A Co v. B Co and Others

HCCT 25/2020

[2021] HKCFI 1477

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 25 OF 2020

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BETWEEN

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Before:  Hon Mimmie Chan J in Chambers

Date of Hearing:  17 March 2021

Date of Decision:  17 March 2021

Date of Reasons for Decision:  25 May 2021

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REASONS FOR DECISION

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1.On 27 May 2020, this Court granted leave to the Applicant to enforce an arbitral award made by the Shenzhen Court of International Arbitration on 28 June 2018 (“Award”), in an arbitration between the Applicant and nine Respondents (“Arbitration”). Under the Award, the Respondents were ordered to pay to the Applicant RMB 62,970,416.38, interest, legal costs and arbitration fees. The order for leave to enforce the Award as a judgment of this Court (“Enforcement Order”) was made pursuant to the ex parte application made by the Applicant on 21 May 2020, under section 92 of the Arbitration Ordinance (“Ordinance”).

2.On 12 June 2020, the Respondents issued their summons to set aside the Enforcement Order (“Summons”). The Summons was supported by the affirmation of Fung (“Fung Affirmation”) filed on the same day as the Summons.  The grounds relied upon for setting aside the Enforcement Order, as disclosed in the Fung Affirmation, are that: (1) the Respondents were not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, or were otherwise unable to present their case; (2) the Applicant had applied in the Mainland for enforcement of the Award, and such application for enforcement has not been completed or concluded on the Mainland; (3) there was material non-disclosure in the Applicant’s ex parte application for the Enforcement Order.  As the Court directed prior to the hearing, these disclosed grounds are the only grounds which can be relied upon and which will be considered at the hearing (KB v S, HCCT 13/2015 15 September 2015).

3.At the conclusion of the hearing of the Summons on 17 March 2021, I set aside the Enforcement Order.  The following sets out the reasons for my decision.

4.It is clear that on the date when the Applicant applied for leave to enforce the Award in Hong Kong, the Applicant had already applied for enforcement of the Award on the Mainland, and such enforcement proceedings had not been completed nor concluded.

5.The provisions of section 93 of the Ordinance are clear.  The section was explained by Cheung J (as the Chief Justice then was) in Shenzhen Kai Long Investment and Development Co Ltd v CEC Electrical Manufacturing (International) Co Ltd HCMP 1885/2000, unreported, 30 October 2003, in the context of section 40C of the repealed Arbitration Ordinance Cap 341.  Where a party in whose favour an award was made has applied to the Mainland courts for enforcement, and the application has been accepted by the Mainland courts, then, during the subsistence of the enforcement procedure in respect of the award, that party cannot apply to the Hong Kong Court for enforcement of the same award until the enforcement procedure on the Mainland is “completed or concluded”.  The rationale of the provision in the Ordinance is not only to prevent double recovery, but to prevent double enforcement (paragraph 57-59 of the Judgment).  Execution procedure on the Mainland in respect of property claimed to be owned by the respondent within the jurisdiction of the Mainland court would be “completed” where such execution has completely come to an end, with all relevant results disclosed and without the need for any further investigation, adjudication or liquidation - and irrespective of whether such execution is fruitful or not.

6.The position remains so until the amendments to section 93 of the Ordinance are effective.

7.It is undisputed, or indisputable, that the Applicant had applied for enforcement of the Award on the Mainland, and that as a result, various orders had been made by the Mainland courts.  The Intermediate People’s Court of Shenzhen (“Shenzhen Court”) issued a ruling on enforcement against the 9 Respondents on 26 July 2019.  The Respondents claim that by virtue of such ruling, their assets were ordered to be sealed up, frozen or transferred. The Respondents were on 22 October 2019 listed by the Shenzhen Court as “dishonest judgment debtors”.  The 1^st Respondent, and 4^th to 9^th Respondents were also restricted from “high-level consumption” by the Shenzhen Court.  On 4 November 2019, the 3^rd Respondent was likewise restricted by the Shenzhen Court from high-level consumption.  On 24 September 2020, the Shenzhen Court issued a Notice for Assistance in Execution to the 1^st Respondent, and seized the financial documents of the 1^st Respondent for audit.  On 23 November 2020, the 2^nd Respondent was restricted by the Shenzhen Court from high-level consumption.

8.All the above orders were made as part of the enforcement proceedings initiated by the Applicant against the Respondents on the Mainland, under and pursuant to the Award.

9.Some of the enforcement orders were contested by the Respondents. On 2 August 2019, the 3^rd Respondent filed papers to object to the jurisdiction of the Shenzhen Court in respect of the enforcement proceedings against the 3^rd Respondent.  Such application was dismissed by the Shenzhen Court on 16 June 2020, as a result of which the 3^rd Defendant applied to the Higher People’s Court of Guangdong Province for reconsideration of the dismissal by the Shenzhen Court.

10.On 22 November 2019, the 5^th Respondent also applied to object to the enforcement of the Award against it by the Shenzhen Court.  Its objection was dismissed by the Shenzhen Court on 29 June 2020.

11.The PRC law experts of both the Applicant and the Respondents do not appear to dispute that the above were part of the proceedings for enforcement of the Award on the Mainland, and that the orders were made in such proceedings for enforcement.  The experts also appear to be in agreement that the Applicant had not made any application to withdraw or terminate the enforcement proceedings on the Mainland.  It was only on 27 November 2020 that the Higher People’s Court of Guangdong issued its judgment in respect of the 3^rd Respondent’s application for reconsideration of its application to object to the jurisdiction of the Shenzhen Court (“November Judgment”).  By that November Judgment, the Court held that the Shenzhen Court had no jurisdiction against the 3^rd Respondent, as it did not have any assets in Shenzhen.  The enforcement proceedings were dismissed or set aside as against the 3^rd Respondent.  However, there can be no dispute that before the November Judgment, the enforcement proceedings had not been concluded as against the 3^rd Respondent.

12.There is issue between the PRC experts as to the effect of the November Judgment, and whether the enforcement steps taken and the orders made by the Shenzhen Court in the enforcement proceedings had been automatically determined as a result of the November Judgment, or whether further steps have to be taken to cause the Shenzhen Court to make express and further orders before the enforcement proceedings can be said to have been revoked or discharged.

13.Whatever the effect of the November Judgment, it is clear that at the time when the application was made in May 2020 for the Enforcement Order, the enforcement proceedings on the Mainland had not been concluded and were still continuing.  Leaving aside the November Judgment affecting the 3^rd Respondent, the enforcement order made against the 5^th Respondent on 26 July 2019 was also the subject of objection made by the 5^th Respondent on 22 November 2019, and the status of those objection proceedings had not yet been determined on 21 May 2020.  The Applicant had also initiated execution proceedings against the 1^st Respondent which led to a notice being issued by the Shenzhen Court on 24 September 2020.  None of these enforcement proceedings had been completed or concluded on 21 May 2020.

14.Nor did the Applicant make any full and frank disclosure in its application for the Enforcement Order, to inform the Court that the enforcement proceedings against the 3^rd Respondent and the 5^th Respondent had been opposed, and were still undetermined as at the date of the ex parte application made on 21 May 2020.  Those are material matters relevant to the Court’s decision as to whether or not it was in a position to grant the Enforcement Order.

15.On these grounds alone, the Enforcement Order must be set aside, and the order was so made on 17 March 2021.  The Applicant must pay to the Respondents the costs of the application for the Enforcement Order and its discharge, on indemnity basis with certificate for one counsel.

Ms Melinda Chiang, instructed by Simon Ho & Co, for the applicant

Mr Michael Lok and Ms Sakinah Sat, instructed by Wilkinson & Grist, for the 1^st to 9^th respondents