HK Court Refuses to Extend Time to Set Aside Award

In A, B, C v D [2020] HKCFI 2887, in a dispute arising out of a transfer agreement, the Hong Kong High Court refused to extend time to apply to set aside an award on the basis that the Applicants failed to give any explanation for their delay in making the application.

The grounds of the setting aside application were that the 2nd Applicant and the 3rd Applicant in these proceedings (the Respondents in the Arbitration) were not parties to the arbitration agreement, and that the arbitration agreement relied upon was not valid.

The Award was received by email on 21 May 2020; the statutory deadline for making the application to set aside the Award expired on 21 August 2020 (3 months from the parties’ receipt of the Award, as set out in Article 34 (3) of the Model Law – as adopted in s.81 of the Arbitration Ordinance).  The Defendant argued that as the application was issued on 28 August 2020, it was out of time and sought an order from the Court for the immediate dismissal of the Originating Summons (following the practice advocated in G v M HCCT 36/2009, 14 September 2009 and Dubai International Real Estate v Al Almadiah Contracting and Trading [2018] HKCFI 613).

The Applicants maintained that the Court has the jurisdiction and power to grant an extension of time for an application to be made under Article 34 (3) (as held in Sun Tian Gang v Hong Kong & China Gas (Jilin) Ltd [2016] 5 HKLRD 221), and since the Respondent claimed that that decision was wrong, the Applicants should be given the opportunity to fully argue this important point at an adjourned hearing. The Applicants maintained that they had established on the evidence a viable and arguable case on the OS and the application for extension of time as sought, and their application should not be summarily dismissed.

Due to the limited time available on the first date before the Court, the initial question – whether the Court had jurisdiction and power to extend time was not decided. The Court stated (@10):

“In fairness to the Applicants, the issue of whether there is jurisdiction and power for the Court to extend the time under Article 34 to set aside an award will have to be determined in another case at an opportune time, when both parties can have the opportunity to make full submissions.”

That said, the Court reiterated its comments from the Sun Tiang decision, that bearing in mind the objectives of the Ordinance that there should be finality in an award, the short period of 3 months set out in the Model Law should not, as a general rule, be extended “unless the applicant can establish to the satisfaction of the court that there are good reasons to do so”, stating that the facts in Sun Tiang were exceptional, and stated to be such in the judgment.

The Respondent argued that even if the Court had the power to extend time, the Applicants had failed to establish a good cause for the extension. The Court agreed, holding that the Applicants had come nowhere near the necessary threshold for the Court to exercise its discretion to extend the time sought. The Court stated (@25):

“No reason has been given by any of the Applicants for their failure to take any steps to apply to set aside the Award between 21 May 2020 and 28 August 2020.  In the absence of any good reason shown to explain the delay and inactivity, I cannot see why the Court should exercise its discretion and grant time to the Applicants.”

Nor did the Court consider the merits of the application to be sufficiently strong to warrant the exercise of discretion to extend time.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Hong Kong Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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