GUO HANWEI v. XIE GUOMIN AND OTHERS

CACV 164/2024, [2024] HKCA 695

On appeal from [2024] HKCFI 1013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 164 OF 2024

(ON APPEAL FROM HCCT NO 58 OF 2021)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This is the application of the 1^st respondent by summons issued on 16 May 2024 (“Stay Summons”), seeking a stay of execution pending the resolution of a “Notice of Appeal” he filed in CACV 164/2024. The 1^st respondent will be referred to as “X” and the applicant in the proceedings (HCCT 58/2021) as “G”, and we will adopt the terms and expressions in the decision of Mimmie Chan J on 12 April 2024 (“Refusal of Leave Decision”)[1].

2.  By the Refusal of Leave Decision, the judge refused to grant leave to X to appeal against her decision dated 19 December 2023 (“Enforcement Decision”)[2], in which she granted leave to G to enforce in Hong Kong an award (“Award”) of a CIETAC tribunal made on 20 April 2021, whereby X was ordered to pay G an amount of RMB 660 million odd with interest. X had made a payment into court in September 2021 to secure the discharge of a Mareva injunction obtained by G.

3.  Having considered the certificate of urgency lodged by X’s counsel on 11 July 2024, we agree to deal with the Stay Summons on an expeditious basis. This is because G had obtained leave from the judge on 5 July for payment out of the amount in contention in CACV 164/2024 which relates to the interest element of the Award[3], subject to X applying to the Court of Appeal for stay or interim stay within 7 calendar days (by 12 July) and on G’s undertaking not to enforce the payment out order relating to the interest element for 21 days (by 1 August 2024). Having considered the submissions lodged on both sides, we do not think an oral hearing is required and it is appropriate to deal with the Stay Summons on paper.

4.  We do not propose to recite the procedural history, which we have taken into account.

5.  Under section 84(3) of the Arbitration Ordinance, Cap 609, 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 under section 84(1). The expression “the Court” is defined in section 2 to mean “Court of the First Instance of the High Court”. As the judge has refused leave by the Refusal of Leave Decision, there would be no further recourse to challenge the Enforcement Decision on appeal. However, notwithstanding the apparent finality of the refusal of leave to appeal by the Court of the First Instance, the Court of Appeal does have a residual jurisdiction under its inherent jurisdiction to set aside the refusal of leave in certain situations of unfair or improper process. It is pertinent to note these guiding principles regarding the exercise of this residual jurisdiction:

(1)  This jurisdiction is to provide redress in the “extreme situation” where the refusal of leave by the Court of the First Instance cannot be properly regarded as a “judicial” decision, or a decision reached “not by any intellectual process, but through bias, chance, whimsy or personal interest”. It targets “substantial defect in the fairness of the process” which invalidates the decision to refuse leave. It is a means of redress in the “rare case where the decision to refuse leave … cannot be regarded as a judicial decision”. The same cannot be said where a judge has refused leave after giving the matter a fair and proper consideration[4].

(2)  In the exercise of this residual discretion, the focus is on the fairness of the proceedings. “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”[5]. This is an “extraordinary high hurdle to surmount”[6].

(3)  The residual jurisdiction is different in character and purpose from a right to apply to the Court of Appeal for leave to appeal. The remedy the Court of Appeal may grant is not to substitute the Court of Appeal with the Court of the First Instance in deciding whether to grant leave to appeal. Rather the Court of Appeal would only decide whether or not to set aside the refusal of leave decision and if it is set aside, the intended appellant could re-apply to the Court of the First Instance for leave to appeal[7].

(4)  “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.”[8] A distinction is to be drawn between “unfair or improper decisions which may found the residual jurisdiction” and “criticism of the substantive merits of the decision, including perversity, which is incapable of founding residual jurisdiction”[9].

6.  By the Notice of Appeal, X seeks to set aside the leave refusal order to the extent that it relates to the interest element in the Award, invoking the residual jurisdiction of the Court of Appeal. There is some debate whether the proceedings commenced by the Notice of Appeal in CACV 164/2024 can be regarded as an appeal[10]. It is not necessary to resolve this for present purpose.

7.  In gist, X’s contention in CACV 164/2024 is as follows:

(1) The judge made a manifest error in the enforcement of the Award and failed to grapple with the grounds raised by X (in Section B of the draft notice of appeal)[11], namely, that the interest provisions in the Award and the “New Award” (issued by a new tribunal after the re-arbitration directed by the Mainland Court) were different. By the Award, X was required to pay interest after 30 days from the date of the Award (21 April 2021). By the New Award, he was required to pay interest after 30 days from the date of the New Award (17 November 2023). Had the judge appreciated the above difference, which is material, resulting in a difference of over RMB 109 million, she should have held that the Award had been partially “set aside” or “suspended” to the extent of the said difference.

(2) In the Refusal of Leave Decision, the judge had failed to grapple with the above argument, and had completely failed to understand a clearly articulated point. This could be regarded as “critically undermining the integrity of the process” and a “substantial defect in the fairness of the process as to invalidate the decision”.

8.  The judge dealt with the proposed ground of appeal in §§42 to 45 of the Leave Decision and rejected it as she did not think she was wrong in her consideration of the merits of the “New Setting Aside Application” and the binding effect of the Award[12]. It is only if she should be wrong on those matters that a reasonable argument might be made that the New Award upon issue replaced the Award so far as it dealt with interest, and when interest commenced to be payable. “Only to that extent can it be arguable that the part of the Award on interest ceased to have effect at the time when the New Award was made.” The judge also gave an additional reason for refusing to exercise her discretion to grant leave on this issue in that this will be determined by the Mainland Court in the “New Award Setting Aside Application”.

9.  We decline to exercise our discretion to grant a stay of execution pending the resolution of CACV 164/2024 as, taking a broad-brush approach, we do not think there are reasonable prospects of success in the attempt of X to invoke the residual jurisdiction of the Court of Appeal, applying the guiding principles we have mentioned above. We do not propose to address the arguments advanced on behalf of X in detail or say more at this stage as the proceedings in CACV 164/2024 have yet to be heard.

10.  That being the case, it is unnecessary to deal with X’s contention that the proceedings in CACV 164/2024 would be rendered nugatory without a stay of execution (which is disputed by G) or whether G may suffer grave prejudice which cannot be fully compensated by costs if a stay were granted.

11.  We dismiss the Stay Summons and order X to pay G’s costs of the application, to be taxed on an indemnity basis. We assess costs summarily at $741,930.