XCHRX GUANDONG OVERSEAS SHENZHEN CO. LTD. v. YAO SHUN GROUP INTERNATIONAL LTD.

1997, No. CA 13

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. On 26 November 1996, a CIETAC arbitral tribunal in mainland China made an award in favour of the plaintiff and against the defendant. On 13 February 1997, I gave leave to the plaintiff to enforce the award in Hong Kong. On 27 February 1997, the defendant issued a summons seeking an order setting aside my order of 13 February 1997. This order is sought under section 44 of the Arbitration Ordinance (Cap. 341) on the grounds mentioned in subsection (2)(c); that the defendant "was not given proper notice . . . of the arbitration proceedings or was otherwise unable to present his case".

2. What happened in the arbitration proceedings is that there was a hearing on 16 August 1996. The award records that "Having examined the application for arbitration, the defense and supporting documents respectively produced by the Claimant and the Respondent, the tribunal held a hearing on August 16, 1996. Both parties were present at the hearing. The tribunal heeded their statements and arguments and did some investigations in relation to some facts. After the hearing, each party submitted his additional written materials. The award is rendered on November 26, 1996."

3. The defendant complains that the hearing on 16 August 1996 was almost entirely devoted to one issue; which of two contracts signed by the parties was to be the basis of the arbitration. The defendant's defence was not considered or argued. The tribunal gave the impression to the defendant that there would be another hearing at which other issues would be considered. The tribunal asked for additional materials, but the defendant believed that this request related only to the issue of which contract was to govern the matter. So, the defendant filed a very brief document on 3 September 1996 in connection with this issue. Only when the defendant received a copy of the plaintiff's additional material in the middle of October 1996 covering the additional issues did it consider that it should submit material covering the other issues. It did so on 26 November 1996. The defendant argues that the tribunal could not possibly have considered these further submissions before it rendered its award on the same day.

4. I have before me a transcript of the proceedings on 16 August 1996. The defendant says this transcript is incomplete and not entirely accurate, but it is all I have. It is for the defendant to make out its case, and if its case is not supported by the transcript, there is nothing else that would justify the order the defendant's seeks.

5. The transcript reveals that the defendant did make some attempt to argue its case fully. After it had done so, the tribunal said that "if there are things unclear, then you supplement it". The tribunal then pointed out that it was necessary to establish "which of these contracts is the basis we should use in the arbitration of this case". The tribunal then went on to point out that there were other problems that needed to be resolved, and sought to identify these. The tribunal made it quite clear that it wanted further material from both parties on these points. The tribunal said ". . . the Applicant gives this [the additional material] to the Respondent, and then you [the Respondent] will also have one chance in respect of such written . . . representation or request, counterclaim, you may make a reply, an interpretation, or counterplea. How long does that take? How long does that take for the first round?" The tribunal then addressed the defendant about the timing of submitting its material. The defendant indicated that it could provide this material in 20 days. The tribunal then said ". . . we'll wait for you to come back in 20 days, to come here specially for giving oral statements, you . . . talk you your solicitor about it, write some material, and that will do". The tribunal said "Remember, submit your evidence before 5 September, OK?" . . . "Hurry, OK?".

6. It has to be said that the transcript - the English version anyway - is not very good. It is sometimes difficult to follow the proceedings easily. But this emerges from the parts I have quoted; that a reasonable interpretation of the tribunal's directions as to future proceedings would be -

1. that the plaintiff would submit additional material on which the defendant would be able to respond;

2. the tribunal would consider this additional material, and

3. that the parties would come back to the tribunal "for giving oral statements".

7. This is to some extent contradicted by the implication in the directions that the defendant would submit additional material by 5 September willy-nilly, but, if the directions were confusing, that is not the fault of the defendant.

8. It is difficult to argue that that the defendant did not respond to the plaintiff's additional material within a reasonable time of their receipt. And, if it was thought that it had not done so, it should have been informed that the tribunal would proceed without it. It is also difficult to believe that the tribunal properly considered the defendant's submissions that were received on the same day as the award was given. The award itself does not refer specifically to those submissions. And it is clear that the tribunal did not hold another hearing "for giving oral statements". I do not say that it was necessary for the tribunal to have done so, but, if it did not intend to do so, it should have told the parties clearly that, upon receipt of the further material from the parties, it would proceed without a further hearing. Here, the message to the parties was the opposite; that there would be as further hearing at which the parties would have the opportunity of giving "oral statements". It was reasonable for the defendant to assume that it would have the opportunity of dealing with the plaintiff's case at that further hearing.

9. In the result, I find that there was a procedural irregularity, and the defendant was unable to present its case properly before the tribunal. In coming to this conclusion, I have to say that this case is unusual; in my experience, most CIETAC arbitral tribunals are normally meticulous in observing procedural fairness. It may be that the imperfect transcript does not paint a true picture of what happened in the proceedings, but, on the material before me, I have to find that there was a procedural slip-up, and this may have resulted in an injustice to the defendant. In these circumstances, I exercise my discretion to set aside my order of 13 February 1997.

10. I have not heard argument on costs, but I cannot see any reason why costs should not follow the event. I make an order nisi that the plaintiff pay the costs.

JK FINDLAY

Judge of the High Court
Court of First Instance