COB v. FCD

HCCT 73/2026

[2026] HKCFI 4162

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 73 OF 2026

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D E C I S I O N

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Background

1.  By Originating Summons issued on 13 March 2026, the Plaintiff applied for leave to enforce a Final Award dated 9 March 2026 (“Award”)  which was made by the Arbitrator in an HKIAC arbitration commenced by the Plaintiff against the Defendant (“Arbitration”). Under the Award, the Defendant was ordered (inter alia)  to pay to the Plaintiff a principal sum ████████, being the outstanding payment certified in a construction contract made between the Plaintiff and the Defendant (“Contract”)  for a project in Hong Kong of which the Defendant was the developer and the Plaintiff was the Main Contractor (“Project”).

2.  By order dated 17 March 2026, the Plaintiff was granted leave to enforce the Award as a judgment of the Court (“Enforcement Order”).

3.  On 2 April 2026, the Defendant applied by its summons (“Summons”)  to set aside the Enforcement Order (“Setting Aside Application”). The stated grounds were that the Defendant was unable to present its case in the Arbitration, such that there was lack of due process and/or structural integrity, serious irregularity and breach of natural justice, and that further, enforcement of the Award would be contrary to public policy by reason of the alleged lack of due process. The Setting Aside Application was supported by an affirmation of W██████ (“W”)  made and filed on the same day as the Summons. It referred to the Defendant’s inability and the inability of the Defendant’s quantum expert (“H”)  to present the Defendant’s case and evidence on the costs claimed to have been necessitated for remedying defects in the works which were the subject matter of the Contract and for which claims were made in the Arbitration.

4.  Under Order 73 rule 10(6A)  RHC, an application to set aside an order granting leave to enforce an award “must be made by summons supported by affidavit, and such affidavit must be filed at the same time as the summons”. The grounds relied upon for the Setting Aside Application in this case should be as set out in the Summons and in W’s affirmation of 2 April 2026 (“W1”).

5.  The matters relied upon by W in his affirmation can be summarized as follows:

(1)  The Plaintiff had “launched a scathing and unwarranted attack” on H’s expert report on Day 1 of the Arbitration, criticizing it for not grouping the assessments by trades as directed by the Arbitrator.

(2)  The above attack contained “blunt and inaccurate, if not misleading, assertions”.

(3)  On the basis of such attack, the Arbitrator “egregiously developed a grudge and/or bias” against H, evidenced by the Arbitrator’s “extraordinary” complaints against H for failing to update his report on the latest evidence and choosing not to produce a supplemental report notwithstanding the Arbitrator’s direction.

(4)  H’s cross-examination manifestly demonstrated the Arbitrator’s grudge and/or bias, and H did not have a reasonable opportunity to present his case; the Arbitrator had made up his mind from the start to adopt a wholesale rejection of H’s evidence and to hold that the Defendant’s claim of Defect Costs (as referred to in the Arbitration)  would be 0.

(5)  As evidence of (4)  above, when H was being cross-examined, the Arbitrator did his own research on the website to find the costs of a waste disposal machine (the valuation of which was in question), such that H was taken by surprise and was unable to fairly or properly consider and respond to the Arbitrator’s questions.

(6)  The Arbitrator realized that H had prepared his final expert report under a misunderstanding of what the Arbitrator had in mind, but did not give him the opportunity to submit a further expert report or evidence on the correct understanding.

(7)  The Arbitrator’s dismissal of H’s evidence demonstrates that the Arbitrator’s ruling was “egregiously flawed”.

(8)  If H had been given the chance to submit his evidence on a correct understanding of what the Arbitrator had wanted, and had not been subjected to “grossly unfair and unequal treatment”, the ruling on Defect Costs and the Defendant’s defence of set-off would have been very different.

6.  On 28 April 2026, the Plaintiff issued its summons to seek security from the Defendant (“Security Summons”)  in respect of the Setting Aside Application. The Plaintiff highlighted that there was no undue delay in its issue of the Security Summons.

7.  The Setting Aside Application was on 20 May 2026 set down for substantive hearing on 5 August 2026. The Plaintiff complained that 2 earlier dates (including 17 July 2026)  had been made available by the Registry for the hearing but both dates were declined by the Defendant.

8.  On 21 May 2026, the Security Summons was set down for hearing on 17 July 2026 (the latest of 3 dates offered by the Registry). The Plaintiff complained that 17 July 2026 had been offered but declined by the Defendant just one day before. The Defendant explained (at the hearing on 17 July 2026)  that it had decided to instruct another counsel for the Security Summons, who was available on 17 July 2026. The Plaintiff on the other hand claimed that the Defendant had all along been adopting delaying tactics, and that the Security Summons could have been heard earlier.

9.  The hearing of the Security Summons took place on 17 July 2026, when submissions were heard.

10.  At the hearing, the Plaintiff highlighted the fact that in the 2^nd affirmation of ██████ (“ML”)  filed by the Defendant in opposition to the Security Summons, ML referred to the use of “inaccurate and misleading assertions on the part of the Plaintiff’s counsel team” when H was cross-examined, which (according to the Defendant)  “led to the Arbitrator’s grudge and/or bias” against H, and that this was in breach of the Code of Conduct of the Hong Kong Bar. The Plaintiff pointed out that this was a serious allegation made against the Plaintiff’s Counsel. Such allegation was not in fact addressed in the skeleton submissions filed by Counsel for the Defendant for the hearing on 17 July 2026, and upon questioning by the Court, Counsel for the Defendant expressly confirmed that no such allegation was pursued against the Plaintiff’s counsel.

11.  At the conclusion of the hearing on 17 July 2026, judgment was reserved.

Applicable legal principles for security

12.  The legal principles applicable to determination of the issues in dispute are not seriously in dispute. Both parties referred to L v B, HCCT 41/2015, 5 May 2016, which applied Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208, where the Court observed:

“In my judgment two important factors must be considered on such an application, although I do not mean to say that there may not be others. The first is the strength of the argument that the award is invalid, as perceived on a brief consideration by the Court which is asked to enforce the award while proceedings to set it aside are pending elsewhere. If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security. In between there will be various degrees of plausibility in the argument for invalidity; and the Judge must be guided by his preliminary conclusion on the point.

The second point is that the Court must consider the ease or difficulty of enforcement of the award, and whether it will be rendered more difficult, for example, by movement of assets or by improvident trading, if enforcement is delayed. If that is likely to occur, the case for security is stronger; if, on the other hand there are and always will be (sufficient)  assets within the jurisdiction, the ease for security must necessarily be weakened.”

(Emphasis added)

13.  The Plaintiff relies further on Order 73 rule 10A RHC, under which the Court may, of its own motion or on an application made by the creditor, and if, having regard to all the circumstances of the case it thinks it just to do so, impose such terms as to giving security or otherwise as a condition of the further conduct of the application, if it thinks fit.

14.  On the Defendant’s part, Counsel contended that as can be seen from Czech Republic v Diag Human SE and anr [2024] 1 WLR 3593, the second consideration in Soleh was a more important factor. At para 52 of the judgment in Czech Republic, the English Court of Appeal referred to section 70 of the English Arbitration Act, and then observed as follows:

“This strongly suggests that, in general at any rate, the merits of the challenge are likely to be irrelevant to the question whether security for the award should be ordered and that, again in general, the primary and usually the only question is whether the making of the challenge is likely to prejudice the ability of the award creditor to enforce the award or the ability of the award and the debtor to honour it. That is, as the DAC Report explained, the mischief at which section 70 (7)  is directed.”

Section 70(7)  of the Act states that the court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application to the court (for serious irregularity or challenge to jurisdiction etc)  or appeal, and may direct that the application or appeal be dismissed if the order is not complied with.

15.  As can be seen when the judgment of Males LJ, from paragraphs 56 to 59 are read in full, the second factor being said in Czech Republic to be possibly more important or relevant, was to highlight the fact that it should not be necessary for the court to go into the merits of the case in much detail on an application for security. At paragraphs 57 and 58 of his judgment, Males LJ referred to the “brief consideration” of the award as used in Soleh as carrying considerable wisdom, and explained that it is “only too easy for a picture of complexity to be painted” if the merits are to be considered “in too much detail”.

16.  However, I do not read the judgment of Males LJ to be saying that the merits, as apparent from a brief consideration, are not relevant or are less important when an application for security is considered. Moreover, the passage cited by Counsel for the Defendant only referred to the position “in general”. In a case where the claims for setting aside enforcement of an award are clearly seen to be without merit, there is nothing in Czech Republic to suggest that an order for security should not be made. As Staunton LJ observed in Soleh, where the award is “manifestly valid”, there should either be an order for immediate enforcement, or else an order for substantial security.

The claims of inability to present case/bias

17.  The assertions made by the Defendant in W1 and ML’s 2 affirmations (“ML1 and ML2”)  are that in the treatment of the late and new evidence on Defect Costs, which was adduced by the Defendant shortly before the hearing of the Arbitration, Counsel for the Plaintiff and the Arbitrator had been harsh and critical of H’s evidence and his expert report, which allegedly caused “a grudge” and/or bias on the part of the Arbitrator against H and his evidence, and that this bias led to the Arbitrator forming a pre-determined decision against H and the Defendant, on the question of either the liability of the Defendant or the quantum of the claims determined. The allegations made are not only of apparent bias, but actual bias on the Arbitrator’s part – as it is alleged in W1 (at paragraph 16)  that “the Arbitrator egregiously developed a grudge and/or bias against H”, and (at paragraph 17.5)  that the Arbitrator “quite clearly had from the start already made up his mind to adopt a wholesale rejection of (H’s)  evidence and to hold that the Defect Costs would be zero”.

18.  As Lord Bingham observed in Locabail (UK)  Ltd v Bayfield Properties Ltd [2000] QB 451 at 471, the proof of actual bias is very difficult, and the shortage of relevant cases on actual bias reflects the fact that actual bias is rare, and largely redundant given the other ground of apparent bias. The Defendant has a high threshold to meet, to prove the Arbitrator’s actual bias, which means that the decision maker was influenced by either partiality or prejudice, and it has been demonstrated that he was actually prejudiced.

19.  As for apparent bias, the relevant test and considerations are set out in Jung Science Information Technology Co Ltd v ZTE Corporation [2008] 4 HKLRD 776, paras 50 - 52. This is whether “an objective fair-minded and informed observer, having considered the relevant facts, would conclude that there was a real possibility that the tribunal was biased”, which was the test considered and applied in Porter v Magill [2002] 2 AC 357, and in Deacons v White & Case Limited Liability (2003)  6 HKCFAR 322. The Court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the judge was biased. Bias means a prejudice against one party or its case for reasons unconnected with the legal or factual merits of the case (Flaherty v National Greyhound Racing Club Ltd [2005] EWCA Civ 1117). These are all clearly established principles.

20.  In CNG v G & G and SIL [2025] HKCFI 3598, this Court highlighted the attributes of the “fair-minded and informed observer”, by reference to the judgment of Lord Hope in Helow v Secretary of State for the Home Department [2008] 1 WLR 2416 (paras 1 - 3). The emphasis is that such an observer is informed, fair-minded, considers matters in the proper and overall context, is not unduly sensitive or suspicious and would be taken to know (amongst other things)  the fact that adjudicators are under strong professional pressures to uphold traditions of integrity and impartiality.

Brief consideration of the merits of the Setting Aside Application

21.  I have considered the transcripts to which the parties have referred, and the cross-examination of H which is complained of. The Plaintiff claims that these should be read in the proper context of the case, which includes the Defendant’s late introduction of the evidence on the cost of repairs of the defects complained of, the contents of the expert reports and the analyses of the costs made therein.

22.  The Defendant has highlighted the fact that the relevant direction which had been issued by the Arbitrator (“Direction No 18”)  was to give leave to the experts to produce supplemental reports, “if any”, to take into account the additional evidence. It was pointed out that under Direction No 18, the production of a supplemental report was not mandatory, but the Arbitrator had “unfairly and oppressively” criticized H for not producing a supplemental report.

23.  The Defendant further highlighted that under the direction for expert evidence on Defect Costs assessment of the Defendant’s set-off claim (“Direction No 4”), the experts’ assessment was to be made irrespective of whether an alleged defective item had been made good or required to be made good, and that the experts were to group their assessments and evaluations “by trades, such as by the relevant nominated subcontracts”. Again, it was highlighted that H’s report contained a detailed breakdown which is itemized and grouped by occupation and by each defect list, that the summary table was grouped by trades/occupation, and that as H had explained, grouping by nominated subcontracts (“NSC”)  was only one of the methods specified in Direction No 4. The claim is that the Arbitrator had unfairly and unnecessarily criticized the way in which H prepared his report and his breakdown of the relevant costs and assessment.

24.  Since Counsel for the Defendant withdrew the allegation that Counsel had cross-examined H on the basis of inaccurate and misleading assertions, the relevance of Counsel’s cross-examination was that it somehow led to the Arbitrator’s “grudge” or prejudice against H.

25.  I fail to see how and why the Arbitrator should have any personal “grudge” against H, as a result of the cross-examination, or H’s evidence.

26.  It was in any event argued that the Arbitrator’s grudge and/or bias against H was evident from the Arbitrator’s exchange with H on Day 6 of the trial, when the Arbitrator repeatedly asked whether H’s figures were estimates only, and why H had not asked for invoices or the actual payment records of the alleged expenses. The Defendant argued that Direction No 4 was understood by H as meaning that assessments were to be made irrespective of whether the defects had to be made good (ie whether the expenses of the actual rectification of defects had been incurred), but even after he had been given such an explanation, the Arbitrator did not give H the opportunity to submit a further report on the correct understanding of what the Arbitrator required.

27.  As this Court sought to explain in the course of the hearing, parties and their legal representatives and experts should be attuned and accustomed to the adversarial features of litigation and dispute resolution by arbitration. Parties engage in arbitration or litigation to win. The legal advisers present their cases to the best of their ability, and this pursuit may include making vigorous attacks on the witnesses in cross-examination, even making technical objections or challenges in order to increase their chances of succeeding in their claims. Trained adjudicators and experienced arbitrators are accustomed to such cross-examination and would not be easily led to form bias, or “grudges” as suggested in this case, to the extent that his/her judgment would be clouded by such bias or prejudice, to reach a conclusion without any factual basis or evidential foundation.

28.  It is the duty of the Arbitrator to evaluate the competing expert evidence produced, and he has to decide which expert evidence he prefers, whether the expert’s evaluation is sound, supported by satisfactory and adequate evidence and reliable. In the process of so doing, it is necessary and reasonable for the Arbitrator to put questions to the experts, test their case, and form his view as to whether the expert’s assessment can reliably be accepted.

29.  The Arbitrator was not obliged to accept an expert’s opinion as if the latter had carte blanche over the report.  He was entitled to ask questions on H’s methodology, the assumptions H had made for his assessments, and any reasons which H had for making a particular valuation or assessment, and generally, to test the soundness of the expert’s opinions and conclusions. If the Arbitrator was not satisfied by the contents of the expert’s report, it was fair that he should voice his concerns and raise the questions which he had, instead of keeping these questions unanswered and dismissing them in his final decision.

30.  The questions put to H in relation to his report and his assessments were for the Arbitrator to fully understand the basis of his assessments and valuation, and were reasonably raised, both in the context of the case and in view of the contents of H’s report. Objectively, I do not regard the questions put to H as oppressive, or harsh, or scathing, or unfair. Even the Arbitrator’s own research in this case on the cost of a kitchen waste disposal machine, and his questions put to H on such costs, cannot be regarded as unreasonable or unwarranted. H was given the opportunity to answer the simple questions and to justify his assessment. The Arbitrator also gave the parties’ counsel the opportunity to address him on the question the Arbitrator had raised.

31.  Having read the transcripts to which the Defendant referred, I cannot agree that the Arbitrator was either unreasonable, unfair, unduly harsh or oppressive in the treatment of H.

32.  I reject the suggestion made for the Defendant, that the Arbitrator adopted any different approach towards the Plaintiff’s expert (“J”). The Arbitrator likewise asked questions of J (on Day 5), as to her approach in the valuation of the costs and the records of payment, whether she considered that reference should be made to the actual costs incurred and the payment records, whether it was necessary to seek such information and documents from the parties, and whether a quotation amounts to an actual payment record.

33.  In the usual course, the Defendant’s legal team had likewise attacked the evidence of the Plaintiff’s expert in their submissions, referring to notable inconsistencies, unsupported assumptions, and methodological weaknesses in her cross-examination, and other failings in her evidence and reports.

34.  The tribunal is the master of the proceedings before it. The Arbitrator was in the best position to decide whether to permit further rounds of expert reports, simply because H may have misunderstood the earlier directions or the basis on which the expert reports were to be prepared. There must be an end to the filing of evidence in any case, and in my judgment, it was open to the Arbitrator to simply reject H’s evidence, rather than to give further time to allow H to produce another report, and then for the parties and the Plaintiff’s expert to consider it. These matters are all within the case management and time management powers of the Arbitrator, and I cannot agree that he had exercised his powers and discretion improperly.

35.  As for the claim that the Arbitrator’s bias is evident from his decision to reject the Defendant’s application for a stay of the proceedings to hear interest and costs, this simply has no merit. Having decided on liability and quantum, it was perfectly understandable and totally in accordance with the principles of arbitration being final and speedy, for the Arbitrator not to defer his findings on interest and costs. The refusal can hardly be explained only by prejudice or bias.

36.  Even on a brief consideration of the Defendant’s evidence on all the instances on which it relies, I am not satisfied that there is any factual basis to conclude that in reaching his decision, the Arbitrator was actually prejudiced against either H or the Defendant. Nor is there any evidence which can lead a fair-minded and informed objective observer, having considered the relevant facts and circumstances in this case, to conclude from H’s cross-examination and all the circumstances that there was a “real possibility” that the Arbitrator was biased.

37.  The Defendant’s claim that it did not have the opportunity to present its case is premised on the Arbitrator’s bias against H and H being stifled from presenting his evidence as a result. As the Plaintiff contended, the Defendant’s legal team had the full opportunity, and did utilize the opportunity, to address the Arbitrator fully on all the issues in dispute including quantum.

38.  The claims of bias and inability to defend have not been made out and any claim that it would be contrary to public policy to enforce the Award for lack of due process likewise falls away. There is no serious or egregious breach of due process, and nothing shocking to the Court’s conscience.

Whether enforcement would be more difficult if it was delayed

39.  The Defendant claims that it is in a position to pay the amounts under the Award, with reference to the actual or anticipated proceeds of sale of the Project in Hong Kong. The Defendant highlighted the fact that the Plaintiff has not produced any evidence of a risk of dissipation of assets on the Defendant’s part.

40.  The Plaintiff referred to the existence of legal proceedings instituted against the Defendant which sheds doubt on the Defendant’s ability to pay and/or evidences the Defendant’s practice of employing delaying tactics to avoid payment of its debts. Of these, the Defendant claims that some of the proceedings had already been settled, and that these proceedings had been in place since 2021.

41.  The Defendant further objects to the Plaintiff’s reference to correspondence which had been exchanged between the parties and their lawyers on a without prejudice basis.

42.  Despite having been referred to the correspondence in the course of the hearing and arguments having been made as to whether a letter from the Defendant dated 18 June 2026 (“18/6 Letter”)  was “without prejudice”, I accept that on the authorities, in light of the without prejudice umbrella having been used in the correspondence which had been exchanged between the lawyers prior to the 18/6 Letter, and the apparent intention of the parties to enter into negotiations to settle the dispute, the 18/6 Letter should not be admitted in evidence. I will exclude the 18/6 Letter and the contents of the without prejudice correspondence from my consideration.

43.  In the case of G v N [2023] HKCFI 2437, this Court had pointed out that if there was delay in the application for security, resulting in only a short interim between the hearing of the security application and the substantive hearing of the application to set aside an enforcement order, the Court might not be prepared to make an order for security. This is in the context of a case where the merits of the setting aside application will have to be considered in further detail at the substantive hearing thereof.

44.  In this case, all the evidence in the Setting Aside Application has been filed and even on a summary and preliminary consideration of the evidence relied upon by the Defendant, the application is clearly without merit. It is not conducive to the principles set out in section 3 of the Arbitration Ordinance, and against the underlying objectives of the RHC, of dealing with a case expeditiously, promoting procedural economy and ensuring the fair distribution of the resources of the court, to delay an order for enforcement of the Award simply because there is an unmeritorious application to set aside. As aptly stated in Soleh, if an award is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security.

Disposition

45.  By the Enforcement Order, the Plaintiff was granted leave to enforce payment of the principal sum of the Award.

46.  The order which I make on the Security Summons is that the Defendant should pay into Court 70% of the principal sum under the Award by 4pm on 31 July 2026, as security for the further conduct of the Setting Aside Application. If such payment is not made, the Setting Aside Application shall be dismissed, with costs on indemnity basis, to be taxed if not agreed, and judgment be entered on the Award pursuant to the Enforcement Order.

Costs

47.  In the Skeleton Submissions filed by Counsel for the Defendant, submissions on costs were made on the basis of the without prejudice correspondence. The contention was that by 18 June 2026, the parties had already agreed settlement terms for the Defendant’s payment of the sums due under the Award, but that the Plaintiff or its lawyers had unreasonably pursued the Security Summons, in breach of the settlement agreement, such that the costs after 18 June 2026 should be borne by the Plaintiff.

48.  For the decision on costs, the without prejudice correspondence exchanged between the parties has been considered. In my judgment, the correspondence cannot show that there was agreement reached between the Plaintiff and the Defendant, and that they were ad idem on the essential terms of settlement, and the time for payment of ██████. It cannot be said that the hearing of the Security Summons could have been avoided after 18 June 2026, such that these costs should be borne by the Plaintiff as a result of its unreasonable behavior.

49.  On the contrary, I have found that there are no merits in the Defendant’s Setting Aside Application, and have ordered security. There is no special reason why the costs of either the Security Summons or the Setting Aside Application should not be paid by the losing party, on indemnity basis as is usual in cases on the Arbitration List.

50.  The costs of the Security Summons are to be paid to the Plaintiff, on indemnity basis to be taxed if not agreed.