Back whence it came: Hong Kong Court remits Award for serious irregularity

A tribunal had decided liability and awarded sums as due on a basis not advanced by the claimant. In P v M [2018] HKCFI 2280, The Hong Kong Court of First Instance decided that this approach breached the “fundamental rule of natural justice that each party should be given the fair and reasonable opportunity to present its case and to deal with the case of its opponent.” The relevant parts of the Award were declared a nullity, and it was remitted to the tribunal to hear submissions on the issues that it had decided were determinative.

Background

P engaged M to carry out works under a construction contract (Contract) containing certain clauses requiring notice for loss and expense claims. Disputes arose and M commenced domestic arbitration proceedings against P under the Contract’s arbitration agreement. M asserted throughout the arbitration that:

  • it was not contractually required to give notice for claims for extended insurance costs or for site and head office overheads; and
  • even if notice was required, P had either waived this requirement or was estopped from asserting M’s failure to give notice (referring to various facts to support these claims).

In closing submissions, P argued that M had not claimed that the notice requirements had been met and M did not respond to this point. The Tribunal issued an Award ordering P to pay M HK$6,246,535.16 for loss and expense, plus interest.

P applied to the court for an order to set aside certain parts of the Award or declaring them to be of no effect, on grounds of serious irregularity under section 4(2)(b) and/or 4(2)(c) and 4(3)(c) of Schedule 2 Arbitration Ordinance. Specifically, P challenged the amount of HK$5,631,845.96 (comprising M’s site expenses and overheads, and insurance costs), on the basis the Tribunal had exceeded its powers and/or failed to conduct the arbitration within the parties’ agreed procedure by finding M had satisfied the notice requirement.

The issues for determination were whether P had had a fair opportunity to present its case on notice and, if it had not, whether this amounted to a serious irregularity.

Decision

P did not have a fair opportunity to present its case. If it had been made clear to P, either by M or by the tribunal before the award was published, that certain documents would be relied on in support of the claim that the notice requirements had been satisfied, P would have addressed the tribunal as to whether those documents sufficiently met the contractual requirements. The tribunal’s failure to comply with section 46(3)(b) of the Ordinance, which requires the tribunal to give the parties a reasonable opportunity to present their cases and to deal with their opponents’ cases, and to conduct the proceedings in accordance with the parties’ agreed procedure amounted to a serious irregularity.

P’s only complaint was that it had been deprived of a fair opportunity to make submissions to the tribunal as to the notice requirements. There was no allegation that the arbitrator was biased, not fit to determine the issues raised in the arbitration, or engaged in misconduct. Accordingly, the court found that it was appropriate in the circumstances to exercise its power under section 4(3)(a) of Schedule 2 to remit the matter to the tribunal and enable P to make submissions on notice, with costs of the application awarded to P.

Discussion

The facts here demonstrate a clear instance of a party not being afforded a fair opportunity to present its case. As the court held, it was appropriate that the matter be remitted to the Tribunal to take submissions on the notice issue. Accordingly, it is apparent that Hong Kong courts will be slow to set aside an award when remitting it to the original tribunal is a more appropriate option.

 

Kathryn Sanger
Kathryn Sanger
Partner, Hong Kong
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+852 2101 4029
Simon Chapman
Simon Chapman
Partner, Hong Kong
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+852 2101 4217
Tomas Furlong
Tomas Furlong
Senior Associate
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+852 21014207
Briana Young
Briana Young
Foreign Legal Consultant, Hong Kong
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+852 2101 4214

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