SHANDONG HONGRI ACRON CHEMICAL JOINT STOCK CO LTD v. PETROCHINA INTERNATIONAL (HONG KONG) CORPORATION LTD

HCCT 45/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 45 OF 2009

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R U L I N G

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1.  On 25 January 2011, I made a decision in these proceedings in respect of the enforcement of an arbitral award between these parties.

2.  On 25 July 2011, the Court of Appeal allowed an appeal against my decision and ordered that if the outstanding costs in respect of the proceedings before me could not be agreed I should fix those costs, in accordance with the Court’s judgment.

3.  In my original decision I had imposed conditions upon the enforcement of the award.  The effect of the appeal was to set aside those conditions, and allow the enforcement of the award on an unconditional basis.

4.  When the proceedings first came before me in December 2009, I expressed concern as to the effect of the arbitral award, if it were to be enforced as the Applicant sought.  The Respondent, encouraged by my concern, resisted the order for enforcement.

5.  The effect of the decision of the Court of Appeal is to remind me that an application to enforce an arbitral award the court adopts a purely mechanistic approach.  The Applicant’s application was to ask for nothing more than a mechanistic conversion of paragraphs 2-6 of the award into a court judgment.  As the judgment of the Court of Appeal shows, the Applicant was entitled to the order and I should not have been persuaded, out of a sense of fairness, to resist that entitlement.

6.  It has been well established for some time that the mechanistic approach is the correct approach: see Xiamen Xinjingdi Group Ltd v Eton Properties Ltd & Anor [2008] 4 HKLRD 972.  The Respondent should have resisted my efforts to depart from the mechanistic approach.  As the judgment of the Court of Appeal shows, Ms Cheng SC was quite right when she argued before me that my concerns were more properly addressed at the enforcement or execution stage.

7.  It is well established that a party who is unsuccessful in an application to appeal against or set aside an arbitration award or who unsuccessfully resists an order for enforcement must pay costs on an indemnity basis in the absence of special circumstances: see A v R [2010] 3 HKC 67.

8.  Mr Khaw seeks to deal with the matter on a summons by summons basis, looking individually at each summons to determine where the costs should lie.  Unpalatable though it may now seem to the Respondent, its proper course at the very start was to ensure that I did not depart from the proper procedure, and to take appropriate steps, in the light of the views I had taken of the matter, at the enforcement or execution stage.  By not doing so the proceedings were unnecessarily extended.

9.  There are no special circumstances in this case. 

10.  There will be an order that the Respondent must pay the Applicant’s costs of the application, including but not limited to the costs of and occasioned by the following Summonses, on an indemnity basis, save in respect of any contrary costs orders expressly made:

(1) the Respondent’s Setting Aside Summons dated 4 December 2009;

(2) the Applicant’s Payment Out Summons dated 8 January 2010;

(3) the Applicant’s Preliminary Issues Summons dated 16 March 2010;

(4) the Respondent’s Amendment Summons dated 14 May 2010;

(5) the Respondent’s Amended Setting Aside Summons dated 18 May 2010;

(6) the Applicant’s Lifting of Stay Summons dated 7 December 2010;

(7) the Respondent’s Trial Summons dated 18 January 2011; and

(8) the Costs Summons.

11.  This is a costs matter which would normally be dealt with by the junior counsel.  But in view of the history of the matter, I am satisfied that there should be a certificate for two counsel.