HEBEI IMPORT & EXPORT CORPORATION v. POLYTEK ENGINEERING CO LTD

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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JUDGMENT

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Background

1. On 15 May 1997, I handing down a judgment in which I dismissed an application by the defendant to set aside an order giving leave to enforce an arbitration award in Hong Kong. The defendant has filed a notice of appeal from my order. The defendant has now applied to me for an order that the execution of the judgment enforcing the award to be stayed pending the outcome of the appeal.

The Merits of the Appeal

2. In my view, it cannot be said that the appeal is without merit.

3. It appears from the notice of the appeal that the defendant's case is going to be argued on a different basis from that on which it was argued before me. The complaint before me was that the experts appointed by the arbitral tribunal had attended an inspection of the machinery involved in the absence of the defendant. The relevant ground of appeal now seeks to base the defendant's case on the fact that the Chief Arbitrator and the experts attended the inspection. At first sight, this appears to me to have more merit than the case argued before me.

4. The award "adjudicated" that the machinery concerned should be returned to the defendant at the cost of the defendant, and that the defendant should refund the price. It was argued before me that these were reciprocal obligations, and I should not enforce one when I was unable to enforce the other. I agreed that the obligations were reciprocal. I held, however, that this did not prevent the award in favour of the plaintiff being converted to a local judgment, but said that, if the plaintiff sought to recover by execution without fulfilling its reciprocal obligation, our courts would be able to assist. In my view, the argument presented to me is not without merit.

Grounds for a Stay

5. Whether or not a stay should be granted is a matter of discretion exercised by balancing the rights of the plaintiff not to be deprived of the fruits of the litigation against the right of the defendant not to be deprived of the fruits of a successful appeal, taking into account any other special relevant factors.

6. I am satisfied that the defendant is good for the money. The plaintiff is not within the jurisdiction of this court. The defendant might be in difficulties in recovering the money if an appeal were successful. To meet this point, the plaintiff says that it is willing that the money be held in a neutral corner until the appeal is decided. Against this, the defendant is willing to pay the sum of $5 million to be held pending the appeal. This sum is calculated by taking the approximate amount of the award other than the price. The defendant adopts this attitude because, it says, the machinery is not in the state in which it should be if it were returned now to satisfy the plaintiff's reciprocal obligation to pay the price. There is a dispute about this, but I am satisfied there is sufficient evidence of this to put the matter in doubt. My judgment envisaged that the plaintiff should not recover under the award until it had met its reciprocal obligation. There is some doubt that the plaintiff is able to meet this obligation as contemplated by the award. I believe that there are special reasons here to justify a stay.

7. In these circumstances, I do not think it is right that the defendant should be obliged to pay over the equivalent of the price of the machinery pending the appeal. I think the justice of the matter will be met by ordering a stay of execution pending the appeal on condition that the defendant pays $5 million into an interest bearing account held jointly by the solicitors for the plaintiff and for the defendant, and I so order.

The Costs

8. The matter of costs was not argued before me, but on the face of it, there seems no reason why costs should not follow the event. The defendant has been successful in the face of opposition. I make an order nisi that the plaintiff pay the defendant's costs.