Hong Kong Court Refuses Enforcement Of Mainland Award, Rejects Limitation Arguments

In Wang Peiji v Wei Zhiyong [2019] HKCFI 2593; [2019] HKEC 3446, the Hong Kong Court of First Instance has set aside an order to enforce a mainland Chinese arbitration award, rejecting arguments that a twelve year limitation period applied because the award had been made under seal.

Background

The Plaintiff, the Defendant and a third party entered into a loan agreement, under which the Defendant and the third party borrowed RMB 22 million. In case of default, the Defendant and the third party would pay interest at 2% per month, and the Defendant's companies would guarantee the repayment. The Defendant, the third party and the Defendant's companies failed to repay the loan, so the Plaintiff commenced arbitration at the Guangzhou Arbitration Commission, which made an award in the Plaintiff's favour on 20 April 2009.

The Plaintiff commenced enforcement proceedings in the Panyu People's Court where it recovered RMB 4,734,019.48, leaving RMB 3,353,496.92 plus interest outstanding under the award. The Plaintiff then commenced enforcement proceedings in Hong Kong to recover the remaining amount. On 14 May 2019 Madam Justice Mimmie Chan granted leave to enforce the award, holding that the Defendant should pay the outstanding sum plus interest. The Defendant appealed.

Decision

In setting aside the enforcement order, the court addressed two main issues.

The applicable limitation period

The first issue was the applicable limitation period under the Limitation Ordinance. The Plaintiff argued that the applicable provision was section 4(3) Limitation Ordinance (Cap. 347), which provides a limitation period of twelve years meaning that the Plaintiff was entitled to enforce the award until 20 April 2021. This was based on the fact that the award of the Guangzhou Arbitration Commission was executed under seal. The Defendant argued that the relevant period was six years under section 4(1)(c). The Court ultimately agreed with the Defendant. It rejected the Plaintiff's argument, stating that the relevant consideration is whether the underlying contractual document, not the award, was executed under seal. As there was no suggestion of that in this case, the Court held that the default limitation period of six years applied.

Suspension of the limitation period

In the alternative, the Plaintiff argued that the limitation should be...