X. v. Jemmy Chien

At a glance

Parties

X (BVI company, plaintiff; respondent in the arbitration) v. Jemmy Chien (Taiwanese national, defendant; claimant in the arbitration)

Case no.

HCCT 31/2019; [2019] HKCFI 2172 (security) and [2020] HKCFI 286 (set-aside and enforcement)

Court

Hong Kong Court of First Instance, Construction and Arbitration Proceedings (Mimmie Chan J)

Underlying award(s)

HKIAC/A16115: Final Award on Merits (save as to costs) of 25 February 2019; Final Award on Interest and Costs of 26 June 2019

Forum and rules

Set-aside application under section 81 of the Arbitration Ordinance (Cap 609) and Article 34 of the UNCITRAL Model Law; Order 73 RHC

Treaty

Clause 7 (arbitration clause) of the Service Agreement of 26 April 2010

Sector

Commission agency; power tools and power adapters

Outcome

Application to set aside dismissed and leave to enforce the Awards granted (4 March 2020). An earlier security application succeeded only as to costs.

Amount

Claimed in the arbitration and awarded: US$388,437.09 and RMB 9,325,125.03 in commission. Security for costs ordered: HK$500,000. Set-aside costs awarded on an indemnity basis.

The dispute

X is a BVI company that makes power tools and power adapters. It belongs to a group whose Taiwanese parent is listed on the Taiwan Stock Exchange. Under a Service Agreement of 26 April 2010, Jemmy Chien agreed to provide product, marketing and promotion services for a 5% commission. Clause 7 sent disputes to arbitration in Hong Kong. Chien won an HKIAC award for unpaid commission. X then applied to set the Awards aside on two grounds. First, it said there was no valid arbitration agreement, because Chien had signed only as agent for Philip Chen, the true party. According to X, Chen was hidden because he was Vice President of an intermediary company and faced a conflict of interest. Second, X said enforcing what it called a sham agreement would be contrary to Hong Kong public policy. Chien replied that he was the true party and had only delegated performance of the services to Chen.

Key holdings

1. The court refused to make security for the award a condition of the set-aside application. The Awards were not manifestly invalid. But X had substantial group assets abroad, there was no evidence of dissipation, and only about three weeks separated the two hearings, so the delay posed no real risk to enforcement. Security Decision ¶¶ 10, 20, 23, 31–33
2. X had no assets in Hong Kong and had earlier agreed to give security for costs. The court ordered it to provide HK$500,000 as security for Chien's costs within 7 days. Security Decision ¶¶ 34–36
3. The court reviews the tribunal's ruling on jurisdiction for correctness (Dallah). That review is limited to true questions of jurisdiction and does not reach the arbitrator's findings of credibility and fact. Judgment ¶¶ 4–6, 21
4. Chien was a party to the Service Agreement and to the Arbitration Agreement. Read objectively, the execution clause shows that Chien signed as "Party B" himself. The extrinsic evidence (his unfamiliarity with the terms, Chen's performance of the services, Chen's prior dealings with X) does not show that Chien did not contract personally. Judgment ¶¶ 14–21
5. The arbitration agreement is separable from the main contract. Even if Chen performed the services, clause 7 can be read as an independent agreement to arbitrate between X and Chien, and enforcing it is not enforcing a sham. Judgment ¶¶ 24–25
6. The public policy ground failed. The court confined X to the ground stated in the affidavit served with the Originating Summons, as Order 73 r 5(4) requires, and the expert opinion did not show any illegal act in Taiwan. X itself had taken part in the alleged sham and could not rely on its own wrongdoing to avoid payment. Even if the ground had been made out, the court would have refused to set the Award aside in its residual discretion. Judgment ¶¶ 22–23, 27–31
7. The set-aside application was dismissed, with costs on an indemnity basis and a certificate for 2 counsel. Leave to enforce the Awards was granted, also with indemnity costs. Judgment ¶ 32

Procedural history

1. 26 April 2010Service Agreement, containing the arbitration clause (clause 7), concluded.
2. 25 February 2019HKIAC Final Award on Merits (save as to costs) in HKIAC/A16115, in favour of Chien.
3. 18 June 2019X issues an Originating Summons to set aside the Awards.
4. 26 June 2019Final Award on Interest and Costs issued.
5. 19 July 2019Chien applies to dismiss the set-aside application, for leave to enforce the Awards, and for security.
6. 5 September 2019Security Decision (hearing of 30 August 2019): no security for the award; HK$500,000 security for costs ordered.
7. 23 September 2019Substantive hearing of the set-aside application and the enforcement application.
8. 4 March 2020Decision: set-aside application dismissed and leave to enforce the Awards granted.

Tribunal, counsel and experts

Decided by

• Mimmie Chan Judge, Hong Kong Court of First Instance

For the claimant

Yan Lawyers

For the respondent

WK To & Co

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Keywords

• set-aside
• enforcement
• Hong Kong
• HKIAC
• Article 34 Model Law
• existence of arbitration agreement
• agency
• party to the contract
• parol evidence
• separability
• public policy
• sham agreement
• security for costs
• Order 73 rule 10A
• Soleh Boneh
• residual discretion
• commission agreement
• New York Convention

Summary generated with AI from the published documents — refer to the award for the authoritative text.