CNG v. G and G [2024] HKCFI 575
In this case, the Hon Madam Justice Mimmie Chan stated that:
“1. This is a typical example of a party which has agreed to submit its contractual disputes to the final and binding determination of an arbitral tribunal, but being aggrieved when the tribunal makes an award against it, makes all attempts to find loopholes and problems in the award…”
The Court dismissed the set-aside application and upheld the arbitral award, emphasising the tribunal’s authority and autonomy in managing the arbitration process. The Court also cautioned against unwarranted challenges to arbitral awards and highlighted that arbitration and litigation should not be “a game of buying time and competing in resources”.
The Court further emphasised that arbitration is a consensual process to which the parties have voluntarily agreed. Consequently, there are limited circumstances in which a party can successfully appeal and challenge an award.
The background facts
This was a shareholder dispute. In 2014, the Applicant and the Respondents entered into a shareholder’s agreement (SHA) in respect of a company (SIL), which owned and operated a mining and processing project.
Conflicts between the parties to the SHA arose as the Respondents claimed that the Applicant had breached the terms of the SHA as it failed to: (a) honour a right of refusal conferred on the First Respondent in respect of the Applicant’s transfer of shares in SIL; and (b) obtain the unanimous approval of SIL’s board before shutting down certain operations relating to a project in 2020.
The Respondents referred the dispute to an HKIAC arbitration. The tribunal ruled in favour of the Respondents on 8 February 2023 (Award).
The Applicant applied to the Hong Kong Court of First Instance, seeking to set aside the Award based primarily on: (a) the tribunal’s alleged failure to deal with all essential issues / set out the reasons for its decision; and (b) the lack of due process that resulted from an unreasonable arbitration timetable, rendering the Applicant unable to adequately present its case.
The Court decision
Tribunal’s alleged failure to deal with all essential issues / set out the reasons for its decision
The Court ruled that the tribunal had not failed to address the key issues or give enough reasons for its decision. The tribunal was free to structure the Award as it saw fit and the reasoning set out in the Award had to be read in context. The brevity of reasoning given in respect of one issue did not mean that it had not been dealt with, as issues need not be dealt with seriatim but can be disposed of in composite. A list of issues should not be likened to an exam paper, which contains compulsory questions that must each be discreetly answered in order by the tribunal. Once the tribunal has decided issues essential to its decision, it will have decided all issues.
The Court also emphasised the policy of minimal curial intervention and reiterated that its approach is to read an award generously, remedying only meaningful and readily apparent breaches of the rules of natural justice. Litigation is not an avenue for the losing party to re-argue the same case before a judge, or for it to reframe its case with a different focus to that it adopted in the arbitration.
Lack of due process
The Court rejected the Applicant’s complaint that the tribunal had imposed an unfairly compressed procedural timetable. It affirmed the tribunal’s full discretion to determine the arbitration timetable and to manage the arbitration procedure. The Court emphasised that the tribunal is in the best position to decide on the most appropriate and fair manner of how the arbitration should be conducted. The Court is not prepared to interfere by ruling on the correctness of the tribunal’s processes and decisions unless there is evidence showing serious breaches of natural justice.
Further, the Court noted that despite the Applicant’s objections to the tight arbitration timetable, the Applicant was still able to meet all procedural deadlines without seeking time extensions. As such, the Court concluded that the tribunal had given the Applicant a reasonable opportunity to present their case under s. 46 of the Arbitration Ordinance (AO) (which in itself does not warrant a full opportunity) and that there was no procedural unfairness in this case. The Court, therefore, dismissed this objection.
Typical example of abusing the Court’s function
The Court stated that this case is a typical example of a party, having agreed to resolve disputes through arbitration, subsequently attempting to search for loopholes and defects in an award following an unfavourable outcome.
On that basis, the Court dismissed the application to set aside the Award and directed that the Applicant bear the Respondents’ legal costs on an indemnity basis.
Comment
This case demonstrates that as a pro-arbitration hub, the Hong Kong courts have taken a firm stance in upholding the minimal curial intervention policy in arbitration, whereby the tribunal is entitled to full autonomy and authority in managing arbitration proceedings. To this end, the courts in Hong Kong will respect the discretion of the tribunal and only intervene in limited circumstances.
As highlighted by the Court, a set-side application under s. 81 of the AO (Application) is not intended to afford the losing party to an arbitration an opportunity to ask the Court to go through the award and identify flaws, to repeat arguments which have been presented to the tribunal, or to raise new issues, hoping that the Court will draw a different conclusion to that arrived at by the tribunal. The limited recourse to the courts is for policy reasons and will only succeed on exceptional grounds, such as when the tribunal has made serious errors, resulting in a serious denial of natural justice.
If a party to arbitration is faced with an unreasonable timetable, it should seek an adjournment at an appropriate juncture in order that it is not subsequently taken to have waived its right to make a procedural objection.
An applicant should also remember that making unwarranted challenges to an award may lead to indemnity costs.
The Court in this case referred to this as a “spurious claim” and criticised “unrelenting endeavours by the losing party in the arbitration to make unjustified challenges to the Award”. The Court also warned litigants against “massaging” a case to fall into the ambit of s. 81 of the AO with the benefit of hindsight. The message is clear: the courts expect parties to make responsible and reasonable applications rather than contrived and opportunistic ones. A party falling on the wrong side of the line may find itself penalised with an indemnity costs award.
