Arjowiggins Hkk2 Ltd v. X Co

HCCT 77/2020

[2022] HKCFI 859

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 77 OF 2020

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D E C I S I O N

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1.On 12 January 2022, this Court handed down a Decision, setting aside the Award made in an arbitration between HKK and X Co. On 26 January 2022, X Co applied for leave to appeal against the Decision. The nomenclature used in the Decision is adopted herein and below.

2.The grounds of the intended appeal are that the Court erred in holding that the issue of the parties’ reference and submission to arbitration should be based on the pleadings, and erroneously held as a result that the Tribunal had no right to raise new issues to ensure a proper remedy is granted to the parties. It was argued that the Court applied an overly stringent approach to rules of pleadings in the context of arbitration. It was further argued that the Court should have exercised its residual discretion not to set aside the Award.

3.The intended appeal is against an exercise of the Court’s discretion. The threshold for such an appeal is high. As Kwan JA reiterated in the case of Mimi Kar Yee Wong Hung v Severn Villa Limited, HCMP 2192/2011, 12 January 2012, at paragraph 31, an appellate court will not generally interfere with a judge’s exercise of discretion unless the judge has misunderstood the law or the evidence or the exercise of his/her discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible. On appeal, the appellate court is not asked to re-exercise the discretion on the facts of the case.

4.In the more recent case of DP World Djibouti FZCO and ors v China Merchants Port Holdings Company Limited [2022] HKCA 84, the Court of Appeal highlighted again the fact that an appellate court adopts a cautious approach in relation to the weight given by the judge to facts taken into account when exercising its discretion. The fact that the appellate court would have given more weight than the judge to one of the many factors to be taken into account in the exercise of the discretion is not a ground for interfering. At paragraph 22 of the judgment, the Court noted:

“22. The judge’s refusal of a stay of proceedings on forum non conveniens involves an exercise of discretion. The Court of Appeal may only interfere with the exercise of the judge’s discretion in limited circumstances, in accordance with the well-established principles in Hadmor Productions Ltd v Hamilton [1983] 1 AC 191 at 220B to E (SPH v SA at §65). As stated in Bright Shipping Ltd v Changhong Group (HK) Ltd (No 2) [2019] 5 HKLRD 30 at §§5 to 7:

‘5. Hence, the grounds on which an appellate court is entitled to interfere with this exercise of discretion are limited and it cannot interfere merely because it would have reached a different conclusion had it been hearing the application at first instance. It can only interfere in three cases: (1) where the judge has misdirected himself with regard to the principles in accordance with which his discretion had to be exercised; (2) where the judge, in exercising his discretion, has taken into account matters which he ought not to have done or failed to take into account matters which he ought to have done; or (3) where his decision is plainly wrong. See The Abidin Daver [1984] AC 398, 420B–C, per Lord Brandon of Oakbrook, which has been followed in a number of cases in Hong Kong, such as China Construction Bank (Asia) Corp Ltd v Shanghai Pudong Development Bank Co Ltd (CACV 14/2016, [2017] HKEC 171, 3 February 2017) at §7.13.

6. An appellate court should adopt a cautious approach regarding the weight given by the judge to facts taken into account when exercising the discretion. The fact that the appellate court would have given more weight than the judge to one of the many factors to be taken into account in exercising the discretion is not a ground for interfering with the exercise of his discretion, for as stated by Lord Templeman in The Spiliada at 465C, “the factors which the court is entitled is entitled to take into account in considering whether one forum is more appropriate are legion” (Berezovsky v Michaels [2000] 1 WLR 1004, 1021E–F, per Lord Hoffmann).

7. Further, as noted in two decisions of the Court of Appeal (China Construction Bank (Asia) Corp Ltd v Shanghai Pudong Development Bank Co Ltd at §7.15, per Cheung JA; and Melvin Waxman v Li Fei Yu (CACV 157/2014, [2016] HKEC 956, 20 April 2016) at §17.2, per Yuen JA), it is appropriate to bear in mind these words of caution of Lord Bingham of Cornhill in Lubbe v Cape Plc [2000] 1 WLR 1545, 1556E–F:

“This is a field in which different conclusions can be reached by different tribunals without either being susceptible to legal challenge. The jurisdiction to stay is liable to be perverted if parties litigate the issue at different levels of the judicial hierarchy in the hope of persuading a higher court to strike a different balance in the factors pointing for and against a foreign forum.”’ ”

5.The first point which must be made on the proposed grounds of appeal is that the Decision on the Award being outside the scope of the submission to arbitration was not made on the basis only of the pleadings in the arbitration, and the construction of the pleadings. A review of the Decision should make it clear that the Court had taken into consideration the pleadings served in the arbitration, the evidence submitted, and the arguments and submissions made by the parties on the basis of the pleadings and evidence, before concluding, after careful consideration of the same, that HKK had been surprised by the Tribunal’s decision to invite further submissions, on the duties of the parties to proceed with and complete the liquidation of the JV Company and on the order to be made for the JV Documents, and that the order finally made by the Tribunal for the delivery of the JV Documents to the CLG was outside the scope of the parties’ submission to the 2018 Arbitration.

6.The Court had considered the pleadings (at paragraphs 36 to 40 of the Decision), the HKIAC Rules (paragraph 43), the role of pleadings and procedures used in arbitral proceedings (paragraph 44), but concluded (see paragraphs 44 to 51) that the key question is whether there was surprise, and whether it was fair for HKK to be confronted, after the conclusion of the hearing of evidence, with the questions raised by the Tribunal, as to the duties of the parties to properly complete the liquidation of the JV Company, and the effect this had on HKK’s duty in relation to the delivery of the JV Documents, after the CLG had been formed shortly before the hearing of the 2018 Arbitration. The Court gave full consideration to the evidence, including the expert evidence adduced at the hearing, in deciding whether there was indeed any surprise to HKK, and whether it can be said that it had the fair opportunity to deal with the so-called unpleaded issues. At paragraph 47 of the Decision, the Court summarized the real dispute, and X Co’s own submission on the scope of the pleading rule: the protection of parties against being taken by surprise.

7.It was in the light of the Court’s review of the pleadings and the evidence adduced in the 2018 Arbitration that it reached a decision on what the parties’ consensus and agreement had been as to the dispute which was submitted to the Tribunal for determination in the 2018 Arbitration.

8.I therefore do not agree that the Decision was based on any erroneous application of the law, as to the interpretation of what may constitute decisions outside the scope of the parties’ submission to arbitration, or on any disregard of the relevant arbitral rules. The rules only provide for the liberty of a party to amend or supplement its claim in the arbitration, provided that the claim may not be amended in a manner so as to fall outside the jurisdiction of the arbitral tribunal.

9.X Co argued that there was no criticism in the Decision of the Tribunal’s failure to give each party the reasonable opportunity to present its case. I cannot agree that can mean that there was a finding that HKK had been afforded the reasonable opportunity to present its defence and evidence on the new claim and issues raised by the Tribunal. The Decision referred, at paragraph 41, to the Tribunal’s position, that it was entitled to resolve the dispute between the parties and to award the proper remedy to X Co, so long as there was equal treatment of the parties and each party was afforded a reasonable opportunity to present its case on the new remedies sought. Apart from pointing out in the Decision that these were 2 separate matters, it should be clear on reading the entire Decision and the conclusions made therein, that the Court accepted that HKK had been surprised by the new claim, and that it had not in fact been given the necessary and fair opportunity to present its case and to adduce any necessary evidence to meet X Co’s new claim for delivery of the JV Documents to CLG. This was made clear at the end of paragraph 66 of the Decision, when the public policy round was considered, and at paragraph 67 of the Decision, although the Court considered that it was sufficient to find that the order of the Tribunal was outside the scope of the reference.

10.Given the high threshold required to succeed in an appeal against the exercise of the Court’s discretion, I am not satisfied that the intended appeal has reasonable prospects of success. I am not persuaded by the submissions of X Co that the Decision involved any misdirection of the law or any erroneous application of the relevant principles, or that the Court had taken into account irrelevant matters, or failed to take into account matters which ought to have been considered, such that the Decision is plainly wrong.

11.The application for leave to appeal is dismissed, with costs to HKK, with certificate for 2 Counsel. The order nisi shall be made unless application for variation is made within 14 days of the opening of the Court Registry after GAP.

Mr Laurence Li SC and Mr CHOW Ho Kiu, instructed by CL Chow & Macksion Chan, for the applicant

Mr Victor Joffe QC and Mr Alexander Tang, instructed by King & Wood Mallesons, for the respondent