Court considers time limits and conditions for leave to appeal arbitral award on a question of law

03 September 2019, Construction, Newsletter, by Kwok Kit Cheung,

In Maeda Kensetsu Kogyo Kabushiki Kaisha v Bauer Hong Kong Ltd [2019] HKCFI 1427, the judge granted leave for the Defendant to appeal against her own decision to remit an arbitral award to the tribunal. In granting leave, she said that the application for leave was not made out of time, and that the appeal had a reasonable prospect of success.

Background

For the background, please refer to the first of our two articles above about this case.

Issues

At issue was:-

(1) 

whether the Defendant’s application for leave to appeal was made out of time; and

(2) 

whether section 14AA of the High Court Ordinance applied, such that the Defendant had to show that the intended appeal had a reasonable prospect of success, or whether the only conditions to be satisfied for obtaining leave to appeal were those set out in section 5(9) of Schedule 2 to the Arbitration Ordinance (Schedule 2).

Decision

Was the application for leave to appeal made out of time?

The judge found that the Defendant’s application was not made out of time.

Section 5(5) of Schedule 2 states that, on hearing an appeal under this section, the Court may, amongst others, remit the award (in whole or in part) to the tribunal for reconsideration. Section 5(8) of Schedule 2 further states that the leave of the Court is required for any further appeal from an order of the Court under section 5(5). The combined effect of these two sections is that the appeal is made against the order for remission to the tribunal.

In this case, the judge merely allowed the Plaintiffs’ appeal against the award on 9 April 2019 as the parties had not addressed the Court on the consequences of the appeal being allowed at the hearing. It was only on 24 May 2019, after considering the parties’ written submissions, that the Court made an order remitting the Award to the tribunal. Accordingly, the application for leave to appeal, which was made on 30 April 2019, was not out of time.

Conditions for leave to appeal

Section 5(8) of the Schedule provides that leave for further appeal must not be granted unless (a) the question is one of general importance; or (b) if the question is one which, for some other special reason, should be considered by the Court of Appeal.

The Plaintiff argued that in addition to the conditions required under section 5(8) of Schedule 2, the Defendant must also satisfy the conditions under section 14AA(1)(4) of the High Court  Ordinance (HCO), which essentially provides that an appeal must have a reasonable prospect of success or there must be  some other reason in the interests of justice before leave to appeal will be granted.

The judge first observed that section 14AA did not apply to the situation here. Section 14AA of the HCO applies to interlocutory judgments or orders, but the order of remission was a final judgment or order.

However, the judge reviewed an earlier decision in Maeda Kensetsu Kogyo Kabushiki Kaisha v Bauer Hong Kong Ltd HCMP 1342/2017, 4 September 2017, and held that the “reasonable prospect of success” test is still relevant because section 5(9) of Schedule 2 is designed to be a filtering process, and it would make no sense if the Court does not consider whether the grounds of the intended appeal are arguable before granting leave. In arriving at this conclusion, the court balanced the need for finality in arbitration against the fact that the parties have chosen to opt into Schedule 2 under which a right to appeal is available.

Applying the observations above, the judge granted leave to the Defendant to appeal against the order of remission. The question of construction of the notice of compliance in question was of general importance. Moreover, the threshold of “reasonable prospect of success” is not high. The Defendant’s contention that the Court’s construction of the notice was wrong in law for failing to consider the finding of facts in the arbitration satisfied this test.

Comments

This case reminds us that for the court to grant leave under section 5(8) of Schedule2, the appeal must have a reasonable prospect of success (or there must be some other reason in the interests of justice).  In contrast with section 6(4) of Schedule 2, the Court will grant leave to appeal against an arbitral award only if the Court is satisfied (amongst other things) that, on the basis of the findings of fact in the award, (i) the decision of the arbitral tribunal on the question is obviously wrong; or (ii) the question is one of general importance and the decision of the arbitral tribunal is at least open to serious doubt.  This appears to be a higher threshold than having a reasonable prospect of success. However, it should be noted that in an application under section 6(4), it is only necessary for the Court to form a provisional view on the decision of the arbitral tribunal.