Lin Chien Hsiung v Lin Hsiu Fen [2022] 4 HKC 590, [2022] HKCFI 1270

Esmond Wong represented the respondent in Lin Chien Hsiung v Lin Hsiu Fen [2022] 4 HKC 590, [2022] HKCFI 1270.

The applicant, the respondent and PS were siblings and the shareholders of YH HK, a company incorporated in Hong Kong. The respondent and PS were directors of YK HK. YH HK was at the material times the holding company of YH PRC, a Mainland company. The applicant and the respondent entered into a share transfer agreement (Transfer Agreement) under which the applicant agreed to purchase the respondent’s 10% shareholdings in YH HK (Shares). The price was RMB 10m to be paid in three installments. The first installment was duly paid. The applicant only paid RMB 3m of the second installment of RMB 6m. The applicant paid the balance of the second installment to the respondent after the date specified in the Transfer Agreement. The applicant claimed that the respondent failed to fulfil her obligation to effect the transfer of Shares to him, which was a precondition for the payment of the second installment, but the applicant had paid anyway in order to enforce the Transfer Agreement. The next day after the applicant’s payment, the applicant commenced Arbitration by submitting the case to the Shanghai Arbitration Commission (SAC). In defence, the respondent claimed inter alia that it was the applicant who had been in breach for non-payment. The SAC issued an Award, in which the respondent was ordered to transfer the Shares to the applicant and cooperate with the applicant to handle the related procedures for registration of the transfer and to pay the applicant RMB 7m and interest, with legal costs and the arbitration fees incurred by the applicant. Upon an ex parte application, the Court of First Instance granted the applicant leave to enforce the Award (Enforcement Order). The respondent applied to set to set aside the Enforcement Order. The respondent relied on the grounds that: (a) by virtue of her application to the Shanghai Intermediate People’s Court for the setting aside of the Award (Shanghai Setting Aside Application), the Award had already been suspended under Mainland Law, such that enforcement of the Award should be refused by the Court under s 95(2)(f)(ii) of the (hk) Arbitration Ordinance (Cap 609); (b) the respondent had been unable to present her case in the Arbitration as a result of the applicant having submitted new materials to the tribunal out of time; and (c) it would be contrary to the public policy of Hong Kong to enforce the Award. In the alternative, the respondent sought adjournment of the proceedings for enforcement of the Award pending an application made by PS, a third party to the Arbitration, to the Shanghai Intermediate People’s Court for the Award to be set aside. The respondent also submitted that there had been material non-disclosure by the applicant in failing to disclose to the Court that (i) The respondent had applied to the Shanghai Intermediate People’s Court to set aside the Award and the Shanghai Court had accepted jurisdiction over the Shanghai Setting Aside Application; and (ii) The applicant had also applied for enforcement of the Award in Shanghai and misled the Court to believe at the time of the ex parte application that there were no parallel enforcement proceedings of the Award in Hong Kong and the Mainland.

Held, discharging the original order and re-granting leave to enforce the Award in Hong Kong and refusing the adjournment application:Material non-disclosure

(1) As important as the duty to make full and frank disclosure to the Court in an ex parte application, was the need for a party seeking to discharge an order to state clearly in its application to discharge the ground of material non-disclosure and the matters relied upon for the discharge. Applications to discharge for material non-disclosure should not be abused, to become a rambling and roving investigation of what should have been disclosed, but was not. Fairness and natural justice also require timely disclosure of the matters relied upon as alleged material non-disclosure, to give the opponent the fair and necessary opportunity to respond to the allegations of breach of duty owed to the Court. G v X & Ors [2022] HKCFI 829 ; [2022] HKCU 1390 applied (para 15).

(2) Non-disclosure of the applicant’s enforcement application on the Mainland was not material to his application for enforcement in Hong Kong. Since the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR came into effect on 27 November 2020 (Supplemental Agreement), parties were no longer precluded from filing applications for enforcement of arbitral awards with the Courts of the Mainland and of Hong Kong respectively and simultaneously. The only restriction under the Supplemental Arrangement was against double recovery by virtue of the enforcement in the Courts of Hong Kong and the Mainland. The amount to be recovered under the enforcement proceedings, and whether there was double recovery, was to be determined later in the recovery proceedings, if necessary (para 17).

(3) However, the Court could not condone any party, and in this case an officer of the Court, misleading the Court on any fact, even if this fact was not material to the outcome of the application (para 20).

(4) The fact that respondent had made the Shanghai Setting Aside Application was material to whether the Hong Kong Court would grant leave to enforce the Award without hearing respondent. In the usual course, on being informed of the fact that there was a setting aside application made to the supervisory court, the Hong Kong Court would have directed a summons to be issued pursuant to O 73 r 10(1) of the (hk) Rules of the High Court (Cap 4A), for the respondent to be heard on whether the enforcement order should be made. Whether the Shanghai Setting Aside Application was subsequently dismissed and whether it had merits, did not absolve applicant from his duty to make full and frank disclosure of the fact that the application had been made (paras 20-22).

Whether the Award was suspended

(5) The relevant ground for refusing to enforce the award under s 95 of the (hk) Arbitration Ordinance (Cap 609) was where the award ‘has not yet become binding on the parties, or has been set aside or suspended by the court or in accordance with the law of the place where the arbitration took place’. There was no evidence to support the ground. Article 7 of the Provisions of the Supreme People’s Court On Several Issues concerning the Handling of Cases regarding Enforcement of Arbitral Awards by the People’s Courts (SPC Provisions), relied upon by respondent, did not provide for automatic suspension of the effect of the Award when an application to set aside was made by a party, or where such an application was accepted by the Mainland Court, or when a third-party applied for non-enforcement of the award. The SPC Provisions only applied to the Mainland Courts and had no effect on the Hong Kong Court as a court of enforcement. The ‘common ground’ of the experts in relation to art 7 of the SPC Provisions was simply that the Mainland court should rule to terminate the enforcement when the conditions of art 7 apply. The contents of the Supplemental Arrangement, revising the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR which took effect on 1 February 2000, added nothing to the grounds for refusing enforcement set out in s 95 of the Ordinance (paras 25-31).

Whether the respondent had the opportunity to present her case

(6) The Court rejected the claim that the tribunal was in any serious or egregious error by deciding to accept the applicant’s evidence without a further hearing, or that the respondent had been deprived of the reasonable opportunity to present her case. The Court was also not satisfied that the respondent had been prejudiced as a result in that the tribunal could have reached a different conclusion in the Award as to the binding effect of the Transfer Agreement and as to the respondent’s breach, by virtue of any evidence that the respondent might have produced. Pacific China Holdings Ltd (in liq) v Grand Pacific Holdings Ltd; sub non Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) [2012] 3 HKC 498 ; [2012] 4 HKLRD 1; Reliance Industries Ltd & Anor v Union of India [2018] EWHC 822 (Comm); and Terna Bahrain Holding Company WLL v Ali Marzook Ali Bin Kamil Al Shamsi [2012] EWHC 3283 (Comm) applied (paras 32-47).

Whether Award contrary to public policy

(7) The respondent had been given reasonable opportunity to present her case, and that there was no breach of the rules of natural justice. There was no basis to refuse enforcement of the Award on the ground that it would be contrary to Hong Kong public policy (para 48).

Whether enforcement of the Award should be adjourned pending the determination of PS’ application on the Mainland

(8) There was no ground to delay enforcement of the Award in Hong Kong, pending the review by the Shanghai Intermediate People’s Court, at a time uncertain, when no evidence whatsoever had been adduced as to the grounds of the review and the merits of such a review. The principles set out in s 3 of the Arbitration Ordinance, to facilitate speedy resolution of disputes by arbitration, and the object to enforce arbitral awards agreed by the parties to be final, must be borne in mind. The Award had not been suspended. The facts relied upon by the Respondent and PS for setting aside and non-enforcement of the Award on the Mainland had already been considered by the Mainland Courts, in the Respondent’s own application, and in PS’s application, and had been rejected by the Mainland Courts on the merits and under Mainland law. Due weight should be given by this Court to the findings made by the supervisory Mainland Courts, which were more familiar with Mainland law than the Hong Kong Courts. Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKC 335 ; [2012] 1 HKLRD 627 applied (paras 49-52).


[The above is excerpted from the headnote to the report in HKC.]




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