YUNNAN PROVINCIAL IMPORT AND EXPORT CORPORATION v. TANG YAT KEUNG AND ANOTHER

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DECISION

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1. On 8 March 2000, leave was given to the plaintiff, ex parte, to enforce a mainland arbitration award dated 17 April 1997 made by the China International Economic & Trade Arbitration Commission ("CIETAC"). The award was made against both defendants.

2. By this summons, the 1^st defendant applies to set aside the order. It relies on section 40E(2)(c) of the Arbitration Ordinance, Cap.341 which provides that the enforcement of a mainland award may be refused if the applicant proves that :

"... he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case."

3. Thus, the burden of proof is on the 1^st defendant. If the burden is discharged, the power to refuse enforcement remains discretionary.

4. The 1^st defendant's case, in a nutshell, is that his office address at the Singga Commercial Centre ceased to be his business address from 28 February 1996. Any attempt to serve documents on him at that address after that date would have been unsuccessful. He was not there. There is no evidence in this case other than service being to that address. The approximate date of attempted service was July or August 1996. The 1^st defendant was not served properly, he was unaware of the arbitration and was thus unable to attend. Had he attended and presented his case the outcome could have been different.

5. It is a fact that CIETAC took cognizance of the case on 27 June 1996. Thereafter, it sent the relevant documents to the Singga Commercial Centre address. The documents were returned by the delivery company marked "change of delivery address". CIETAC then instructed Hong Kong solicitors, Messrs Livasiri & Co., to serve the documents. The address was checked. Messrs Livasiri & Co. served the documents again by ordinary post on 7 August 1996.

6. Counsel for the 1^st defendant, Ms Audrey Eu, SC, complains that the plaintiff did not do enough in attempting service. They knew the 1^st defendant was not physically present in the Singga Commercial Centre, yet they made no enquiries about his whereabouts, nor did they investigate other possibilities, such as serving him at his residential address. They merely used the ordinary post to the same address, after the documents had been returned marked "change of delivery address".

7. On the face of these facts, there is some force in the contention that the notice of the arbitration proceedings did not physically come within the sight of the 1^st defendant's eyes. Mr Maurice Chan, counsel for the plaintiff, however invites the court to consider the wider picture and draw such inferences that would lead the court to conclude that the 1^st defendant was deliberately evading service because he did not want to avail himself of the opportunity of attending the arbitration in Beijing and present his case.

8. The case concerns a consignment of oil delivered by the plaintiff to the 1^st defendant in July 1995. According to the Business Registration Office, the 1^st defendant's company, "Tomdar", ceased business on 28 February 1996. For many years, its business address had been in the Singga Commercial Centre. The dispute over payment had arisen well before February 1996. Correspondence had been exchanged. The plaintiff had been pressing for payment. The 1^st defendant clearly knew he was being "chased". Moreover, the exchange of correspondence, by fax, continued after February 1996. Between 6 March and 2 May 1996, seven faxes were exchanged, which have been exhibited, four from the plaintiff and three from the 1^st defendant in reply. The 1^st defendant's replies are on its usual "Tomdar" notepaper with the Singga Commercial Centre address and the same fax number as had always been used. After 2 May, there is silence. The 1^st defendant gives, as his reason for leaving his business premises, the suggestion that he could no longer tolerate being harassed by the plaintiff. The tenor of the faxes, however, gives no hint of harassment or nuisance by the plaintiff. They are a normal commercial exchange of one party trying to get payment for goods from another party. Tomdar's replies conclude with expressions such as "waiting for good news" and "wishing you good business".

9. The 1^st defendant affirms that he also vacated his residential address at the same time, February 1996. There is no evidence that he made any arrangements for mail, either at his office or his home, to be forwarded to a new address. Mr Chan submits that it must be inferred that he continued to collect his mail. The business premises were not sold until September 1996. Mail would have been delivered to it from February to September and dealt with by the recipient in whatever way he wished, for example, by reading it or ignoring it or discarding it. The picture being portrayed is one of the plaintiff pursuing the 1^st defendant for payment, who then abandoned his office, left his home and turned his back on the mail. He was aware that the plaintiff had proposed to seek redress through arbitration. His fax of 9 April 1996 says so.

10. The arbitration got under way in 1997. It made an award in the plaintiff's favour. The defendants had not attended. The award was delivered to the Singga Commercial Centre address in April 1997. If the 1^st defendant's account is true, the new owners of the premises neither forwarded it nor returned it to sender.

11. The next attempt to serve a document on the 1^st defendant was a charging order on his residential property in July 2000, after the plaintiff has secured a judgment enforceable in Hong Kong. This produces a different reaction from the attempts to serve documents on him in 1996. His neighbour knew his whereabouts and contact details and was able to inform him promptly of the charging order and notice of sale. The 1^st defendant's response was to promptly set in motion this application to set aside the leave to enforce, given ex parte in March 2000. The hearing has been adjourned twice since then. News of the notice for sale reached him very quickly. The inference sought to be drawn is that, in truth, the notice of arbitration would have reached him with similar alacrity.

12. Many affirmations have been filed and considered. The foregoing is but an outline of the salient features. The question arises, is there evidence upon which an inference can be properly drawn that the 1^st defendant knew he had been served with the notice of arbitration (regardless of whether he chose to read it or not) and chose not to avail himself of the opportunity of attending the arbitration to present his case? I am satisfied that this is a proper inference to draw. The whole picture leads me to conclude that the 1^st defendant deliberately made himself scarce, full in the knowledge of impending proceedings. If the notice of the arbitration did not in fact fall within his vision, he alone is responsible for that. It has not been proved, on the balance of probabilities, that he was not given proper notice or was otherwise unable to present his case. The application of the discretion, therefore, does not arise.

13. It should be noted that when the 1^st defendant applied, unsuccessfully, to set aside the award in Beijing, the adjudicators ruled that the 1^st defendant had received proper notice of the arbitration proceedings. It is correct to say that that court was deciding a slightly different issue, namely whether Article 77 of CIETAC's own rules (which deals with the requirements for service) had been complied with. The requirements for compliance with Article 77 and the meaning of "proper notice" in Hong Kong are not the same. It is simply noted that this court has come to the same conclusions in relation to the underlying facts.

14. Ms Eu helpfully referred the court to three authorities which illustrate the principle to be applied. In all three cases, namely, Paklito Investment v. Knockner East Asia Ltd [1993] 2 HKLR 39, Apex Tech Investment Ltd v. Chuang's Development (China) Ltd [1996] 2 HKC 293 and Guangdong Overseas Shenzhen Co. Ltd v. Yao Shun Group International Ltd [1998] 1 HKC 451, the court found there to have been a serious procedural irregularity in the course of the arbitration at which the applicant was present. There were findings that the irregularity in the procedure gave rise to a risk of injustice or substantial prejudice to the applicant.

15. In this case, no issue was taken, nor indeed could there have been, with the principles derived from these cases. The important difference is that in the present case, there was no irregularity in the procedure or the proceedings which could have caused the 1^st defendant to be prejudiced. The hearing of the arbitration in his absence was of his own making. Each case turns on its own facts.

16. In view of the fact that this court has found there was no irregularity in the service procedure and that the 1^st defendant has failed to establish the ground in section 40E(2)(c), it is not necessary to consider the question of whether the outcome of the arbitration could have been different if he had been there.

17. For the sake of completeness, it is nonetheless appropriate to make two observations about the defences he said he would have raised had he been an active party in the arbitration.

18. His first defence is agency. He says he entered into the contract as an agent for a Taiwanese customer. This defence is fraught with difficulties. The suggestion of agency appears nowhere in the contemporaneous documents. It emerges for the first time when attempts were made to set aside the award in Beijing. The 1^st defendant's lawyers abandoned the point in Beijing. It relies heavily on a document, the provenance of which, the plaintiff can demonstrate to be highly suspicious. The second defence concerns the quality of the goods delivered. The differences between the goods delivered and the goods contracted for appear, according to the contemporaneous certification, to be trivial at best.

19. I decline to set aside the leave to enforce order dated 8 March 2000 and I accordingly dismiss this application with costs.