MAEDA KENSETSU KOGYO KABUSHIKI KAISHA also known as MAEDA CORPORATION AND ANOTHER v. BAUER HONG KONG LTD

HCCT 4/2018

[2019] HKCFI 1427

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 4 OF 2018

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D E C I S I O N

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Background

1.  This is an application made by the Defendant for leave to appeal against my decision of 9 April 2019 (“Judgment”), whereby I allowed the Plaintiffs’ appeal against the Second Interim Award of the Arbitrator in the Arbitration between the parties.  The facts are more particularly set out in the Judgment, the nomenclature of which is adopted.

2.  Two issues are raised.  The first is whether the intended appeal is out of time, such that leave to appeal out of time is required.  The second is whether section 14AA of the High Court Ordinance (which governs appeals against interlocutory judgments and orders of the Court) applies, such that the Defendant has to show that the intended appeal has reasonable prospects of success, or whether the only conditions to be satisfied for obtaining leave to appeal are those set out in section 5 (9) of the Schedule to the Arbitration Ordinance.

Is the intended appeal out of time?

3.  I accept the Defendant’s submissions on this issue.

4.  Section 5 (5) of the Schedule states, for an appeal against an arbitral award on question of law:

“On hearing an appeal under this section, the Court may by order - (a) confirm the award; (b) vary the award; (c) remit the award to the arbitral tribunal, in whole or in part, for reconsideration in the light of the Court’s decision; or (d) set aside the award, in whole or in part.”

5.  Section 5 (8) of the Schedule provides for further appeal, and leave to appeal, stating:

“The leave of the Court or the Court of Appeal is required for any further appeal from an order of the Court under subsection (5).” (Emphasis added)

6.  By the Judgment and as reflected in the Amended Order, this Court only allowed the Plaintiffs’ appeal against the Award on the first question of law for which leave to appeal was originally granted (on 30 August 2018).  The parties had not addressed the Court at the hearing on 8 November 2018 as to the consequences of the appeal being allowed, whether pursuant to section 5 (5) of the Schedule, the Court should confirm the Award, vary the same, remit the Award to the tribunal for reconsideration in the light of the Court’s decision, or set aside the Award, in whole or in part.  It was on such basis that the Amended Order was made, simply to reflect that the appeal was allowed.

7.  It was only on 24 May 2019, after considering the further written submissions made by the parties, that the Court made the order remitting the Award to the tribunal - as opposed to setting aside the Award or varying it, which were options available under section 5 (5) of the Schedule.

8.  The appeal, for which leave is required under section 5 (8) of the Schedule, is an appeal “from an order of the Court under subsection (5)”.  Properly made, the appeal is against the order for setting aside, variation, or remission to the tribunal.

9.  The intended appeal, for which leave is sought by the Defendant, is against the order made under section 5 (5) for remission, consequent to the appeal being allowed on 9 April 2019.  The order for remission was only made on 24 May 2019.  Accordingly, the application for leave to appeal, which was made on 30 April 2019, was not out of time.

Conditions for leave

10.  Section 5 (8) of the Schedule provides for leave being required for further appeal against the order made under section 5 (5), with the conditions for leave to appeal set out in section 5 (9):

“Leave to further appeal must not be granted unless - (a) the question is one of the general importance; or (b) the question is one which, for some other special reason, should be considered by the Court of Appeal.” (Emphasis added)

11.  The Plaintiffs contend that in addition to the conditions for the grant of leave set out in section 5 (9), the Plaintiff must also satisfy the conditions set out in section 14AA (1) (4) of the High Court Ordinance (“Section 14AA”), namely, the appeal should have a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard.

12.  I accept the submissions of the Defendant, that section 14AA is not applicable to the appeal presently intended.  Section 14AA only governs interlocutory judgments or orders of the Court.  The order of remission of the Award pursuant to the appeal on the question of law being allowed under the Judgment is a final judgment or order in these proceedings.  It finally determines the whole action, or the entire cause in this action.

13.  Section 5 (9) of the Schedule therefore governs the present application for leave to appeal.  The question should be one of general importance, or one which for some other special reason should be considered by the Court of Appeal. In this context, however, the decision of the Court of Appeal in Maeda Kensetsu Kogyo Kabushiki Kaisha (also known as Maeda Corporation) and anr v Bauer Hong Kong Limited HCMP 1342/2017, 4 September 2017 is relevant. The Court of Appeal decision was on section 6 (6) of the Schedule, and the criteria for leave to be granted against a decision of the Court of First Instance granting leave to appeal against an award on a question of law, but the language of section 5 (9) and section 6 (6) are identical.  The Court of Appeal held that section 14AA applies to an application for leave to appeal against a decision made under section 6 (6) to grant or refuse leave to appeal (as distinct from a decision on the appeal itself), but explained that although section 6 (6) provides for some necessary conditions which must be fulfilled before leave could be granted, section 6 (6) does not provide that these are the only conditions that need to be fulfilled. 

14.  Bearing in mind the aims and objectives of the Ordinance as set out in section 3 of the Ordinance itself, the presumption of finality of an arbitral award, and the overall scheme of the Ordinance and the Schedule, it can hardly be disputed that section 5 (8) and (9) of the Schedule are intended to be a filtering process for any further appeal.  Section 5 (9) sets out the essential conditions which must be satisfied before leave to appeal can be granted.  However, the filtering process makes no sense if the Court, in considering whether leave to appeal should be granted, does not consider the grounds of the intended appeal and be satisfied that the intended appeal is at least arguable, and have some reasonable prospects of success.  The threshold for “reasonable prospects of success” in the context of section 14 AA are not high, conveying the notion that the prospects of succeeding in the appeal must be reasonable, and therefore more than not fanciful, without having to be probable (SMSE v KL [2009] 4 HKLRD 125 and Ho Yuen Ki Winnie v Ho Hung Sun Stanley HCMP 1009/2009).  In the absence of any authorities cited by the parties, I consider it appropriate to adopt the “reasonable prospects of success” threshold for the filtering process in the grant of leave to further appeal under section 5 (8) of the Schedule.  I come to such view, having balanced the interests of finality of an arbitral award and the objectives of the Ordinance, against the fact that the parties had chosen to opt for the provisions of the Schedule (and the availability of an appeal to the courts on questions of law) to apply to their dispute.

15.  In granting leave to appeal on the questions of law on 30 August 2018, I was already satisfied that the question of law on the construction of Clause 21.1 and 21.2 of the Sub-Contract (on notice compliance) are of general importance.  The Defendant contends that the Court’s construction of the notice of claim provisions was wrong in law, for having failed to give consideration to the findings of fact made by the Arbitrator in the Award.  Since the threshold for “reasonable prospects of success” is not high, I consider in the light of the submissions and the draft Grounds of Appeal that this has been satisfied, and accordingly grant leave to the Defendant to appeal against the Order of remission, made as a result of the Court’s findings on the question of law decided in the Judgment.

16.  The costs of the application for leave to appeal will be in the cause of the appeal.