Three month time limit to set aside an arbitral award will rarely be extended

14 December 2020, Construction, Newsletter, by Joseph Chung,

In the recent case of A v D, HCCT 52/2020, the court dismissed the Applicants’ application for an extension of time to set aside an arbitral award. It held that bearing in mind the objectives of the Arbitration Ordinance (Ordinance) there should be finality in an award and the short period of three months to apply to set aside an award in Article 34 (3) of the Model Law (adopted by s.81 of the Ordinance) should not, as a general rule, be extended unless the applicant can establish to the court’s satisfaction that there are good reasons to do so. On the facts of this case, the court found that the Applicants had come nowhere near the necessary threshold for the court to exercise its discretion to extend time.

Background

On 21 May 2020, an arbitral award was made in an arbitration in Hong Kong and administered by the HKIAC.  On 28 August 2020, the Applicants issued an Originating Summons (OS) to set aside the award. The Respondent sought an immediate dismissal of the OS on the grounds that the Applicants had received the award by email on 21 May 2020 and that the statutory deadline for applying to set aside the award had therefore expired on 21 August 2020 (three months from the parties’ receipt of the award (as per Article 34 (3) of the Model Law), and that in any event, none of the Applicants, in seeking a retrospective extension of time, had given any satisfactory explanation for the delay. 

On the undisputed evidence, the arbitral tribunal had sent the award by email on 21 May 2020 to the Applicants’ email accounts, which accounts were the same as those notified by them to the tribunal for communications with the tribunal, the HKIAC and Respondent.  The email account for the 1st and 2nd Applicants was that of their lawyers on the Mainland (Mainland Lawyers Account).  The email account for the 3rd Applicant was his own. The Mainland lawyers of the 1st and 2nd Applicants had sent an email to the tribunal and HKIAC, to confirm that they had authority to receive and respond to email communications from the tribunal, the Respondent and their legal representatives.  In the course of the arbitration, emails had in fact been exchanged between the Mainland lawyers for the 1st and 2nd Applicants, the tribunal and HKIAC, using the Mainland Lawyers Account.

Respondent’s argument

The Respondent argued that the court had no power to extend the three-month period provided for in Article 34 (3) of the Model Law and that even if it did have power, it should not extend time,  as the Applicants had not provided any good reason to do so.

Applicants’ argument

The Applicants argued that the court had jurisdiction and power to grant an extension of time under Article 34 (3), as held in Sun Tian Gang v Hong Kong & China Gas (Jilin) Ltd [2016] 5 HKLRD 221.

The 1st and 2nd Applicants sought to rely on unsigned draft affirmations of their Mainland lawyers (Ms Yang and Ms Tu), which were in identical terms, exhibited to the signed affirmation of their Hong Kong solicitor (Mr Leung), made two days before the hearing of the OS. Mr Leung claimed that the “finalised drafts” of Yang and Tu were to support the application for an extension of time to set aside the award, and that the contents of the draft affirmations had been “reviewed and confirmed” by Yang and Tu and that he had been informed by them that “in the limited time available they were unable to execute” the affirmations before a Chinese notary.

The 3rd Applicant admitted that the email with the award had been sent and received on 21 May 2020.  He only claimed that it was due to the oversight and inadvertence of secretaries, that the matter was not reported to him

Court’s decision

The court found that in all the circumstances of this case, there was no good reason to exercise its discretion to extend time and it dismissed the OS and application for a time extension, with costs to be paid by the Applicants to the Respondent on an indemnity basis. It held:

1. 

Even in Sun Tian Gang v Hong Kong & China Gas (Jilin) Ltd, the court made it clear that bearing in mind the objectives of the Ordinance, there should be finality in an award and the short period of three months set out in the Model Law should not, as a general rule, be extended “unless the applicant can establish to the satisfaction of the court that there are good reasons to do so”. The facts in Sun Tian were exceptional, and stated to be such in that judgment.

2. 

The Applicants had not given any reason to explain why they were unable to apply to set aside the award before expiry of the three month period. There was not even an excuse raised, that they were preoccupied, or required time to review the award or to consult their lawyers.

3. 

Under Article 3 of the Model Law (adopted in s.10 of the Ordinance), any written communication is deemed to have been received if delivered to its mailing address, and the communication is deemed to have been received on the day it is so delivered. S.10 (2) of the Ordinance states that if a written communication is sent by any means by which information can be recorded and transmitted to the addressee, the communication is deemed to have been received on the day it is so sent. Article 2.1 of the 2013 HKIAC Administered Arbitration Rules (Article 2.1) further provides for when any notice or other written communications pursuant to the Rules shall be deemed to have been received.

4. 

By the operation of Article 2.1 and/or s.10 (2) of the Ordinance, the award was deemed to have been received by the Applicants on the date of the email sent to the Mainland Lawyers Account, on 21 May 2020. If the Applicants wished to displace the deeming provisions and rebut the presumption of receipt, they should have adduced sufficient and credible evidence to show that they had not in actual fact received the award by the email on 21 May 2020.

5. 

In respect of the 1st and 2nd Applicants, it was no excuse to have a last minute draft affirmation of Yang and Tu, produced two days before the hearing, when the service of the award should have been appreciated as a critical issue in the application to set aside. The time and manner of dispatch and receipt of the award are important and the deciding issues. These issues should have been addressed, in detail and in good time before the hearing scheduled by the Applicants for the OS. It was unacceptable for cursory affirmations to be prepared at the last minute, with scanty details, and to excuse such lack of particulars or the timely and proper signing and attestation of the affirmations by alleged lack of time. Based on the identical contents of the Yang and Tu draft affirmations, and their brevity, it was dubious whether Yang and Tu had themselves prepared them, to explain in their own words the circumstances of and reasons for their alleged lack of receipt and notice of the email of the award. The 1st and 2nd Applicants’ evidence that the tribunal’s email of 21 May 2020, had not been received by their lawyers, was totally unconvincing. The Award was sent to and deemed to have been received by them.

6. 

As for the 3rd Applicant, despite having been informed by his lawyers that the original award was received on 29May 2020, he took no steps to apply to set aside the award before the expiry of the three month period on 21 August 2020.

7. 

No reason had been given by any of the Applicants for their failure to take any steps to apply to set aside the award between 21 May 2020 and 28 August 2020. In the absence of any good reason shown to explain the delay and inactivity, there was no reason why the court should exercise its discretion and grant time to the Applicants.

Comment

This judgment is a good reminder that an extension of the time limit for setting aside an arbitral award is difficult to obtain, unlike an extension of time for complying with the procedural orders of the arbitral tribunal or the Court where the importance of finality of the orders is not in question.