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Hong Kong – Arima Photovoltaic & Optical Corp V Flextronics Computing Sales And Marketing (L) LTD [2014] HKCU 1394.

23 July, 2014

 

On 4th June 2014, the Hong Kong Court of Appeal gave its reasons for dismissing the appeal by the plaintiff against the judgment of Au J at first instance, by which the learned Judge dismissed an application seeking to set aside an arbitral award on the ground that it did not constitute a reasoned award pursuant to Articles 34(2)(a)(iii), (iv) and 34(2)(b)(ii) of the UNCITRAL Model Law on Arbitration, which applies to international arbitration in Hong Kong by virtue of section 34C of the old Arbitration Ordinance (Cap 341) (which was then in force at the time of the arbitration).


The arbitration arose out of a dispute between the parties under an agreement by which the defendant purchased the plaintiff’s business. In the arbitration, the plaintiff claimed for the balance of the purchase price payable by the defendant. The defendant resisted the claim and counterclaimed for damages for alleged breaches of certain warranties under the agreement. The outcome of the arbitration was that, although the plaintiff succeeded in its claim, it was also held to be liable to the defendant on some of the defendant’s counterclaims. Au J dismissed the plaintiff’s application to set aside the award in respect of the counterclaims which had prevailed, as the Judge was not satisfied that the award was not a reasoned one. 


The Court of Appeal (Barma JA giving the Reasons for Judgment of the Court) considered that when considering the sufficiency or adequacy of the short reason given by the arbitrators, it was appropriate to have regard to the circumstances of the arbitration, and in particular the manner in which the matter under consideration was dealt with by the parties to the proceedings. The parties can be expected to know how the issue had been approached by them, and the nature of such arguments as they may have put forward in relation to it.

 
Although it is right that the quantum of counterclaim put forward by the defendant was not accepted by the plaintiff, the nature and extent of the challenge to the defendant’s case was highly relevant to the question of what the arbitrators needed to do to deal with the aspect of the case. At the arbitration, relevant documents inconsistent with the defendant’s case on quantum were not put to the defendant’s witness while he was giving evidence. Moreover, they were not referred to at all before the arbitrators, whose attention was never drawn to them. Thus, the Court of Appeal found it scarcely surprising that the arbitrators did not deal with those documents.

 
In the circumstances, the arbitrators could rely on the evidence of the defendant’s witness on the relevant issue of quantum, as set out in his witness statement and adopted as evidence in chief in coming to their award. In the absence of any challenge to the matters put forward by the defendant, the arbitrators were entitled to conclude that the defendant’s case was made out.

 
This is an example of the Court taking a pragmatic approach when considering the sufficiency of an arbitral award. To allow losing parties in arbitration to knit pick parts of an award they are not satisfied with in vacuo without having regard to the reality of the situation and the history of the arbitral proceedings would defeat some of the key objectives of arbitration, namely finality and speed.

 
The full judgment of the Court of Appeal can be found here

 

This article was supplied by Jose Antonio-Maurellet, Des Voeux Chambers

 

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