Shandong Hongri Acron Chemical Joint Stock Co Ltd v. Petrochina International (Hong Kong) Corporation Ltd
Read the full judgment text of HCCT 45/2009 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 6 August 2010 before Hon Saunders J.
Arbitration enforcement — Partial enforcement of arbitration award — Interpretation of supplemental award affecting sequence of performance — Material nondisclosure in ex parte application. The applicant, Shandong Hongri, sought enforcement of only the monetary portions of a CIETAC arbitration award against Petrochina, excluding the return of sulphur stipulated in the award. Petrochina contested the enforcement, relying on a supplemental award clarifying the conditional nature of payment upon return of goods, and alleged nondisclosure by Shandong Hongri. The Court held that partial enforcement of arbitration awards is permitted under s 40B of the Arbitration Ordinance, applying the mechanistic approach endorsed in Xiamen Xinjingdi Group Ltd v Eton Properties Ltd. The key legal issue whether the return of goods is a concurrent condition precedent to payment was reserved for a full hearing to determine the effect of the supplemental award under O14A. Material nondisclosure allegations were acknowledged but reserved for later argument relating to costs. The Court varied the order nisi to permit Petrochina to enforce the goods return obligation and stayed execution, scheduling directions for further hearing. The approach avoids unnecessary relitigation costs while ensuring all issues receive proper adjudication.
Legal issues: Whether partial enforcement of arbitration award is permissible · Effect and enforceability of supplemental award clarifying sequence of performance · Material nondisclosure in ex parte application
Outcome: Order nisi varied to grant leave to Petrochina to enforce paragraph 1 of the award; Shandong Hongri required to return sulphur; execution stayed; costs reserved
Cites 3 cases
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HCCT 45/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION & ARBITRATION PROCEEDINGS NO. 45 OF 2009 ____________ IN THE MATTER OF ENFORCEMENT OF ARBITRATION AWARD ____________ BETWEEN
____________ Before: Hon Saunders J in Chambers Dates of Hearing: 16 December 2009, 11 January, 5 February, 10 February, 31 March, 12 May and 21 June 2010 Date of Ruling: 6 August 2010 __________ R U L I N G __________ 1.On 21 September 2009, the China International Economic and Trade Arbitration Commission (CIETAC) issued Arbitral award No. 0305 [2009] in respect of a dispute between the parties to this litigation. The award was in the following terms:
2.On 17 November 2009,Shandong Hongri,in reliance upon s 2GG and s 40B Arbitration Ordinance, Cap 341, made an ex parte application for an order granting leave to enforce items 2, 3, 4, 5,and 6 of the award, together with interest on the sum of US$2,953,198 at judgment rate from 22 October 2009 to the date of payment, and interest on the accumulated sum of RMB669,689.16 for the same period. 3.It will be noted immediately thatShandong Hongridid not seek to enforce that part of the award contained in paragraph 1, whereby it was obliged to return 3,810.57 tonnes of sulphur to Petrochina. 4.The matter first came before me on an ex parte basis and, there being no apparent reason on the face of the documents why the order should not be made, an order nisi was duly made on 18 November 2009. 5.On 4 December 2009, Petrochina applied to set aside the order on the following grounds:
6.My initial approach to the matter was to endeavour to persuade the parties to resolve the circumstances by making arrangements for an appropriate inspection and return of the goods, and at the time the goods were returned, for payment of the amount due. In the course of a number of short hearings Petrochina paid into court the whole of the amount due under the award. 7.Notwithstanding that payment, the parties were unable to arrange inspection and return of the goods. It is not appropriate at this stage of the proceedings to consider the steps were taken towards that end. It may be necessary to examine those steps and subsequent proceedings. It is sufficient if I say that no successful arrangement was made to enable the return of the goods. The funds remain in court. 8.Counsel forShandong Hongrisays thatShandong Hongriis entitled, forthwith, to an order enforcing the award, that there should be an immediate order for payment of the sums due as sought by its summons, as set out in paragraph 2 above. 9.Counsel for Petrochina says that payment should not be made until the goods have been returned, and, at my suggestion, filed a summons to vary the ex parte order, by including in the order item 1 of the award, thereby making the obligation ofShandong Hongrito US$2,953,198 to Petrochina part of the judgment, and consequently enforceable in Hong Kong. 10.In Xiamen Xinjingdi Group Ltd v Eton Properties Ltd [2009] 4 HKLRD 353, the Court of Appeal rejected an appeal from a decision[1] of Reyes J, holding that the exercise of the conversion of an arbitration award into a court judgment is a purely mechanistic matter, see per Le Pichon JA at § 28. If the criteria in s 40B of the Arbitration Ordinance, Cap 341 (the Ordinance) are met, the court will usually give effect to the award by granting permission to enforce it: see Russell on Arbitration, 23rd Edn, § 8‑005. 11.Effectively, what was sought byShandong Hongriwas partial enforcement of the award. There is nothing in the Ordinance which prevents partial enforcement where appropriate: see Xiamen Xinjingdi per Reyes J at § 80-84. At this stage, the court is not concerned with enforcement, but with the stage at which an award is registered, and becomes enforceable as a judgment. 12.Nothing that Ms Cheng said went to justify an argument that Petrochina should not be entitled to have that portion of the award favourable to it registered and enforceable as a judgment. 13.I see no reason at all why, if those portions of the award favourable toShandong Hongriare to be registered, and to be enforceable as a judgment, then those portions of the award favourable to Petrochina should not equally be registered and be enforceable as a judgment. 14.The real issue that arises in these proceedings is the question of enforcement of the award, and whether or not the obligation onShandong Hongrito return the sulphur to Petrochina is concurrent with the obligation on Petrochina to make payment of the sum of $2,953,198 toShandong Hongri. That issue raises the effect of the application made by Petrochina to the CIETAC arbitrators for a supplemental award in order to clarify the sequence of performance by the parties under the award. That is an issue that will require full argument. 15.The sequence of events that led to the supplemental award was as follows.
16.Mr Ng contended that by reason of material nondisclosure on the part ofShandong Hongri, the ex parte order should be set aside. The material nondisclosure he said, arose because the true effect of the correspondence between the parties and the CIETAC arbitrators was not adequately set out in the affidavit, and the correspondence itself was effectively buried, entirely unidentified, in exhibits to the affidavit comprising 148 pages. 17.Further, Mr Ng said that the continuing obligation of disclosure in an ex parte application required that the letters purporting to constitute supplementary awards, from the CIETAC arbitrators, apparently clarifying the award and enabling Petrochina to resist payment until it was in receipt of the sulphur, should also have been disclosed to the court, even after the ex parte order was made. 18.Were this not a situation where Petrochina itself seeks to enforce part of the award itself, there may well be a sound basis to refuse leave to enforce the award. But I propose to take a practical view of the matter. If I refuse leave under s 40B, or set aside the order nisi on the ground of material non-disclosure, it will be necessary for the parties to commence an action on the award to achieve enforcement. To insist on that course would achieve only unnecessary expenditure on legal fees, and the proceedings would reach precisely the point at which they now are in these proceedings. The question would then arise as to the effect of the purported supplementary awards. 19.The true nature and effect of the two letters is a pure question of law capable of disposal by a short hearing under O 14A. Shandong Hongrihas issued a summons seeking the resolution of those questions of law. 20.But that is not to say that the issue of nondisclosure simply disappears. As I say, Mr Ng may well be on sound ground in his contention that there has been material nondisclosure. The question is reserved for further argument and consideration when I ultimately come to deal with costs in these proceedings. 21.Having regard to the foregoing matters I make the following orders:
22.If required, I will hear the parties on the form of the order.
Ms Teresa Cheng SC, instructed by Messrs Hogan Lovells, for the Applicant/Creditor Mr Peter Ng SC, instructed by Messrs JSM Mayer Brown, for the Respondent/Debtor [1] [2008] 4 HKLRD 972 | |||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCT 45/2009