S v. K

HCCT 145/2024

[2025] HKCFI 683

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 145 OF 2024

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BETWEEN

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D E C I S I O N

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Background

1.  On 28 November 2024, this Court granted leave to the Plaintiff to enforce an arbitral award dated 8 August 2024 made in an HKIAC arbitration (“Arbitration”) as a judgment of the Court (“Enforcement Order”). Paragraph 2 of the Enforcement Order states that the Defendant may apply to set aside the Enforcement Order within 14 days after service of the Enforcement Order upon it. There is no dispute that the Enforcement Order was served on the Defendant in Hong Kong on 29 November 2024. The last day for any application to be made to set aside the Enforcement Order was 13 December 2024.

2.  The Defendant in this case are the Incorporated Owners of a building. On 13 December 2024, it issued a summons to extend the time for the Defendant to apply to set aside the Enforcement Order (“Time Summons”). More than 2 weeks later, on 31 December 2024, the Defendant filed an affirmation of CWP, a member of the management committee of the Defendant (“CWP”), purportedly in support of the Time Summons.

3.  It is pertinent that when a party applies to set aside an Enforcement Order, it is required by Order 73 rule 10(6A) RHC to make the application by summons supported by affidavit, which affidavit “must” be filed at the same time as the summons. It has also been held that in compliance with Order 73 rule 10(6A), the applicant should clearly set out in the summons and in the affidavit filed in support the grounds and the evidence relied upon to set aside the Enforcement Order (see 73/10/8 Hong Kong Civil Procedure 2025 and K&C Asia Pacific Ltd v G [2021] HKCFI 865).

4.  As held in KB v S HCCT 13/2015, 15 September 2015 the court will extend time to make an application to set aside an Enforcement Order where there are compelling reasons to do so. The applicant for time should furnish to the court good reasons for the delay in making the application, and further, satisfy the court that its application has merits.

5.  The above is to reflect and implement the object and principles stated in section 3 of the Arbitration Ordinance (“Ordinance”): to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense, and accords with the policy of the Hong Kong court to enforce and facilitate arbitration agreements and arbitral awards. As pointed out in the judgment in K&C Asia Pacific Limited v G, the court and the party entitled to enforcement of an arbitral award made in its favor should be given clear notice of the grounds and the evidence relied upon to set aside, from the time when the application is made, so as not to leave the status of the award in uncertainty. This cannot be said to be an onerous task, since the parties to the arbitral award would in the ordinary case have had attended the arbitration and should be aware of any facts or grounds which could affect the due enforcement of the award.

6.  It follows from the above that in any application seeking an extension of time to make the setting aside application, the court would likewise expect the applicant to clearly state the grounds it proposes to rely upon to set aside the Enforcement Order. At the very least, the applicant should state the reason why an extension of time is required in the circumstances of the case, and why the extension sought is appropriate and warranted. The grounds of the intended application to set aside should be set out, so that the court can consider whether there are merits in the intended application, in the proper exercise of its discretion to grant indulgence to the applicant for time.

7.  The Time Summons in this case (returnable on 20 December 2024) did not state any ground which can be relied upon for the setting aside. Nor was any affirmation filed with the Time Summons, to explain or justify the extension sought, or why the grounds cannot even be identified.

8.  At the hearing of the Time Summons on 20 December 2024, an order was made (“20/12 Order”) whereby the Court directed that unless the Defendant files and serves its factual evidence in support of the Time Summons within 14 days, the Time Summons be dismissed. A timetable was set down for the filing of the Plaintiff’s evidence in opposition, and for skeleton submissions to be filed and served by the parties in relation to the Time Summons. By paragraph 5 of the 20/12 Order, the Time Summons was ordered to be dealt with by paper disposal.

9.  On 31 December 2024, the affirmation of CWP was filed and it was only then that the Defendant set out the facts relied upon by it to support the application for time extension.

10.  Pursuant to the 20/12 Order, the Plaintiff filed its affirmation in opposition to the Time Summons on 16 January 2024. The Defendant filed its skeleton submissions in support of the Time Summons on 22 January 2025, and the Plaintiff filed its skeleton submissions in opposition on 4 February 2025.

11.  On 10 January 2025, after the service of CWP’s affirmation, the Defendant issued a separate summons to set aside the Enforcement Order (“10/1 Summons”). It was filed together with the 2^nd affirmation of CWP (“CWP 2”). The 10/1 Summons was returnable on 28 February 2025.

12.  Not surprisingly, the Plaintiff took objection to the issue of the 10/1 Summons. It pointed out that the 10/1 Summons was an abuse of process, when the Court had already issued directions for the filing of evidence and submissions in connection with the Defendant’s application for extension of time to set aside the Enforcement Order, which had yet to be determined, and the Court had further directed that such application for time to set aside the Enforcement Order should be determined by paper disposal. The action taken by the Defendant in relation to the 10/1 Summons contradicted and went against the Court’s directions. According to the Plaintiff, it was an attempt by the Defendant to slip in evidence which had not hitherto been included in the Time Summons, and after the deadline imposed by the Court had already expired for the filing of the Defendant’s evidence. The Plaintiff contended that the 10/1 Summons should be dismissed outright as an abuse of process.

13.  The Court also directed the Defendant on 14 January 2025 to show cause why the 10/1 Summons should not be dismissed with costs.

14.  In response, the Defendant’s solicitors wrote on 20 January 2025, to state that it had no intention to use or to rely on the 10/1 Summons and CWP 2 to support the Time Summons. It claimed that it had only intended to obviate the need to seek a further extension of time should the Time Summons be determined after 10 January 2025 (the expiry of the time extension sought in the Time Summons). The Defendant submitted in the letter that the 10/1 Summons should be stayed pending determination of the Time Summons.

15.  Bearing in mind the requirements of Order 73 rule 10(6A), and in view of the directions made by the 20/10 Order, it would neither be appropriate, nor fair to the Plaintiff, for this Court to consider CWP 2 when deciding the Time Summons. The 10/1 Summons was totally unnecessary, and inappropriate, in view of the directions already made in the 20/12 Order. Pursuant to the 20/12 Order, I will only consider the evidence and submissions which were filed in accordance with the 20/12 Order. Whether the Defendant pursues the 10/1 Summons is for it to decide at the risk of any adverse costs orders to be made on the return date.

Whether extension of time should be granted under the Time Summons

16.  Counsel for the Defendant has referred to Astro Nusantara International BV v BT Ayunda Prima Mitra (2018) 21 HKCFAR 118, where the Court emphasized the importance of looking at all relevant matters and considering the overall justice of the case when deciding on an extension of time, rather than promoting the importance of certain factors and affording to others a secondary status. The length and reasons for the delay, whether a party had acted reasonably, the strength of the case, prejudice and the injustice of denying the applicant the opportunity of having the application determined, are all relevant factors to be considered in the exercise of the court’s discretion to extend time.

Reasons for the delay

17.  In CWP’s affirmation filed on 31 December 2024, she explained the Defendant’s delay and inaction, and deposed to the fact that there had been changes in the membership of the management committee of the Defendant (“MC”), that the Chairman of the MC at the time of the Arbitration (in 2023 to 2024) was one Mr Ng, who had resigned in September 2024, that the Defendant had difficulties in obtaining documents and instructions relating to the Arbitration and the agreement signed with the Plaintiff in September 2021 (“Agreement”) (which led to the dispute and the Arbitration) from Ng, from the former chairman of the MC Madam Chan (“Chan”), and from the management company of the Defendant (“Managers”). CWP claimed that she did not know why the Defendant had “defaulted” in some of the initial parts of the Arbitration, and that the Defendant had been given misleading advice and incomplete records by the Managers. He admitted that Ng had made representations on behalf of the Defendant in the Arbitration, but CWP claimed that the Award was “erroneous”, in that the arbitrator had ignored the poor quality of the work executed by the Plaintiff, and there had been delay in the completion of the Plaintiff’s works.

18.  As summarized by the Plaintiff, the reasons proffered by CWP are accordingly: (i) difficulties in obtaining and providing to lawyers adequate documents and instructions to make the setting aside application; (ii) inability to contact Chan who was chairman of the MC at the time of the Agreement; (iii) inability to contact Ng who was chairman at the time of the Arbitration; (iv) misleading advice and incomplete records given by the managers; and (v) the need to comply with the statutory period of notice for convening formal meetings of the MC.

19.  I am not satisfied that the Defendant has shown any good reason for its inaction, and do not consider that the excuses offered by CWP can constitute compelling reasons to justify the extension of time sought.

20.  According to the Plaintiff’s evidence, Ng, CWP and 3 other members of the MC had attended the hearing of the Arbitration, as recorded in the Award. In this regard, it is noteworthy that although CWP referred in her affirmation to the Defendant’s inability to contact Ng, and to various unparticularized “defaults” at the early stage of the Arbitration, she did not claim in her affirmation that the Defendant’s representatives were absent at the hearing/hearings of the Arbitration. She admitted that Ng had made representations in the Arbitration. The only allegation was that the Defendant “failed to adequately understand what had happened during the whole arbitration process”.

21.  The Plaintiff pointed out that the Notice of Arbitration and the Request for appointment of arbitrator had been delivered to the Defendant, and that Ng had personally signed acknowledgment of receipt. On its part, the Defendant did not allege that it had not received notice of the Arbitration or of appointment of arbitrator.

22.  If, having had notice of the Arbitration, and having taken part in the Arbitration, the Defendant for its own reasons, whether due to ignorance or otherwise, decided not to present its case on defects, delay, or otherwise, it only had itself to blame and cannot thereafter claim, on evidence procured after the Arbitration, that it was unable to present its case in the Arbitration.

23.  After the issue of the Award on 8 August 2024, and on the Defendant’s own case (as set out in CWP’s affirmation), the Plaintiff’s solicitors had written to the Defendant on 22 August 2024, threatening to enforce the Award after 14 days. The Defendant claims that it had immediately instructed solicitors in August 2024, and had received Counsel’s advice on the implications of the Award and enforcement thereof by early September 2024.

24.  Yet, there was no action to set aside the Enforcement Order, in the interim of 4 months from 22 August 2024, until the issue of the Time Summons in December 2024.

25.  Notwithstanding any change in the post of chairman of the MC, the Defendant admits that there were “overlapping committee members” between 2021 and 2024, including Cheng. It is not credible that members of the MC had no knowledge at all of the works undertaken by the Plaintiff under the Agreement, or of any dispute which may have existed relating to such works and the payments claimed by the Plaintiff. In fact, CWP claimed that members of the MC had observed that the quality of the Plaintiff’s works were seriously deficient. If this was true, it is incredible that the Defendant would have ignored either the Arbitration (in which the Plaintiff sought payment for its works) or the Award (which found in favour of the Plaintiff), or would have allowed the Award to stand without taking any action - if there were indeed grounds to resist the claims made in the Arbitration, or to set aside the Award, or oppose enforcement thereof.

26.  As the Plaintiff also pointed out, even though the Notice of Arbitration and the Request for appointment of arbitrator had been served on Ng in July 2023, and a meeting of the Defendant had been held on 28 February 2024, the matter of the Notice of Arbitration and of the commencement of the Arbitration was not discussed or even mentioned at the meeting - as evidenced by the Minutes thereof.

27.  Although the MC members of the Defendant had attended the hearing of the Arbitration on 8 May 2024, the Arbitration was not discussed in the meeting of the MC held on 31 July 2024. Even after the Award had been published in August 2024, there is no evidence that the Defendant had attempted to convene any meeting of the Defendant, or of the MC. CWP admitted that an informal meeting had been held to discuss the matter on 7 December 2024, but no decision was made to instruct lawyers to make the application for setting aside.

28.  I agree with the Plaintiff, that the Defendant had chosen to procrastinate and delay taking any action, for reasons of its own, and not due to any inability to convene the necessary meetings to authorize the necessary proceedings to resist enforcement of the Award. Even if documents and critical information had been lacking, as alleged, the Defendant had managed to issue the 10/1 Summons and put in CWP 2 in January 2025, without such information and documents from Ng and Chan.

Merits of the defence

29.  Needless to say, the fact that the Award was “erroneous”, to the extent that the arbitrator had allegedly failed to consider the merits of the defence, on the basis of the Plaintiff’s allegedly defective work and alleged delay, are not grounds recognized under section 86 of the Ordinance to oppose enforcement of the Award. The Plaintiff also highlighted the fact that the question of defects and of the quality of the Plaintiff’s works had never been raised before, in or immediately after the Arbitration.

30.  The arguments made by Counsel in his submissions on merits are not supported by any cogent facts referred to in CWP’s affirmation. Even if I should pay heed to them, I fail to see how it can be said that having received due notice of the Arbitration and of the appointment of arbitrator, but failing to take any steps in relation to the appointment, the Defendant can now complain that the appointment by HKIAC was invalid. The arbitration clause contained in the parties’ Agreement clearly expressed the intention to arbitrate their claims, which is sufficient to constitute a valid arbitration agreement (Kinli Civil Engineering Limited v Geotech Engineering Limited [2021] HKCFI 2503, A v C [2023] HKCFI 804). The HKIAC to which the Arbitration was submitted has the power under sections 14 and 24 of the Ordinance to appoint an arbitrator in the absence of the parties’ agreement. I can see no basis for the Defendant to claim that the arbitration agreement is invalid simply because the arbitration clause did not specify a mechanism for the appointment of arbitrator.

31.  Having been validly appointed, the arbitrator has case management powers to impose the timetable and to make orders for the filing of the defence, and I see no factual or legal basis for the Defendant to contend that the arbitrator is biased simply because the arbitration was held in the office of the Plaintiff’s solicitors. The fact that the representatives of the Defendant did not understand, or may have misunderstood, the procedure is not by itself and without more sufficient to discharge the Defendant’s burden of establishing that there are valid grounds to oppose enforcement of the Award and to set aside the Enforcement Order.

32.  Having considered the Defendant’s conduct, the reasons given for the delay and for the further time sought, the lack of merits of the application to set aside, and the prejudice to the Plaintiff of further delay in the enforcement of a final award made in its favor pursuant to a valid arbitration agreement, I am not inclined to grant further time to the Defendant to make the application to set aside the Enforcement Award. Having decided to take no immediate action, and to accept the risk of not taking immediate action, despite having received notice of the dispute, of the arbitration and then of the Award, despite having attended the hearing and having been ordered by the arbitrator to file its defence, I see no injustice in finding that it should be bound by its decision of inaction and by the Award.

Disposition

33.  The Time Summons is dismissed.

34.  The costs of the application for time are to be paid by the Defendant to the Plaintiff, on indemnity basis, with certificate for counsel.