37.CSP’s case in the Arbitration was based on Clause 14.1 of the Turnkey Agreement, which provided that if ULVAC failed to pass the Site Acceptance Tests, ULVAC would be obliged to refund all payments already paid and CSP would be relieved of all other agreements. CSP alleged that ULVAC had not passed the Site Acceptance Tests and so CSP was not liable for the balance of the purchase price for Line 1 nor the purchase price for Line 2, and to a refund of the monies already paid.

38.CSP says that the Arbitrator did not analyze or consider whether the relevant test requirements had been fulfilled. Instead the Arbitrator had found the Site Acceptance Test set out in the Turnkey Agreement had been modified, without identifying how and when. CSP alleges that there has been a gross violation of due process and natural justice which would justify setting aside on the basis that it is against public policy (Art 34(2)(b)(ii)), and the failure to identify what exactly the Site Acceptance Test had been modified into and how it was so modified led CSP to be unable to present its case justifying setting aside the award under Art 34(2)(a)(ii).

39.The Arbitrator dealt with this aspect of the case at paragraphs 213‑290 of the Partial Award. As is apparent, his consideration of these issues comprises a significant portion of the Partial Award. His conclusion was that the Acceptance Criteria had been modified by the Parties’ subsequent revisions, and that CSP had certified that the acceptance tests had been performed to its satisfaction and it had clearly accepted Line 1 (with a minor outstanding issue). He thus found that there was no need to analyze the actual acceptance tests, but nevertheless did so and made findings on the expert evidence called by the Parties.

40.CSP says that it was incumbent on the Arbitrator to identify how the Site Acceptance criteria had been modified, and it was not sufficient to rely only on the Certificate of Site Acceptance and accompanying Memorandum of Site Acceptance. I do not agree. This is an attempt by CSP to go into the merits of the Arbitrator’s decision, which the authorities clearly say is not allowed. The Arbitrator made a reasoned finding that Line 1 had been accepted by CSP. It is no place for the court to assess whether the Arbitrator’s reasons are sound.[5]

41.In any event, the Arbitrator did go on to consider at length the expert evidence on this issue, and did find that Line 1 satisfied the standards envisaged by the Parties under the Turnkey Agreement.  Although Mr Kwok tried to argue that the Arbitrator did not deal with each and every of the Site Acceptance Criteria, he conceded that the Arbitrator had dealt with those on which the Parties’ experts had joined issue.

42.Ground 2 fails.

Grounds 3 & 4 — Existence of Line 2

43.CSP’s original case on Line 2 was not that it did not exist, but that Line 1 was defective so it was not bound to take delivery of and pay for Line 2. This can be seen from the Agreed Non-Contentious Summary of Facts which was Annex A to the Partial Award. Paragraph 17(1) of the Summary provided : “PV Production Line 2 was ready for shipment as at 30 December 2008, however, in the event CSP never confirmed or requested that ULVAC ship PV Production Line 2 and this Line was never in fact shipped to CSP”.

44.As described at paragraph 10 above, things took a different turn after the substantive hearing which resulted in PO4 in the following terms :

(1) The Respondent's various applications for leave to amend its Amended Defence and Counterclaim stand adjourned.

(2) On or before 3 May 2014, the Claimant shall serve a document in narrative form entitled “Claimant's Case on Line 2” and shall set out chronologically therein its entire case concerning the production, ordering of parts, sale, or otherwise disposal and storage of PV Production Line 2 in respect of which cancellation and warehousing charges are claimed.

(3) The document referred to in (2) above shall have attached to it any new witness statements upon which the Claimant seeks to rely on these issues together with any documents relevant thereto not already produced. With regard to documents, the Claimant should have regard to the documents and categories thereof specifically requested by the Respondent in its application.

(4) On 3 June 2014, the respondent will serve a document entitled “Response to Claimant's Case on Line 2” and shall set out therein its entire case concerning the Line 2 issues in respect of which cancellation and warehousing charges are claimed.

(5) The document referred to in (4) above shall have attached to it any new witness statements upon which the respondent seeks to rely on these issues together with any documents not already produced in this arbitration.

(6) A hearing in October or November 2014 will be fixed in consultation with diaries with three days reserved for the hearing on all Line 2 issues.

(7) All costs in connection with and relating to this application will be reserved.

45.It is not in dispute that it was envisaged and expected that the three day hearing would involve cross‑examination of the witnesses in relation to the existence of Line 2.  In other words, there would be a full hearing of the Line 2 issues before the Arbitrator would decide whether or not CSP would be allowed to amend its case.

46.The hearing on the Line 2 issues was held on 20‑21 October 2014. At the hearing, however, no evidence was received in the form of witness testimony, or at least by way of cross-examination. The issue as to whether CSP would be permitted to Re‑Amend its Defence and Counterclaim to plead that Line 2 did not exist together with the allegations of fraud relating to such would be decided on the papers.

47.It is this turn of events which leads to CSP’s grounds 3 and 4. CSP says that it was not allowed to cross-examine ULVAC’s witness which prevented it from presenting its case.  Instead the Arbitrator made a finding in the Partial Award that Line 2 did exist without having heard from the witnesses. CSP further complains about the Arbitrator having made PO4 on the understanding that there would be examination of witnesses, subsequently reneged on that order which constituted a failure of due process.

48.However, this submission ignores one important fact — that it was with the consent of CSP’s counsel at the arbitration that the Arbitrator decided to take this course. This came out of submissions made on the first day of the hearing on 20 October 2014. The transcript bears this out :

“(1) At 10:10, ULVAC’s counsel said:

“We are completely content for Mr. Takahashi’s supplemental witness statement and indeed all the line 2 evidence to be dealt with at a later stage, if you allow the amendments. Which is why we suggested that actually it may be appropriate to deal with this on paper. That might be a more appropriate way, because you have seen the basic evidence, you know essentially what the witnesses are going to say. We now know, because we now have the pleading, what the case is going to be, if it’s allowed, and we can all approach the question as to whether these amendments should be allowed on the understanding of what evidence is likely to be given in support of it.

Sir, you said that wasn’t the correct approach and that’s fine, but actually, on reflection, it may be an appropriate approach to say that now, having seen all the papers, seen all the evidence, let’s leave aside cross‑examination because if you don’t allow the amendments... If you don’t allow them, the evidence is not necessary.  It’s only if you allow them, that the evidence becomes necessary...”

(2) At 10:14, the Arbitrator canvassed the views of CSP’s counsel to this suggestion by ULVAC’s counsel :

“What do you say about the idea of doing these amendments either in or out or some in or some out, whatever the case may be, so we know where we are going from here?” There was then further discussion between CSP’s counsel and the Arbitrator about the consequences one way or the other.

(3) At 10:24, CSP’s counsel said:

“Because this is a new suggestion as to a way forward. I’m not criticising my learned friend for that but I would certainly appreciate a few minutes with those instructing me to consider ...”

(4) In the end, the adjournment for CSP’s counsel to consider and take instructions lasted until the afternoon. At 14:12, CSP’s counsel said:

‘To put it shortly, we are content to proceed in the manner in which was discussed before we adjourned; that is to say that rather than there be, as I understand the suggestion, an evidentiary hearing you would instead proceed to determine the application to amend on the basis of the submissions that I and my learned friend will make.’”

49.It is therefore clear that CSP considered the suggestion and agreed to the change in procedure. It cannot now complain about this change which it agreed to.

50.In any event, the change in procedure is in the nature of a case management decision, which is within the remit of the Arbitrator and it would take highly unusual circumstances for a case management decision to form a valid ground for challenge. The Arbitrator had considered the materials produced by both parties as a result of PO4, and had also considered the prejudice which may be suffered as a result of this late amendment which changed the whole complexion of the case, some 7 years after the event. The case management decision of the Arbitrator cannot be faulted.

51.Without the amendment, CSP was bound by its pleaded case and its admissions. The Arbitrator was perfectly justified to find the existence of Line 2 proved.

52.Grounds 3 & 4 are therefore not made out.

Ground 5 – Invalid Closure of Proceedings

53.On 11 February 2015, the Tribunal Secretary sent an email to the parties with the message that “In accordance with Article 27 of the HKIAC Administered Arbitration Rules (Closure of Proceedings), I now declare the proceedings closed with respect to all matters to be decided in the Partial Award.”

54.It is not in dispute that the HKIAC Administered Arbitration Rules did not apply, since the arbitration clause expressly adopted the UNCITRAL Arbitration Rules 1976.

55.Nevertheless, neither party sought to correct the Arbitrator between the date of this email and the issue of the Partial Award on 17 February 2015. CSP did not raise any objection to this until well after the Partial Award was issued. CSP’s objection came in the course of objections to the ULVAC’s application to withdraw the claim for warehousing charges in respect of Line 2. 

56.ULVAC’s application for withdrawal was made 12 March 2015.  By letter dated 24 March 2015, CSP opposed the application, stating that it wished to amend the ADCC to plead that ULVAC represented that Line 2 “was complete and charged for warehousing that had not and was not taking place”, bringing again all the matters that had been decided against it earlier in the Partial Award. In further submissions dated 1 April 2015, CSP first stated its objections to the application of the HKIAC Administered Arbitration Rules, and stated that it had not received the notice that the Arbitrator had declared the proceedings closed. CSP later explains that the email which had been addressed to CSP’s solicitors, had been automatically quarantined by the firm’s email servers and did not reach its intended recipients within the firm. This state of events was only discovered after 1 April 2015.

57.The Arbitrator after considering the written submissions of the parties issued Procedural Order No 5 giving leave to ULVAC to withdraw its claim on the warehousing charges. In doing so, the Arbitrator stated that he was satisfied that he had terminated the proceedings by the Tribunal Secretary’s email of 11 February 2015. In any event, he was satisfied that no further submissions were to be received on the issue of amendment to plead the issues of the non‑existence of Line 2. He referred specifically to the exchange between the Arbitrator and counsel for CSP at the end of the hearing on the application for amendment on 21 October 2014[6], where counsel for CSP had confirmed that there was nothing more he wanted to say on the amendment issue, and that he had had a sufficient opportunity to say everything he wanted to say about the amendment issue.

58.CSP complains that “by declaring proceedings closed without prior notice to the parties, pursuant to the wrong rules, then declaring that this was valid regardless of whatever the correct rules were, and in the circumstances where CSP had not actually received the email which purported to close the proceedings and had wanted to pursue a defence of misrepresentation concerning the existence and warehousing of Line 2, the Arbitrator had run roughshod over Art 15 of the UNCITRAL Arbitration Rules and... fundamental principles of due process and natural justice... and justifies the setting aside the Partial Award under Art 34(2)(a)(ii) and Art 34(2)(b)(ii)”.

59.I am satisfied that the reference to the HKIAC Administered Arbitration Rules was a mere slip on the part of the Arbitrator. The Arbitrator well knew the rules which applied as was apparent from the Partial Award itself.

60.I am also satisfied that CSP was neither prevented from presenting its case nor was it denied due process. CSP’s counsel had confirmed that he had been given full opportunity to say everything he wanted to about the amendment application relating to the Line 2 issues and that there was nothing more that he wished to add.

61.Mr Kwok was unable to point to anything else that CSP was denied the opportunity to address save to reiterate that it was unable to present its case on the Line 2 issues. Those issues had been fully canvassed and there was in reality nothing more that could be said.

62.In the circumstances, ground 5 fails as well.

Conclusion

63.I am satisfied that CSP had been afforded full opportunity to present its case on all aspects, and the Arbitrator had dealt with the case in a detailed reasoned award. I am satisfied that there are no grounds upon which the Partial Award should be set aside, and I dismiss CSP’s application.

64.Although Mr Kwok submitted that CSP had legitimate grievances and it was proper to ventilate them in the courts, I find that there are no special circumstances why indemnity costs should not be awarded, and following A v R [2009] 3 HKLRD 389 (as affirmed in Grand Pacific Holdings Ltd. v Pacific China Holdings Ltd. (in liq.) [2012] 4 HKLRD 569), I order that CSP pays ULVAC’s costs on an indemnity basis, to be taxed if not agreed.

65.ULVAC seeks a certificate for two counsel. Mr Kwok says that it is reasonable to have only one counsel, pointing to ULVAC’s submissions that the matters raised by CSP could be decided in simple and straightforward form. I have considered the matter and it has not escaped me that CSP appeared by Mr Kwok alone. Nevertheless, in view of the amount involved, the protracted length of the arbitral proceedings and the volume of papers as well as the varied issues raised, I am satisfied that the case is fit for two counsel and I so certify.

66.I thank counsel for their assistance.

Mr Eugene Kwok, instructed by Baker & McKenize, for the applicant

Mr Robert Whitehead, SC and Ms Zabrina Lau, instructed by Deacons, for the respondent