XCHRX WAH SIN ELECTRONICS INDUSTRIAL CO. LTD. FUJIAN v. TAN LOK

1993 M.P. No. 2843

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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REASONS FOR DECISION

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1. On the 15th September 1993, I made on the ex parte application of the Plaintiff an order giving the Plaintiff leave to enforce an arbitration award dated the 16th November 1992 and made by the China International Economic and Trade Arbitration Commission (CIETAC). The order was amended on the 17th January 1994 because in its original form, it failed to indicate that leave was granted to the Defendant to apply within 14 days to set it aside. The Defendant, having obtained leave to do so out of time, took out a summons seeking leave to have the amended order set aside.

2. After the matter had several times come before the court and been adjourned for various reasons, I dismissed the application to set aside on the 14th March 1995, saying that I would give reasons later, which I now do.

3. It is common ground that the Plaintiff is a Sino-Foreign joint venture enterprise incorporated under the laws of the People's Republic of China. The Defendant is Mr. Tan Lok trading as the Wahton Company.

4. The history of this matter begins on the 8th September 1988 when a joint venture agreement was signed with the object of forming a company called Wah Sin Electronics Co. Ltd. Fujian. The parties to that agreement were :

1. Mawei District Industrial Supply Company,

2. Wahton Company (i.e. the Defendant in the present proceedings), and

3. Fujian Province Electronics Import and Export Corporation.

The Wah Sin Electronics Co. Ltd. Fujian was duly formed and is the Plaintiff in the present proceedings.

5. Clause 7 of the agreement of the 8th September 1988 provides that the capital contributed by the Defendant to the enterprise should consist of an investment in the form of production equipment, means of communication and transportation and relevant items for office use.

6. There are appendices to the agreement and item 20 of one of the appendices relates to 10 air-conditioners as part of the investment to be provided by the Defendant. There is no specification of the air-conditioners but there is a total value specified of US$38,540.00.

7. Pursuant to that joint venture agreement, the Plaintiff as buyer and the Defendant as seller entered into a contract No. 89EMFCR/7414100CK, dated the 18th September 1989. Under that agreement, the Defendant was to supply equipment and technology required for the production of ceramic capacitors and chips, which production was contemplated in the original joint venture agreement.

8. There were five appendices to the agreement describing among other things the equipment to be supplied. There was no mention of air-conditioners.

9. On the 12th April 1989, the Defendant entered into a contract with the Fujian Province Electronics Import & Export Corporation (one of the parties to the original joint venture agreement). That was contract No. 89EMFCR/4714100CK. It concerned the purchase of equipment for the sum of US$722,811.00. The Plaintiff was not a party to that contract. It had not even been incorporated in April 1989.

10. Then there was an agreement dated the 18th September 1989 which lists the quantities and amount of investment by the Defendant. In the list, item 13 describes 10 Mitsubishi air-conditioners MWH-13AS, origin Japan, amount US$4,900.40. The Plaintiff says that that document relates, as its wording indicates, to the Defendant's obligation to supply certain equipment by way of fulfilling his obligation as part of the joint venture to inject capital. The Plaintiff says it was never to pay for the air-conditioners.

11. There was a document dated the 14th December 1989, apparently signed by the Defendant, expressed to be part of contract 89EMFCR/4714100CK. It appears to have been issued by Fujian Electronics Import & Export Corp., one of the parties to the joint venture agreement (to which the Plaintiff was not a party). It was addressed to China National Electronics Import & Export Corp. and to the Defendant. Among other things, it says :

"2. The total value of the contract: USD400,684.90 (except investment by party B)" (i.e. the Defendant).

"USD299,988.00, the investment by the joint venture enterprise will be handled separately."

12. The figure of USD299,988.00 referring to the amount of the Defendant's investment to be made in the joint venture appears in both the document of the 18th September 1989 and the 14th December 1989.

13. The Plaintiff's case is that the Defendant was obliged under the original joint venture agreement to supply as his own investment in the venture, certain items of equipment which he would not be paid for. The items included 10 unspecified air-conditioners in the original agreement, but in the later supplemental agreement they were specified as Mitsubishi air-conditioners. On the other hand, the Defendant had an obligation to the Plaintiff to supply certain equipment for which he would be paid. That obligation arose out of contract No. 89EMFCR/7414100, but the equipment to be supplied under that contract did not include air-conditioners. Letters of Credit were duly opened for the purposes of contract 89EMFCR/7414100. The Defendant then sent 10 Goldstar air-conditioners to China and managed to secure payment for them under the Letters of Credit which had been issued for the purposes of contract 89EMFCR/7414100.

14. A dispute was thus created between the Plaintiff and the Defendant as to whether the Defendant had been entitled to draw money against the Letters of Credit in respect of a transaction not contemplated by the agreement. There was an arbitration clause in contract No. 89EMFCR/7414100CK. The Plaintiff therefore went to arbitration in the People's Republic of China and obtained an award in its favour from CIETAC. Both parties were represented in the arbitration proceedings. Submissions were made by both sides and there was a hearing at which both were represented.

15. There has been no attempt on the part of the Defendant to challenge the award in the Chinese legal system, but he now submits that the order should not be enforced in Hong Kong on various grounds, with which I shall deal in turn.

16. The first ground was that the Plaintiff allegedly failed to comply with section 43 of the Arbitration Ordinance, Cap. 341 (the Ordinance) by failing to disclose to this court at the ex parte application stage the full contents of the agreement between the parties.

17. Under the terms of section 43 of the Ordinance, the party seeking to enforce a convention award must produce :

(a) the duly authenticated original award or a duly certified copy of it;

(b) the original arbitration agreement or a duly certified copy of it; and

(c) where the award or agreement is in a foreign language, a translation of it certified by an official or sworn translator or by a diplomatic or consular agent.

18. The Plaintiff did comply with section 43. It produced a duly certified copy of the contract No. 89EMFCR/7414100CK together with a certified translation and a certified copy of the award together with a certified translation. The arbitration agreement is to be found at clauses 13.1, 13.2 and 13.3 of the contract. The Defendant's complaint is that its case before the Arbitral Tribunal was that the Plaintiff had gone to arbitration on the wrong contract, submitting that the arbitration ought to be about the supplemental agreement listing the air-conditioners. The Tribunal, however, having listened to all the submissions and considered the evidence, came to the conclusion that the dispute did arise out of the contract relied upon by the Plaintiff and that the document which the Defendant sought to introduce was connected with another contract to which the Plaintiff was not a party and in relation to which the Tribunal had no jurisdiction.

19. In this court, the Defendant by its counsel has sought to retry the issues which were dealt with by the Arbitral Tribunal, but I am quite satisfied that the Plaintiff was under no obligation to produce at the ex parte stage a document which the Arbitral Tribunal had found to be irrelevant. In relation to the first ground, the Defendant submits in the alternative that the Plaintiff has failed to make full and frank disclosure of a material fact, namely the Defendant's argument that the arbitration was all about the wrong contract. There is no merit in that submission. It is manifest on the face of the award that the issue was raised by the Defendant in the arbitration and disposed of.

20. The Defendant's second ground is that the award contains an irregularity, namely a statement that the Tribunal held a hearing on the 20th June 1992.

21. In an affirmation made on the 13th May 1994, the Defendant raised, so far as I know for the first time, the question whether there had been a hearing on the 20th June as stated in the preliminary recitals in the award. His case is that if there was a hearing on the 20th June, he was not given notice of it and was not present. He was thus unable to present his case and that is a ground for refusing to enforce the award. That ground appears at section 44(2)(c) of the Ordinance which is in the following terms :

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

22. The matter having been brought to its attention, the Plaintiff then made enquiry of CIETAC and as a result, the Arbitral Tribunal produced a correction stating that there had been only one hearing, on the 27th April and that there had been no hearing on the 20th June 1992. Mr. C.M. Wong, counsel for the Defendant, has been at pains to take me through a number of cases stretching back to the 15th century on the question whether at common law an arbitrator can amend an award. He did not refer to the modern statutory power to correct clerical errors, but in any event, it is clearly provided in section 44(2) that "enforcement of a convention award may be refused if the person against whom it is invoked proves" the various grounds set out therein. The burden is upon the Defendant to show that CIETAC had no power under the law of the People's Republic of China and its own rules to correct an immaterial clerical error which this clearly was. The Defendant has failed to discharge that burden.

23. Apart from the correction published by the Arbitral Tribunal, there is affidavit evidence before me to the effect that there was only one hearing and that both parties were before the Tribunal at the hearing and argued their respective cases.

24. Though Mr. Wong said several times that there was an error on the face of the award, that is not the case. The Defendant has failed to show that he was unable to present his case and it is clear from the affidavit evidence and from the correction published by the Arbitral Tribunal that the Tribunal has done no more than correct an immaterial clerical error.

25. In connection with the second ground, Mr. Wong submitted that there has been a breach of the rules of natural justice in that the Arbitral Tribunal purported to rely on a hearing in June when the Defendant was not present. In those circumstances, the Defendant says that it can rely on section 44(3) which provides that enforcement may be refused "if it would be contrary to public policy to enforce the award". It is fanciful to suggest that there is any public policy aspect in the fact of the present case. The argument on ground of public policy is so far fetched that it does not merit further consideration, but I would respectfully repeat what was said by Kaplan J. in Qinhuangdao Tongda Enterprise Development Co. & another v. Million Basic Co. Ltd. [1993] 1 HKLR 173 at page 178 as follows :

"In the case of Werner A. Bock K.G. v. The N's Company [1978] HKLR 281, it was said that the whole tenor of this part of the Arbitration Ordinance is to discourage unmeritorious technical points and to uphold convention awards except where complaints of substance can be made good. I very much agree."

26. There is no merit in the second ground.

27. The third ground is that the Arbitration Tribunal dealt with a matter not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration - section 44(2)(d) of the Ordinance.

28. Here again the burden of proof is on the Defendant.

29. Mr. Wong submitted that the Arbitral Tribunal failed to appreciate the nature of the dispute and wrongfully exercised its jurisdiction by failing to pinpoint the correct contract upon which the difference arose.

30. As Mr. M.T. Yeung for the Plaintiff succinctly put it in his skeleton argument, the dispute the subject of the reference is "whether the 10 air-conditioners were covered by contract No. 89EMFCR/7414100CK; if not, the Defendant is not entitled to draw the sum of US$32,759.00 from the Plaintiff's Letters of Credit issued under contract No. 89EMFCR/7414100CK". Mr. Wong has attempted to persuade me by reference to the substantial amount of documentation relating to the dispute and the arbitration that the Arbitral Tribunal should have accepted his client's submissions.

31. As Kaplan J. said in the case cited above, at page 269 :

"The New York Convention is clear that it is not for the enforcing court to rehear the case on the merits."

32. It is clear from the award that the Defendant's case was fully considered in the arbitration proceedings and the Arbitral Tribunal found against the Defendant. The Defendant's present application is not an appeal on the merits against the arbitral award and will not be treated as such by this court.

33. The Defendant has failed to make out a case against enforcement of this convention award. For these reasons, I dismissed the Defendant's application. In doing so, I ordered that the Plaintiff's costs of and occasioned by the application be taxed, if not agreed and paid by the Defendant.

(D.J. Leonard)

Judge of the High Court