T v. W

HCA 366/2020

[2021] HKCFI 160

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 366 OF 2020

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BETWEEN

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D E C I S I O N

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1.  On 18 November 2020, this Court refused the Defendant’s application to stay these proceedings to arbitration. The Defendant now seeks leave to appeal against the Decision.

2.  The definitions set out in the Decision are adopted.

3.  Under section 20 (9) of the Ordinance, the leave of the court making the decision to refuse to refer the parties to arbitration is required for any appeal from that decision. No threshold or test for the grant of leave is specified in section 20 (9). Since the Decision is not a final decision, sections 14AA (1) and (4) of the High Court Ordinance, and the requirement of “reasonable prospect of success”, may apply.

4.  This means that the prospects of the appeal succeeding must be “reasonable” and therefore more than “fanciful”, without having to be probable (SMSE v KL [2009] 4 HKLRD 125). The Court explained in Wynn Resorts (Macau) SA v Mong Henry unreported, HCA 192/2009, [2009] HKEC 1293 that to meet the reasonable prospect of success test, an applicant is required to show more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed.

5.  Under section 14AA (4) (b) of the High Court Ordinance, leave to appeal may be granted if there is some other reason in the interests of justice why the appeal should be heard.

6.  The Defendant argued that the Decision was based upon the Court’s view that the Court of Appeal judgment in CA Pacific Forex Ltd v Lei Kuan Ieong [1999] 1 HKLRD 462 is binding, and hence applied the test of whether there was a plain manifestation in the arbitration clause that it is to apply to the Cheque. The Defendant maintained its argument that CA Pacific has been overtaken by developments in the law favouring “one-stop” dispute resolution, as advocated in Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951. Instead of presumptions against arbitration of disputes over bills of exchange, there should be a presumption that parties would not have agreed to separate the claims under the bill of exchange and those under the underlying contract for which the bill was issued. Accordingly, the Defendant argued that leave to appeal should be granted for this matter to be argued before the Court of Appeal, so that the Court of Appeal can analyze the more recent decisions and decide whether to follow the approach adopted by the English Court in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 and Uttam Galva Steels Ltd v Gunvor Singapore Pte Ltd [2018] EWHC 1098 and of the Singapore High Court in Piallo GmbH v Yafriro International Pte Ltd [2014] 1 SLR 1028.

7.  Counsel for the Plaintiff rightly pointed out that this Court did not rely entirely on the presumption against arbitration of bills of exchange, as stated in CA Pacific. The Court construed the arbitration clause but found that the language was not wide enough to include a claim based on the Cheque, which was a separate contract to the underlying Loan Agreement.

8.  At paragraph 15 of the Decision, this Court pointed out that the issue at the end of the day is the construction of the language used in the arbitration clause. As recognized by Kaplan J in York Air-conditioning & Refrigeration Inc v Lam Kwai Hung (t/a North Sea a/c Elect Eng Co) [1995] 2 HKLRD 56, it is possible for an arbitration clause to be drafted widely enough to cover a claim made under a bill of exchange. On construction of the arbitration clause in the Loan Agreement, this Court found that it did not extend to the Plaintiff’s claim on the Cheque. The Court further pointed out at paragraph 22 of the Decision that even if the construction of the arbitration clause should start with the presumption of one-stop dispute resolution, the nature of the Cheque and the remedies thereunder are good commercial reasons for the parties to have agreed not to resort to the same arbitral process for the underlying Loan Agreement.

9.  The “reasonable prospect of success” threshold is not high (as recognized by the Court of Appeal in China International Fund Ltd v Dennis Lau & Ng Chun Man Architects & Engineers (HK) Ltd [2015] 4 HKLRD 609 at para 33), and it is arguable that the appeal on the construction of the arbitration clause may have merits which are more than fanciful. Counsel for the Defendant also argued that the appeal involves an important point of law on whether the presumption stated in CA Pacific should continue to apply in Hong Kong.

10.  For the above reasons, I will grant leave to appeal, with costs in the cause of the appeal.