TGL v. SDC AND ANOTHER

HCCT 41/2023

[2024] HKCFI 2393

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 41 OF 2023

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D E C I S I O N

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1.  On 10 July 2024, this Court handed down a Decision, dismissing the Respondents’ application to oppose enforcement of an arbitral award. The nomenclature used in the Decision is adopted below.

2.  The grounds relied upon by the Respondents in their Summons to set aside the Enforcement Order of the Court were that the composition of the tribunal in the Arbitration was not in accordance with the agreement of the parties and/or the law of the Mainland, and that it would be contrary to the public policy of Hong Kong to enforce the Award. Essentially, it was argued that the arbitrator had failed to disclose his relationship with companies associated with the Applicant in the Arbitration (“Impugned Relationship”), and that there was apparent bias on his part, such that the composition of the tribunal was contrary to the parties’ arbitration agreement, or the law of the Mainland, and that it would be contrary to the public policy of Hong Kong to enforce the Award as being in breach of the basic principles of natural justice, when there is a perception and real risk of bias on the part of the arbitrator by virtue of the Impugned Relationship.

3.  In the Decision, the Court found (see paragraph 28)  that the Hong Kong court of enforcement should give due regard and weight to the decision of the Shenzhen Court, as the supervisory court of the Arbitration, that there was no breach of PRC law and no breach of the SCIA Rules governing the Arbitration regarding the arbitrator’s duty of disclosure, and no actual or apparent bias on his part, in that there were no circumstances which may give rise to a reasonable doubt as to the arbitrator’s fairness and impartiality. The ground under section 95(2)(e)  of the Ordinance was accordingly not established.

4.  The Court also found that in the circumstances of the case, there was no cogent and rational link between any association which the arbitrator may have had with the Applicant, and the capacity of such association to influence the arbitrator’s decision in the Arbitration, to give any impression of possible bias on the part of the arbitrator. As such, it would not be contrary to the public policy of Hong Kong to enforce the Award.

5.  The Respondents now seek leave to appeal against the Decision.

6.  The Respondents argued that the Court erred in accepting at face value, or placed too much weight on, the arbitrator’s own representation or evidence as to the relevant facts, of the Impugned Relationship between the Applicant and the companies with which the arbitrator/his firm had dealings, and of the arbitrator’s professed knowledge or lack of knowledge of these facts and relationship.

7.  It was also argued that there was error in the Decision as the Court had failed to consider relevant matters which would have shown inconsistencies in the arbitrator’s disclosure, and would have caused an objective fair-minded and informed observer to conclude that the arbitrator had not been truthful, and that there was a real risk of bias on his part.

8.  The Decision was a final one, and under section 84(3)  of the Ordinance (which applies to a Mainland award by virtue of section 92(1)(b)  of the Ordinance), the leave of the Court is required for any appeal from a decision of the Court to grant or refuse leave to enforce an award. A decision to grant or refuse leave to enforce an arbitral award is an exercise of the discretion of the Court, and the applicant for leave to appeal has to show that he has an arguable case with reasonable chances of success that the relevant decision exceeds the generous ambit within which reasonable disagreement is possible, and is in fact plainly wrong, and not merely that the appellate court would prefer a solution which the judge had not chosen (RK v YS HCMP 1969/2012, cited at para 59/2A/4 Hong Kong Civil Procedure).

9.  In KNM v HTF HCMP 288/2011, the Court of Appeal explained that a reasonable prospect of success means an appeal with prospects that are more than “fanciful” but which do not need to be shown to be “probable”. It is insufficient to show that the appeal was “merely arguable” and “not fanciful” for the court to be satisfied that the applicant had a reasonable prospect of success.

10.  Counsel for the Respondents highlighted the fact that the arbitrator had stated incorrect facts in the Response, that such inconsistencies with the actual facts cast doubts on the truthfulness of the arbitrator and the completeness of his Response, but that the Court had failed to take into consideration such inconsistencies, and had erred in accepting the arbitrator’s Response at face value, which was tantamount to adopting a subjective test of whether there was a risk of bias, instead of an objective test from the perspective of the reasonable hypothetical bystander.

11.  It should be clear from the Decision, and in particular paragraphs 39 to 42 of the Decision, that the test which was applied by the Court was that of the independent objective third-party observer who was fully informed of the relevant facts and circumstances. In particular, it was pointed out at paragraph 40 of the Decision that the Court was not bound to accept the statement made by the arbitrator in his Response. The claim that the wrong legal test had been applied cannot have any reasonable prospect of success.

12.  Seeking to place reliance on the decision of Save and Prosper Pensions Ltd v Homebase Ltd [2001] L & TR 11, Counsel further sought to argue that the Court should have found that there was a real risk of bias where a firm of which one arbitrator was a partner acted for a company associated to one of the parties. The authority cannot advance the Respondents’ case further, as the Court clearly stated at paragraph 46 of the Decision that the consideration of the arbitrator’s dealings was not confined to his dealings with the Applicant only, but included the extent of the associations and dealings with CN Zhongyuan, TFE, TFH and CN Nuclear Capital of which the Respondents complained.

13.  There was no evidence adduced at the hearing which could contradict the arbitrator’s claims, that he had no knowledge of the dealings relating to the Impugned Relationship of which the Respondents complained.  In any event, the fact of the submission and award of the tender (including the actual date of the announcement of the award)  were included in the facts which the independent third-party observer was taken to have known. Having considered all the facts and circumstances and the entire history of the dealings between the arbitrator and the group of companies of which the Applicant forms part, the Court was not satisfied that there was a sufficiently cogent and rational link between any association which the arbitrator may have had with the Applicant, and the capacity of such association to influence the decision of the arbitrator, to give any impression of a real risk of bias on the part of the arbitrator.

14.  Hence, I am not persuaded that the Respondents have an arguable case with reasonable prospects of success that the Decision exceeds the generous ambit within which reasonable disagreement is possible, and is plainly wrong.

15.  However, the parties had not advanced focused arguments at the hearing on the duties of an arbitrator to make disclosure throughout the course of an arbitration (which duty exists under Article 12 of the Model Law, which has effect by virtue of section 25(1)  of the Ordinance), the extent of such duties with regard to matters which came to the knowledge of the arbitrator or which he ought reasonably to have known, and whether the matters required to be disclosed should be wider in scope than what would justify recusal of an arbitrator. Breach of such duties may be relevant to the question of whether enforcement of the Award should be refused as being contrary to public policy. This question is one of general principle and is of importance, such that a decision of the Court of Appeal would serve advantage to the arbitration community. For that reason, I will grant leave to appeal.

16.  The costs of the application will be in the cause of the appeal.