8 November, 2019
In the recent case of Wang Peiji v Wei Zhiyong, HCMP 571/2019, the Plaintiff had been granted leave to enforce in Hong Kong an arbitration award made by the Ghangzhou Arbitration Commission (Enforcement Order). The Court set aside the Enforcement Order on the grounds that the cause of action was time-barred. It held that by virtue of s.4(1)(c) of the Limitation Ordinance (Cap 347), where, as here, there is an application to enforce an award, where the submission to arbitration (i.e. the underlying contract) is not under seal, the limitation period is 6 years from the date on which the cause of action arose. Had the underlying contract been executed under seal, s.4(3) of the Limitation Ordinance would have applied instead and the limitation period would have been 12 years. The Court also held that such time limits are not suspended while enforcement is attempted in the Mainland.
Background
The Plaintiff had commenced arbitration proceedings against the Defendant in Guanghouz for failure to repay a loan. The Guangzhou Arbitration Commission granted an award in the Plaintiff’s favour on 20 April 2009, by which it ordered the Defendant to pay the sum outstanding under the loan agreement together with interest. In June 2009, it was adjudicated that the award be enforced by the Panyu People’s Court.
The Plaintiff recovered part of the sum payable under the award in enforcement proceedings before the Panyu People’s Court and on 15 December 2009, that Court adjudicated that as there were no further assets available for execution, the enforcement proceedings had come to an end, but the Plaintiff could reinstate them in future if it provided evidence of further assets available for execution.
The Defendant’s Case
Relying on the decision in CL v SCG [2019] 2 HKLRD 144, the Defendant asserted that the application to enforce the award in Hong Kong was time-barred, by virtue of section 4(1)(c) of the Limitation Ordinance (Cap 347), which provides that actions to enforce an award, where the submission is not by an instrument under seal shall not be brought after the expiration of 6 years from the date on which the cause of action arose.
The Defendant argued that time ran, for limitation purposes, from around June 2009 (as the date of the Mainland enforcement order which prompted demands to pay) and that time expired for limitation purposes around June 2015, long before the Plaintiff’s 2019 enforcement application was filed in Hong Kong. Thus the enforcement action in Hong Kong was time-barred. Relying also on CL v SCG, the Defendant submitted that the six-year limitation period was not suspended while enforcement efforts were underway in the Mainland.
The Plaintiff’s Case
The Plaintiff argued that the applicable time bar provision was not s.4(1)(c) of the Limitation Ordinance, but rather, s.4(3), which provides that an action upon a specialty shall not be brought after the expiration of 12 years from the date on which the cause of action accrued. This, the Plaintiff said, set a 12 year time limit that ran from the date of the award, namely, 20 April 2009 (i.e. not 12 years from the date of the underlying contract).
The Plaintiff’s fall back argument was that if the six-year time limit in the Limitation Ordinance s.4(1)(c) was found to be applicable, time must be suspended for the whole period during which the Plaintiff’s (partially successful) enforcement efforts were underway in the Mainland and that a successful Plaintiff cannot be expected to have stopped enforcement efforts in the Mainland which were bearing fruit.
Court’s Decision
The Court granted the Defendant’s application to set aside the Enforcement Order, holding as follows:
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(1) |
S.4(1)(c) of the Limitation Ordinance applied. Where, as here, there is an application to enforce an award, where the submission to arbitration (i.e. the underlying contract) was not under seal, the limitation period is 6 years from the date on which the cause of action accrued. |
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(2) |
Had the underlying contract been executed under seal, then the limitation period would have been 12 years, pursuant to s.4(3) of the Limitation Ordinance. That section did not apply here, as it was not suggested by either party that the underlying contract was executed under seal. |
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(3) |
As regards the Plaintiff’s argument that the award of the Guangzhou Arbitration Commission, being executed under seal, was a specialty and thus a 12 year limitation period ran from the date of the award, this is not how s.4(3) of the Limitation Ordinance should be construed. It is clear that sections 4(1)(c) and 4(3) are directed to the question of whether the underlying contractual document giving rise to disputes is (or is not) executed under seal. |
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(4) |
Hong Kong law, including the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (Arrangement) does not provide for time limits to be suspended while the successful party attempts enforcement on the Mainland. Both this case and CL v SCG were based upon the provisions of the Arbitration Ordinance (Cap.341) and there is nothing in that Ordinance (including sections 2GG and 40C) that would lead the Court to conclude otherwise. |
Comment
This judgment illustrates the importance of checking and keeping a close eye on time limits when enforcing an arbitral award between Hong Kong and the Mainland. The Arrangement prohibits an applicant for enforcement of an arbitral award from filing applications for enforcement with both the courts of Hong Kong and those of the Mainland at the same time. Only when the result of enforcement of the award by the court in one place is insufficient to satisfy the liabilities, may the applicant apply to the court of another place for enforcement of the outstanding liabilities. As Mimmie Chan J said in CL v SCG, “However, unfair may be the consequence, there is no express provision in the Arrangement, the relevant Arbitration Ordinance, or the [Limitation] Ordinance itself, that time limitation for enforcement of an arbitral award should not run during the period when a successful party to an arbitral award applies for enforcement in the Mainland…. applicants will have to consider withdrawing and procuring determination of a pending application for enforcement on the Mainland before applying for enforcement in Hong Kong prior to the expiry of the relevant limitation period”
For further information, please contact:
Kwok Kit Cheung, Partner, Deacons
kwokkit.cheung@deacons.com.hk
