深圳市深超科技投資有限公司 v. 世紀晶源科技有限公司 AND ANOTHER

CACV 263/2020, [2025] HKCA 551

On appeal from [2020] HKCFI 1334

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 263 OF 2020

(ON APPEAL FROM HCCT NO 38 OF 2019)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  We dismissed the appeal of the applicant at the conclusion of the hearing. These are the reasons for judgment of the court.

The notice of appeal

2.  On 23 June 2020, Anthony Chan J handed down his decision (“Refusal of Leave Decision”)[1] dismissing the applicant’s application for leave to appeal against his decision of 7 May 2020 (“Set Aside Decision”),[2] by which he set aside the ex parte order dated 21 August 2019 (“HCCT Order”) of Mimmie Chan J obtained by the applicant to enforce a Mainland arbitral award (“Award”) against the respondents.

3.  On 13 July 2020, the applicant filed a notice of appeal in CACV 263/2020 against the Refusal of Leave Decision. The orders sought in the notice of appeal are in these terms:

“FOR AN ORDER that the Refusal Decision be set aside AND FOR AN ORDER that the Applicant’s costs of this appeal and the costs of the Leave Application be in the cause of the appeal against the 7/5/20 Decision[3], to be taxed if not agreed, with counsel certificate.”

4.  The ground of appeal stated in the notice of appeal read as follows:

“The Refusal Decision was not reached by any intellectual process and/or not by proper or fair process, and/or there was fundamental error of law in that the learned Judge’s ruling (paragraph 7 of the Refusal Decision) that ‘the contention that [the court] had erred in the statutory interpretation exercise is academic’ because ‘there is no appeal against the findings of fact by the court that at the time of the Applicant’s ex parte application, its Mainland enforcement proceedings were on foot and the amount recoverable from those proceedings could not be ascertained’ is blatantly contrary to any logical or intellectual process or fundamentally wrong. If the interpretation and application of s.93 of the Arbitration Ordinance (Cap 609) (‘the AO’) construed and adopted by the learned Judge are erroneous and/or if the interpretation of s.93 of the AO as submitted by the Applicant (considered in paragraph 13 of the Refusal Decision) is adopted, the Original Decision[4] must be wrong and liable to be set aside by applying the findings of fact by the court.”

5.  On 6 July 2021, the applicant filed an amended supplementary notice of appeal in CACV 263/2020 adding grounds 1 to 4 (“Impugned Grounds”) to the existing ground of appeal, which was re-numbered as ground 5 (“Ground 5”). The respondents issued a summons on 23 September 2022 to strike out the Impugned Grounds on the ground that they disclose no reasonable ground of appeal, and/or are frivolous or vexatious, and/or otherwise are an abuse of the process of the court.

6.  The Court of Appeal handed down its judgment on the strike out application on 20 July 2023 (“CA Judgment”)[5] and ordered the Impugned Grounds to be struck out. In opposing the striking out application, the applicant did not invoke the residual jurisdiction of the Court of Appeal to supervise the fair processing of the application for leave to appeal by the Court of First Instance[6] (“CFI”) but sought to advance the Impugned Grounds in this appeal by a “separate and independent basis”. The CA Judgment held it is clear that the Impugned Grounds are unarguable on what the applicant called the “separate and independent basis” and that this case falls within the category of very clear and obvious cases where the Court of Appeal would and should exercise its power of striking out. Indemnity costs were awarded against the applicant.

7.  Thereafter, there is no further amendment to the notice of appeal. The orders sought in this appeal are as stated above and the only ground of appeal remains as stated in Ground 5. This must be borne firmly in mind. The notice of appeal sought an order to set aside the Refusal of Leave Decision. As noted in the CA Judgment at §35, the applicant did not apply for leave to appeal from the Court of Appeal against the Set Aside Decision, presumably because it was aware of the authorities that only the CFI can give (or refuse) leave to appeal against a decision setting aside leave to enforce an arbitral award.

8.  In his submissions for the applicant in this appeal, Mr Foster Yim[7] repeated arguments that have been ruled against him in the CA Judgment, mounted direct and collateral attacks on the Set Aside Decision for which leave to appeal was refused in the Refusal of Leave Decision, advanced arguments that are outside the scope of the remaining ground of appeal being Ground 5, and sought orders that are not mentioned in the notice of appeal. It is unacceptable for counsel to make submissions on appeal in this manner.

9.  Mr Andrew Liao SC, who appeared for the respondents on appeal with Ms Jacqueline Ng[8], submitted that this appeal is unmeritorious and the way it is now advanced further makes it frivolous, vexatious, constituting a flagrant abuse of the process of the court and ought to be dismissed as such with costs on an indemnity basis.

Background

10.  The relevant background has been set out in the Set Aside Decision (§§3 to 29) and the CA Judgment (§§4 to 34). It is not necessary to recite all the details. A brief account will suffice for present purpose.

11.  The applicant advanced a loan of RMB 530 million to the 1^st respondent under an agreement in 2008. The 2^nd respondent provided a personal guarantee for the repayment of the loan. The respondents failed to repay the loan.

12.  The agreement contained a provision for arbitration by 中國國際經濟貿易仲裁委員會華南分會 (“CIETAC(SC)”), which changed its name to 華南國際經濟貿易仲裁委員會 (“SCIA”) with effect from 22 October 2012. On 4 April 2013, the applicant applied to SCIA for arbitration. The respondents challenged the jurisdiction of SCIA on the ground that CIETAC(SC) and not SCIA was the agreed tribunal and CIETAC(SC) was only a sub-commission of CIETAC and not an independent body.

13.  The respondents’ challenge to jurisdiction failed before SCIA and the Supreme People’s Court. The arbitration hearing took place in July 2013 and the Award was made by SCIA on 22 August 2013. The respondents were held liable to pay the applicant RMB 530 million with interest and other relief. The respondents did not apply to set aside the Award but failed to make payment.

14.  On 13 March 2015 (19 months later), the applicant brought an action in the Shenzhen Intermediate People’s Court (“SIPC”) to enforce the Award, then in excess of RMB 958 million with interest calculated up to that time. On 16 March 2015, the SIPC granted an enforcement judgment which ordered the respondents to provide the court with a list of their properties, that such properties be frozen or preserved, and that such properties be sold or auctioned. The respondents failed to comply with the order.

15.  By a notification dated 6 March 2017, SIPC notified the applicant it had seized 5 pieces of land belonging to the 1^st respondent (“5 Plots of Land”). On 30 October 2018, SIPC notified the parties of the court-appointed assessor’s valuation of the 5 Plots of Land. On 16 April 2019, SIPC affirmed the assessor’s valuation after review upon the 1^st respondent’s objection. The 5 Plots of Land were auctioned and sold to the applicant on 20 January 2020 at the assessor’s valuation of RMB 486,178,488. By an enforcement judgment dated 19 February 2020, SIPC set off the purchase price against the debt owed to the applicant by the respondents and approved the transfer of the 5 Plots of Land to the applicant. By another enforcement judgment dated 21 February 2020, SIPC held that the Mainland enforcement action had been concluded.

16.  Meanwhile, on 29 July 2019, the applicant issued an ex parte summons in CFI in Hong Kong under HCCT 38/2019 for leave under section 92 of the AO to enforce the Award in the same manner as a judgment of the court to the same effect and to enter judgment in terms of the Award. As mentioned, Mimmie Chan J granted the HCCT Order on 21 August 2019.

17.  The respondents issued a summons on 30 October 2019 to set aside the HCCT Order. One of the grounds was that the enforcement of the Award infringed section 93 of the AO as, at the time the ex parte summons was issued, enforcement on the Mainland was ongoing, the 5 Plots of Land had not been sold, the amount recoverable from them could not be ascertained and the enforcement action was not concluded until 21 February 2020.

18.  Section 93 as then in force[9] provided as follows:

“93. Restrictions on enforcement of Mainland awards

(1) A Mainland award is not, subject to subsection (2), enforceable under this Division if an application has been made on the Mainland for enforcement of the award.

(2) If a Mainland award is not fully satisfied by way of enforcement proceedings taken in the Mainland, or in any other place than in Hong Kong, that part of the award which is not satisfied in those proceedings is enforceable under this Division.”

19.  By the Set Aside Decision, the judge set aside the HCCT Order on the ground that enforcement of the Award infringed section 93 and he had no jurisdiction to grant the HCCT Order afresh as section 93 went to the jurisdiction of the Hong Kong court. He agreed with the judgment of A Cheung J (as he then was) on section 40C of the former AO, Cap 341 (the wording of which was very similar to section 93) in Shenzhen Kai Loong Investment and Development Co Ltd v CEC Electrical Manufacturing (International) Co Ltd [2001-2003] HKCLRT 649, which held that both double enforcement and double recovery were prohibited by the provision, and that where an award holder had applied for enforcement in the Mainland, he would have to wait until those proceedings were completed or concluded, and the amount recovered ascertained, before he could apply to the Hong Kong court for enforcement in respect of any deficiency in the recovery.

20.  The applicant issued a summons on 21 May 2020 for leave to appeal from the Set Aside Decision, on the grounds that (1) the judge had wrongly construed section 93, the decision in Shenzhen Kai Loong adopted by him was wrong, and failed to take into consideration the time limitation of enforcement in Hong Kong of six years; and (2) he erred in finding that it was not open to him to re-grant the HCCT Order.

21.  The judge refused leave to appeal by the Refusal of Leave Decision on 23 June 2020, as he did not find any merits in the proposed grounds of appeal. As there was no appeal against the findings of fact that at the time of the ex parte application the Mainland enforcement proceedings were ongoing, there was clear infringement of the prohibition against double enforcement in section 93. The provision does not admit of the applicant’s construction to allow an enforcement application to be made despite ongoing Mainland enforcement proceedings if at the time of application the award has not been fully satisfied and the unsatisfied part is reasonably ascertainable or ascertained[10]. The wording of section 93 is clear and the exception provided under section 93(2) can only apply if the award “is not fully satisfied”.

22.  The judge affirmed his agreement with the analysis in Shenzhen Kai Loong. He rejected the contention that Shenzhen Kai Loong failed to take into consideration the time limitation of enforcement in Hong Kong as he regarded this of little moment, for the reasons given in §§10 to 12 of the Refusal of Leave Decision. As for the contention it was wrong in law to find that it was not open to re-grant the HCCT Order, the applicant had not pointed out how the judge’s analysis was wrong.

23.  We turn to consider Ground 5 and Mr Yim’s submissions in this appeal.

Ground 5

24.  Ground 5 was set out verbatim in the beginning of Mr Yim’s skeleton submissions but he did not appear to have advanced any substantive arguments in relation to it in his six points (“Six Points”) that followed in his submissions. Mr Yim informed us he does not wish to abandon Ground 5 and he would ask this court to consider it nonetheless.

25.  Ground 5 is wholly devoid of merits.

26.  It asserts at the outset that the Refusal of Leave Decision “was not reached by any intellectual process and/or not by proper or fair process, and/or there was fundamental error of law”. The wording would appear to track the dicta of Mustill LJ in Aden Refinery Ltd v Ugland Ltd [1987] 1 QB 650 at 666B when discussing the residual jurisdiction of the English Court of Appeal to supervise the fair processing of the application for leave to appeal at first instance. The serious allegation that the Refusal of Leave Decision “was not reached by any intellectual process and/or not by proper or fair process” was wholly unsubstantiated.

27.  As for the fundamental error of law alleged in Ground 5, the applicant has failed to demonstrate any error of law, let alone fundamental error of law, in the Refusal of Leave Decision. The errors of law as contended in the skeleton submissions are in substance challenges to the merits of the Set Aside Decision, not the fairness of the process in making the Refusal of Leave Decision. In invoking the residual jurisdiction of the Court of Appeal, a clear distinction is drawn between a challenge to the merits of the decision and the fairness of procedure, and what one is looking for is not merely an error of law, but such a substantial defect in the fairness of the process as to invalidate the decision[11]. In any event, the applicant’s contention that the judge was wrong in the Set Aside Decision in adopting the analysis in Shenzhen Kai Loong on the construction of section 93 was rejected in the CA Judgment at §46.

28.  If the purpose of Ground 5 was to invoke the residual jurisdiction of the Court of Appeal to set aside the Refusal of Leave Decision (as borne out by the terms of the order sought in the notice of appeal), Mr Yim has disavowed any intention to rely on this in his skeleton submission, plainly recognizing that he has an “extraordinarily high hurdle to surmount” to engage the residual jurisdiction[12]. He no longer asked the Court of Appeal to set aside the Refusal of Leave Decision. Instead, he relied on a “separate doctrine” (a variation of the “separate and independent basis” that he advanced in opposing the striking out of the Impugned Grounds) that the Court of Appeal has jurisdiction to entertain an appeal against the Set Aside Order, which the judge has no jurisdiction to make, under section 14(1) of the High Court Ordinance where an appeal shall lie to the Court of Appeal as of right from every judgment or order of the CFI in any civil cause or matter. This is outside the scope of the order sought in the notice of appeal and the ground of appeal in Ground 5 and is simply not open to the applicant to pursue, not to mention that this is a volte face from the clear stance of the applicant’s former counsel that leave to appeal the Set Aside Order is required from the CFI[13].

29.  In his written reply submissions, Mr Yim contended that the applicant may take a “jurisdictional point” in the present hearing before us even if it had not been raised before the Court of First Instance and that the Court of Appeal should exercise its discretion to permit the applicant to run a new argument on a pure point of law. We firmly reject his contentions. The arguments he raised regarding excess of jurisdiction are premised on the alleged mis-construction of section 93. These arguments are variations on the same theme of the arguments taken by the applicant in its application for leave to appeal against the Set Aside Order and in its opposition to the respondents’ application to strike out the Impugned Grounds in the amended supplementary notice of appeal. It is an abuse of process to argue the jurisdictional point which has been considered substantively and rejected in the Refusal of Leave Decision and in the CA Judgment.

30.  Mr Yim acknowledged that the substantive arguments in the Six Points are outside the scope of Ground 5 and not open to the applicant to pursue. As Ground 5 is without merit, this is sufficient reason for the dismissal of this appeal.

The Six Points

31.  It is therefore not necessary to consider the Six Points. As rightly pointed out by the respondents, the Six Points are just an attempt to re-run the Impugned Grounds rejected in the CA Judgment by the back door. They are in any event without merit, we will deal with them succinctly.

(1)  First Point

32.  Mr Yim’s contention is that the Set Aside Order was made in excess of the judge’s jurisdiction. He cited Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 3555 at §25 for the proposition that where the judge makes an order which is outwith his jurisdiction in that he could not (as opposed to should not) make it, a statutory provision requiring leave of the court for an appeal against the decision does not prevent an appeal to the Court of Appeal, as a decision made without jurisdiction cannot fairly be held to have been made under the provision. Mr Yim submitted that excess of jurisdiction provides a “separate doctrine” in construing the limitation on the right to appeal in the AO, such that the applicant can appeal against the Set Aside Order as of right.

33.  A similar argument he advanced in reliance on Cetelem in support of ground 4 of the Impugned Grounds was rejected in the CA Judgment[14]. In applying for leave to appeal against the Set Aside Order, the applicant had not argued before the judge that the judge could not (as opposed to should not) make that order. Nor are we able to discern in Mr Yim’s submissions for this appeal in what way the Set Aside Order was made without jurisdiction, in light of sections 84 and 92(1)(b) of the AO and Order 73 rule 10(6) of the Rules of the High Court[15]. Section 93 sets out the restrictions on the enforcement of Mainland awards, it does not set out the limits on the powers of the judge to hear and determine an application to set aside the HCCT Order. As in the CA Judgment, we do not think Cetelem assists the applicant at all, leaving aside that the time limit to appeal against the Set Aside Order has long expired.

(2)  Second to Fifth Points

34.  These points sought to draw a distinction between “recognition” and “execution”. The arguments are in effect grounds 1 and 2 of the Impugned Grounds[16], which are based on a distinction between “recognition” and “enforcement” (or “execution”). We see no reason to differ from the CA Judgment why the applicant should be permitted to launch a new argument based on the alleged distinction. Besides, it was rejected in the CA Judgment that the HCCT Order was only concerned with the “recognition” stage[17]. The contention that Shenzhen Kai Loong has misconstrued section 40C of the former AO (very similar to section 93) was also rejected in the CA Judgment. Further, Mr Yim made another about turn in the written reply submissions that his “present arguments … do not challenge the rationale of Shenzhen Kai Loong”.

(3)  Sixth Point

35.  This relates to the limitation period in Hong Kong. Mr Yim raised a new argument that an award creditor has six years to enforce the award by “recognizing” it as a judgment and thereafter a further 12 years to “execute” the judgment invoking section 4(4) of the Limitation Ordinance, Cap 347[18], in other words a total of 18 years. He contended that the judge’s construction of section 93 is wrong, as in the enactment of that provision it could not have been the legislative intent to shorten the limitation period available to the award creditor to six years.

36.  The six-year time bar was the position adopted by the applicant’s former counsel in the application for leave to appeal against the Set Aside Order[19].

37.  Besides, it is wrong to aggregate the limitation for an action to enforce an award (six years, under section 4(1)(c)) with the limitation for subsequently executing it as a judgment (12 years, under section 4(4)). Where a party fails to enforce an award within the six-year limitation period, he does not thereby lose the 12-year period for execution. He simply does not have a judgment to execute and the 12-year limitation period does not begin to run.

Costs

38.  We have ordered the applicant to pay the respondents’ costs of this appeal on an indemnity basis. We think it is appropriate to order indemnity costs against the applicant, in light of the manner in which this appeal was conducted, which can fairly be described as an abuse of the process of the court.