SUN TIAN GANG v. HONG KONG & CHINA GAS (JILIN) LTD

HCCT 64/2023
HCCT 84/2023
(dealt with together)

[2024] HKCFI 1912

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 64 OF 2023

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BETWEEN

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AND

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 84 OF 2023

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BETWEEN

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D E C I S I O N

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1.  On 22 April 2024, this Court dismissed Sun’s application to set aside an arbitral award and for leave to appeal against the award on questions of law, and granted leave to Gas to enforce the award as a judgment of the Court. The Reasons for Decision were handed down on 13 June 2024. The nomenclature used in the Reasons is adopted.

2.  Sun’s application to set aside the Award was not pursued at the hearing, which only dealt with the question of whether the Schedule to the Ordinance applies to the arbitration agreement under which the Arbitration was commenced, for an appeal to be brought under section 5 of the Ordinance. As reflected at paragraph 36 of the Reasons, leave to enforce the Award was granted, because the Court considered that the arbitration agreement between the parties did not provide that the Arbitration is a domestic arbitration, for sections 5 and 6 of the Schedule to apply, and so there is no permissible appeal against the Award.

3.  Sun now seeks to appeal against this Court’s decision, on the basis that he is entitled as of right to appeal against the preliminary and jurisdictional question of whether the Schedule applies. On Sun’s case, there is no decision on the merits of the questions of law raised in the Award, and no decision on whether leave should be granted to Sun under section 6 of the Schedule to appeal against the questions of law raised. Counsel for Sun argued that the Decision is not one which comes within the ambit of section 6(5), to require leave to appeal.

4.  If leave is required, it was contended for Sun that there are reasonable prospects of success in the intended appeal.

5.  On behalf of Gas, Counsel relies on section 6(5) of the Ordinance which expressly provides that the leave of the Court or the Court of Appeal is required “for any appeal from a decision of the Court to grant or refuse leave to appeal from an award”.

6.  Gas also relies on section 14(3) of the High Court Ordinance (“HCO”), which states that, except as provided by the Ordinance, no appeal shall lie from any judgment or order of the Court “under section 5 or section 6 to (the Schedule) on a question of law arising out of an arbitral award” (section 14(3)(ea)(viii)).

7.  Emphasizing that the requirement of leave is a device deliberately included in the Ordinance to restrict appeals and to promote the efficacy and speedy resolution of disputes by arbitration in accordance with the parties’ choice, and that the restriction of the right to appeal has been held by the courts not to violate any party’s right of access to the courts (citing Swire Properties v SJ (2003) 6 HKCFAR 236, and SJ v Cheung Kai Yin [2016] 4 HKLRD 367), Counsel for Gas argued that the Decision is clearly one which falls within section 14(3)(ea)(viii) of HCO, as a judgment or order made under section 6 of the Schedule, and within section 6(5) of the Ordinance, as a decision to refuse leave to appeal against the Award. By the express provisions of the HCO and section 6(5) of the Ordinance, leave is required for such appeal, and there are no reasonable prospects of success in the intended appeal.

8.  On behalf of Sun, it was argued that the Decision is a preliminary decision on whether the Court has jurisdiction to grant leave to appeal, and such decision on jurisdiction was a final determination in a summary way of Sun’s substantive rights. Not being an interlocutory appeal, Counsel argued that no leave to appeal is required.

9.  Guidance as to whether a judgment or order is final, or interlocutory, can be found in Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222, where the Court of Final Appeal held that the “application test” or approach applies. In that case, a defendant sued as guarantor in the action, in respect of sums claimed to be due to the plaintiff under a franchise agreement, applied for a determination under Order 14A RHC on the question of his liability under the guarantee, as to whether the guarantee which was executed for an earlier agreement between the parties had lapsed. The Deputy Judge held that the guarantor was still bound by the guarantee. The guarantor’s appeal was allowed by the Court of Appeal which treated the appeal as an interlocutory appeal, but on appeal to the Court of Final Appeal, it was held that the judgment in question was final. Chan PJ explained the question in the following manner (at paragraphs 34 to 37 of his judgment):

“34. As the plaintiff’s claim on the Franchise Agreement has been abandoned, the issues between the plaintiff and the 2^nd defendant are these: whether the Personal Guarantee executed by the 2^nd defendant in 1991 was still effective and binding at the time of the plaintiff’s claim; and if it was, what was the extent of the 2^nd defendant’s liability as provided under the Personal Guarantee.

35. If the Personal Guarantee was at the material time no longer effective and binding on the 2^nd defendant, he is not liable to the plaintiff and can drop out of the proceedings altogether. But if he remained liable as a guarantor, he would only be interested to know the extent to which he is liable under the Personal Guarantee and whether and if so, how much the 1^st defendant is liable to the plaintiff under the Franchise Agreement. The latter issue would be a matter between the plaintiff and the 1^st defendant.

36. Hence, as between the plaintiff and the 2^nd defendant, the issue whether the Personal Guarantee is still effective and binding on the 2^nd defendant is clearly a crucial and substantial issue between them. A determination on this issue in favour of the 2^nd defendant would be dispositive of the plaintiff’s claim against the 2^nd defendant. On the other hand, if it is decided in favour of the plaintiff, it would not dispose of the whole action against the 2^nd defendant. However, this would finally dispose of a crucial and substantial issue between them.

37. That being the case, the Deputy Judge’s judgment given on 19 September 2001 should be regarded as a final judgment.”

10.  Adopting such approach, the Decision that sections 5 and 6 of the Schedule do not apply to Sun’s application determined the whole action commenced by Sun for leave to appeal against the Award (since he did not pursue the setting aside of the Award). Even if it does not determine the whole action, the Decision determined the crucial issue which goes to the root of the case, or an issue which is a dominant feature of the case, which is whether section 6 of the Schedule applies, and whether Sun has the right to appeal against the Award on questions of law.

11.  However, irrespective of the final nature of the Decision, section 14(3)(ea)(viii) of HCO expressly provides that no appeal shall lie from “a judgment or order under section 5 or 6 of the Schedule on a question of law arising out of an award”.

12.  Although the Decision was a judgment or order, made under section 6 of the Schedule, that leave to appeal may not be granted as the remedy provided under section 5 did not apply to the arbitration agreement between Sun and Gas, Mr Wong argued for Sun that it was not a decision made under section 5 or 6 “on a question of law arising out of an arbitral award”. There was no decision on the merits of the questions of law raised, as the Court simply found that sections 5 and 6 do not apply.

13.  However, Counsel for Gas argued that Sun’s construction of section 14(3)(ea)(viii) is too narrow, and pointed out that the argument has already been rejected by the Court of Appeal in Haller AG v Vestey International [2023] 1 HKLRD 39. Mr Li submitted that the purpose of the Ordinance should be borne in mind when construing section 6(5) of the Schedule and section 14(3) of the HCO, and that the construction contended by Sun would lead to absurd results.

14.  In Haller, the pertinent part of the proceedings relates to the decision of the first instance judge refusing to stay the action to arbitration under section 20 of the Ordinance. She refused leave to appeal against her decision, and the defendant applied to the Court of Appeal for leave to appeal. Section 14(3)(ea)(ii) of HCO provides that no appeal shall lie from any judgment or order of the court under section 20(1) of the Ordinance refusing to refer the parties to arbitration, and the issue before the Court of Appeal was whether the Court had jurisdiction to entertain the application for leave to appeal.

15.  As highlighted by Counsel for Gas in this case, the argument made for the defendant in Haller was that where the court finds that the case does not come within section 20(1) which adopts Article 8(1) of the Model Law at all on the reading of the provision, then the court’s refusal to refer the parties to arbitration is not made under section 20 or Article 8(1), in which case section 14(3)(ea)(ii) HCO and the exclusion of appeal does not apply. In rejecting the argument, G Lam JA explained (at paragraphs 74 to 79 of his judgment):

“74. ... He prays in aid the Chinese version of s.20(9) (‘凡法院根據 - (a) 藉第(1)款而具有效力的《貿法委示範法》第8條 … 決定拒絕將各方轉介仲裁，則須獲該法院許可，方可針對該決定提出上訴。’) and submits that the phrase ‘根據’ confirms that s.20(9) only applies where the court’s refusal to grant a stay is based on art.8. Since in this case the Judge found that no arbitration agreement existed at all, art.8 was not engaged, and the Judge did not refuse to refer the parties to arbitration under art.8.

75. The argument is ingenious but we do not accept it. It seems to us that the language of s.20(9) and s.14(3)(ea)(ii) is apt to apply to the Judge’s order in this case. The 2^nd defendant applied for an order to refer the parties to arbitration and for a mandatory stay of the action (as against the 1^st plaintiff) specifically and solely pursuant to s.20 and art.8. The Judge refused to do so. That seems to us to be ‘a decision to refuse to refer the parties to arbitration under article 8’ within the meaning of s.20(9), and an ‘order of the Court of First Instance under section 20(1) … refusing to refer the parties to arbitration’ within the meaning of s.14(3)(ea)(ii).

76. As Mr Sussex points out, s.20(9) is one of several similar provisions in the Arbitration Ordinance that curtail the possibility of appeal: see ss.15(5), 60(10), 81(4) and 84(3), in addition to a number of provisions which exclude appeal altogether. It was observed by this Court in China International Fund Ltd v Dennis Lau & Ng Chun Man Architects & Engineers (HK) Ltd [2015] 4 HKLRD 609 at [27] that in general, the role of the Court of Appeal under the scheme of the Arbitration Ordinance is more limited than in usual proceedings in the High Court and that even in instances where an appeal to the Court of Appeal is possible, it has to be brought with the leave of the Court of First Instance.

77. The statute provides in s.20(8) that a decision to refer the parties to arbitration under art.8 is not subject to appeal, and provides in s.20(9) for a restricted avenue for appeal in the obverse situation - where the court has refused to refer the parties to arbitration under art.8. It seems to us unlikely to be the legislative intention that there is yet a third category of outcome in an application for a reference and stay under s.20, falling within neither sub-s.(8) nor sub-s.(9), where leave to appeal may be obtained under the general provisions of s.14AA of the High Court Ordinance.

78. Mr Chang is unable to identify any purpose for a distinction to be made, in the context of leave to appeal, between cases where the court refuses to refer the parties to arbitration because it finds that the agreement is null and void, inoperative or incapable of being performed, and cases where the court refuses to refer because of reasons concerned with the existence or applicability of the arbitration agreement. No reason has been shown why leave to appeal should be restricted if the lower court has found that the arbitration agreement is null and void because, for example, of a fundamental common mistake, but not restricted where the court has found that the dispute lies outside the scope of the arbitration agreement. In both cases it may be said that there was no true consent to arbitration which calls into play the respect for parties’ autonomy. It may be noted that under s.81, a decision by the Court of First Instance to set aside an arbitral award on the ground that it deals with a dispute not falling within the arbitration agreement can only be appealed with the leave of that court.

79. It is true that the sentence structure in the Chinese version of s.20(9) is different from the English version. But the phrase ‘根據’ (which is also used in the Chinese version of s.14(3)(ea)(ii)) seems to us to have been used there simply to mean ‘under’’, without any necessary connotation that the court must first have found that art.8 applies. In so far as necessary, if a comparison of the two versions discloses a difference of meaning, we prefer the meaning discussed above which in our view best reconciles the texts, having regard to the object and purposes of the Ordinance: s.10B(3) of the Interpretation and General Clauses Ordinance (Cap.1).”

16.  The judgment of G Lam JA shows that there is no justification or reason at all to construe section 14(3)(ea) narrowly, and as Mr Li has highlighted, this is all in accordance with and reflects the purpose and object set out in section 3 of the Ordinance.

17.  Mr Wong sought to distinguish Haller on the basis that the judge did decide the question of whether there should be a stay, but decided against it, whereas in the present case, there was no decision on the question of law and whether leave to appeal should be granted on those questions.

18.  There may be a reasonably arguable case, that although the Decision is one refusing leave to appeal under section 6 of the Schedule, it is not a judgment or order “under section 5 or 6 of the Schedule on a question of law arising out of an arbitral award”, within the meaning of section 14(3)(ea)(viii) HCO. This is because the question of law arising of the Award had not been considered or determined, applying the guidelines set out in section 6(4) of the Schedule. Haller and the finding on section 14(3)(ea)(ii) may be distinguishable. This is because section 14(3)(ea)(ii) refers to a judgment or order “under section 20(1) or (2) of (the Ordinance) refusing to refer the parties to arbitration”. The decision of the first instance judge in Haller was indeed a refusal to refer the parties to arbitration, whatever the reasons as argued or distinguished by Counsel in the case. In the present case, the Decision or order of this Court was a refusal of leave to appeal made under section 6 of the Schedule, but technically, it is different in terms of language to that used in section 14(3)(ea)(viii): a judgment or order “on a question of law arising out of an arbitral award”.

19.  Notwithstanding the above, section 14(3)(ea) states that it applies “except as provided by the Arbitration Ordinance”. The provisions of the Ordinance on appeals prevail, and the Decision to the effect that sections 5 and 6 of the Schedule are not engaged at all to give to Sun any right to appeal is, without doubt, in substance a “decision to refuse leave to appeal”, which comes within section 6(5) of the Schedule. Under section 6 (5), the leave of the Court, or the Court of Appeal, is required for any appeal from the Decision.

20.  I agree with Mr Li, that to adopt the construction advocated for Sun would lead to absurdity: a party who has a right to apply for leave to appeal from an arbitral award on a question of law, in a case which falls within the Schedule because the relevant agreement has provided for domestic arbitration, but is refused leave (for example because the Court does not consider that the decision will substantially affect the rights of the parties as required under section 6(4)(a) of the Schedule), would have to apply for leave to appeal against the refusal; but a party who has no right at all to apply for leave to appeal from an award because the case is outside the Schedule would have an automatic right of appeal against the refusal of leave. It cannot be the intended meaning of section 14(3)(ea) of HCO or section 6(5) of the Ordinance.

21.  My conclusion therefore is that leave to appeal against the Decision is required.

22.  For the intended appeal, Sun argued that this Court failed to deal with his arguments on the parties’ intention to have a domestic intention. However, as Counsel for Gas rightly pointed out, the Decision sought to explain that that was no longer the proper or relevant test by virtue of section 100 of the Ordinance (see for example paragraph 34 of the Decision). The other grounds of the intended appeal are simply repetition of the matters already argued on 22 April 2024, and rejected. For the Reasons set out on 13 June 2024, I do not accept that the intended appeal has reasonable prospects of success.

23.  The application for leave to appeal in HCCT 64/2023 is accordingly dismissed, with costs.

24.  The application for leave to appeal against the order granting leave to enforce the Award is premised entirely on leave being granted to appeal in HCCT 64/2023. Having dismissed the application in HCCT 64/2023, leave to appeal in HCCT 84/2023 is refused, with costs.

25.  The application for stay of execution pending appeal is dismissed, with costs.

26.  Certificate for Counsel is granted for all the applications.