Read the full judgment text of CACV 158/2012 on BabelCite. This Court of Appeal judgment was delivered on 15 April 2016 before Yuen JA, Barma JA, Poon JA.
Civil procedure – enforcement of arbitral award – Common Law action on the award – implied promise to honour award – whether court has jurisdiction to award damages when award was for continued performance rather than damages – election of remedies – Statutory Process under Arbitration Ordinance Cap.341 s.2GG and s.40B – Tort – inducing breach of contract – double actionability rule – whether tort actionable under PRC law – whether Hong Kong has most significant relationship – Said v Butt defence – alter ego – Tort – unlawful means conspiracy – elements – common intent to injure – restructure of shareholding – Equity – constructive trust – shares in Hong Kong company – whether PRC governed contract gives rise to constructive trust – whether agreement amenable to specific performance – International arbitration – CIETAC arbitration – Mainland award – enforcement in Hong Kong. The plaintiff, a PRC property development company, entered into an agreement on 4 July 2003 with EP and EP Holdings, Hong Kong companies within the Eton group controlled by Mr Tan, to transfer the right to develop the No.22 Land in Xiamen for RMB120m, with the ultimate mechanism being the transfer of shares in HK Legend to a legal entity designated by the plaintiff. Mr Tan subsequently decided to discontinue performance, and a Notice to Discontinue Performance was issued in November 2003. A CIETAC arbitral award in October 2006 ordered EP and EP Holdings to pay damages of RMB1,275,000 and continue performance of the agreement. The Eton group then carried out a 'restructure' that diluted EP and EP Holdings' control of HK Legend, allotting 9,998 shares to EP Group and transferring EP's share to EP Group. The court held that a Common Law action on the award is an independent cause of action based on an implied promise by implication of law to honour the award, and the court has jurisdiction to award damages even when the award was for non-monetary relief such as continued performance, distinguishing Walker v Rome, Gater Assets, and Sonatrach as cases concerning the Statutory Process. However, no order could be made at this time because of issues concerning election of remedies with the judgment entered in HCCT54/2007 under the Statutory Process. The plaintiff failed to establish the tort of inducing breach of contract against Mr Tan because his act was not actionable under PRC law, and the double actionability rule was not satisfied; the Lenovo case from the Yixing court did not establish a civil wrong of inducing breach of contract under PRC law, relying instead on the 'good faith principle' and Article 97 of the PRC Contract Law. The exception to double actionability did not apply because the contract, decision, and implementation were predominantly connected with the PRC, not Hong Kong. The Said v Butt defence was not available to Mr Tan because he was not the alter ego of the contracting parties. The unlawful means conspiracy claim failed because there was no common intent to injure; the trial judge accepted the evidence that the defendants did not connect the restructure with the agreement, believing it was already 'dead and buried'. The constructive trust claim failed because PRC law does not recognise the concept of constructive trust, and even under Hong Kong law, the agreement was a complex joint venture development requiring constant supervision, not amenable to specific performance. The appeal was dismissed in respect of the economic tort claims and constructive trust. No order was made at this time in respect of the Common Law action on the award claim for damages, with counsel to consult on an order. Costs submissions to follow within 56 days.
Legal issues: Jurisdiction to award damages in a Common Law action on the award when the award was for continued performance · Election of remedies and inconsistency with HCCT54/2007 judgment · Double actionability for inducing breach of contract · Said v Butt defence for Mr Tan · Unlawful means conspiracy · Constructive trust over HK Legend shares
Outcome: Appeal dismissed in respect of the claims for inducing breach of contract, unlawful means conspiracy, and constructive trust. No order made at this time in respect of the claim for damages under the Common Law action on the award, with the court directing that counsel should consult and if possible agree an order for the court's consideration and approval.
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