深圳市智能制造軟件開發有限公司 (Plaintiff) v Yick Heung Knitters Limited (Defendant)

HCCT 93/2020

[2021] HKCFI 1096

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 93 OF 2020

____________________

____________________

BETWEEN

____________________

Before: Hon Mimmie Chan J in Chambers

Dates of Written Submissions: 14, 15 & 16 April 2021

Date of Decision: 22 April 2021

_____________

D E C I S I O N

_____________

1.  This is an application made by the Defendant for an extension of time to apply to set aside the order of this Court dated 26 January 2021 (“Enforcement Order”), whereby leave was granted to the Plaintiff to enforce an arbitral award dated 22 December 2019 and made by CIETAC (“Tribunal”), for the Defendant’s payment to the Plaintiff of the sums of HK$3,258,130.88 and RMB 116,022, interest and costs (“Award”). The Enforcement Order was made pursuant to the Plaintiff’s ex parte Originating Summons issued on 28 December 2020. The Plaintiff is the assignee of the rights of the claimant under the Award.

2.  The Enforcement Order expressly provides that the Defendant would be entitled to apply to set aside the Enforcement Order within 14 days after service of the order upon it, and that enforcement of the Award be stayed until after the expiration of the period of 14 days or until any application to set aside the Enforcement Order is finally disposed of.  According to the affirmation of service filed on behalf of the Plaintiff on 19 February 2021, the Enforcement Order was served on the Defendant on 29 January 2021.  The 14 days specified in the Enforcement Order expired on 16 February 2021 (after the general public holidays from 12 to 15 February 2021).

3.  It was only on 4 March 2021, that the Defendant applied by its summons for further time to make the application for setting aside the Enforcement Order (“Summons”).  This was 16 days out of time. Conspicuously absent at the time when the Summons was issued was an affidavit in support, to explain the delay, to justify the application for extension of time, and to set out the grounds relied upon to set aside the Enforcement Order.

4.  The Summons was scheduled for a half-hour hearing on 15 April 2021.  On 13 April 2021, the Court issued directions for the Summons to be dealt with on paper, and set down a timetable for written submissions to be filed and served.

5.  It was only on 15 April 2021 that the Defendant filed and served the affirmation of Tai Chun Ming, purportedly to support the Summons, and notwithstanding that the directions of the Court did not grant leave for any further affidavits to be filed.  On 14 April 2021, the Defendant’s solicitors had purported to send to the Court and to the Plaintiff’s solicitors a signed affirmation of Tai, but pointing out that the exhibits referred to in the affirmation were not complete and that the original of the affirmation was yet to be filed.

6.  The Plaintiff has objected to the Defendant’s affirmation being considered by the Court for the Summons.

7.  It is incumbent on an applicant seeking extension of the time specified in a Court order to do an act to set out the reasons why the time limit cannot be adhered to, and why the indulgence of the Court should be granted.  This is particularly necessary for an application for leave to set aside an order made by the court for enforcement of an arbitral award under the Arbitration Ordinance (“Ordinance”).  The objective of the Ordinance is to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense, based on the principles that parties to a dispute should be free to agree on how the dispute should be resolved (section 3 of the Ordinance).  The Court is to facilitate the enforcement of the parties’ agreement on resolution of their disputes by arbitration, and their agreement that the arbitral award shall be final and binding.

8.  It is also trite, that enforcement of arbitral awards under the Ordinance should be as mechanistic as possible (Re PetroChina International (Hong Kong) Corp Ltd [2011] 4 HKLRD 604).  Order 73 RHC provides for applications for enforcement of arbitral awards to be made ex parte, and for orders granting leave to enforce to provide for 14 days for a respondent named in the award to apply to set aside the order (Order 73 rule 10 (6)).  The primary aim of the Court is to facilitate the arbitral process and to assist with enforcement.

9.  Order 73 rule 10 (6A) expressly requires an application to set aside an order granting leave to enforce an award to be made by summons, supported by affidavit, which affidavit must be filed at the same time as the summons.  This is consistent with the objectives of the Ordinance, and as the Court has emphasized, a party should not be left to speculate on the grounds relied upon by an applicant seeking to set aside either an arbitral award, or an order granting leave to enforce the award.  The status of the award should not be left uncertain.  It has also been held that it is an abuse of process for applicants to apply to set aside an award or an order granting leave to enforce an award, without stating the grounds sought to be relied upon as justifying the setting aside (KB v S HCCT 13/2015,15 September 2015).

10.  Bearing in mind the requirements of Order 73 rule 10 (6A) as regards an application to set aside an Enforcement Order, there is no justification why an applicant who seeks an extension of time to make an application to set aside an Enforcement Order should be given more latitude in relation to the evidence to be filed with the application, which should include an explanation for the delay or inability to make the application to set aside in time, the precise grounds relied upon to set aside the Enforcement Order, and if it is really impossible to adduce all the evidence in the affidavit in support filed with the summons, to explain such difficulty if it seeks the indulgence of the Court.

11.  In this case, no affirmation was filed with the Summons, and none of the matters referred to above were put before the Court, until effectively a day before the originally scheduled hearing.

12.  Even if this Court should take into consideration the matters outlined in the affirmation of Tai, the explanation given by the Defendant, that its witnesses are on the Mainland and that a considerable period of time was required to obtain information from them to substantiate its application to set aside the Enforcement Order is not adequate.  The Defendant had taken part in the arbitration before the Tribunal (“Arbitration”), so it was well aware of the details of the Plaintiff’s claims since the Arbitration was commenced in June 2019, and of the evidence relied upon by the Plaintiff to pursue its claims in the Arbitration.  The Defendant had the contracts relied upon by the Plaintiff, and it had had the opportunity since 2019 to make the detailed enquiries and investigations with its own staff on the Mainland, and with any other witnesses in question.  The Defendant claims that its lawyer instructed on the Mainland was incompetent, and had given it either erroneous advice, or advice which was not in the interests of the Defendant, but that does not alter the fact that the Defendant had since June 2019 known of the nature and details of the claims made by the Plaintiff.  There should be no difficulty for the Defendant to set out the facts and the grounds it now relies upon to resist enforcement of the Award.

13.  The Defendant itself is a Hong Kong company and Tai himself is resident in Hong Kong.  There should be no problem with Tai contacting lawyers and making affirmations here.

14.  Even if I should consider Tai’s affirmation on the merits of the Defendant’s intended application to set aside the Enforcement Order, the Defendant’s case is that the contracts which were the subject matter of the claims made in the Arbitration had been signed without the authority of the Defendant, and/or that the contracts had been obtained under false pretenses that they were required for tax or customs purposes.  The Defendant claims that the contracts were forged by the claimant and that there was in fact no contract of sale and purchase of goods between the Defendant and the claimant in the Arbitration, and from which the Plaintiff had taken an assignment of the Award.  The Defendant acknowledges that these questions of fraud were not raised in the Arbitration by his Mainland lawyer who had the conduct of the Arbitration on behalf of the Defendant, and that it had defended the Arbitration notwithstanding its unwillingness to submit to the jurisdiction of the Tribunal.  The Defendant suggests that the Tribunal was wrong in failing to call the witnesses to give evidence on the contracts, and that the Defendant had not been able to cross-examine the witnesses.  However, the Defendant also claims that he was advised by his Mainland lawyer that the Tribunal did not have the procedural power to call witnesses or to give evidence.

15.  In reliance on the foregoing, the Defendant seeks to set aside the Enforcement Order on the ground that it would be contrary to the public policy of Hong Kong to enforce the Award which was obtained by fraud, and in the absence of any valid contract with the claimant in the Arbitration.  The Defendant claims that it is also entitled to set aside the Enforcement Order when the procedures of the Arbitration and the Tribunal did not provide any means to the Defendant to challenge the credibility of the claimant, by admitting witness statements and calling the witnesses to give evidence.

16.  The Defendant’s claims of alleged fraud, lack of authority, or deception were never raised in the Arbitration.  It is incredible that if such claims are genuine, they would not have been raised at all in the Arbitration. The Defendant alleges that they were not raised because of the incompetence or mistake of its lawyer.  The Tribunal cannot be criticized for not dealing with these claims.  Any redress which the Defendant may have would have to be pursued against the Defendant’s lawyers.

17.  If there was any failure to call or cross-examine witnesses, this can only be due to the decision or fault of the Defendant’s Mainland lawyer. It is not credible that the Tribunal did not have the power to call witnesses. There is no mention in the Award of the Defendant’s application to call witnesses and such application being rejected by the Tribunal.

18.  Even if it was true, that the procedure of the Tribunal did not permit any witnesses to be called, that was the procedure the parties had agreed to under the arbitration agreement when they accepted arbitration of their disputes by CIETAC and submitted to the jurisdiction of the Tribunal.  I feel to see how it can be contrary to public policy to enforce and give effect to the parties’ arbitration agreement.

19.  From the Award, it can be seen that the Tribunal had referred to the claim made by the Defendant, that there was no contract at all with the claimant.  The Tribunal had studied the documents relied upon by the Defendant to show that it had only contracted with 東莞市益強紡織品有限公司 (“YQ”) for the supply of goods and that it had paid YQ for the goods purchased.  However, the Tribunal referred to various inconsistencies in the Defendant’s documents, and considered that the documents produced by the Defendant did not support its assertions that it had not contracted with the claimant.  The Tribunal found that the documents produced by the claimant supported its case that it had delivered goods to the Defendant which the Defendant had received but had not paid for.  The defence was dismissed by the Tribunal on that basis.  The incorrectness of the Award on facts or law is not a ground to refuse enforcement of the Award.

20.  According to the evidence of the Plaintiff when it applied for leave to enforce the Award, and as the Defendant confirmed in Tai’s affirmation, the Defendant had applied to the Intermediate People’s Court of Beijing on 30 July 2020 to annul the Award.  Before the Mainland Court, which is the supervisory court of the Arbitration, the Defendant should and would have argued the grounds of annulment, be it on fraud or on the ground of the absence of any valid arbitration agreement, but the Mainland Court had dismissed the application.

21.  On the documents available, I am not satisfied that the Defendant has an arguable case that the contracts relied upon by the claimant, or the Award itself, was obtained by fraud.  There is only the Defendant’s bare assertion of fraud made in these proceedings, after the Award and the assignment of the Award with notice to the Defendant.  Nor can I see how it can be reasonably argued that it would be contrary to public policy to enforce the Award in Hong Kong.

22.  Having regard to the lack of any good explanation for the delay in making the application to set aside the Enforcement Order and the lack of merits of the proposed application to set aside, I refuse the application for extension of time sought by the Defendant.

23.  The costs of the application are to be paid by the Defendant forthwith on indemnity basis, to be summarily assessed.  The Defendant should within 7 days of the handing down of this Decision file and serve its objections to the statement of costs of the Plaintiff.

The plaintiff was represented by CP Lin & Co

The defendant was represented by TC Wong & Co