WINGTECH GROUP (HONG KONG) LTD v. TAT CHUN PRINTED CIRCUIT BOARD COMPANY LTD

HCCT 33/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 33 OF 2013

____________

____________

________________________

D E C I S I O N

________________________

The Application

1.  On 17 September 2013, Madam Justice Mimmie Chan made an order (“the Enforcement Order”) granting leave to the applicant to enforce an arbitral award made by a tribunal of three arbitrators of the Jiaxing Arbitration Commission, No 024 of 2012, dated 6 June 2013 (“the Award”) against the respondent, pursuant to section 92 of the Arbitration Ordinance, Cap 609 (“the Ordinance”) and Order 73, rule 10(1)(d) of the Rules of the High Court.

2.  On 7 October 2013, the respondent applied by summons (“the Setting Aside Summons”) to set aside the Enforcement Order or, in the alternative, for a permanent stay of execution of the Award.

3.  On 8 September 2014, I heard the Setting Aside Summons.

4.  On 17 September 2014, I handed down my reasoned judgment (“the Judgment”) and made an order (“the Order”) dismissing the Setting Aside Summons with costs to the applicant.

5.  On 3 October 2014, the respondent took out a summons (“the Summons”) seeking leave to appeal against the Order.  This is my decision on the Summons.

The requirement for leave to appeal

6.  By section 108 of the Ordinance, a decision, determination, direction or award of the court under that Ordinance is to be treated as a judgment of the court for the purposes of section 14 (Appeals in civil matters) of the High Court Ordinance (Cap 4).

7.  Section 14(3)(ea)(v) of the High Court Ordinance states as follows:

“No appeal shall lie –

(ea) except as provided by the Arbitration Ordinance, from any judgment or order of the Court of First Instance –

(v) under section 84, 87 or 92 of that Ordinance to grant or refuse leave to enforce an arbitral award.”

8.  Section 92(1)(b) of the Ordinance provides that a Mainland award is, subject to Division 3 of that Ordinance, enforceable in Hong Kong in the same manner as an award to which section 84 applies, and that section applies to a Mainland award accordingly as if a reference in that section to an award were a Mainland award.

9.  Section 84(1) of the Ordinance provides that, subject to section 26(2) thereof (which has no relevance to the present case), an award, whether made in or outside Hong Kong, in arbitral proceedings by an arbitral tribunal is enforceable in the same manner as a judgment of the court that has the same effect, but only with the leave of the court.

10.  Section 84(3) of the Ordinance provides that the leave of the court is required for any appeal from a decision of the court to grant or refuse leave to enforce an award under subsection (1).

11.  Lastly, the expression “Court” is defined in section 2(1) of the Ordinance to mean the Court of First Instance of the High Court.

12.  It follows from the above provisions that the leave of the Court of First Instance of the High Court is required for any appeal from the Order.

Principles for granting leave to appeal

13.  Mr Norman Nip (for the respondent) submits that, for the purpose of the present application, I should apply the general principles governing the granting of leave to appeal from an interlocutory judgment or decision of the Court of First Instance to the Court of Appeal under section 14AA(4) of the High Court Ordinance, namely, that leave to appeal shall not be granted unless the court hearing the application for leave is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal shall be heard.  Mr Nip further submits that, as explained by the Court of Appeal in SMSE v KL [2009] 4 HKLRD 127, a “reasonable” prospect of success for this purpose means a prospect which is more than “fanciful” but without having to be “probable”.

14.  In view of section 14(3)(ea)(v) of the High Court Ordinance, it seems to me clear that section 14AA(4) of the High Court Ordinance does not apply to an application for leave to appeal from a decision of the Court of First Instance to grant or refuse leave to enforce a Mainland award under section 84(3) of the Ordinance.

15.  On the other hand, Mr Au Lut Chi (for the applicant) submits that the court should apply the approach set out by the Court of Final Appeal in Swire Properties Ltd & Others v Secretary for Justice (2003) 6 HKCFRA 236 governing leave to appeal from a domestic arbitral award to the High Court under the old section 23 of the Arbitration Ordinance (Cap 341).  However, that decision dealt with the question of how the court ought to exercise its discretion when deciding whether to grant leave to appeal against a domestic arbitral award on a question of law, and a distinction was drawn between a question of law of general public importance or the construction of a standard clause on the one hand, and the construction of a “one‑off” clause on the other.  Such distinction plainly can have no relevance to the question of whether the court ought to refuse to enforce a Mainland award on one or more of the specified grounds under section 95 of the Ordinance.

16.  In my view, section 84(3) of the Ordinance confers on the court a general discretion whether to grant leave to appeal against a decision of the court to grant or refuse leave to enforce a Mainland award.  In the exercise of that discretion, the court will no doubt take into account the prospect of success of the proposed appeal, but is also entitled to take into account other relevant considerations, including the general legislative policy that a Mainland award should be readily enforceable in Hong Kong.

Discussion

17.  The basic facts of this case and my reasons for refusing to set aside the Enforcement Order are set out in the Judgment and I shall not repeat them here.

18.  As I understand from Mr Nip’s arguments today, two main grounds are advanced to contend that the Judgment is wrong.

19.  First, it is said that while the Master Agreement may govern purchase orders which had been entered into prior to the making of the Master Agreement but which had not yet been performed, it should not govern fully executed purchase orders entered into prior to the making of the Master Agreement because it would be “illogical and unreasonable” for the Master Agreement to “add new terms” to those purchase orders.

20.  This point was in fact dealt with at paragraph 21 of the Judgment, where it was stated that:

“…. the question remains whether the applicant and respondent intended that the Master Agreement (or such provisions thereof as may be applicable, including in particular the arbitration agreement contained in Clause 18.2) would govern not only purchase orders entered into on or after the date of the Master Agreement, but also purchase orders entered into prior to that date. ….” (emphasis added).

There seems to me no reason why the parties could not have agreed that only those provisions in the Master Agreement which could still have application (such as Clause 18.2 thereof) would apply to the 5 Purchase Orders in question, and I was of the view that this was what the parties had agreed.  This having been said, I consider that this point is open to reasonable debate, and the respondent’s argument has a reasonable prospect of success.

21.  Mr Nip also argues there was no “consideration” for the respondent’s agreement to “vary” the 5 Purchase Orders so that they would be governed by the Master Agreement. It seems to me, however, that the parties’ mutual agreement to subject the 5 Purchase Orders to the Master Agreement, including the agreement to submit any disputes arising out of the 5 Purchase Orders to arbitration, would be sufficient consideration to make such agreement binding on each of them.

22.  Second, Mr Nip argues that evidence of the parties’ intention during the negotiation process of the Master Agreement is not admissible for the purpose of construction of the Master Agreement, but such evidence was taken into account at paragraph 22(1) of the Judgment.  It is of course trite that the parties’ subjective intention during the course of negotiation of a written agreement is not admissible and cannot be relied upon for the purpose of construing the written agreement subsequently entered into.  However, paragraph 22(1) of the Judgment was addressing the common or objective aim or purpose of the parties in relation to the scope of the master agreement then under negotiation, which I considered to be relevant to the construction exercise.

23.  Paragraph 22(1) of the Judgment states:

“At the time of the making of the 5 Purchase Orders, the parties were in the course of negotiating a master agreement which was intended to have general application ….”

The reference to “in the course of negotiating a master agreement” was a reference to the time of the making of the 5 Purchase Orders.  It is incorrect to read this paragraph as suggesting that account was taken of the subjective intention of the parties during the negotiation process in the construction of the Master Agreement.

24.  There are other minor points raised by Mr Nip which I do not consider have merits.

25.  I bear in mind the fact that the respondent’s argument that the arbitration agreement contained in the Master Agreement does not govern the current disputes between the parties has been rejected on three previous occasions, but I also take into account the substantial amount of the Award.

26.  Balancing all relevant considerations, I am just persuaded that I ought to grant leave to appeal in the present case.

Disposition

27.  I make an order in terms of the respondent’s summons.