Capital Wealth Holdings Ltd and Others v. 南通嘉禾科技投资开发有限公司
Read the full judgment text of HCCT 66/2020 on BabelCite. This 高等法院原訟法庭 judgment was delivered on 4 December 2020 before Hon K Yeung J in Chambers.
Arbitration — Interim Anti-suit Injunction — Variation — Jurisdictional challenges in Mainland proceedings — Whether defendant may respond to jurisdictional challenges and seek adjournment or stay while subject to interim injunction. The defendant commenced four proceedings in the Nantong Intermediate People’s Court (NIPC) against certain plaintiffs identified as WFOEs. The NIPC fixed substantive hearing dates without consultation. The plaintiffs obtained an interim anti-suit injunction restraining the defendant from proceeding in the Mainland actions, in breach of the arbitration agreement and pending arbitration in Hong Kong. WFOEs later applied to the NIPC to challenge jurisdiction, aiming to prevent the hearing. The defendant applied to vary the interim injunction to be allowed to respond to the jurisdictional challenge and seek adjournment or stay of the Mainland proceedings. The court recognized the procedural rules in the Mainland that hearing on the merits cannot proceed while jurisdictional challenges are pending. Balancing the risk of injustice to both sides, the court varied the injunction to grant defendant liberty first to seek stay or adjournment of the Mainland proceedings including jurisdictional challenges, and if refused, to respond to such challenges, thereby maintaining the injunction’s purpose while mitigating procedural risks. The remainder of the summons concerning discharge of the injunction and fortification was adjourned for substantive hearing. The court ordered the defendant may attend and participate in the jurisdictional challenge hearing fixed by the NIPC on 7 December 2020. The interlocutory order was thus refined to better balance procedural fairness in cross-border arbitration-related litigation.
Legal issues: Variation of interim anti-suit injunction
Outcome: The court varied the interim anti-suit injunction to permit the defendant first to seek stay or adjournment of the Mainland proceedings, and if unsuccessful, to respond to the WFOEs’ jurisdictional challenge before the NIPC.
Cites 1 case
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HCCT 66/2020 [2020] HKCFI 3058 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 66 OF 2020 ______________
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______________ DECISION ______________ 1.By an interim anti-suit injunction of 19 October 2020 granted by Deputy Judge Sit SC (the “Interim Injunction”), the defendant (“D”) is inter alia restrained from starting, continuing, pursuing or taking further steps in 4 specified proceedings commenced by D in the Mainland before the Nantong Intermediate People’s Court (“NIPC”) against inter alios P3 to P6 (the “WFOEs”). 3 of those proceedings have been referred by the parties as the WFOE Proceedings, which term I adopt. 2.By summons of 1 December 2020 (the “Summons”), D is seeking (1) the discharge of the Interim Injunction in respect of the WFOE Proceedings, (2) a limited variation to, as summarized by Mr Anson Wong SC who appears for D, enable D to (i) respond to the WFOEs’ jurisdictional challenge made before the NIPC (“1st Variation”), and (ii) to seek a stay or adjournment of the WFOE Proceedings thereafter (“2nd Variation”), and (3) fortification of the undertaking as to damages. 3.This is the first hearing of the Summons. 4.Mr Maurellet SC appears for the plaintiffs (“Ps”). 5.The part of the Summons for discharge and fortification will be adjourned for substantive hearing. I have given parties directions on the filing of evidence. Parties will come back before me on 20 January 2021. I now deal with the application for variation. 6.The basis of Ps’ application for the Interim Injunction was that the WFOE Proceedings were brought by D in breach of the arbitration agreement between some of the parties, and that there are indeed ongoing arbitration proceedings in Hong Kong initiated by Ps against D in relation to the subject disputes. 7.I have considered the draft affirmation Zhao Lifeng exhibited to the affirmation of Wong Ka Chun filed in support of the Summons. I have also read the 4th affirmation of Yang Tai Ming filed in opposition, together with the Mainland legal opinion of Mr Sun Guangwei exhibited thereto (the “Mainland Legal Opinion”). 8.I set out some relevant background leading to the present application. 9.As said, the WFOE Proceedings were commenced by D. 10.What appears to have happened is that the NIPC, having seized upon the WFOE Proceedings, proceeded to fix the substantive hearing of the WFOE Proceedings to be heard between 8 and 10 December 2020. Those dates were apparently fixed without consulting the parties. 11.After those dates had been fixed, and with knowledge of the hearing dates, Ps came before Deputy Judge Sit SC for the Interim Injunction. 12.There was no application for an order that the WFOE Proceedings be withdrawn (though it is one of the relief Ps seek by the Originating Summons). 13.On the other hand, despite having notice of Ps’ application for the Interim Injunction, D took no part in the application and did not attend the hearing before the learned Deputy Judge. 14.Upon the grant of the Interim Injunction, and restrained thereby, D could take no further step in the WFOE Proceedings. According to the strict terms of the Interim Injunction, D cannot even take any step to apply to have the WFOE Proceedings adjourned or stayed. Those proceedings remain pending before the NIPC. 15.The WFOEs then on 12 November 2020 took out applications before the NIPC to challenge its jurisdiction to hear the WFOE Proceedings. They thought it was necessary for them to do so to prevent the hearing on 8 to10 December 2020 from taking place. It is not apparent why they did not do so earlier, and only did so after the grant of the Interim Order. Those applications have subsequently been fixed to be heard on 7 December 2020 before the NIPC. 16.It is against those background that the Summons now come before me. 17.Parties’ consensus is that given the Interim Injunction, the WFOE Proceedings should be adjourned or stayed. But how that should be done they cannot agree upon. 18.D’s concern is that if the NIPC refuses any application for an adjournment or stay, which NIPC can, D will suffer irreparable damage if it were to be restrained from resisting before the NIPC the WFOEs’ jurisdictional challenge — hence the need for the 1st Variation. 19.Ps do not agree. Ps’ concern is that if the NIPC refuses any application for adjournment or stay, and if D is to be permitted to participate in the WFOE Proceedings in the manner as contemplated by the 1st Variation, the WFOE Proceedings would in reality be permitted to be continued, thereby defeating the purpose of the Interim Injunction. Ps’ position is that in the eventuality of any application for adjournment or stay being refused, D should apply to have the WFOE Proceedings withdrawn. 20.But on the other hand, Ps sought the Interim Injunction with knowledge of the hearing dates of 8 to 10 December 2020. They did not see fit to seek an interim order compelling D to withdraw the WFOE Proceedings. I see force in Mr Wong’s submission that if this court is to accept the WFOEs’ present stance, D may in effect be compelled to withdraw the WFOE Proceedings. The WFOEs will benefit from an extra step they took in challenging the jurisdiction of the NIPC after D’s hands have been tied, which step they could have taken before their application for the Interim Injunction. 21.The task before this court is to decide which course would pose lower risk of injustice. 22.According to the Mainland Legal Opinion, whilst a jurisdictional challenge is pending, the court concerned cannot proceed to consider the substantive merits of the case. To do so would be a serious procedural irregularity. 23.Bearing in mind all the circumstances, the variation that is going to pose the lowest level of risk of injustice is in my view as follows:
24.To implement the mechanism above, Mr Wong placed before me a refined set of variations which he now seeks instead. 25.On the evidence before me, I form the view that the variations now proposed by D pose lower risk of injustice. 26.I vary the Interim Injunction in terms of the refined variations now being sought.
Mr José-Antonio Maurellet SC, leading Mr Gary C C Lam, instructed by DLA Piper Hong Kong, for the 1st to 6th Plaintiffs Mr Anson Wong SC, leading Mr Martin Kok, instructed by Baker & McKenzie, for the Defendant | ||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCT 66/2020