Court finds arbitral award manifestly valid and orders immediate enforcement

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Authored by: Justin Yuen

In Q v F [2023] HKCFI 647, the court dismissed the Respondent’s application to set aside an Enforcement Order, whereby the Applicants had been given leave to enforce an arbitral award (Award) against him. The court held that, contrary to his assertions, the Respondent had been given notice of the arbitration and the opportunity to defend himself before the Award was made. The court, having found the Setting Aside Application unmeritorious and the Award manifestly valid, made an order for immediate enforcement of the Award, that being consistent with the court’s policy of enforcement of arbitration agreements and awards without unnecessary expense and delay.

Arbitration Award and Enforcement Order

The Applicants, who were the Claimants in the arbitration, were granted leave to enforce the Award against three Respondents (Enforcement Order). The Award stated that R1 and R2 were in breach of a Framework Agreement and R1-R3 were in breach of a Subscription Agreement. R3 (Y) was ordered pay to the 2^nd Claimant US$13,302,493.15 and the costs of the arbitration.

Y’s application to set aside Enforcement Order

Y applied to the court to set aside the Enforcement Order (Setting Aside Application) on the grounds that there had been material non-disclosure in the application for the Enforcement Order, in that the Applicants had not informed the court that he had made an appeal to the HKIAC concerning the Award and that he had not been given notice of the arbitration or a chance to defend himself in the arbitration before the Award was made. He also claimed that he did not receive notice of the arbitration, as he was not in Hong Kong at the relevant time, due to travel restrictions and quarantine requirements during the Covid pandemic.

The Applicants applied for security from Y, and in default of security, for the Setting Aside Application to be dismissed.

No setting aside for material non-disclosure

The court held that there was no basis to set aside the Enforcement Order on the grounds of material non-disclosure.  Y’s “appeal” to the HKIAC in fact consisted of his solicitor’s letter to the HKIAC (Letter), in which they referred to the Award and the fact that Y had not been in Hong Kong and had not received notice relating to any arbitration and did not have a reasonable opportunity to attend the arbitration.  However, the Applicants’ affirmation in support of the application for the Enforcement Order, had exhibited a copy of the Letter. Accordingly, the court found that it was clear that there had been no withholding of the fact that Y had raised objections to the HKIAC on the basis that he had not received notice of the arbitration, was not given the opportunity to attend the arbitration, and that he had been absent from Hong Kong.

Y had been given notice of the arbitration

The court referred to the Subscription Agreement, to which Y was a party. It contained an arbitration clause (16.1) providing for written notice of disputes arising out of or relating to the Subscription Agreement to be given, and clause 16.2 provided that any document in an action may be served on a party to the Subscription Agreement by being delivered to that party’s address in the “Details” of the Subscription Agreement. The court noted that Notice of Arbitration had been sent to Y’s email address as recorded in the Details and that such service was in accordance with clause 16.2 and was also deemed received under the notice provision in clause 14.1 of the Subscription Agreement. On the Applicants’ evidence, which Y had not disputed, the Applicants’ lawyers had received notice of the successful delivery of the email. Although Y claimed in his evidence that the email address had been suspended and that he had no access to the company computer at the relevant time, on the evidence, the emails had been successfully sent to Y and had not bounced back. Further, on the Applicants’ evidence, Y himself had informed them in their discussions that he was aware of the arbitration.

The court held that having been served with the Notice of Arbitration and given notice of the commencement of the arbitration, the empaneling of the arbitral Tribunal, and timetable for the service of the necessary documents for the arbitration, Y had notice of all these matters, but chose not to take any steps, nor to communicate with the Tribunal in relation to the claims made against him, and any defence he may have. He could have, but chose not to, inform the Tribunal that he would not be able to attend or to appear in the arbitration in Hong Kong on any date, and that the hearing should be postponed for any reasons he relied on. Even on Y’s own evidence, he had been in Hong Kong when the Notice of Arbitration was served on him, by email.  It was open to him, the court said, to deal with the Notice and to correspond with the Tribunal, if he had intended to do so.

The Tribunal had given a reasonable opportunity to Y, and the other parties to the arbitration, to present their cases, the court said. It had specified the time within which the statement of Defence and other evidence should be filed, and fixed the dates of the hearings. The Tribunal was entitled to proceed with the hearing in the absence of any defence, documents, or any response being submitted or made by Y pursuant to the Tribunal’s directions and orders. This was a case, the court said, not of Y having been deprived of the opportunity, but of his failing to utilize the opportunity afforded to him, to present his defence in the arbitration, and it was a matter of his own conscious decision. Whether he had made attempts to settle the matter with the Applicants, and whether he had a good defence to the claims made, were irrelevant, when it was his own decision not to appear in the arbitration to present his case.

Further, the arbitration hearing was partly by remote or virtual attendance. Therefore, even if Y was not in Hong Kong, he could have applied to attend by video conferencing facilities, but chose not to do so.

Dismissal of Setting Aside Application

Accordingly, the court concluded that there was no merit at all in Y’s Setting Aside Application. Bearing in mind the unmeritorious Setting Aside Application and manifest validity of the Award, the court held that there should be an order for immediate enforcement, and for the Setting Aside Application to be dismissed, instead of adjourning the matter until after the substantive hearing of the Setting Aside Application set for 28 April 2023. This, the court said, was consistent with the court’s policy of enforcement of arbitration agreements and awards without unnecessary expense and delay. It would not be in the interests of either the Applicants or Y himself, for further legal costs to be incurred.

Applicants’ Security Application

The court did not have to consider the Applicants’ application for security, since it made an order for immediate enforcement of the Award. However, it said that having considered the lack of merits in Y’s Setting Aside Application, absence of frank disclosure of his assets and falsity of factual assertions made by him in putting forward the grounds for the Setting Aside Application, notwithstanding the short delay until the scheduled substantial hearing on 28 April 2023, it would have ordered Y to furnish security within 21 days for the full amount of the Award, as a condition for the further conduct of the Setting Aside Application.

Key Contacts

Justin Yuen

Partner | Litigation and Dispute Resolution

Email or call +852 2825 9734