Hong Kong Court of Appeal declines leave to appeal stay in favour of arbitration notwithstanding procedural irregularity

In Wing Bo Building Construction Co Ltd v Discreet Ltd (HCMP 775/2016), the Hong Kong Court of Appeal ("CA") has declined an application for leave to appeal a decision by the Court of First Instance ("CFI") to stay the action in favour of arbitration. Click here for the full judgment.

The dispute arose out of a construction contract containing an arbitration clause. A master in Chambers, who in fact lacked jurisdiction to hear the application, refused to stay the proceedings in favour of arbitration. Wing Bo appealed that decision to the CFI. Ng J noted that the application should not have been brought before her by way of appeal, since the master lacked jurisdiction to hear it at first instance. However, counsel for both parties urged the judge to deal with the substantive issues. She agreed to do so, and ordered a stay pursuant to s.20 of the Arbitration Ordinance, which mandates a stay of court proceedings if the dispute is the subject of a valid arbitration agreement.

Although s.20(8) Arbitration Ordinance expressly excludes appeal of a stay in favour of arbitration, Wing Bo applied to the CFI for leave to appeal the judge's order. (See our previous blog post for a detailed discussion of the CFI's decision)

When the CFI rejected the application, Wing Bo sought leave to appeal from the CA.

On appeal, the CA noted that the master's decision was a "nullity", since the master plainly lacked jurisdiction. The CA also found that the manner in which the matter came before Ng J by way of appeal, as opposed to a fresh application, was an "irregularity". However, the parties' joint request to the judge to hear the substantive dispute amounted to a waiver of the right to challenge the decision on the basis of the irregularity. Concluding that Ng J did possess jurisdiction to entertain the application for a stay, the CA refused to grant leave to appeal.

The CA went on to hold that the application was "clearly hopeless", and ordered Wing Bo to pay costs on the indemnity basis. In reaching the decision, the CA considered its "policy in refusing leave in hopeless applications, particularly in the context of application [sic] for stay in favour of arbitration ".

The CA's decision is a welcome confirmation of the CFI's support for the limitations on appeals in arbitration-related matters. It also serves to remind both parties and counsel that Hong Kong courts do not look favourably on unfounded applications in the context of arbitrations, and will not hesitate to deal with them robustly.

For further information, please contact Justin D'Agostino, May Tai, Simon Chapman, Dominic Geiser or your usual Herbert Smith Freehills contact.