昆明預應力制管廠 v. TRUE STAND INVESTMENTS LTD AND ANOTHER

HCCT 67/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 67 OF 2005

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J U D G M E N T

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1. The applicant obtained in its favour a Mainland arbitral award, dated 6 November 2002, against the two respondents.  On 14 March 2006, the applicant obtained an ex parte order from this Court granting leave to the applicant to enforce the arbitral award against the two respondents.  Pursuant to the ex parte order, judgment in terms of the arbitral award was entered on 14 March 2006.

2. The 2nd respondent has since applied by summons to set aside the ex parte order and judgment so obtained.

3. A number of matters have been mentioned in the supporting affirmation.  At today’s hearing, Mr David Chum, appearing for the 2nd respondent, relied on six grounds set out in paragraph 11 of his written submission in support of his client’s application. 

(i) The tribunal was not an agreed arbitral authority under the joint venture agreement and was different from the arbitral body named in the agreement;

(ii) The arbitral procedure was not in accordance with the agreement between the parties since the tribunal was not constituted by the arbitral body named in the agreement;

(iii) The malpractice or misappropriation of assets complained of in the arbitration proceedings was beyond the authorisation of the 2nd respondent;

(iv) The 2nd respondent had not in its possession any documents regarding the financial affairs or status of the joint venture corporation;

(v) The applicant had failed to discharge its burden to prove the economic loss in question;

(vi) There was non-disclosure of a notice of non-prosecution in the arbitral proceedings.

4. The principles and grounds for refusing enforcement of a Mainland award are not in dispute.  The grounds are found in section 40E of the Arbitration Ordinance (Cap 341).  Section 40E(2) sets out six grounds on which a Mainland award may be refused.  Section 40E(3) sets out a further ground for refusing enforcement, namely, public policy.

5. The first two grounds relied on by Mr Chum may be taken together.  The arbitration agreement named the 中國國際經濟貿易促進會仲裁委員會 as the arbitral body to resolve any disputes or differences between the parties.  The arbitral body which rendered the arbitral award in the present case was中國國際經濟貿易仲裁委員會.  Formerly, it was known as中國國際貿易促進委員會對外貿易仲裁委員會.  It was subsequently renamed as中國國際貿易促進委員會對外經濟貿易仲裁委員會.  Still later its name was changed to its present name, under which the arbitration was conducted.  The 2nd respondent’s point was essentially that the body which rendered the award was a separate body from the arbitral body named and agreed in the joint venture agreement.

6. I reject the argument.  It is not in dispute that at the time when the joint venture agreement was signed, the arbitral body which eventually rendered the arbitral award was, under its former name, the only arbitral body on the Mainland legally competent to conduct arbitrations on the Mainland, in relation to foreign-related economic contractual disputes.  In my view, the parties to the joint venture agreement must have intended to name an existent and authorised rather than a non-existent or unauthorised arbitral body to conduct arbitration to resolve any differences between them.  To suggest that they intended to name a non-existent arbitral body to resolve any such differences would be nonsensical.  Given that the arbitral body that eventually rendered the award was at the material time the only legally authorised body on the Mainland to conduct arbitrations, there cannot be any real doubt that the parties to the joint venture agreement intended to refer any differences between them for arbitration to that arbitral body.  The fact that in their joint venture agreement the name of the arbitral body did not match precisely the then name of the arbitral body that eventually rendered the award, can be easily explained by a slip in drawing up the joint venture agreement.

8. There is no question, in my view, of there having been two separate arbitral bodies.  I am fortified in my view by the fact that both the arbitral body which conducted the arbitration, as well as the Intermediate People’s Court in Beijing, which heard an appeal from the losing respondents from the award, came to the same view.  In short, the first and second grounds are gone.

9. The fourth and sixth grounds both deal with the lack of or non-disclosure of documents.  Mr Chum was frank enough during the hearing to admit that the two grounds do not fall specifically within any of the grounds for refusal of enforcement set out in section 40E of the Ordinance.  I fail to see how they can assist the 2nd respondent.  It is trite that in this type of court proceedings, the court is not concerned with the merits of the underlying dispute. The court does not sit on appeal from the arbitral award.

10. Mr Chum vaguely mentioned section 40E(2)(c) during his argument, which refers to a party’s inability to present his case during the arbitration proceedings.  I do not consider the non-disclosure, or the non-possession of the documents in question rendered the 2nd respondent unable to present its case in the arbitration proceedings. 

11. Mr Chum also mentioned that the case concerned the possible fraudulent conduct of an official involved in the joint venture corporation.  He pointed out that under section 26 of the Ordinance, in case of local arbitration, the court has a discretion to order the matter in dispute not to be dealt with by arbitration but by the court if the dispute should involve an issue of fraud.  That may well be so, but that has nothing to do with our case, because section 40E does not provide for such an exception.

12. Mr Chum also relied on public policy and reminded the Court that it covers those situations where an award has been obtained by behaviour which is criminal, fraudulent, corrupt, oppressive or otherwise immoral or unconscionable.  See Shandong Textiles Import and Export Corp v Da Hua Non-Ferrous Metals Co Ltd [2002] 2 HKLRD 844, 860, para 66.  Again, that has nothing to do with our case.  There is a world of difference between a case which involved some issues of fraud and an arbitral award which was obtained by behaviour which was fraudulent on the part of the successful party.  In my view, public policy is not engaged in the present case.

13. As Kaplan J has reminded us in Qinhuangdao Tongda Enterprise Development Co v Million Basic Co Ltd[1993] 1 HKLR 173, 178:

“The public policy ground for refusal must not be seen as a catch-all provision to be used wherever convenient.  It is limited in scope and is to be sparingly applied.”

14. Finally, the third and the fifth grounds concerning the merits of the case.  As I said, this Court is not concerned with the merits of the underlying dispute.  The third ground relates to whether the 2nd respondent should be held responsible legally for the malpractice of or the misappropriation of assets by an official of the joint venture corporation.  That is a matter of substantive law and it was the subject of the arbitral award, which was affirmed on appeal by the Intermediate People’s Court.  The 2nd respondent is not entitled to reopen the matter before this Court. 

15. The fifth ground relates to the quantum of loss.  Again, that is a matter going to the merits of the case.  This Court is not concerned with such a matter.

16. A final point raised by Mr Chum relates to the liability of the 2nd respondent under the award.  In my view, there is no doubt that it is liable for the amount set out in the award.  The fact that the 1st respondent is also liable for the same amount does not mean that the 2nd respondent is not liable for the whole amount, or is just liable for 50% of the amount awarded in the award.  The award does not say so.  Subject to the rider that there should not be any double recovery, I fail to see why the 2nd respondent’s liability under the award should only be 50%.  The point has no merit.  In any event, I fail to see how it falls within any of the grounds set out in section 40E of the Ordinance.

17. For all those reasons the application is dismissed. 

[Discussion re costs]

18. Costs of the application be paid by the 2nd respondent to the applicant, to be taxed if not agreed.