Overview

The Hong Kong Court of First Instance (CFI) has denied leave to appeal its May 2017 decision in Israel Sorin (IZZY) Shohat v Balram Chainrai [2017] HKEC 1118. In that decision (see our previous post), Chow J refused to stay execution of the CFI’s order to enforce an arbitral award pending the outcome of the Award Debtor (Mr Shohat)’s claim against Mr Chainrai (Award Creditor) in the Hong Kong High Court (High Court Action).

On 21 July 2017, the Award Debtor applied for leave to appeal Chow J’s decision (Leave Application), and for an interim stay of execution of the enforcement order pending the outcome of its application for leave to appeal (Stay Application). The court also considered an application by the Award Creditor for payment out of monies that the Award Debtor had paid into court in partial satisfaction of the award (Payment Out Application).

The Court dismissed the Leave and Stay Applications. It granted the Payment Out Application, subject to a 14-day delay to allow for any further application for leave to appeal and interim stay pending appeal.

Reasons for the Court’s decisions

In support of the Leave Application, the Award Debtor argued that Chow J had erred in rejecting its demand for security from the Award Creditor pending the outcome of the High Court Action. The application for security had been sought on grounds that: a) it would be difficult to enforce a judgment against Mr Chainrai in Israel, where he lives and b) Mr Chainrai was of advanced age and might dissipate his assets as part of his estate planning.

Chow J rejected these arguments, noting that: a) Hong Kong law does not give a plaintiff a general right to seek pre-trial security over the subject matter of a claim or any costs incurred in bringing legal proceedings in Hong Kong, regardless of the defendant’s place of residence or domicile, or his solvency (see FG Skerritt Ltd v Caledonian Building Systems Ltd [201] EWHC 1898 (TCC)). Chow J had considered the potential inconvenience of enforcing a Hong Kong judgment in Israel, but was persuaded by other, “more weighty” factors to refuse the stay of execution; and b) Mr Chainrai’s advanced age, as well as the possibility that he might engage in estate planning, are “just ordinary life events”. The judge was not persuaded that they constituted good grounds for granting the stay of execution. Further, there was no evidence that Mr Chainrai would dissipate his wealth to such an extent that he would not be able to satisfy any judgment in the High Court Action. The Award Debtor had offered in open court not to pursue its stay application if Mr Chainrai (the Award Creditor) would provide security. Chow J considered the offer irrelevant to his decision on granting the stay. The Award Debtor still had to provide sufficient grounds to support his application.

Chow J dismissed both the Leave Application and the Stay Application, and granted the Payment Out Application. He ordered the Award Debtor to pay the costs of the Applications on an indemnity basis, “in accordance with the courts usual practice regarding unsuccessful applications to challenge the enforcement of arbitration awards“.