G v. X and Others

HCCT 58/2021

[2024] HKCFI 621

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 58 OF 2021

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BETWEEN

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D E C I S I O N

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1.The last occasion on which this Court handed down a decision in the dispute between the Applicant (“G”)  and the 1^st Respondent (“X”)  was on 19 December 2023 (“Decision”), which Decision sets out the relevant background and disputes between the parties. The nomenclature used in the Decision is adopted below.

2.In the Decision, G was granted leave to enforce the Award.

3.I now have to deal with an application made by G for payment out from Court of a sum of US $93,108,135.21, which is equivalent to RMB 666,756,667.054 as at 8 January 2024. The amount which had been paid into Court pursuant to an order of 20 September 2021 was US $107,845,632.43. The money paid into court by X was to secure the discharge of an interim Mareva injunction obtained by G against him, pending the determination of G’s application for enforcement of the Award.

4.Counsel’s submissions have pointed out that the payment out now sought by G is only of the principal sum ordered to be paid by X to G, under an Award made in the Arbitration on 20 April 2021. Interest on the principal debt and costs have been excluded.

5.G seeks payment out of the sum X had paid into court on the basis that the Court had, by the Decision, already determined all the matters referred to in the Decision, and as there is no application for leave to appeal against the Decision, there is no basis and no good reason to withhold and delay the release of the funds in Court for payment to G as the debtor under the Award.

6.It was contended by X that the above is misconceived, as X has already applied to this Court for leave to set aside the order granting leave to G to enforce the Award, within 14 days of his being served with the order made under the Decision. X relies on Order 73 rule 10(6)  RHC, arguing that this rule (for applying to set aside an order granting leave)  is not confined to a case in which an applicant applies ex parte for leave to enforce an arbitral award, as is contended by G. On behalf of X, it was argued that there is no express provision in rule 10(6)  to limit its application to one made ex parte.  Reliance was placed on a decision made in JJ Agro Industries (P)  Ltd v Texuna International Ltd [1992] 2 HKLR 402, in which the Court held that a defendant has 14 days from the date of service of the order granting leave to enforce an award, to apply to set aside the order, irrespective whether such application be made ex parte or inter-partes.

7.Having considered the submissions made by Counsel for both parties, and having due regard to the matters already decided by this Court, I find that X has no further ground to contend that the Award should not be enforced in Hong Kong, and there is no good reason why the principal amount of the Award should not be paid out from the money in Court.  The following sets out my reasons.

8.It is pertinent to consider the substance of the matters which have been argued before the Court and which have already been determined in the two decisions of the Court handed down on 21 June 2022 and 19 December 2023. The history of the proceedings on the Mainland and in Hong Kong have also to be taken into consideration. These are set out clearly in the Decision.  By way of recap of the material events:

(1)  the Award was issued on 20 April 2021, for X’s payment to G of a sum of RMB 660,752,667.05, interest and costs.

(2)  X applied to the Mainland Court in May 2021 to set aside the Award.

(3)  In July 2021, G applied for leave to enforce the Award in Hong Kong.

(4)  X opposed G’s application for enforcement of the Award in Hong Kong (“Opposition”), and filed evidence in the Opposition, on the stated grounds of his inability to present his case (“Inability to Present Ground”); that the Award had dealt with disputes which did not fall within the terms of the submission or contains decisions beyond the scope of the submission, raising the issue of whether, under Mainland law, the tribunal could deal with a consolidation of disputes arising out of 8 agreements in the Arbitration (“Procedural Ground”); and whether by reason thereof, enforcement of the Award would be contrary to public policy.

(5)  On 12 April 2022, X applied to the Hong Kong Court to stay the enforcement proceedings in Hong Kong pending determination of the Mainland Setting Aside Application.

(6)  In a decision handed down on 21 June 2022, this Court dismissed the Inability to Present Ground of the Opposition, but adjourned G’s application for enforcement of the Award for 3 months to await a decision on the Mainland Setting Aside Application on the Procedural Ground.

(7)  On 23 September 2022, the Mainland Court ordered a re-arbitration to be held, having notified the parties that the tribunal in the Arbitration had collected evidence on its own without the parties’ examination.

(8)  On 30 September 2022, CIETAC notified the parties of its decision for a re-arbitration to be held.

(9)  On 11 October 2022, the Mainland Court ruled to terminate the Mainland Setting Aside Application.

(10)  The adjourned hearing of G’s application for leave to enforce the Award and X’s application for stay of the enforcement proceedings in Hong Kong took place on 29 September 2023.

(11)  On 17 November 2023, a New Award was issued by the new tribunal enpaneled for the re-arbitration ordered by the Mainland Court. The parties made submissions to the Court on the effect of the New Award.

(12)  On 19 December 2023, this Court handed down the Decision.

9.The Decision referred to the parties’ evidence and submissions made on the developments which had taken place on the Mainland since the hearing and decision in June 2022, including the fact of the Mainland Court’s issue of the Notice for re-arbitration, and the making of the New Award. Expert evidence on PRC law was adduced at the hearing on 29 September 2023, as to the effect under PRC law of respectively the Notice, the re-arbitration, the termination of the Mainland enforcement proceedings and of the Mainland setting aside proceedings, and whether as a result of such “new developments” as argue by X, it could be contended that the Award was either not binding, or had been suspended by the Mainland Court, or under Mainland law, under section 95(2)(f)  of the Ordinance.

10.Reading the Decision, it should be obvious that the Court found:

(1)  On the basis of the expert evidence and on the face of the relevant statutes, the Award remained a valid and binding award as at the date of the issue of the Originating Summons for leave to enforce, and as at the date of the hearing on 29 September 2023. The Award had not been set aside on the Mainland.  (See the summary in paragraphs 39 and 40 of the Decision.)

(2)  The enforcement proceedings in Hong Kong had been stayed only to await the determination by the Mainland Court as to whether the alleged defect as to the scope of the submission to arbitration would be recognized by the Mainland Court as a ground to set aside the Award under Mainland law, and it is clear that this Procedural Ground had been rejected by the Mainland Court, when it only ordered a re-arbitration on the Evidence Issue.

(3)  The re-arbitration ordered by the Mainland Court and the New Award had no effect on the Award, as the award of damages allowed by the tribunal in the re-arbitration remains unaltered, and was the same as the amount of damages awarded in the Award.

(4)  There was no established ground to refuse enforcement of the Award in Hong Kong, and G’s application to enforce the Award was allowed, and X’s application for stay was dismissed.  (See paragraphs 41 and 43 of the Decision.)

(5)  There was no merit in X’s assertion that the New Award is not enforceable for deviation from the parties’ agreed procedure, but any application to set aside the New Award should, on X’s case, be separately pursued by him, and the mere making of an application to set aside does not render the award invalid or unenforceable.  (See paragraph 42 of the Decision.)

11.The facts of this case can be clearly distinguished from those in JJ Agro Industries (P)  Ltd v Texuna International Ltd. This Court has dealt with and decided not only G’s application for leave to enforce the Award, and X’s application for stay of those proceedings, but also X’s opposition to enforcement of the Award on all the grounds he has substantively argued, under section 92 of the Ordinance. By way of contrast, in JJ Agro, there were two separate applications made by the plaintiff for enforcement of first, the principal amount of the award, and then, the costs of the award. The defendant had, at an inter-partes hearing, resisted the plaintiff’s application for enforcement of the costs of the award, not on the substantive grounds for refusing enforcement or for setting aside an arbitral award under the Arbitration Ordinance (“Ordinance”), but on the ground that the plaintiff has to commence a fresh action for recovery or reimbursement of the sum the plaintiff had paid out for the costs of the arbitration. In those circumstances, the Court considered that it was still open to the defendant to apply, within 14 days of the Court’s granting leave for enforcement, to set aside such order under Order 73 RHC and the Ordinance. No question of either res judicata, the Henderson principles, or having argued the substantive grounds available under the Ordinance arose in JJ Agro.

12.In this case, when all the grounds relied upon by X to oppose enforcement of the Award under section 95 of the Ordinance have been raised, argued, and rejected by this Court after substantive hearings, it is absurd to contend that he can be allowed to apply again, under Order 73 rule 10(6), to set aside the leave granted for enforcement, after the Court allows G’s application and makes an order granting leave to enforce the Award as a judgment of this Court, just because the rule is not stated to be confined to an ex parte application.

13.Counsel for G has emphasized that the application for payment out is confined to the principal amount stated in the Award, and does not include any interest, in respect of which X has claimed that under the New Award, interest only accrues after 30 days from the date of the New Award, and that in monetary terms, it represents a difference of over RMB 100 million.

14.X claims that the tribunal in the re-arbitration was wrong in confining the re-arbitration to determining the Evidence Issue, which was in fact the only defect identified by the Mainland Court when it issued the Notice, and that he has applied to set aside the New Award. It was argued that it would be unjust if the new setting aside application on the Mainland should be determined in his favor, but the amount of principal has already been paid out to G, who has allegedly been found to be a fugitive and listed as a Dishonest Person Subject to Enforcement, and the principal released to G would be unlikely to be recoverable.

15.This Court is entitled to consider the merits of the grounds relied upon by G in the application for setting aside the New Award. I have done so and have already indicated, at paragraph 42 of the Decision, that I saw no merit in his application on the evidence and on the authorities to which the PRC law experts have adduced.

16.There is no question of X being shut out or precluded from arguing why leave should not be granted by the Court to enforce the Award.  He had the full opportunity to do so, and had made submissions on all the grounds he sought to rely on, at the hearings on 21 June 2022 and 29 September 2023, and he will have the further opportunity to argue whether the New Award should be set aside or that enforcement thereof in Hong Kong should be refused, in the applications separately made to the Mainland and Hong Kong Courts.

17.Since interest is not included in the amount sought to be paid out, I see no injustice to allow G’s present application. The balance of the funds will remain in Court, and the amount of interest payable can be established and argued after the challenge to the New Award has been determined.

18.The application for payment out made by G is accordingly allowed, in terms of paragraphs 1, 2 and 4 of G’s summons issued on 8 January 2024, with costs and certificate for 2 Counsel, to be taxed if not agreed.

Mr Douglas Lam SC and Ms Jacqueline Law, instructed by Reed Smith Richards Butler LLP, for the applicant

Ms Sara Tong SC and Ms Astina Au, instructed by Fangda Partners, for the respondents