WANG PEIJI v. WEI ZHIYONG

HCMP 571/2019

[2019] HKCFI 2593

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 571 OF 2019

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DECISION

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1.  This case is a setting aside application made pursuant to Order 73, rule 10(6) of the Rules of the High Court.

2.  By an ex parte originating summons filed on 17 April 2019, the plaintiff sought leave to enforce an award (from the Guangzhou Arbitration Commission) made on 20 April 2009.  The application was made under sections 2GG and 40B of the Arbitration Ordinance (Cap. 341).   

3.  By an order made on 14 May 2019 (the “Enforcement Order”), Madam Justice Mimmie Chan granted leave to enforce the award, in the following terms:

  (a)  The defendant and 周友华 should pay to the plaintiff the outstanding sum of RMB 8 million and interest (interest is calculated from 1 April 2008 up to the date of full payment at 2% per month for the principal sum of RMB 8 million).

  (b)  The defendant and 周友华 are jointly and severally liable for payment under (a) as stated above.

  (c)  The defendant and 周友华 shall reimburse the plaintiff the arbitration fee in the sum of RMB 87,517.

  (d)  In respect of the sum due from the defendant and 周友华 under (a) and (c) above, the Defendant’s Companies, namely 广州市启邦信用担保有限公司 and 广州市红马汽车出租有限公司 are to be held jointly and severally liable for the same.

4.  By an inter partes summons filed on 27 May 2019, the defendant seeks to set aside the Enforcement Order.  The grounds relied upon are that the cause of action is time barred; alternatively, that the principle of res judicata applies.

Agreed facts

5.  Helpfully, the parties provided me with a set of Agreed Facts at the start of the hearing.  I have set these out below, for ease of reference:

“ 1. The Plaintiff, the Defendant and one 周友华 (‘Zhou’), and their related companies广州市启邦信用担保有限公司 and 广州市红马汽车出租有限公司 (collectively referred as ‘Ds’ Companies’) entered into a loan agreement on 29 October 2007 whereby the Defendant and Zhou would borrow Lent the sum of RMB 22 million, such sum to be repaid on 30 March 2008. In case of default, the Defendant and others Zhou should pay interest on the outstanding loan together with interest calculated at the rate of 2% per month and Ds’ Companies would guarantee the repayment of the same by the Defendant and Zhou.

2. The Defendant, Zhou and Ds’ Companies did not repay the loan on its due date. The Plaintiff therefore commenced arbitration proceedings in the 廣州仲裁委員會 (‘Guangzhou Arbitration Commission’) on 31 December 2008.

3. The Guangzhou Arbitration Commission granted the award dated 20 April 2009 in favour of the Plaintiff and made the following orders (‘the Award’):-

(i) The Defendant and others Zhou should pay to me the outstanding loan sum of RMB 8 million and interest (interest is calculated from 1st April 2008 up to the date of full payment at 2% per month for the said principal sum of RMB 8 million).

(ii) The Defendant and other Zhou should be jointly and severally liable for payment under (i) as stated above;

(iii) The Defendant and other Zhou shall reimburse to the Plaintiff the arbitration fee in the sum of RMB 87,517.

(iv) In respect of the sum due from the Defendant and Zhou under (i) and (iii) above, Ds’ Companies are to be held jointly and severally liable for the same.

4.  On 17 June 2009, it was adjudicated that the Award should be enforced by廣東省廣州市番禺區人民法院 (‘the Panyu People’s Court’).

5.  On 1 July 2009, the Panyu People’s Court accepted the Plaintiff’s enforcement application of the Award.

6.  On 29 November 2010, it was adjudicated by the Panyu People’s Court that the sum of RMB 4,692,289.24 was obtained from the Defendant through execution and the sum of RMB 3,395,227.76 plus interests remained outstanding under the Award.

7.  On 15 December 2018, it was further adjudicated by the Panyu People’s Court that through further execution against the Defendant, a sum of RMB 41,730.84 has been recovered.  As there was no other assets of the Defendant available for execution and the Plaintiff could not provide other evidence to the contrary,the enforcement procedures have come to an end.  If and when circumstances could become possible for the purpose of execution,the Plaintiff may apply to reinstate the enforcement procedures. According to section 519 of the Civil Procedure Law of the People’s Republic of China, the enforcement procedures have been completed.

8.  In each of the Award and the subsequent determinations of the Panyu People’s Court, both the Plaintiff and the Defendant were identified with their respective PRC Identification number, their addresses in PRC and PRC law firms.

9.  On 11 January 2019, the Plaintiff’s then solicitors Messrs. Wing Hang Lawyers filed the writ in HCA85/2019 against the Defendant suing on remaining balance due under the Award and Statement of Claim was subsequently served on the Defendant regarding HCA 85/2019.

10.  In January and February 2019, the Plaintiff and the Defendant exchanged pleadings.

11.  On 16 April 2019, the Plaintiff obtained an order to discontinue HCA 85/2019 with costs to the Defendant.”

The defendant’s case

6.  Relying upon the separate decision of Madam Justice Mimmie Chan in CL v SCG [2019] 2 HKLRD 144, Mr Dickson Li, appearing for the defendant, asserted a time bar argument under the Limitation Ordinance (Cap. 347) (the “LO”).

7.  It appears to me that the CL v SCG case is highly relevant to the present case and I will thus summarise the salient facts from that case.

8.  In CL v SCG, the plaintiff, CL had received an order in its favour dated 17 February 2011 whereby the defendant, SCG was ordered to pay US$2,173,000, together with interest and costs.  Demands were made on 18 and 31 March 2011 but no payment was received.  So in July 2011,CL launched enforcement proceedings in Shenzhen.  Those proceedings were singularly unsuccessful and on 30 March 2015 (ie, almost four years later), the Shenzhen Court rejected the enforcement application.  That decision was appealed by CL and unfortunately for CL that appeal was rejected in March 2016.  In effect, some five years of enforcement efforts in Shenzhen had come no nothing.  

9.  CL then turned its enforcement efforts to Hong Kong, seeking enforcement here on 6 February 2018.  Leave to enforce was granted (ex parte) on 12 February 2018. 

10.  SCG applied to set aside CL’s enforcement order, arguing that the application was time barred due to LO section 4(1) (which governed the arbitration). 

11.  Mimmie Chan J agreed that the application was time barred. Relying on the decision in Agromet v Maulden Engineering Ltd [1985] 1 WLR 762, the judge held that the six-year time limit ran for CL from the time SCG failed to honour the implied promise to perform the award (and not from the date of the arbitration agreement, nor the date of the award).  On the facts of that case, this date was 8 April 2011 such that CL’s application was time barred on 8 April 2017.

12.  In this situation, CL sought to argue that the limitation period was suspended during the time when CL attempted enforcement proceedings in China.

13.  This argument was rejected by Mimmie Chan J, in these terms:

“ 21. However unfair may be the consequence, there is no express provision in the Arrangement, the relevant Arbitration Ordinance,or the Ordinance itself, that time limitation for enforcement of an arbitral award should not run during the period when a successful party to an arbitral award applies for enforcement on the Mainland. By the plain reading and operation of s.4(1)(c) of the Ordinance,the cause of action accrued to CL to enforce the Award in Hong Kong when SCG acted in breach of its obligation to make payment under the Award, and became time-barred after the expiration of 6 years. Any remedy to provide for circumstances when there is pending application for enforcement of the Award on the Mainland can only be provided by statutory amendment. In the meantime,applicants will have to consider withdrawing and procuring determination of a pending application for enforcement on the Mainland, before applying for enforcement in Hong Kong prior to the expiry of the relevant limitation period.”

14.  Mr Li submitted that CL v SCG applies fully to the facts of the present case.  He maintains that time ran for limitation purposes from around June 2009 (as the date of the Mainland enforcement order which prompted demands to pay) and that time expired for limitation purposes in or around June 2015 – long before the plaintiff’s 2019 enforcement application was filed in Hong Kong.  Thus, CL’s application is time barred.  Mr Li further submits that the six-year limitation period for the defendant in the present case was not suspended while enforcement efforts in China were still underway, relying again on CL v SCG.

15.  Aside from the limitation argument, Mr Li argued that the Enforcement Order should be set aside on the ground of res judicata. This was on the basis the same claims had been pursued by the plaintiff in HCA 85/2019 but that those claims had since been withdrawn.

The plaintiff’s response

16.  Ms Joyce Leung, appearing for the plaintiff, made what was essentially a two-pronged response to the defendant’s time bar submissions.

17.  Firstly, Ms Yeung asserted that the applicable time bar provision is not LO section 4(1)(c) at all but rather,section 4(3). The relevant part of this provision is in these terms:

“ An action upon a specialty shall not be brought after the expiration of 12 years from the date on which the cause of action accrued”.

18.  In Ms Yeung’s submission this provision sets a 12 year time limit that runs from the date of the award made by the Guangzhou Arbitration Commission, namely, 20 April 2009 (ie not 12 years from the date of the underlying contract).  If she succeeds with this argument,the limitation period will expire on 20 April 2021, such that the time bar issue falls away.

19.  The second (and fall back) argument pursued by Ms Yeung is that if the six-year time limit in LO section 4(1)(c) is found to be applicable, time must be suspended for the whole of the period in which the plaintiff’s (partially successful) enforcement efforts were underway.  The period to be excluded from time calculations, on her analysis, is the period from around July 2009 through to December 2018 – a period of roughly 9 years.  Ms Yeung invited me to distinguish this case from the facts in CL v SCG.  She said that this case was different for a number of reasons but most particularly, that in the present case, enforcement efforts in China went on for some time and were materially successful.  This is in strong contrast to CL v SCG where the efforts at enforcement were only ever pending and ultimately failed.  In Ms Yeung’s submission, a successful plaintiff cannot be expected to have stopped enforcement efforts in China which were bearing fruit.

Discussion

20.  In light of the decision of CL v SCG, the above points can be taken quite briefly.

21.  As to the question of whether it is LO section 4(1)(c) or 4(3) which applies, I believe it is the former.   Where, as here, we have an application to enforce an award, where the submission to arbitration (ie the underlying contract) is not under seal, the limitation period is 6 years from the date on which the cause of action accrued.  This is how section 4(1)(c) applies in this case.

22.  Had the underlying contract in this case been executed under seal, then the limitation period would have been 12 years, pursuant to LO section 4(3).  But section 4(3) does not come into play in this case as it is not suggested by either party that the underlying contract was executed under seal.

23.  As noted, Ms Yeung seeks to argue that the award of the Guangzhou Arbitration Commission, being executed under seal, is a specialty and thus, a 12 year limitation period runs from the date of the award.  I am satisfied this this is not how section 4(3) should be construed.  It is clear in my view that LO sections 4(1)(c) and 4(3) are directed to the question of whether the underlying contractual document giving rise to disputes is (or is not) executed under seal.  This much is clear from a plain reading of the provisions of the Limitation Ordinance.

24.  As to the plaintiff’s submission that time limits should be suspended, I am not persuaded by Ms Yeung’s efforts to distinguish CL v SCG.   The passage cited above from that case (see §13), is entirely clear and correct in my view, namely, that Hong Kong law (including the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region) does not provide for time limits to be suspended while the successful party attempts enforcement on the Mainland.  I note that both this case and the case of CL v SCG were based upon the provisions of the Arbitration Ordinance (Cap. 341) and there is nothing in that Ordinance (including sections 2GG and 40C) that would lead me to conclude otherwise. 

25.  This is the law as it applies to the present case.  The plaintiff’s efforts to distinguish this case from the facts in CL v SCG (eg, on the basis that in the present case, the plaintiff’s efforts at enforcement had been partially successful), do not change this legal reality. 

26.  For the reasons set out above, I would grant the defendant’s application to set aside the Enforcement Order on the ground that the application to enforce is time barred based upon the application of LO section 4(1).  

27.  It only remains for me to address the res judicata argument relied upon by the defendant as a second ground to challenge the Enforcement Order.  In this regard, I would be inclined to accept Ms Yeung’s submission that the withdrawal of a writ is no bar to new action, so that the defendant’s res judicata argument fails.  But since the defendant’s application to set aside the Enforcement Order on limitation grounds has succeeded, the success or otherwise of the res judicata issue does not need to be determined.      

Costs

28.  In light of my decision, I make a costs order nisi that the costs of this application (together with any costs previously reserved) be to the defendant.