Challenging enforcement of arbitration award under s.86 of the Arbitration Ordinance (Cap 609) – The Pride of Treasure Fund v Canadian Forest Natural Beverage Limited & Anor (2011)

Under the Arbitration Ordinance (Cap.609), enforcement of an arbitration award can be refused if a party was not given proper notice of appointment of the arbitrator or of the arbitral proceedings. However, a party wishing to establish such must substantiate his case with good and well-founded reasons and evidence.

The facts of this case are briefly as follows. The Respondents did not respond to any pleadings, notices of arbitration, appointment of arbitrator or correspondence from the Applicant’s solicitors and were absent from the arbitration hearing itself. However, the arbitrator was satisfied that proper notice had been given to the Respondents and proceeded with the hearing in their absence.

The Applicant obtained an award against the Respondents for HK$25,000,000 (and interest at 60% p.a. on that sum) being the balance due under a share purchase agreement (“Purchase Agreement”). Upon the Applicant’s ex parte application, an order was made allowing the Applicant to enforce the award (“the Enforcement Order”). The Respondents applied to court to set aside the Enforcement Order on the ground that they were not given proper notice of the arbitration. The issue was whether the Enforcement Order should be set aside.

The Court was not persuaded by the Respondents’ case and evidence that they were not given proper notice of the arbitration and held that the Enforcement Order should not be set aside, for the following reasons:-

1. It was expressly provided in the Purchase Agreement (containing the arbitration clause) that any notices permitted pursuant to the Agreement sent to the Service Address or faxed to the Service Fax Number shall be deemed to be effected. Good service of the notice of arbitration and appointment of arbitrator had been achieved by sending the documents to the Service Address and faxing them to the Service Fax Number.
2. The 2nd Respondent’s submission that he was on business trips around China and did not receive the notices by fax, mail or email were not convincing. There were assistants managing the business operations at the Service Address. That address was the same as that on the 2nd Respondent’s name card. None of the documents delivered to the Service Address by mail and fax were returned or reported undelivered.
3. The 2nd Respondent must have been aware of the ongoing arbitration since he had asked his assistant to instruct a PRC lawyer to approach the Applicant’s solicitors to enquire about the arbitration. It was unbelievable that the 2nd Respondent’s assistant had somehow failed to convey or inform him of the existence of the arbitration.
4. Further, the Applicant’s solicitors had actually received an email notifying them that the email sent to the 2nd Respondent had been received and opened. It was incredible that the 2nd Respondent’s assistant, fully aware of the email, would not have told the 2nd Respondent about the ongoing arbitration.

The Court also rejected the Respondents’ other argument for setting aside the Enforcement Order, namely that the award dealt with a difference not contemplated by or not falling within the terms of the submission to arbitration.