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19 November 2019 | by LexisNexis Hong Kong

Facts

In the case of Wang Peiji (王培基) v Wei ZhiYong (魏志勇) [2019] HKCU 4018, the Plaintiff, the Defendant, a third party (“Zhou”) and their related companies entered into a loan agreement, in which the Defendant and Zhou borrowed a sum of RMB 22 million from the Plaintiff. In case of default, the Defendant, Zhou and their related companies should pay the interest, calculated at the rate of 2% per month and the Defendants’ companies would guarantee the repayment.

The Defendant, Zhou and their related companies failed to repay the loan on its due date. The Plaintiff then commenced arbitration proceedings at Guangzhou Arbitration Commission, which it granted the award in favour of the Plaintiff on 20 April 2009.

On 29 November 2010, the Panyu People’s Court enforced the award and the Plaintiff recovered part of the loan from the Defendant. However, the remaining sum plus interests were still outstanding under the award. The Plaintiff then applied for enforcement proceedings in Hong Kong to recover the remaining balance owed. By an order made on 14 May 2019, Madam Justice Mimmie Chan granted leave to enforce the arbitral award. The Defendant then applied to set aside the order.

Judgment

The court considered a factually similar case, CL v SCG [2019] HKCU 816, that the court set aside an arbitral award enforcement order as the application to enforce was time barred due to section 4(1) of Limitation Ordinance (“LO”). The judge in CL held that the six-year time limit began from the date on which the implied promise to perform the award was broken instead of the date of the arbitration agreement or the date of the award. There is no such express provision in the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, the relevant Arbitration Ordinance or the LO itself, which states that time limitation for enforcement of an arbitral award should not run during the period when a successful party to an arbitral award applies for enforcement on the Mainland. By the plain reading and operation of s.4(1)(c) of LO, the cause of action accrued to CL to enforce the award in Hong Kong when SCG acted in breach of its obligation to make payment under the award became time-barred after the provided expiration of 6 years.

By applying CL and s.4(1)(c) of LO, the court granted the Defendant’s application to set aside the enforcement order recognizing that the application to enforce was time-barred. In addition, the court also noted that as the underlying contract was not executed under seal, the 12 years limitation period under section 4(3) of LO did not apply.

For more information, please see:

The Annotated Ordinances of Hong Kong – Arbitration Ordinance (Cap 609), High Court Ordinance (Cap 4), Limitation Ordinance (Cap 347)

Halsbury’s Laws of Hong Kong – Arbitration, Civil Procedure: High Court

Hong Kong Civil Court Practice

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