A v. B

HCCT 68/2022

[2022] HKCFI 3620

[amended and redacted copy]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 68 OF 2022

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Before: Hon Mimmie Chan J in Chambers

Dates of Written Submissions: 22 and 28 November 2022

Date of Decision: 1 December 2022

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D E C I S I O N

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Background

1.The Plaintiff issued a summons on 26 October 2022 (“26/10 Summons”), seeking an order to restrain the Defendant from: making or causing to be made any further disclosure, publication or communication of information relating to arbitrations commenced in Hong Kong between the Plaintiff and the Defendant (“Arbitrations”) and any arbitral award in the Arbitrations in connection with the product referred to as XXXXXXXXXXX (“Product”), including the issuance, promotion or redemption of the Product; and from taking any further steps to issue or promote the Product. The order sought in the 26/10 Summons is referred to herein for convenience as “Restraining Order”.

2.As spelt out in a further summons issued by the Plaintiff on 23 November 2022 (“23/11 Summons”), the Plaintiff seeks from the Court an order that the substantive argument of the 26/10 Summons be heard by the Court on an earlier date no later than 8 December 2022. The Plaintiff urged the Court to deal with this application on urgent basis, and this Court finally directed that it be dealt with on papers, and be confined to the preliminary question of why the Court should not decline to grant the Restraining Order sought under section 45(4) of the Arbitration Ordinance (“Ordinance”). Written submissions have been filed by the parties, as directed by the Court.

3.The proceedings herein were commenced by an Originating Summons issued on 18 August 2022 (“OS”). On 17 August 2022, the Plaintiff had applied ex parte and was granted an order from the Court (“Injunction”), under which the Defendant was restrained from making, or causing to be made, any disclosure, publication, and/or communication of information relating to the Arbitrations and/or the arbitral award ultimately rendered in the Arbitrations. The Injunction made specific provision to restrain the Defendant from “making, or causing to be made, any further disclosure, publication and/or communication of information concerning the Arbitrations including but not limited to (i) the existence of the Arbitrations; (ii) the identity of the parties; (iii) the nature of the claims, defences, and/or counterclaims; (iv) the quantum claimed (or counterclaimed) by any party; (v) the factual allegations made by any party; and/or (vi) the outcome of the Arbitrations, including the existence of any award, the identity of the successful party, and/or the quantum awarded (if any)”.

4.The Injunction expressly provided that it applied save as permitted under section 18(2) of the Ordinance and/or Article 45.3 of the 2018 HKIAC Administered Arbitration Rules (“Rules”) (which govern the Arbitrations). Section 18(1) of the Ordinance prohibits any party from publishing, disclosing and communicating any information relating to the arbitral proceedings or the award, but section 18(2) provides that a party may publish, disclose or communicate the relevant information to protect or pursue a legal right or interest of the party, or if the publication, disclosure or communication is made to a regulatory body, court or tribunal and the party is obliged by law to make the publication, disclosure or communication.  The Rules make similar provision.

5.The ex parte application on 17 August 2022 originally included an application for an order in terms of the Restraining Order. At the hearing, this Court pointed out that on the evidence presented by the Plaintiff, there was delay and the Court was not prepared to grant the Restraining Order on ex parte basis, without hearing the Defendant’s case on the Product.

6.On 26 August 2022, Hon Lisa Wong J continued the Injunction, by consent.

7.On 24 October 2022, the Plaintiff made yet another ex parte application, with notice on the Defendant, for the Restraining Order. That was heard by Hon Lisa Wong J, who dismissed the application with costs.

8.On 26 October 2022, the Plaintiff issued the 26/10 Summons on inter-partes basis, and on 28 October 2022, Hon K Yeung J made directions for evidence to be filed by the parties, and for the hearing of the 26/10 Summons to be adjourned for substantive argument on an expedited date, subsequently fixed to be 9 March 2023.

9.The Plaintiff thereafter wrote to this Court, for an earlier date to be fixed not later than 8 December 2022, in terms of the 23/11 Summons.

10.For the second ex parte application made on 24 October 2022, and in seeking an expedited hearing from Yeung J on 28 October 2022, the Plaintiff relied on the fact that the Defendant had made application to the Court in Seychelles (where the Defendant was incorporated) for its scheme of restructuring and/or arrangement (“Scheme”), which involved or contemplated the issue of the Product, such that the application for the Restraining Order directly referring to the Product should not be delayed. However, even in the first ex parte application before this Court on 17 August 2022, the Plaintiff had already referred to and placed reliance on the imminent application to the Seychelles Court and the Scheme which involved the issue of the Product. The Plaintiff alleges that a hearing is now imminent, on 9 and 12 December 2022, when the Seychelles Court will consider approval of the Scheme.

Applicable legal principles

11.The Plaintiff’s application to the Court for the Restraining Order is one for interim relief which falls within section 45 of the Ordinance. Under section 45(2), the Court “may”, in relation to any arbitral proceedings which have been or are to be commenced in or outside Hong Kong, grant an interim measure. Section 45(3) expressly states that the powers conferred may be exercised by the Court irrespective of whether or not similar powers may be exercised by an arbitral tribunal under section 35 of the Ordinance in relation to the same dispute.

12.Section 45(4) states:

“The Court may decline to grant an interim measure under subsection (2) on the ground that-

(a) the interim measure sought is currently the subject of arbitral proceedings; and

(b) the Court considers it more appropriate for the interim measure sought to be dealt with by the arbitral tribunal.”

13.I reject the submissions made by Counsel for the Plaintiff, that as the application for the Restraining Order is not currently made the subject matter of an application to the tribunal in the Arbitrations, the case does not come within the ambit of section 45(4), and the Court has no basis to decline the grant of the Restraining Order sought. The submissions are that both of the conditions set out in section 45(4) must be satisfied before the Court can decline the grant of the interim measure.

14.As Counsel for the Defendant rightly pointed out, section 45 (4) does not set out the only and exclusive grounds for the Court to decline the grant of an interim measure. The powers conferred under section 45 are discretionary, and the interim measure sought by any party may, or may not, be granted by the Court (see also Company A & Ors v Company D & Ors HCCT 31/2018, 3 October 2018, at paras 38-39). Section 45(4) only states that the Court may decline to grant an interim measure if the matters set out in (a) and (b) apply. However, it does not follow from that that the Court must grant the interim measure and may not decline to grant same, if section 45(4) does not apply. There are established principles governing when the Court may grant any interlocutory or interim relief sought, whether by way of interim injunction, orders for preservation of assets or evidence, orders to maintain or restore the status quo pending the determination of the dispute, or otherwise as may be just, convenient, necessary and justified on the facts of each case, and in exercise of the discretionary powers of the Court. Section 45(4) cannot be exhaustive of the grounds on which an application for interim measure may be declined.

15.As Counsel for the Defendant rightly submitted, it is in each case necessary for the Court to decide whether it is proper, just or convenient for the Court to grant the injunctive relief sought, taking into consideration matters such as whether there was delay in the application and hence the need for the relief, and whether the balance of convenience lies in favour of the grant of the injunction.

16.The spirit and principles of the Ordinance must also be borne in mind. As stated in section 3 of the Ordinance, the object of the Ordinance is to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense, and the Ordinance is based on the principles that parties to a dispute should be free to agree on how their dispute should be resolved, and that the Court should interfere in the arbitration of the dispute only as expressly provided for in the Ordinance. This is reiterated in section 45(7) of the Ordinance, in the context of the Court exercising its powers to grant interim measures in relation to arbitral proceedings outside Hong Kong, when the Court is required to have regard to the fact that its power is ancillary to the arbitral proceedings outside Hong Kong, and for the purposes of facilitating the process of the court or arbitral tribunal outside Hong Kong that has primary jurisdiction over the arbitral proceedings.

17.The relief now sought by the Plaintiff relates to the Arbitrations commenced in Hong Kong, and the Court is the supervisory court. Although section 45(7) is not directly applicable, this does not mean that the principles and object stated in section 3 of the Ordinance do not apply, and there are constant reminders given by the Court that it acts only to support and aid the tribunal, and to facilitate the speedy resolution of disputes by arbitration in accordance with the parties’ agreement, and without unnecessary expense: a matter specifically mentioned in section 3.

18.Leviathan Shipping Co Ltd v Sky Sailing Overseas Co Ltd [1998] 4 HKC 347 was decided under the repealed Arbitration Ordinance Cap 341, but the relevant provisions considered (ss 2GC (5) and 2GC (6)) contain the same language used in sections 60(4) and 45(4) of the Ordinance. There, Findlay J made the following observations on the concurrent powers of the tribunal and the Court to deal with applications for interim measures:

“The legislature has provided for the intervention of the courts, but, in my view, the jurisdiction should be exercised sparingly, and only where there are special reasons to utilize it. A special reason would be where the arbitral tribunal does not have the power to grant all the relief sought in a single application. Rather than apply to the tribunal for some relief and to the court for the other relief, it would obviously be more appropriate for the application to be made in its entirety to the court.”

19.The policy of minimal curial intervention in arbitrations and the need to recognize the autonomy of the arbitral process has continued to be recognized and enforced by the Court despite the repeal of Cap 341, and is indeed reflected in the Ordinance, and I see no reason to depart from the approach highlighted by Findlay J in Leviathan Shipping Co Ltd.

20.Although it is recognized that the power of the Court to grant interim measures under section 45 is not per se interference in the arbitration, the policy of minimal curial intervention is based and underpinned by the need to recognize the autonomy of the arbitral process, and the fact that parties who opt for arbitration must be taken to have acknowledged and accepted the attendant risk of having only a limited right of recourse to the courts. The arbitrators must therefore be recognized as the tribunal with the primary jurisdiction over the arbitration proceedings.

Whether interim relief application should be declined

21.On the facts of this case, it is pertinent that the Court has already granted the Injunction on the Plaintiff’s application in August 2022, on the basis submitted by the Plaintiff, that there was a need for the parties to maintain the confidentiality of the Arbitrations and of the matters and information relating to the Arbitrations, and that there was a risk of the Defendant acting in breach of that duty. The contents and terms of the Injunction are clear as to what the Defendant is prohibited from doing.  If it is contended by the Plaintiff that the Defendant has acted or threatened to act in breach of the Injunction, it is open to the Plaintiff to take appropriate action against the Defendant and those said to be in breach of the Injunction, by way of enforcement including the institution of contempt proceedings.

22.If the Plaintiff contends that the Scheme and/or the issue or promotion of the Product involve the disclosure, publication and/or communication of information relating to the Arbitrations, the existence of the Arbitrations, the identity of the parties, the nature of the claims, the quantum claimed and the factual allegations made by the parties, which is not permitted under section 18(2) of the Ordinance and hence constitute breach of the Injunction, the Plaintiff is free and entitled to inform the Seychelles Court, and any other relevant court or tribunal to which application is made for the approval of the Scheme which is causing concern to the Plaintiff.  Whether the promotion and issue of the Product is a breach of the Injunction, how that affects the Scheme and whether the Scheme can or should be approved if there is breach, can all be argued before the Seychelles Court in December 2022, and at any other time.

23.In short, it is neither urgent nor necessary for this Court to explain or clarify on the Plaintiff’s application the terms of the Injunction already made, before the Plaintiff can object to the approval of the Scheme proposed to the Seychelles Court. It will be an unnecessary duplication of legal costs and judicial time and resources for the same issues as to the duties of confidentiality, any breach of the Injunction, and whether the Scheme should be approved to be ventilated before the Court now, and before the Seychelles Court and/or the tribunal in the Arbitrations.

24.It is highly pertinent that the tribunal in the Arbitrations has already been duly constituted on 27 October 2022 (“Tribunal”). A case management hearing already took place before the Tribunal on 15 November 2022. The Court was prepared to grant that Injunction in August 2022 because the Tribunal was not yet empanelled then, and the Plaintiff contended that emergency relief could not be obtained in time in the Arbitrations. I fail to see why the Plaintiff cannot now make its application for the Restraining Order to the Tribunal, or why the Tribunal cannot deal with the application. There is no evidence adduced and no submissions made, to the effect that the Tribunal has no power to deal with and determine the application for the Restraining Order - which is sought against the Defendant, and not any third party to the Arbitrations.  According to the Defendant, the Tribunal has confirmed that it has the power and availability to determine any application for interim relief.

25.The Plaintiff insisted, for no good reason discernible, that the Court should hear its application instead of the Tribunal. It lies ill in the Plaintiff’s mouth to maintain that section 45(4) of the Ordinance does not apply because the interim measure sought is not “currently the subject of arbitration proceedings”, when it is the Plaintiff itself which refused to bring the application before the Tribunal in the Arbitrations.

26.If the Plaintiff takes the view that it is necessary to obtain the Restraining Order in the terms sought in the 26/10 Summons, specifically to deal with the issue or promotion of the Product, and in addition to the Injunction already granted by the Court, then it is clearly in my judgment more appropriate for the Tribunal deal with the application.

27.I do not agree with the Plaintiff’s claim, that the obligation of confidentiality is not founded in the contract containing the arbitration clause, and that the duty sought to be enforced by the Restraining Order is separate to the dispute to be arbitrated in the Arbitrations, such that it is appropriate for the Court to grant the Restraining Order sought, as there is no need to consider the merits of the claims made in the Arbitration.

28.The Plaintiff’s case is and has always been (since August 2022) that the Restraining Order, like the Injunction, stems from the parties’ duty to maintain the confidentiality of the Arbitrations, and as provided for in section 18 of the Ordinance, and that the issue of the Product constitutes a breach of the Injunction because the issue and promotion of the Product involved the disclosure of confidential information relating to the Arbitrations. On such a case, the Tribunal clearly has the power, inherent in and incidental to the parties’ agreement to submit their dispute to the Tribunal for arbitration, to grant the Restraining Order in order to prevent and restrain any act on the part of the Defendant which may cause harm or prejudice to the arbitral process before the Tribunal and the confidentiality of such process.

29.Put in another way, the parties had agreed under their contract (the Agreement referred to in Confidential Schedule 1 of the Originating Summons (“Agreement”)) to arbitrate any disputes “arising out of or relating to” their Agreement on their trades XXXXXXXXXXXXXXXXXXXXXXX, including “the interpretation, performance, breach or termination of (the Agreement) and any dispute regarding non-contractual obligations arising out of or relating to it”. The parties now dispute whether there is a duty to maintain confidentiality of their disputes which have arisen under the Agreement and which are to be arbitrated, and the confidentiality of the Arbitrations commenced, and dispute whether there is any breach of such confidentiality. Such disputes are inevitably caught by and fall within the terms of their arbitration agreement, and the parties are bound to refer such disputes to arbitration as well. It is illogical to claim that the current dispute is not part of the contract between the Plaintiff and the Defendant to arbitrate, to fall within the jurisdiction and powers of the Tribunal to control and protect the arbitral process. The Court may of course act in aid if it is appropriate and necessary to do so, but it is the Tribunal which has primary jurisdiction.

30.On the above analysis, I disagree with Counsel for the Plaintiff if it is suggested that the issues arising in the OS and the application for the Restraining Order are discrete and separate from the substantive claims made in the Arbitrations, and should not be considered and determined by the Tribunal. There is force in the submissions made by Counsel for the Defendant, that on the facts of this case and the nature of the relief sought in the 26/10 Summons, the Restraining Order and the application therefor can be said to be necessarily part of the subject matter of the Arbitrations.

31.If the Tribunal considers and finds that the issue or promotion of the Product does constitute breach of the parties’ duty to maintain the confidentiality of Arbitrations, and should be restrained, such decision can be brought to the attention of the Seychelles Court directly for its due consideration. I remain of the view that it would be an unnecessary duplication of costs and judicial resources (a matter of public policy) for the same issues to be submitted to the Hong Kong Court and the Seychelles Court, in addition to the Tribunal, for consideration and determination, when the parties had agreed to resolve their disputes by arbitration.

32.In the context of alleged breaches of the Injunction by officers of the Defendant, it is trite that the Injunction can be enforced against any person who has knowledge of the Injunction and who carries out any act to assist the Defendant to act in breach of the terms of the Injunction, and such persons may be held in contempt of court. The parties should need no reminder of the fact that the Injunction is expressed to restrain the Defendant, by itself, or through its representatives, employees and/or agents. I do not consider the need to enforce the Injunction against officers of the Defendant to be a good or sufficient reason to grant the Restraining Order, which is in any event sought to be made against the Defendant only as opposed to any other independent third party.

33.Finally, if any Restraining Order is made by the Tribunal on the Plaintiff’s application, such order can (with the leave of the Court which may be granted on ex parte basis) be enforced as an order of the Court, and upon service on relevant parties, the Restraining Order can be enforced against third parties.

Disposition

34.For all the above reasons, I dismiss the 23/11 Summons. An order nisi is made that the costs of and occasioned by the 23/11 Summons are to be paid by the Plaintiff to the Defendant, with Certificate for Counsel.

35.The directions issued by this Court on 21 November 2022 were for the parties to make submissions, for paper disposal by the Court, as to why the Court should not decline to grant the interim relief sought under section 45(4) of the Ordinance. This was in response to the parties’ correspondence leading to the issue of the 23/11 Summons. There was no express direction for paper disposal of the 26/10 Summons, but for the reasons set out in this Decision, it is unlikely that the Court can come to a different conclusion on the application of section 45(4) in the context of any further evidence, or submissions for the hearing of the 26/10 Summons which could have been made but were not made pursuant to the directions of 21 November 2022. In the light of this Decision, the Court would expect that the hearing on 9 March 2023 can be vacated, and that the parties can sensibly agree on the costs of and incidental to the 26/10 Summons. Any party which unreasonably insists on proceeding with the hearing without good cause may be penalized in costs on indemnity basis, and the Court may consider requiring the legal advisers to show cause as to why a wasted costs order should not be made against them personally, or why they should not be disallowed any costs unreasonably incurred.

Mr Timothy Parker, instructed by TITUS, for the plaintiff

Mr Martin Ho, instructed by Clifford Chance, for the defendant