廣東長虹電子有限公司 v. INSPUR ELECTRONICS (HK) LTD

HCMP 434/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 434OF 2015

(ON AN INTENDED APPEAL FROM HCCT NO. 43 of 2013)

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REASONS FOR JUDGMENT

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

1.  On 24 December 2014, Mimmie Chan J refused to set aside the leave granted by Her Ladyship on 13 February 2014 for enforcement of a Mainland arbitration award of 6 March 2013. That order was made under sections 84 and 92 of the Arbitration Ordinance.

2.  The respondent applied for leave to appeal. On 4 February 2015, after hearing submissions from counsel for the respondent, the judge refused to grant leave.

3.  The respondent then applied on 18 February 2015 to this court for leave to appeal. 

4.  On 16 March 2015, this court drew attention of the parties to a line of authorities suggesting that there could not be any appeal from such decision without leave of the judge in the Court of First Instance.

5.  Subsequently, parties filed supplemental submissions. 

6.  Further, by a summons of 18 March 2015, the respondent applied for leave to amend its application by deleting the application for leave to appeal and applying, in its stead, for the setting aside of the refusal of leave by the judge.

7.  We heard the matter on 24 March 2015 and dismissed the application for leave to appeal and the summons of 18 March 2015 with costs. The following are our reasons.

8.  In light of section 84(3) of the Arbitration Ordinance which is applicable to a Mainland award by reason of s92(1)(b) of the Ordinance, and reading it together with s 14(3)(ea)(v) of the High Court Ordinance, it is clear that there could not be any appeal from the decision of 24 December 2014 when the judge had refused leave to appeal.

9.  This proposition is well supported by English authorities on similar provisions in England, Henry Boot Construction (UK) Ltd v Malmaison Hotel [2001] QB 338; Itochu Corp v Johann MK Blumenthal Gmbh [2012] 2 CLC 864; Kyla Shipping Co Ltd v Bunge SA [2013] EWCA Civ 734; Philip Hanby Ltd v Andrew John Clarke [2013] EWCA Civ 647.  Such approach highlighted the underlying philosophy in respect of the limited role of the courts in respect of enforcement of arbitration awards: parties who have undergone arbitration should have finality as speedily as possible and with as little expense as possible.  There is a deliberate policy of restricting the rights of appeal. 

10.  Mr Tsang, who appeared for the respondent, conceded that this court has no jurisdiction to grant leave to appeal in respect of the decision of 24 December 2014. 

11.  However, counsel submitted that, based on Aden Refinery co Ltd v Ugland Management Co Ltd [1987] QB 650 and CGU Insurance plc v AstraZeneca Insurance Co Ltd [2007] Bus LR 162, [2006] EWCA Civ 1340, this court has residual jurisdiction to set aside the refusal of leave due to unfairness in the process.

12.  In Aden Refinery co Ltd v Ugland Management Co Ltd supra, Mustill LJ said the following in respect of this residual jurisdiction at p.666:

“ I can envisage that if a judge had in truth never reached ‘a decision’ at all on the grant or refusal of leave, but had reached his conclusion, not by any intellectual process, but through bias, chance, whimsy or personal interest, an appellate or other court might find a way to intervene.”

13.  The relevant nature of this residual jurisdiction was examined at some length by Rix LJ in CGU Insurance plc v AstraZeneca Insurance Co Ltd, supra.  Though there is some difference in emphasis, the focus is still on the fairness of the proceedings.  The distinction between a challenge to the merits of the decision and the fairness of the procedure is highlighted at paragraph 79:

“ 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.”

14.  At paragraph 99, Rix LJ further stressed the need for the court to be vigilant in guarding against abuse of this exceptional jurisdiction:

“ It is important to underline what was also said in the North Range Shipping Ltd case about the dangers of this residual jurisdiction being misused. There may be a temptation, even an unconscious one, to present an unfavourable decision as one which is not only wrong but arrived at unfairly. But in the nature of things it is likely to be an exceptionally rare case where the submission of unfairness is justifiably advanced. The courts will not permit the residual jurisdiction, which exists to ensure that injustice is avoided, to become itself an unfair instrument for subverting statute and undermining the process of arbitration.”

15.  In Philip Hanby Ltd v Andrew John Clarke, supra, the Chancellor of the High Court said at paras 17 and 18,

“17. … Notwithstanding the apparent finality of the High Court’s refusal of permission of appeal …the Court of Appeal retains a residual jurisdiction to set aside the refusal of permission … in certain situations of unfair or improper process. Those situations are, firstly, where the High Court judge never reached something which can properly be called ‘a decision’ at all and, secondly, where the decision was reached through a process incompatible with the European Convention on Human Rights and Fundamental Freedoms …

18. In the case of both categories the distinctions between unfair or improper process which may found the residual jurisdiction on the one hand and criticism of the substantive merits of the decision, including perversity, which is incapable of founding residual jurisdiction on the other hand …”

16.  In  Kyla Shipping Co Ltd v Bunge SA, supra, Longmore LJ as supervising judge of Commercial matters said at paragraph 15:

“ … a litigant complaining of a refusal of [leave to appeal] has an extraordinary high hurdle to surmount.”

17.  And the procedural difference between an application for leave to appeal and application for setting aside the refusal of leave at the court below was clearly explained at paragraph 23:

“ It seems that in my capacity as supervising judge of Commercial matters I caused this application to be listed as an application to decide whether there was jurisdiction in this court to grant permission to appeal. There is no such jurisdiction and, for the avoidance of doubt, it would be sensible … so to declare. … this court cannot decide whether to grant or refuse leave to appeal to itself. This court can only decide whether or not to set aside the original decision to refuse leave to appeal to this court. If that were done, the successful party would then be free to re-apply to the Commercial Court for a fresh decision.”

18.  We respectfully agree with this line of reasoning on the distinction between the residual jurisdiction and the power to grant leave to appeal. In England, the residual jurisdiction stems from s16 of the Senior Courts Act 1981 (see para 18 of Philip Hanby Ltd v Andrew John Clarke, supra, and para 73 of CGU Insurance plc v AstraZeneca Insurance Co Ltd, supra). In Hong Kong, subject to one point, it may stem from s14(1) of the High Court Ordinance based on similar reasoning. The only rider is whether the application to set aside a refusal of leave by the court below can be regarded as “an appeal” when this court cannot grant leave in substitution of the order of the lower court. This point has not been argued before us and, apparently, not discussed in the English cases cited to us. We would prefer to leave it open. In this judgment, we assume (without deciding) that we have a similar residual jurisdiction to set aside.   

19.  Thus, even if the respondent did not abandon its application for leave to appeal, it fell to be dismissed.  In respect of the application to set-aside, we make the following observations:

(a) We have before us an application for leave to amend the summons to seek the relief of setting aside the refusal of leave on 4 February 2015;

(b) We doubt if the substantive application for setting aside could be heard by 2 judges.  However, we accept that 2 judges can hear the application for leave to amend the summons; and if leave is granted, the matter might have to be listed before 3 judges; and

(c) In considering the application for leave to amend, we have to assess whether there is any reasonable prospect in the application for setting aside in light of the high threshold laid down in the cases cited above.  

20.  Having reviewed the arguments advanced by Mr Tsang in support of his application, we must say that the respondent’s case is nowhere near the baseline for meeting such high threshold.  In substance, all his arguments were directed towards the merits of the judge’s decision of 24 December 2014. We categorically reject counsel’s submission that a serious flaw in logic in the judge’s decision (assuming there is any) can bring the case within the residual jurisdiction. There is absolutely no basis for suggesting that the judge did not act fairly towards the respondent in refusing to grant leave to appeal.  We cannot see any substantial defect in the fairness of the process on 4 February 2015.  The fact that Her Ladyship did not regard the grounds of appeal (on the merits as to the decision of 24 December 2014) reasonably arguable was a view she was, rightly or wrongly, entitled to hold and as such, cannot be a ground for challenging the fairness of the process.

21.  For these reasons, we declined to grant leave to amend the summons. 

22.  It also follows from what we said that the application for leave to appeal must be dismissed with costs.  The application for stay of execution was also dismissed. In accordance with the usual practice in arbitration cases, costs were awarded in indemnity basis.

23.  After the hearing, the parties agreed the costs at $138,361.00.  We fix the costs of the applicant accordingly.