SETTING ASIDE AN ARBITRAL AWARD ON INCONSISTENT FINDINGS OF FACT (2)

June 2022

In November 2021, we wrote about the case of W v AW (HCCT 70/2020) to set aside the arbitral award made on 13 July 2020 (Award 2 referred to in the article) on the ground of public policy. This is a sequel to that article .

Security for Costs & Interlocutory Appeal

Other than applying for enforcement of Award 2, AW also resisted by applying security for costs. In the security for costs application ([2021] HKCFI 1701) , Hon Mimmie Chan J declined security for costs by finding that the common arbitrator who sat in both sets of arbitration made inconsistent findings which constituted injustice and grave unfairness to W. Hon Mimmie Chan J found that Award 2 was “manifestly invalid”.

AW sought leave to appeal but both applications were refused by the Court of First Instance ([2022] HKCFI 1296) and again by the Court of Appeal ([2022] HKCA 685) . In particular, the Court of Appeal agreed with the Hon Mimmie Chan J’s reasoning that an arbitrator’s duty of confidentiality is not absolute, and disclosure is permissible where it is necessary for protection of legitimate interests of an arbitrating party.

Setting Aside Award 2

The set aside application was heard on 26 January 2022, and Hon Anthony Chan J pronounced his decision on the same day ([2022] HKCFI 341]).

In gist, Hon Anthony Chan J agreed with Hon Mimmie Chan J’s analysis in the decision for refusing security for costs. It was held that Award 2 was “manifestly invalid” as there was a serious breach of a party’s entitlement to have a fair adjudication. In particular, Hon Anthony Chan J held that fairness and justice required the common arbitrator to invite submissions on inconsistent findings from the parties at Arbitration 2.

On another note, Hon Anthony Chan J expressed disagreement with AW’s approach to go into the details of the arbitral hearing and to second-guess what was or was not in the mind of Tribunal 2. Hon Anthony Chan J followed the guiding authority set out in Grand Pacific Holdings Ltd v Pacific China Holdings Ltd (in liq) (No 1) CA [2012] 4 HKLRD 1 that “The Court is concerned with ‘the structural integrity of arbitration proceedings’. The remedy of setting aside is not an appeal, and the Court will not address itself of the substantive merits of the dispute, or to the correctness or otherwise of the award, whether concerning errors of fact or law…”

Time Limit for Setting Aside Award 1

As an additional counter-measure to oppose W’s set aside application, AW applied to set aside Award 1 on 10 June 2021, and such application was made nearly a year out of time ([2022] HKCFI 1397) . The application was dismissed by Hon Mimmie Chan J.

In making the decision, the Court departed from Sun Tian Gang v Hong Kong & China Gas (Jilin) Ltd ([2016] 5 HKLRD 221) that where there are good reasons and exceptional facts, the Court has jurisdiction to extend the 3-month time limitation set out in the Model Law. The Court clarified that Order 3 rule 5 of the Rules of the High Court (Cap.4A) cannot be invoked by the Court to extend the time provided for in Article 34(3) of the Model Law especially where no time extension provision is provided under the Model Law. Therefore, the period within which a party can set aside an arbitral award cannot be extended.

Conclusion

It is well-known that the threshold of setting aside an arbitral award is high. There are few local cases on the issue. This case, with 5 reasoned judgments, serves as a good reminder of the relevant legal principles and their applications. The Court’s revisit to the issue of limitation period for setting aside arbitral awards is worthy of particular attention.