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Oe1 And Another v Sc

Judgment Cited authorities 10 Cited in Precedent Map Related
Vincent
Judgment Date24 August 2020
Neutral Citation[2020] HKCFI 2065
Year2020
Judgement NumberHCCT66/2019
Subject MatterConstruction and Arbitration Proceedings
CourtCourt of First Instance (Hong Kong)
HCCT48/2019 SC v. OE1 AND ANOTHER

HCCT 48/2019
HCCT 66/2019
(heard together)

[2020] HKCFI 2065

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 48 OF 2019

______________

IN THE MATTER of SECTION 81 OF THE ARBITRATION ORDINANCE, CAP 609 AND IN THE MATTER OF AN ARBITRATION
and
IN THE MATTER OF ORDER 73, RULE 5(4) & (5) OF RULES OF HIGH COURT

______________

BETWEEN
SC Plaintiff

and
OE1 1st Defendant
OE2 2nd Defendant
______________

AND

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 66 OF 2019

________________________

IN THE MATTER of SECTION 84 OF THE ARBITRATION ORDINANCE (CAP 609)
and
IN THE MATTER OF AN ARBITRATION AWARD OBTAINED BY OE1 AND OE2 IN ARBITRATION CASE NO HKIAC/PA 16067

______________

BETWEEN
OE1 1st Plaintiff
OE2 2nd Plaintiff

and
SC Defendant
______________
(Heard Together)

Before: Hon Mimmie Chan J in Chambers

Date of Hearing: 29 May 2020

Date of Decision: 24 August 2020

______________

D E C I S I O N

______________

Background

1. In April 2005, OE1, OE2 (together “OE”), and SC entered into an OEM Supply Agreement (“Agreement”), with an arbitration clause for their disputes to be settled by arbitration in Hong Kong at the Hong Kong International Arbitration Center in accordance with the UNCITRAL Arbitration Rules. Disputes arose as to SC’s alleged breach of the Agreement and on 20 May 2016, OE commenced arbitration in Hong Kong.

2. SC challenged the jurisdiction of the Tribunal on 17 October 2016. After a hearing which took place in November 2016, the Tribunal issued its award on jurisdiction, dismissing SC’s challenge.

3. A hearing on liability took place before the Tribunal in January and February 2018, followed by “Post Hearing Briefs” on liability, and a further hearing in April 2018 for closing submissions on liability.

4. A Final Award on liability was issued by the Tribunal on 16 April 2019 (“Award”), spanning 140 pages and 488 paragraphs in total. By this, the Tribunal made findings on SC’s breaches of sections 4.01, 9.01 and 12.01 of the Agreement, in respect of its filing of 7 patents and utility models on the Mainland. In its “Dispositive Order”, the Tribunal declared (at paragraph 488 (a) of the Award) that SC was in breach of its obligations under sections 4.01, 9.01 and 12.01 of the Agreement. It further ordered SC (at paragraph 488 (b)) to pay the costs of the Arbitration, and that “all other claims and reliefs sought by the Parties are rejected” (paragraph 488 (d) of the Award).

5. On 26 April 2019, OE applied to the Tribunal to correct the Award on the basis of the Tribunal’s failure to address OE’s requests for a perpetual licence under the Agreement (“Licence”) and for injunctions, pursuant to their claims for relief (as stated in Section E (i) to (iv) of the Notice of Arbitration, and in its Statement of Case served in the Arbitration). OE stated that this failure was despite findings made by the Tribunal of SC’s breaches and of OE’s entitlements to the Licence in the body of the Award. OE requested the Tribunal to correct the Award pursuant to Article 33 (1) of the Model Law, or to make an additional award pursuant to Article 33 (3) in order to correct the oversight and the errors of omission in the Award.

6. SC objected to OE’s application, claiming that the Tribunal had already rejected all the claims and relief sought by the parties in its Dispositive Order, as contained in paragraph 488 (d) of the Award (“488 (d)”). It further disputed the Tribunal’s power to make the correction or additional award sought.

7. On 25 June 2019, the Tribunal acceded to OE’s application and issued the Addendum to the Award (“Addendum”). At paragraph 33 of the Addendum, the Tribunal stated:

“In addition, the Tribunal would point to the fact that, contrary to the Respondent’s complaints of a lack of pleading, injunctive relief was indeed asked for in the Statement of Case, and again in the post-hearing brief on the issue of liability (at paragraph 332 (d) of the Claimants’ post-hearing brief). The Claimants’ arguments in support of the relief have also been extensively laid out in the body of the brief. Basically they are simply a request for relief that should follow from the necessary finding on the breaches under complaint and are not of any extraordinary nature that would warrant justification in form or impact over and above a positive finding on liability for breach.”

8. In summary, the Tribunal explained that it had already made its findings and conclusions of SC’s breaches of the Agreement, and it should have repeated a summary of its findings by providing a declaration in the Dispositive Order. It pointed out that SC had not advanced any argument in its closing submissions against the grant of the relief formulated by OE. The Tribunal confirmed that there was a clerical error of its failing to repeat an earlier finding in the Award at the Dispositive Order, and stated at paragraph 37 of the Addendum that it should add an additional paragraph 488 (a) (1), as follows:

“The Tribunal declares that OE1 has been granted royalty‑free perpetual licence with rights to sub‑licence under each of the patents, utility models and designs set forth in (OE’s) Exhibits C5‑1 through C5‑7 (inclusive) and Exhibit C91.”

9. In relation to the application for correction/ an additional award for injunctive relief, the Tribunal pointed out that OE had sought clarification as to whether the silence on the injunctive relief sought was denied on the merits, denied on procedural grounds, or if the Tribunal had failed to address the issue.

10. The Tribunal clarified, at paragraph 61 of the Addendum, that it was “a mistaken omission” for the Tribunal not to have set out the declaration at the Dispositive Order. From paragraphs 62 to 68 of the Addendum, the Tribunal stated:

“62. Having made the findings and conclusions that (SC) had violated the prohibition and against reverse engineering in Article 4, the Dispositive Order (paragraph 488) of the Final Award should not have been silent with respect to relief granted to prevent (SC) from continuing to benefit from its improper conduct to the detriment of (OE). There was no point for the Tribunal to have gone into the merits of the submissions and come up with reasoning as well as a conclusion in the main body of the Award on Liability but not to sum this up in a single sentence at the Dispositive Order at Paragraph 488 of the Award.

…

64. The Tribunal also agrees with the Claimants’ Reply to Respondent’s Reply that having known about the application for injunctive relief and having failed to make these new arguments that have now been raised in the Respondent’s Reply, or indeed any arguments in its post-hearing brief against the appropriateness of such relief in the event the issue should be found against it, these new submissions should be deemed waived and now rejected.

65. In addition, the Tribunal would point to the fact that, the entitlement to the injunctive relief is to give effect to the findings on confidential information. There is evidence that the subject machine was manufactured, and there is no evidence, less still any undertaking, from the Respondent that no manufacture has continued or would continue to take place. In the absence of any undertaking, and any closing submission arguments from the Respondent against the entitlement or form of relief in the Respondent’s post-hearing brief (other than on the substantive issue of breach of confidentiality) (at paragraphs 332(e) and (f) of the Claimants’ post-hearing brief), the Tribunal was correct in coming to its conclusions in the main body of its Final Award on Liability.

66. The Claimants’ arguments in support of the relief were (sic) also been extensively laid out in the body of the post hearing brief and in essence was simply a request for relief that should follow from the necessary finding on the breaches under complaint. They are not of any extraordinary nature that would warrant justification in form or impact over and above a positive finding on liability for breach. However, there is no need to go further in this direction as the Tribunal has already agreed with the Claimants’ submissions as set out in both its Application as well as its Reply to the Respondent’s Reply.

67. The Tribunal shall allow for the correction in adding in the conclusion made in the main body of the Award on Liability into the Dispositive Order.

68. The Tribunal shall therefore add an additional Paragraph 488 (aaaa) to follow after the current original wording of Paragraph 488 (a) of the Final Award and immediately after Paragraph 488 (aaa) in the following manner:

‘The Tribunal orders and/or issues an order enjoining the Respondent from the manufacture and sale of any ATM that is based upon and/or incorporates any OE Confidential Information including, but not limited to, the SC‑manufactured version of the CDS6040W and/or any part thereof (which CDS6040W was ordered to be produced for inspection during the hearing on liability, but which the Respondent refused to produce for inspection), regardless of model name, model number or other product identifier.’”

11. With regard to 488 (d) of the Dispositive Order, the Tribunal again accepted that there was a clerical error in failing to summarize its findings in the Dispositive Order of the Award. At paragraph 77 of the Addendum, the Tribunal explained:

“… Paragraph 488 (d) in its current wording would wrongly be interpreted to appear to conflict with the Tribunal’s findings and conclusions in the main body of the Award. In this regard, (OE) are...

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