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S v G

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date10 March 2022
Neutral Citation[2022] HKCA 383
Year2021
Judgement NumberCAMP96/2021
Subject MatterMiscellaneous Proceedings
CourtCourt of Appeal (Hong Kong)
CAMP96/2021 S v. G

CAMP 96/2021

[2022] HKCA 383

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 96 OF 2021

(ON AN INTENDED APPEAL FROM HCCT NO 46 OF 2020)

_______________

IN THE MATTER OF enforcement of an arbitration award dated 3 July 2020
and

IN THE MATTER OF section 92 of the Arbitration Ordinance (Cap 609) and Order 73 Rule 10 of the Rules of the High Court (Cap 4A)

_______________

BETWEEN
S Applicant

and
G Respondent

_______________

Before: Hon Barma and Au JJA in Court
Dates of Written Submissions: 29 March 2021 and 3 May 2021
Date of Judgment: 10 March 2022

_______________

J U D G M E N T

_______________

Hon Au JA (giving the Judgment of the Court):

A. INTRODUCTION

1. This is the respondent (“G”)’s renewed application for leave to appeal from the decision (“the Decision”) of Mimmie Chan J (“the Judge”) dated 2 February 2021 ([2021] HKCFI 263).

2. By way of the Decision, the Judge dismissed G’s application for stay of enforcement of a Mainland arbitral award obtained by the applicant (“S”) against G dated 3 July 2020 (“the S Award”). Leave to appeal against the Decision was refused by the Judge on 16 March 2021 ([2021] HKCFI 673).

3. After reviewing the parties’ respective written submissions, we are of the view that it is proper to dispose of this application on paper pursuant to Order 59, rule 2A(5) of the Rules of the High Court (Cap 4A) (“the RHC”). This is our decision.

B. BACKGROUND

4. The factual background of this case has been set out in detail at [1] ‑ [14] of the Decision and need not be repeated here. For present purposes, we highlight the following.

5. The parties entered into a cooperation agreement dated 20 July 2017 (“the 17 Agreement”) whereby G was appointed as the exclusive distributor of S’s products on the Mainland. The 17 Agreement was subsequently replaced by a new agreement dated 1 October 2018 (“the 18 Agreement”). Disputes subsequently arose between the parties which eventually led to two sets of arbitrations in April 2019 and two separate arbitral awards in July 2020 being made by the Arbitral Tribunal in the Mainland.

6. In August 2019, S obtained a freezing injunction on the Mainland (“the Mainland Freezing Order”), whereby funds in G’s bank account in Ningbo, with a balance of USD469,248.56 (around EUR400,000), were frozen by the Hangzhou Court. This was an order for preservation of assets.

7. In the arbitration commenced by G (“the G Arbitration”), the Arbitral Tribunal ordered, inter alia, that S was in breach of the 18 Agreement and should continue to perform its obligations under the 18 Agreement (“the Specific Performance Order”); and that S should pay G various sums adding up to approximately EUR510,000, which included a total sum of RMB1,181,664.95 and USD161,211.03 in respect of marketing costs incurred during the period of the parties’ cooperation (“the Marketing Costs Order”). It was also ordered that S should provide EUR890,833.27 worth of sample products to G, or pay the equivalent amount to G (“the Alternative Relief Order”).

8. In the arbitration commenced by S (“the S Arbitration”), the Arbitral Tribunal ordered, inter alia, that G should pay S a sum equivalent to EUR1,762,360.70 representing the overdue payment for S’s products supplied under the 18 Agreement; together with the corresponding interest thereon and the costs of the arbitration. The total amount added up to approximately EUR1.8m.

9. On 4 September 2020, leave for enforcement of the S Award was granted to S by the Judge (“S Enforcement Order”). S subsequently served a statutory demand on G on 23 September 2020 in respect of the total sum due under the S Award. This led to an application by G for an injunction to restrain S from presenting a winding up petition against G, which was eventually resolved by S undertaking not to present any winding up petition for the amount due under the S Award and G making payment into Court of the sum of USD470,000 (approximately EUR400,000) (“WUP Injunction Payment”), pending the adjourned hearing of the injunction application in the Companies Court on 18 February 2021.

10. Subsequently in September 2020, G issued a new request for CIETAC arbitration against S (“the New Arbitration”), seeking, inter alia, damages of RMB59,439,836.97 (approximately EUR7.5m) (“Unliquidated Damages Claim”) in respect of S’s breach of clause VII 5 of the 18 Agreement (“the Inventory Clause”).

11. On 22 September 2020, G applied by summons to stay the S Enforcement Order (“the Stay Application”) pending the final resolution of (a) G’s application for leave to enforce the G award; and / or (b) the New Arbitration.

12. On 25 September 2020, the Judge granted leave to enforce the G Award (“the G Enforcement Order”).

13. As mentioned above, the Judge heard G’s stay application on 5 November 2020 and handed down the Decision on 2 February 2021. To complete the chronology:

(1) On 10 November 2020, S applied to set aside the G Enforcement Order (“the Set Aside Application”). This was however refused by the Judge on 24 May 2021 ([2021] HKCFI 1461).

(2) On 12 March 2021, Harris J granted the injunction sought by G enjoining S from presenting a petition for winding-up of G on the grounds of insolvency ([2021] HKCFI 568).]

C. THE STAY APPLICATION AND THE DECISION

14. G’s claims advanced in support of the Stay Application are essentially that:

(1) G has various cross-claims adding up to about EUR9m, which is far more than the amount claimed by S under the S Award (about EUR1.8m), which sum is also adequately secured up to about EUR800,000 by the WUP Payment and the Mainland Freezing Order (“the Cross-claims Basis”); and

(2) On the other hand, serious prejudice will be caused to G if the enforcement of the S Award is not stayed as S may remove such payments from Hong Kong and thereby make it more difficult for G to enforce against S even if G is successful on all of its cross-claims later (“the Prejudice Basis”).

15. In particular, under the Cross-claims Basis, G submitted that it has the following meritorious claims against S:

(1) A costs order granted in HCMP 1154/2019 against S in favour of G. G estimates that the likely taxed sum is to be around HKD350,000 (about EUR37,000 or no less than EUR15,000) albeit it is not yet taxed. (“the Costs Claim”)

(2) Under the G Award, there is a monetary award of about EUR510,000. (“the G Award Monetary Claim”)

(3) Under the Alternative Relief Order of the G Award, there is a claim of EUR890,000 as it is G’s case that S had lost the right to elect under that order to provide the equivalent worth of samples to G, as it had (a) failed to provide the same within 30 days or a reasonable time, and (b) wrongfully imposed a condition against sale in providing G with the samples thereafter. The right of election of reliefs therefore passed to G, and G elected to have the payment of EUR890,000 instead of having the samples. In this respect, G says its case on the interpretation of the Alternative Relief Order is well supported by its PRC law expert opinion adduced before the Judge. (“the Sample Claim”)

(4) The Unliquidated Damages Claim under the New Arbitration (of about EUR7.5m). Under this claim, it is G’s case that under the Inventory Clause, it is entitled to continue to distribute and sell its remaining stock even after the termination of that agreement, which S had wrongfully prevented G from so doing. G further says that in fact, in the G Award, the relevant Arbitral Tribunal found S to have acted in breach of the Inventory Clause, and such finding is likely to be followed by the tribunal in the New Arbitration.

16. In the premises, G submits that it at least has a total of some EUR8.915m[1] in claims against S, which would comfortably set-off S’s sum of EUR1.8m under the S Award.

17. In this context, G further says it will suffer real prejudice if the enforcement of the S Award is not stayed as:

(1) S will remove the payment from Hong Kong, making it difficult for G to recover the same even if it later succeeds in its cross-clams, in particular, under the Unliquidated Damages Claim in the New Arbitration.

(2) On the other hand, as mentioned above, in relation to S’s claim of EUR1.8m, G says S is already secured up to EUR800,000 by reason of the WUP Injunction Payment and the Mainland Freezing Order.

18. By the Decision, the Judge rejected G’s grounds and refused the Stay Application:

(1) The Judge considered that the Costs Claim could not properly constitute a good basis to stay the enforcement as (a) it did not constitute a legal set-off; (b) the legal proceedings in HCMP 1154/2019 and costs recoverable therein did not have any close connection with the S Award so as to form the basis of an equitable set-off or a cross-claim which justified the stay of enforcement of the S Award; (c) in any event, the amount involved was insignificant even by G’s own estimate of EUR15,000 to EUR37,000.[2]

(2) The Judge was also not satisfied that the Sample Claim constituted a good basis to make it just and equitable to stay as (a) she was not persuaded that S was clearly bound to pay EUR890,833.27 under the G Award in light of the argument on the proper construction of the Alternative Relief Order; and (b) even if the payment under the G Award should include this sum, the aggregate did not exceed the sum due from G under the S Award.[3]

(3) Further, by reference to the evidence placed before her and the reading of the Inventory Clause, the Judge found that the merits of the Unliquidated Damages Claim were dubious and in any event, it was clearly questionable whether that the quantum of the claim of RMB59m was exaggerated.[4]

(4) Finally, the Judge...

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