G v. N

HCCT 38/2021
HCCT 28/2023

(dealt with together)

[2024] HKCFI 655

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 38 OF 2021

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AND

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 28 OF 2023

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D E C I S I O N

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1.  This is an application made by N for leave to appeal against this Court’s Decision of 29 December 2023, to remit the Awards to the arbitrator to take such action as in his opinion will eliminate the grounds for setting aside the Awards, that they are against public policy (“Decision”).

2.  The nomenclature used in the Decision is adopted.

3.  As pointed out in the Decision, the matter involves the question of the application of public policy in a case where illegality is raised as a defence to a claim, and the extent to which the Court can intervene in the decision of the tribunal on public policy under Article 34 of the Model Law.

4.  I accept the submissions made for N, that the Decision raises an important and novel issue on the proper scope of the Court’s permissible intervention on the ground of public policy, and the interplay between, on the one hand, the public policy underpinning the denial of remedies on the ground of illegality and, on the other hand, the policy of the Court’s support of arbitral awards and minimal curial intervention in arbitrations. It would be in the interests of justice to allow the appeal to be made, and to obtain a decision from the Court of Appeal with guidance on the extent of permissible review by the supervisory court of a tribunal’s consideration of public policy, when illegality is raised by way of defence to a claim made.

5.  As Counsel for N rightly submitted, parties should not be encouraged to use public policy as a ground to seek substantive review of an award, on the basis simply that the tribunal had misapplied the “range of factors” test in Patel, or had failed to consider a particular factor before dismissing a claim on the basis of illegality. A decision by the Court of Appeal and clear guidance on the issues disputed in this case would benefit the development of arbitration law in Hong Kong and in the Model Law jurisdiction.

6.  Although the facts of this case are unique, and the Decision was on the basis (as explained at paragraph 26) that the Court has the power and duty to consider the issue of whether the Awards are contrary to the public policy of Hong Kong, and whether the arbitrator’s consideration of denial of relief in his decision was made in accordance with the guidelines set out in Patel as applicable to Hong Kong (on the basis of the decision in Monat), N argues that at most, there was a change in the legal framework, but no change in public policy or its scope. Any change in the legal approach as to how the illegality defence should be evaluated by the courts is a question of law, and there is no review of arbitral awards on the basis of there being errors of law.

7.  It cannot be said that these grounds of appeal have no reasonable prospects of success.

8.  I accept that N’s citation and reliance on section 61 of the Ordinance in its summons for leave to enforce the Award is a clerical slip, which refers to paragraph 2 of the summons concerning the arbitrator’s order discharging his earlier interim preservation order. The citation of the erroneous jurisdictional bases in margin notes of summonses does not prevent the Court from granting relief under the proper basis (Yan Yu Ying v Leung Wing Hei [2023] HKCFI 1839). The clerical error was repeated in N’s summons seeking leave to enforce the 2^nd Award.

9.  Notwithstanding the wrong citation, the applications to set aside the Awards were argued on the bases of sections 81 and 84 of the Ordinance, and the remission was made under section 81.

10.  I therefore reject the submission made for G, that the Court has no jurisdiction to grant leave to appeal in this matter.

11.  The Decision was made under section 81 of the Ordinance, which states that the Court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.

12.  I do not accept G’s submission that the Decision amounts to a case management direction to reserve the application for determination, and does not amount to any “decision” from which an appeal would lie. The Decision to suspend the setting aside proceedings and to remit the matter to the tribunal under section 81 of the Ordinance is a substantive decision to firstly, stay the setting aside proceedings and secondly, to remit the matter to the tribunal for it to decide the matters referred to in section 81. It is a decision which affects the substantive rights of the parties to the arbitration, and not just one for the management of the procedural aspects of the setting aside proceedings. In my view, a decision under section 81 is one from which an appeal may lie with the leave of the Court, as provided for in section 81 (4). The facts and circumstances in which the decision in Canadian Int’l Education v Cole [2022] HKCFI 2725 was made, to reserve costs, are totally distinguishable.

13.  The parties have informed the Court that the hearing of the arbitration will still be resumed for the arbitrator to consider the matter remitted, and to that extent, the arbitration will not be affected by any appeal granted on N’s application for leave.

14.  Considering all the above, I grant leave to appeal in terms of the draft order attached to N’s skeleton submissions of 19 January 2024.