G v. X and Others

HCCT 58/2021

[2024] HKCFI 1013

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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D E C I S I O N

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1.This is an application by the 1^st Respondent (“X”) for leave to appeal against this Court’s Decision dated 19 December 2023 (“Decision”), the nomenclature of which is adopted below.

2.The facts have been set out in the Decision. By the Decision, and pursuant to sections 92 and 84 of the Ordinance, this Court granted leave to the Applicant (“G”) to enforce the Award, refused all the grounds of X’s opposition to enforcement, and dismissed X’s application for stay or adjournment of the enforcement proceedings which was made by his summons of 12 April 2022. The Decision was made after a substantive  hearing on 1 June 2022, and a further hearing on 29 September 2023 (“September Hearing”), with additional written Supplemental Submissions filed by both parties on 11 December 2023, regarding developments of the Mainland Setting Aside Application: including the Mainland Court’s issue of the Notice on 23 September 2022, the Re-arbitration Decision of CIETAC on 30 September 2022, a re-arbitration which was held on the Mainland, and the issue of a New Award on 17 November 2023.

3.Prior to the September Hearing, by consent of the parties, the Court had granted leave for expert PRC law evidence to be filed on issues of PRC law, and the parties had filed such evidence on the effect of the Notice, the Re-arbitration Decision and the re-arbitration in February, July and September 2023, all prior to the September Hearing. The Supplemental Submissions of Counsel filed in December 2023 was on the effect of the New Award which had by then been issued.

4.The grounds relied upon in X’s opposition to enforcement of the Award were, originally, that he was unable to present his case in the Arbitration, that the procedure of the Arbitration was not in accordance with the parties’ agreement, and that enforcement of the Award would be contrary to public policy.

5.At the September Hearing, in reliance on the developments of the Mainland Setting Aside Application after the first hearing in June 2022 (“New Developments”), from September 2022 to November 2023, Counsel for X further made submissions against enforcement of the Award in Hong Kong, on the ground that the Award was not binding, or had been suspended by the Mainland Court or under Mainland law under section 95(2)(f) of the Ordinance.

6.After the handing down of the Decision, X applied under Order 73 rule 10(6) RSC to set aside the Decision to grant leave to enforce the Award (“rule 10(6) Application”), and to stay enforcement pending his application to set aside the New Award (“New Setting Aside Application”). That application was made by summons of 19 January 2024 (“Summons”), and was dismissed by this Court on the return day of 29 February 2024, on the ground that the application was an abuse of process when the substantive matters relied upon by X against enforcement had already been argued and dismissed by the Court. The reasons were set out on 1 March 2024. The stay application was directed to be adjourned for argument (and was promptly heard on 12 March 2024).

7.By the Decision, this Court granted leave to G to enforce the Award. Under section 84(3) of the Ordinance, leave is required for any appeal from such a decision. X now applies by his summons of 5 March 2024 for leave to appeal, out of time, against the Decision (“Leave to Appeal Application”). X further seeks to rely on Order 59 rule 13 for a stay of execution pending appeal.

8.In dealing with X’s application for extension of time to appeal, the relevant principles are set out in the Court of Final Appeal’s decision in Astro Nusantara International BV & ors v PT Ayunda Prima Mitra [2018] HKCFA 12. The Court is to look at all relevant matters and consider the overall justice of the case, the relevant factors including (but not restricted to) the length of the delay, whether the party who had permitted the time limit to expire was acting reasonably in the circumstances, whether the respondent had contributed to the delay, whether the respondent would by reason of the delay suffer irremediable prejudice in addition to the mere loss of time, and the strength of the application. The Court of Final Appeal emphasized that the Terna Bahrain approach of promoting the importance of certain factors, and according to others a secondary status, is not correct.

9.The merits of the appeal are one of the relevant factors to be considered. As held by the Court of Appeal in Tsang Wai Fan v Hui Siu Kwong HCMP 409/2016, 12 April 2016, leave to appeal will not normally be granted unless it is shown that the intended appeal has a reasonable prospect of success, but where the delay is inexcusable even though insubstantial, the party applying for an extension of time to appeal would have to show a real prospect of success on the merits.

Delay

10.The Decision was handed down on 19 December 2023. Under Order 59 rule 2B(1), an application for leave to appeal may only be made within 14 days from the date of the judgment or order. The summons for the Leave to Appeal Application was only issued on 5 March 2024, and the application was accordingly 9 weeks out of time. Compared to the yardstick of 14 days specified in rule 2B(1), this is not insubstantial delay.

Reasons for the delay

11.In my judgment, there is no good explanation or excuse for X’s delay in making the Leave to Appeal Application.

12.The explanation offered for X’s delay is that he had genuinely believed that the procedure under Order 73 rule 10(6) was open to him, and that this was a reasonable mistake which led to the delay in taking the route of appealing against the Decision and the orders made therein.

13.As Counsel for G pointed out, ignorance of the law is generally not a reasonable excuse for X’s failure to apply for leave to appeal within 14 days of the Decision (Tsang Loi Fat v Sun Fook Kong (formerly known as Sung Foo Kee Ltd) [2011] 4 HKLRD 344). Counsel for X sought to emphasize that Tsang Loi Fat only stands for a “general proposition” that ignorance of the law is not an excuse, and highlighted the fact that in the present case, there may be an acceptable explanation and sufficient ground to seek extension of time because the mistake made by X and those advising him (as to the rule 10(6) Application) was one which “to anyone who was reading the rule might very well have arisen”, relying on Chiu Sin Chung v Yu Yan-yan, Angela [1992] 1 HKLR 225.

14.I do not accept the contention made for X, as to the nature of the mistake made, and that it could afford him with a good excuse for the delay.

15.As explained in the Reasons for Decision dated 1 March 2024 (“Reasons”), the rule 10(6) Application was an abuse of process. Order 73 deals with and refers to applications made under the Ordinance, and no sensible practitioner would have read it without at the same time reading the Ordinance, and the different sections of the Ordinance to which rule 10 refers. No common sense reading and construction of rule 10(6) can lead to a conclusion that a respondent who has filed evidence and made substantive submissions to oppose an application for leave to enforce an arbitral award on the grounds set out in section 95 of the Ordinance, as X had done, will be able, after the Court grants leave, to apply once again to set it aside on the same grounds. The key question is not whether the original application for leave to enforce the award was made by inter-partes summons, or ex parte, but whether the respondent had on such application the full opportunity to consider the applicant’s case for leave to be granted, to file evidence in opposition, and to fully argue the matter at a substantive hearing fixed in consultation with parties’ diaries - all of which had been made available to X.

16.With all due respect, there was no mistake which anyone reading the rule might very well have made.

17.Nor is it a case of whether there are authorities, or whether leave for enforcement is “rarely” granted on inter-partes applications, as alleged by X. There have indeed been cases before this Court, whereby leave to enforce arbitral awards was granted on inter-partes basis. Even in the absence of authorities, a common sense reading of the rule itself, of the Ordinance and of Order 1A RHC must lead to the conclusion set out in the Reasons. The basic principle, that an application made, opposed, argued and decided cannot be remade or reopened, hardly needs authorities to support it.

18.It is certainly not true that X’s application to set aside the enforcement order was “premised on post-hearing matters” which he “did not raise and could not have raised” at the September Hearing, and that he had not attempted to re-litigate matters. It is blatantly clear from the Decision that all the “post-hearing matters” had been raised and argued by his team of Counsel at the September Hearing, when they sought to rely on and made submissions on all the New Developments. Expert evidence on PRC law governing the Mainland Setting Aside Application and the re-Arbitration and its effect had been filed, and lengthy submissions made thereon, at the September Hearing. The New Award was also addressed by Counsel in their Supplemental Submissions of December 2023, after the September Hearing. It cannot be accepted that there was no attempt to re-litigate these matters already argued at the September Hearing, and I reject this as X’s excuse for his genuine belief in the rule 10(6) procedure.

19.Pertinently, after X had issued his Summons of 19 January 2024 for the rule 10(6) Application (returnable on 29 February 2024), those advising G had written (as early as on 24 January 2024) to point out the error, that such Application had no basis due to the manifestly incorrect understanding of rule 10(6).  That notwithstanding, X did not take any action to withdraw the Summons but pursued same, insisting that it be adjourned for substantive argument. As pointed out for G, if there had been any innocent and genuine mistake as to the application of rule 10(6), X could have immediately made the proper application for leave to appeal against the Decision instead of maintaining his rule 10(6) Application to set aside. Mr Lam pointed out that an application to set aside an enforcement order and an application for leave to appeal are not mutually exclusive. X’s considered decision to pursue the rule 10(6) Application suggests that his prime consideration was to cause delay to the enforcement proceedings by repeatedly making applications, and adjoining same, all to frustrate and postpone G’s enforcement attempts.

20.Even after the hearing on 29 February 2024 when the rule 10(6) Application was dismissed, G did not immediately issue the Leave to Appeal Application but waited until 5 March 2024. It has to be borne in mind that throughout the entire history of proceedings, X has been advised and represented by a large team of lawyers and Senior Counsel and it should not have been necessary to wait days to take any action.

21.Having considered the matter overall, I am not satisfied that there is any good excuse for the delay in this case. In my judgment, the delay was caused by X’s deliberate and unreasonable action which I have found to be an abuse of process.

Merits of the intended appeal

22.As the Court of Appeal found in Tsang Wai Fan v Hui Siu Kwong, where the delay is inexcusable even though insubstantial, the party applying for an extension of time to appeal would have to show a real prospect of success on the merits of the appeal. In this case, the delay is not insubstantial, and is also inexcusable.

23.It is to be borne in mind that in Astro Nusantara, the Court has  held that the merits of the application are one of the factors to be taken into consideration, but such a factor is not to be afforded any more or less importance than other factors. On the overall approach to the merits of the case, the Court in Terna Bahrain Holding Company WLL v Al Shamsi [2013] 1 Lloyd’s Rep 86 had observed that:

“Unless the challenge can be seen to be either strong or intrinsically weak on a brief perusal of the grounds, this will not be a factor which is treated as of weight in either direction on the application for an extension of time. If it can readily be seen to be either strong or weak, that is a relevant factor; but it is not a primary factor, because the court is only able to form a provisional view of the merits, a view which might not be confirmed by a full investigation of the challenge, with the benefit of the argument which would take place at the hearing of the application itself if an extension of time were granted.”

24.X seeks to contend that this Court erred on law or principle, in misunderstanding or failure to properly consider the PRC law expert evidence, misunderstanding the facts or evidence, and had failed to take into account relevant considerations. This was on the basis that in finding that the Award remained valid and binding despite the commencement of the re-arbitration, the Court had failed to take into account or had misunderstood the expert evidence and PRC law. For the intended appeal, X referred to his expert’s evidence on the meaning of Articles 20 and 22 of the 2018 Enforcement Provisions, arguing that the effect of the Award and the New Award is a matter of PRC law. On the other hand, X also referred to English Court’s decision in Diag Human SE v Czech Republic [2014] EWHC 1639 as to the meaning of a binding, or non-binding, award and argued that this Court had failed to consider Diag.

25.In the Decision, this Court had referred to and considered the expert evidence adduced by Bai and Liu, the experts of X and G respectively, and explained that for the reasons set out in the Decision, and upon reading the relevant provisions referred to by the experts, what had been terminated were the enforcement proceedings and the setting aside proceedings on the Mainland. The Court preferred the expert evidence of Liu, to that of Bai, on PRC law so far as the status of the Award and the effect of the re-arbitration were concerned. It cannot be said that the Court had failed to consider the effect of PRC law simply because Bai’s evidence was not accepted, and Liu’s evidence was found to be more analyzed and persuasive.

26.With regard to the relevance of common law decisions including Diag on which Counsel for X seeks to rely, Counsel’s skeleton submissions filed for the September Hearing referred to the findings in Diag, that the award in question was subject to a process of ordinary recourse by reason of a pending review of a review tribunal, and was not binding. Counsel then sought to argue that by reason of the re-arbitration, the original Award had become subject to a process of review, which prevents the Award from becoming binding. To deal with this argument, this Court referred (at paragraphs 27 and 35 of the Decision) to Liu’s evidence that the scope of the re-arbitration was confined to the Evidence Issue, that the cases cited by Bai did not have effect on international or foreign-related arbitrations, that the scope of the re-arbitration was confined to the issue identified by the Mainland Court in the Notice and that notwithstanding the re-arbitration, the Award remained a valid, final and binding award on all the other issues of fact and law already decided, which was in accordance with the fundamental principle of finality of arbitration. At paragraph 37 of the Decision, the Court explained that whether the original Award can be said to have been replaced by the New Award (as Bai contended) depends on the scope of the re-arbitration ordered, and the extent that the New Award is in any way different on the confined issue. This meant that any process of “review” to which the Award was allegedly subjected by the reasoning in Diag is actually confined to the Evidence Issue only, rather than the entire Award. It was pointed out that in any event, the tribunal in the New Arbitration had taken the same view as to the limited scope of the issues to be considered by it upon any possible     “review”.

27.With regard to the emphasis now made by Counsel, that the ground relied upon by X to resist enforcement of the Award at the September Hearing was that the Award is “not binding” or has been “suspended”, there was in fact no clear expert evidence adduced that by virtue of the Re-arbitration Decision, the Award was suspended as a result. The experts only referred to Article 61 of the Arbitration Law which provides for the termination of the enforcement proceedings upon the commencement of the re-arbitration. This prompted the distinction made by the Court (at paragraph 30 of the Decision) between an order of the supervisory court setting aside an award, and an order permitting or refusing enforcement of the award. The distinction was also made by Liu, G’s expert. Liu’s evidence was clear, that in the absence of an order setting aside the Award, and with the termination of the setting aside proceedings by the commencement of re-arbitration, the Award was still valid in law as to the issues decided and not identified in the Notice, and this can only mean that there is no suspension of the Award.

28.The reference in the 2008 Interpretation/SPC Comprehension as referred to by Counsel for X only refers to the original award in the re-arbitration being replaced by the new award. This is subject to the expert evidence on the limited scope of the re-arbitration, and the New Award to be made within such limited scope and, according to Liu, the Award remains unaffected with regard to the issues already and finally decided (apart from the Evidence Issue) and remains to be a valid, final and binding Award.

29.The Court explained at paragraph 28 of the Decision its interpretation of the PRC provisions referred to by the experts, and why Bai’s evidence was not accepted. The fact that the Award had not been set aside and the Mainland Setting Aside Application had been terminated (as emphasized by Liu) were the main reasons for the Court to conclude that the Award was valid, and remained binding as such.

30.X raised the further ground that by the Decision, the Court had erred in refusing and/or failing to consider an application made by X by summons issued on 11 December 2023 for a stay of the enforcement proceedings and a stay of the Decision, pending the determination of X’s application to set aside the New Award (“11/12 Summons”). This ground is entirely baseless, and has no prospect of succeeding on appeal at all.

31.As a matter of background, after the September Hearing and before the handing down of the Decision, this Court granted leave to the parties on 4 December 2023 to file Supplemental Submissions by 11 December 2023, confined to not more than 2 pages each, on the issue only of the effect of the New Award on the Award.

32.On the same day as the filing of the Supplemental Submissions, X issued the 11/12 Summons.

33.First of all, the 11/12 Summons was returnable on 10 January 2024 before the Court. It is incomprehensible why X can contend that this Court should consider the 11/12 Summons and deal with it before handing down the Decision on 19 December 2023, and why the Court’s failure to consider the application made by the 11/12 Summons can be a ground for appealing against the Decision.

34.In any event, the fact that X had issued the 11/12 Summons to seek a stay pending the determination of the New Setting Aside Application was referred to in the Skeleton Submissions dated 11 December 2023, which was filed by Counsel for X pursuant to the Court’s directions of 4 December 2023. The Court had of course taken note of those Submissions of Counsel, but having considered the New Developments, their effect on the Award, the fact that the award of damages remained unaltered in the New Award, the delay, and the merits of the New Setting Aside Application (considered at paragraph 42 of the Decision), this Court did not order a stay of the enforcement proceedings in the exercise of its discretion.

35.The stay sought in the 11/12 Summons was of course not the first and only stay applied for in respect of these enforcement proceedings. Perhaps because of the many summonses and applications made by X, and the fact that many of them are duplicated (examples being the opposition to enforcement of the Award and the rule 10(6) Application; paragraph 2 of the rule 10(6) Application and the 11/12 Summons), X may have lost sight of the fact that he had already applied for a stay of the Hong Kong enforcement proceedings, first by his original summons for stay dated 11 March 2022 and filed on 12 April 2022 (relating to the first Mainland Setting Aside Application), then by the 11/12 Summons, and finally by paragraph 2 of the Summons (of 19 January 2024) both of which related to the New Setting Aside Application.

36.When the 11/12 Summons was scheduled by X for hearing on 10 January 2024, and when the hearing of the application for leave to enforce the Award had been concluded on 29 September 2023, the Court did not find good reason to issue directions before 10 January 2024 as to how the application for stay made should be dealt with. It was a matter of case management, and bearing in mind the high threshold required for appeals against such case management decisions, I fail to see how the Court of Appeal would interfere. The matter remains that Counsel for X had made the point in his Skeleton Submissions that X had made a separate application for stay, but the Court considered that an order for stay was not justified in all the circumstances of the case.

37.Nor can I see what prejudice X had suffered as a result of the Court’s alleged failure to consider or deal with X’s 11/12 Summons in the Decision. X withdrew the 11/12 Summons by consent application made to the Court on 5 January 2024, and his application for stay pending the New Setting Aside Application, as made in paragraph 2 of the Summons for the rule 10(6) Application was dealt with by Deputy High Court Judge Reyes on 12 March 2024. 

38.In case there should be any complaint by X with regard to the delay in the disposal of the stay sought by the Summons (of 19 January 2024), it should be noted that from the time the 11/12 Summons was issued, X/his lawyers had been pressing for the said summons to be adjourned, with one day reserved for argument on a date to be fixed in consultation with Counsel’s diaries. This was evident from the letter dated 6 February 2024 from X’s lawyers to the Court (attaching a copy of their letter of 19 January 2024 with directions proposed to G’s lawyers), and their letter of 7 February 2024. Up to 23 February 2024, X’s lawyers maintained their resistance to the immediate disposal of the Summons on the return day of 29 February 2024, which was a half-hour hearing. In the limited time available on 29 February 2024, after dealing with and dismissing the rule 10(6) Application, it was within the discretion and case management power of the Court to adjourn the stay application made in the Summons for substantive argument, as X had throughout sought.

39.In conclusion, on the question of the merits of the intended appeal, I am not satisfied that X has real prospects of success on any of the grounds stated, of there being any misunderstanding of the PRC law evidence and facts, or errors of principle or law, or by reason of any failure to take into account all relevant matters, when the Court rejected X’s claim that the Award was not binding, or has been suspended.

40.Having considered all the relevant factors, the application to extend time to appeal should be refused. Even if I should be wrong, and there were reasonable prospects of success on the intended appeal to warrant an extension of time to appeal, I decline leave for the following additional reasons.

Discretion

41.It has to be borne in mind that the Court retains a discretion to enforce an award, even if the grounds set out in section 95 of the Ordinance are made out (Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) to HKCFAR 111, 136A-B). Likewise, even if there were any prospects of success in the intended appeal, the Court retains a discretion whether or not to grant leave to appeal.

42.In this case, the New Award made no changes to the amount of damages which X has been found liable to pay to G. Counsel for X has maintained that the New Award may have impact on the amount of interest which X may be liable to pay, as interest on the damages affirmed under the New Award would only accrue on a month and a day after the date when the New Award was issued. On X’s calculation, the difference in damages may be in the region of RMB 100 million. If I should be wrong in my consideration of the merits of the New Setting Aside Application and the binding effect of the Award, any reasonable argument on the intended appeal is that the New Award upon issue replaced the Award so far as it dealt with interest, and when interest commenced to be payable. Only to that extent can it be arguable that the part of the Award on interest ceased to have effect at the time when the New Award was made.

43.This issue, of whether the New Award does have the effect contended for by Counsel, with regard to X’s liability for payment of interest on the damages awarded to G under the Award, will be determined by the Mainland Court in the New Award Setting Aside Application. The Mainland Court will also be deciding then on whether the New Award should be set aside on the ground that the re-arbitration was not conducted in accordance with the proper procedure, when the new tribunal had confined its scope to the Evidence Issue. There has already been some hearing on the New Setting Aside Application, and a decision is expected from the Mainland Court in May 2024.

44.The Mainland Court is obviously in a better position than the Hong Kong Court of Appeal to decide on matters of Mainland law, as to the effect of the re-arbitration on the Award, and whether the New Award should be set aside. The decision from the Mainland Court will be available before the Hong Kong Court can even hear the appeal, should leave be granted. Rather than to squander further time and costs of the parties in pursuing an appeal against the Decision, and wasting the resources of the Hong Kong Court of Appeal, it would be more cost-effective and in line with the objective of procedural economy, to let the Mainland Court decide on these issues.

45.With that in mind, even if there should remotely be any reasonable prospects of success in the intended appeal from the Decision, I decline leave to appeal. The costs of the Leave to Appeal Application are to be paid by X to G, on indemnity basis, to be summarily assessed, with Certificate for 2 counsel. X has leave to file a statement of objection to the statement of costs filed by G, within 7 days.

46.Since leave to appeal is not granted, the stay pending appeal is also declined.

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

Mr Paul Shieh SC, Ms Sara Tong SC and Ms Astina Au, instructed by  Fangda Partners, for the 1^st respondent