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Shandong Hongri Acron Chemicaljoint Stock Co Ltd v Petrochina International(hong Kong) Corporation Ltd

Judgment Cited authorities 3 Cited in 12 Precedent Map Related
Judgment Date25 July 2011
Citation[2011] 4 HKLRD 604
Judgement NumberCACV31/2011
Year2011
CourtCourt of Appeal (Hong Kong)

CACV 31/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 31 OF 2011

(ON APPEAL FROM HCCT NO 45 of 2009)

____________

BETWEEN

SHANDONG HONGRI ACRON CHEMICAL
JOINT STOCK COMPANY LIMITED
Appellant/
Creditor
and
PETROCHINA INTERNATIONAL
(HONG KONG) CORPORATION LIMITED		Respondent/
Debtor

____________

Before : Hon Cheung CJHC, Kwan JA and Lam J in Court

Date of Hearing : 13 July 2011

Date of Judgment : 25 July 2011

_______________

J U D G M E N T

_______________


Hon Cheung CJHC:

Facts

1. This is an appeal from the order of Saunders J dated 25 January 2011 relating to an application to enforce an arbitral award dated 21 September 2009.

2. The Applicant, Shandong Hongri Acron Chemical Joint Stock Company Limited, a company incorporated in the Mainland, carries on business as a manufacturer of fertilizers. The Respondent, Petrochina International (Hong Kong) Corporation Limited, a local company, is a supplier of chemical products and commodities. The parties entered into a contract dated 4 July 2008 for the supply of lump sulphur with defined specifications. A total of 3,937.448 tonnes of sulphur were supplied under the contract, and USD3,051,522.20 was paid as purchase price. The Applicant accepted and used 126.87 tonnes but rejected the rest (3,810.578 tonnes) as being of the wrong specifications. It claimed for the return of the balance purchase price in the sum of USD2,953,198 in respect of the rejected sulphur.

3. Pursuant to an arbitration clause in the contract, the parties’ dispute was heard by an arbitral tribunal of the China International Economic and Trade Arbitration Commission (“CIETAC”) in Beijing. By an arbitral award dated 21 September 2009 given by the majority of the Arbitral Tribunal, the Tribunal found in favour of the Applicant and made the following awards:

“(1) The Applicant shall return 3,810.578 tonnes of sulphur to the Respondent.

(2) The Respondent shall return USD2,953,198 (being the payment received for the goods) to the Applicant.

(3) The Respondent shall pay RMB11,126.18 (converted from USD1,624.26) as damages, the amount being insurance premium paid by the Applicant.

(4) The Respondent shall indemnify the Applicant’s costs incurred on the relevant goods under the Sales/Purchase Contract at the destination port, which included 14 expenses such as ‘service fees’, in the amount of RMB350,002.58 (calculated up to December 2008).

(5) The Respondent shall pay an examination and certification fee to the Applicant in the amount of RMB65,400.00 as damages.

(6) The costs of this arbitration is RMB347,372. The Respondent shall bear 70% of the costs (it being RMB243,160.4), and the Applicant shall bear 30% of the costs (it being RMB104,211.6). As the Applicant has already prepaid the arbitration fee in full, the Respondent shall reimburse the Applicant the sum of RMB243,160.4.

(7) Other claims made by the Applicant in the arbitration are dismissed.

The sums mentioned in (2), (3), (4), (5) and (6) above, which are payable to the Applicant, shall be fully paid by the Respondent to the Applicant within 30 days from the date of this Award. Should payment be made after the deadline, interest shall be added in accordance with the law.

This is the final award, and is effective on the date when the award is made.” (English translation)

4. After the arbitral award was made, the parties could not agree on the inspection and return of the sulphur still in the possession of the Applicant. The Respondent took the stance that repayment of the balance purchase price ordered under paragraph (2) of the arbitral award and payment of other sums ordered were conditional upon the return of the rejected sulphur to the Respondent “in the same status and quality” as and when the same was delivered to the Applicant.

5. The Applicant disagreed and on 17November 2009, applied for leave to enforce paragraphs (2) to (6) of the arbitral award in Hong Kong.

6. This was opposed by the Respondent, who in due course also applied for leave to enforce paragraph (1) of the award in Hong Kong. Saunders J was seized of the matter as well as a number of interlocutory applications made by the parties respectively. In substance, the Respondent argued that repayment of the balance purchase price and payment of the other sums were conditional upon the return of the rejected sulphur. The Respondent relied on the arbitral award itself as well as the nature of the dispute between the parties and of the awards in support of its contention. Further, the Respondent relied on two letters from the CIETAC Secretariat dated 18 November 2009 and 20 November 2009 and a third letter from the Arbitral Tribunal dated 30 March 2010 (collectively “the CIETAC letters”), which the Respondent claimed were additional/supplemental awards made by the Arbitral Tribunal, in support of its argument. The three CIETAC letters suggested that the Respondent’s understanding of the position was the correct one (see below).

7. After eleven hearings, Saunders J handed down a Ruling on 25 January 2011. The Judge accepted the Respondent’s argument that under the arbitral award, the obligation of the Respondent to make payment of the sums awarded to the Applicant was not “concurrent” with (used in the sense of “independent of”) the obligation of the Applicant to return the sulphur, but was subsequent to, and conditional upon, due performance of that obligation. However, the Judge did not base his decision on the three CIETAC letters. He found that they did not constitute additional or supplemental awards by the Arbitral Tribunal, and in any event, so far as the second and third letters were concerned, they were issued without affording the Applicant any opportunity to be heard.

8. Paragraph 1 of the sealed Order of the Judge gave leave to the Respondent to enforce paragraph (1) of the arbitral award relating to the return of the sulphur. Whilst the Ruling was silent on the matter, paragraph 2 of the Order ordered that the Applicant do forthwith return to the Respondent the original 3,810.578 tonnes of sulphur “in the same status and quality” as and when the same were received by the Applicant. Paragraphs 3 and 4 of the Order gave leave to the Applicant to enforce paragraphs (2) to (6) of the arbitral award but the judgment so entered shall require payment of the various sums awarded in paragraphs (2) to (6) only “upon due performance” of the Applicant’s obligation to return the sulphur in the manner described above.

9. From that Ruling and Order, the Applicant appeals to this Court.

General principles

10. Section 2GG(1) of the old Arbitration Ordinance (Cap. 341) (which continues to apply to arbitrations commenced before 1 June 2011) provides that :

“An award, order or direction made or given in or in relation to arbitration proceedings by an arbitral tribunal is enforceable in the same way as a judgment, order or direction of the Court that has the same effect, but only with the leave of the Court or a judge of the Court. If that leave is given, the Court or judge may enter judgment in terms of the award, order or direction.”

11. As the majority of the Court of Final Appeal in Democratic Republic of the Congo v FG...

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