C v. D

CACV 387/2021

[2022] HKCA 1199

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 387 OF 2021

(ON APPEAL FROM HCCT NO 24 OF 2020)

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BETWEEN

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Before:  Hon Cheung, Yuen and Chow JJA in Court

Dates of Written Submissions:  19 July and 2 & 9 August 2022

Date of Judgment:  31 August 2022

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court of Appeal):

1.On 7 June 2022, the Court of Appeal (Cheung, Yuen and Chow JJA)  gave its judgment dismissing the Plaintiff’s appeal against the judgment of G Lam J (as he then was)  dated 24 May 2021, whereby the learned Judge rejected the Plaintiff’s application for, inter alia, a declaration that an arbitral award dated 21 April 2020 was made without jurisdiction and was not binding on it.

2.The basic facts of the case and the reasons for dismissing the Plaintiff’s appeal are fully set out in the written judgment of the Court of Appeal, and will not be repeated here.  In what follows, unless the context indicates otherwise, references to “Article” shall be to the UNCITRAL Model Law.

3.On 5 July 2022, the Plaintiff issued a Notice of Motion seeking leave to appeal against the Court of Appeal’s judgment to the Court of Final Appeal.  In the Notice of Motion, the following question, said to be a question of great general or public importance, is identified:

“Is an arbitral tribunal’s determination on whether a pre-arbitration condition precedent in an arbitration agreement that the parties thereto should first attempt to resolve their dispute by a specified mechanism has been fulfilled subject to recourse to the Court under Articles 34(2)(a)(iii)  and/or (iv)  of the UNCITRAL Model Law (as incorporated into Hong Kong law under sections 81(1)(2)(a)(iii)  and/or (iv)  of the Arbitration Ordinance (Cap. 609))?”

4.This is essentially the same question that the Court of Appeal posed at the beginning of its judgment for determination in the appeal (namely, “whether an arbitral tribunal’s determination that a pre-arbitration procedural requirement in an arbitration agreement that the parties thereto should first attempt to resolve their dispute by negotiation has been fulfilled is subject to recourse to the court under Article 34(2)(a)(iii)  or (iv)  of the UNCITRAL Model Law”), save that (i) the Plaintiff has characterized the “procedural requirement” as a “condition precedent”, and (ii)  the Plaintiff has put the question more generally by referring to the requirement that the parties should first attempt to resolve their dispute by “negotiation” as “a specified mechanism”.

5.Leaving aside for the time being these minor differences which should not affect the analysis in the context of the present case, the Court of Appeal held in its judgment that:

(1)  The answer to the question of whether an arbitral award deals with a dispute “not contemplated by or not falling within the terms of the submission to arbitration” for the purpose of Article 34(2)(a)(iii)  depends on the intention (or agreement)  of the parties.

(2)  The distinction between objections as to the “admissibility of a claim” and the “jurisdiction of the tribunal” should be recognized for the purpose of Article 34(2)(a)(iii)  through the route of statutory interpretation. This distinction is ultimately controlled by the agreement of the parties, because arbitration is consensual and it is the parties’ agreement which determines the true scope of the disputes which may be submitted to arbitration.

(3)  It is an over-simplification to say that where a reference to arbitration is subject to some condition precedent, an arbitral tribunal’s decision on whether the condition precedent has been fulfilled must necessarily be a jurisdictional decision, or one which is open to review by the court under Art 34(2)(a)(iii).  The true and proper question to ask is whether it is the parties’ intention (or agreement)  that the question of fulfilment of the condition precedent is to be determined by the arbitral tribunal, and thus falls “within the terms of the submission to arbitration” under Art 34(2)(a)(iii).

(4)  The Plaintiff’s objection in the present case that the pre-arbitration procedural requirement (or condition precedent)  that the parties should first attempt to resolve their dispute by negotiation has not been fulfilled is an objection going to the admissibility of the claim rather than the jurisdiction of the tribunal, and thus the arbitral tribunal’s decision on this objection is not subject to review by the Court under Art 34(2)(a)(iii).

(5)  Even if one disregards the distinction between admissibility and jurisdiction, and considers the question simply as a matter of construction and application of Art 34(2)(a)(iii), it is clear, upon the true construction of the Clauses 14.2 and 14.3 of the Agreement, that the dispute between the parties on the question of fulfilment of the relevant pre-arbitration procedural requirement (or condition precedent)  is a dispute falling within the terms of the submission to arbitration under Art 34(2)(a)(iii).

(6)  Accordingly, the arbitral tribunal’s decision that the relevant pre-arbitration procedural requirement (or condition precedent)  has been fulfilled is not subject to review by the Court under Art 34(2)(a)(iii).

6.The Plaintiff accepts that the answer to the question raised in the Notice of Motion depends on the intention of the parties[1], and contends that it is at least reasonably arguable that, unless there is indication to the contrary, by stipulating a condition precedent the parties intend the Court (rather than the arbitral tribunal)  to have final determination on the issue of whether the pre-arbitral condition precedent has been satisfied.  The Plaintiff goes on to argue that the parties in the present case did not intend the issue of satisfaction of the pre-arbitral condition precedent to be finally determined by the arbitral tribunal.  As we see it, the question is not whether the parties intend the question of fulfilment or satisfaction of the pre-arbitral procedural requirement (or condition precedent)  to be “finally” determined by the arbitral tribunal.  The question is simply whether the parties intend the relevant objection (or dispute)  to be a matter falling within the scope of the arbitration agreement or the terms of the submission to arbitration.  If it is, the further question of whether the arbitral tribunal’s decision is subject to recourse to the Court, or is “final”, is governed by Article 34(2)(a)(iii).

7.Effectively, the Plaintiff’s intended appeal boils down to its disagreement with the Court of Appeal (and Court of First Instance)’s determination of the true intention of the parties, which in turn depends on the proper construction of the Agreement, in particular Clauses 14.2 and 14.3 thereof.  While the proper construction of a written agreement is a question of law, we do not consider it to be a question of great general or public importance.

8.There is an additional reason why we would not be minded to grant leave to appeal in the present case.  As pointed out in Defendant’s Skeleton Submissions in Opposition dated 2 August 2022, a central object and purpose of the Arbitration Ordinance is to promote the use of arbitration with its incidence of speed and finality, and to limit the scope of intervention by the Court.  In respect of a decision of the Court under Article 34, s 81(4)  of the Arbitration Ordinance expressly provides that the leave of the Court is required for any appeal from such decision.  This provision reinforces the legislative intention that generally speaking, a decision of the Court under Article 34 should be accepted as final save where, exceptionally, the Court is of the view that the matter ought to be further considered on appeal.  In the present case, G Lam J granted leave to appeal on the basis that the question of the proper approach to an application to set aside an arbitral award on the ground that certain prior requisite steps envisaged by such a clause have not been undertaken and that the arbitral tribunal consequently lacks jurisdiction is a subject matter of some general significance to arbitration law in Hong Kong. We do not believe that it would be consistent with the legislative policy of limiting or curtailing the scope of the Court’s intervention in arbitral decisions to permit the Plaintiff to re-argue the same issue for a third time in the Court of Final Appeal.

9.Lastly, in so far as the Plaintiff’s application is based on the “or otherwise” limb in s 22(1)(b)  of the Hong Kong Court of Final Appeal Ordinance, it is the well-settled practice of the Court of Appeal to defer consideration of such matter to the Appeal Committee of the Court of Final Appeal.  We see no reason to depart from this practice in the present case.

10.For the above reasons, the Notice of Motion is dismissed with costs to the Defendant, which we summarily assess at HK$80,380.

Mr Benjamin Yu, SC, Ms Bonnie YK Cheng and Mr Brian Lee, instructed by M/s Baker & McKenzie, for the Plaintiff (Appellant)

Mr Simon Chapman, Solicitor Advocate, of M/s Herbert Smith Freehills, for the Defendant (Respondent)