Xu Hongbiao v. Oasis Investment Group Ltd and Others

HCA 1963/2020

[2023] HKCFI 860

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1963 OF 2020

__________________

BETWEEN

(By Original Action)

AND BETWEEN

(By Counterclaim)

__________________

__________________

DECISION

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A. Introduction

1.For ease of reference, I will call (1) the plaintiff by Original Action (also being sued as the 1^st defendant by Counterclaim) “Xu”, (2) the 1^st to 4^th defendants by Original Action (also suing as the plaintiffs by Counterclaim) respectively “R1” or “Oasis”, “R2”, “R3” and “R4”, and collectively the “Respondents” or “Rs”, (3) the 5^th defendant by Original Action (also being sued as the 2^nd defendant by Counterclaim) “Ke” and “Zhang”, and collectively the “Applicants” or “As”, and (4) Ke Zhengguang the “Deceased”.

2.Ke and Zhang are the administrators of the Deceased’s estate (the “Estate”). In that capacity they took out the summons of 4 January 2022 (the “Summons”) for an Order that (1) the Order dated 9 August 2021 granting the Respondents leave to serve the Counterclaim on the Applicants out of jurisdiction (the “Leave to Serve Out”) be set aside (the “Setting Aside Application”), (2) further or in the alternative the Counterclaim be struck out (the “Striking Out Application”), and (3) in the further alternative, the Counterclaim be stayed on case management basis pending determination of the Maryland Proceedings (defined below) and the re-adjudication of the Shanghai Proceedings (defined below) (the “Stay Application”).

3.Mr Richard Khaw SC leading Mr Jeffrey Lee appeared for the Applicants. Mr Abraham Chan SC leading Mr Danny Tang appeared for the Respondents.

B. The scope of the application

4.In respect of the scope of the application I record and note the following matters:

(a) The Stay Application is no longer being pursued[1]. The reasons given are that the Maryland Proceedings and the Shanghai Proceedings have been disposed of; and

(b) In relation to the Setting Aside Application and the Striking Out Application, at the beginning of his submissions, and upon this Court’s invitation for clarification, Mr Khaw accepted that given the structure of his submissions, if this Court were to refuse the former, there would no longer be any realistic basis for this court to allow the latter (though the reverse may not be true). To such an extent, the 2 applications may be said to stand or fall together;

(c) Xu is not a party to the Summons. He has not sought any order for the Counterclaim be struck out. Despite that, Mr Khaw, relying upon Makhssian Trajan Vahe v Mayer Brown Jsm [2020] HKCFI 3168 at §67, submitted that if this Court is of the view that the Counterclaim as against the Applicants is liable to be stuck out, the Counterclaim against Xu being on the same basis, this Court can strike out the entire Counterclaim even though Xu is not a party to the Summons.

C. The relevant affirmations

5.Rs’ application to serve out was supported by 2 affirmations of Ip Wing Hang Francesca (“Ip”) dated 7 July and 28 July 2021 (“Ip/1” and “IP/2”). Ip is the Respondents’ legal advisers.

6.In support of the Summons the Applicants have filed 2 affirmations by Chan Tsz Chun dated 6 January and 5 December 2022 (“Chan TC”, “Chan/1” and “Chan/5”), and 1 by Ke (“Ke/Aff”). Chan TC is the Applicants’ legal adviser.

7.In opposition Rs have filed 1 affirmation of 3 March 2022 by R2 (“R2/Aff”), and one by another legal adviser of theirs Leung Cho Chak Gary of 6 January 2023 (“Leung/Aff”).

D. The background facts

8.R2 to R4, Xu and the Deceased used to be partners in a real estate development joint venture in the Mainland (the “Joint Venture”). It was operated in the name of R1.

9.R1 (綠洲投資集團有限公司) was incorporated in the British Virgin Islands in 2001. It is the direct or indirect parent company of, relevantly, the following companies:

(a) Shanghai Greencourt Property Development Co Ltd (上海綠庭房地產開發有限公司) (“PRC Greencourt” or “綠庭房產”),

(b) Greencourt Properties Ltd (綠庭置業有限公司) (“HK Greencourt” or “綠庭置業”),

(c) Shanghai Oasis Kechuang Ecological Technology Co Ltd (上海綠洲科創生態科技有限公司) (“Oasis Kechuang”), renamed as Shanghai Greencourt Kechuang Ecological Technology Co Ltd (上海綠庭科創生態科技有限公司) (“Greencourt Kechuang”) on 30 July 2015, and

(d) Shanghai Four Season Flower City Property Development Co Ltd (上海四季花城房地產開發有限公司) (“SJHC” or “四季花城”).

10.The investments of R1 included, inter alia, retail properties in Shanghai (“Jiuting Stores” or “九亭商舖”) held through PRC Greencourt, and 2 residential villas (“A2 Villas” or “A2型别墅”) held through SJHC.

11.Three other companies also feature. They are:

(a) Global State Ltd (“Shibang” or “世邦公司”). It was incorporated in Hong Kong in about November 2009. Though its company search records and annual returns are not before this Court, it is parties’ common ground that when first incorporated, Shibang was the direct wholly owned subsidiary of HK Greencourt. I italicize the word direct as whether Shibang should be the direct subsidiary of HK Greencourt or of Oasis for the performance of one aspect of the 4.28 Agreement (as defined below) is one issue that has been in dispute. I will come back to that;

(b) Focus Town Limited, a British Virgin Islands company of which Xu has been the sole shareholder and which he controlled; and

(c) Cheergain International Group Limited, also a British Virgin Islands company, of which the Deceased had been the sole shareholder and which he controlled.

12.R2 to R4 were the controlling shareholders of the Joint Venture (the “Controlling Shareholders”), holding together 66.67% in R1. Xu and the Deceased were the non-controlling ones (the “Non-controlling Shareholders”), each holding 16.67% in the same.

13.In 2009, Xu and the Deceased requested to quit the Joint Venture. To effect that, the parties reached an agreement dated 28 April 2010 (the “4.28 Agreement”). It contained a divestment scheme involving principally payment of cash (“Cash Consideration”), repurchase and transfer of shares and equity (“Equity Consideration”), and a property swap (“Property Exchange Consideration”).

14.By any standard, the 4.28 Agreement is not a straightforward one. Its implementation has involved a complex process.

15.Disputes subsequently arose between the parties in relation to the performance of the 4.28 Agreement. In 2013, pursuant to Clause 4.2 of the 4.28 Agreement, the Non-controlling Shareholders commenced arbitration (the “Arbitration”) against the Respondents.

16.Clause 4.2 of the 4.28 Agreement (the “Arbitration Clause”) stipulates (according to the translated version[2]):

“Any conflicts, disputes and claims resulting from this agreement or related to this agreement, breach of contract, termination of contract and void of contract (hereafter referred to as ‘disputes’) shall be dealt with through amicable negotiations by all Parties. If the negotiation fails, any Party is entitled to submit the dispute to the Hong Kong International Arbitration Centre for arbitration … The outcome of arbitration is final and binding on all Parties.”

17.In June 2013, an arbitral tribunal (the “Tribunal”) was constituted.

18.In December 2013, the Deceased passed away. The Tribunal granted leave for the Applicants to continue the arbitration on his behalf.

19.On 28 February 2018, the Tribunal issued the Final Substantive Award[3]. It was modified by the Clarification Award dated 19 December 2018 (the “Clarification Award”)[4]. They will collectively be referred to as the “Awards”.

20.By the Awards, 9 orders were made (“Order 1” to “Order 9”, and collectively the “9 Orders”)[5], in the following terms (the “申請人” and “參股股東”[6] being the Non-controlling Shareholders, and “第一被申請人” to “第四被申請人” being respectively R1 to R4):

“1. 命令被申請人（從裁決作出之日起的4週內）促使綠庭房產與申請人或其指定的第三方簽署一份有關九亭商舖的《上海市房地產買賣合同》並將九亭商舖的所有權轉讓給參股股東或其指定的第三方。（4.28協議第3.1條）(“Order 1”)

2. 命令被申請人（從有關更正作出之日起的4週內）促使第一被申請人指定的第三方與四季花城簽署A2型別墅的《銷售合同》並完成所有相關手續。(“Order 2”)

3. 命令各方按裁決第304至324段的裁示在裁決作出之日起的4週內清結並支付有關四季花城與第一被申請人的債務。（4.28協議第3.6條）(“Order 3”)

4. 命令申請人於本裁決作出之日起的2個月內向相關的審批機關提供一份審計報告。(“Order 4”)

5. 命令第一被申請人安排及促使世邦公司（從裁決作出之日起的2個月內）收購第一被申請人的子公司綠庭置業所持有的四季花城80%的股權。（4.28協議第2.3.1條）(“Order 5”)

6. 命令第一被申請人與參股股東（從裁決作出之日起的2週內）簽署及促使其子公司綠庭置業共同簽署有關世邦公司的股權購買權協議及託管協議。（4.28協議第2.3.1，2.3.2條）(“Order 6”)

7. 命令第一被申請人（從裁決作出之日起的2個月內）促使上海綠庭科創生態科技有限公司轉讓其所持有的四季花城20%的股權予綠豪貿易。(“Order 7”)

8. 命令被申請人（從上述第1-6項命令履行後的4週內）按4.28協議的第2.2.1(4)條款及裁決第232(4)(a)(b)(c)及第233段的裁示支付調整後的最終金額。(“Order 8”)

9. 命令第二被申請人、第三被申請人和第四被申請人共同支付給申請人人民幣10,346,211元的損失作為損失賠償（以2017年8月8日作為計算損失的基準日）。(“Order 9”)”

21.Despite the Awards and the 9 Orders, further disputes have developed over the performance and enforcement of the Awards. Such disputes have led to, relevantly, the Maryland Proceedings, the Shanghai Proceedings, and the present action.

22.In November 2018, the Applicants commenced proceedings in the Maryland Court in the United States (i.e. the Maryland Proceedings) to recognise Order 9. R2 was the only named defendant, she being a Maryland resident and by then the sole beneficial owner of R1. Subsequently in March 2019, the scope of the application was expanded to the entire Awards. In April 2019, R2 filed a Motion to Dismiss. One of the grounds raised was, as described therein, “The Claimants’ Infighting and Non-Cooperation Impedes Carrying Out the [Awards]”[7] (which Mr Khaw calls the “Order 9 Payment Obstruction Allegation”, which term I adopt).

23.On 21 February 2020, the Maryland Court granted the Applicants’ request to recognise and enforce the Awards, and dismissed R2’s Motion to Dismiss. Relevantly, the Maryland Court in the Memorandum Opinion dated the same (the “2/2020 Memorandum Opinion”) recorded and ruled in relation to Order 9 that:

“[R2] contends that she has already tendered the funds for payment under Order 9, mooting the relief sought by the Estate … She also argues that any judgment as to Order 9 should be entered in RMB, not U.S. dollars …”[8]

“I do not agree that [R2’s] efforts to tender payment from her China-based company in a form that was unacceptable to the Estate constitutes an unconditional tender that moots this case … Even if the Estate had accepted the payment, it is still entitled to an order recognizing the Final Award and the ability to pursue pre- and post-judgment interest … The Estate indicated it was willing to accept payment in RMB, but it required a negotiable instrument capable of being deposited into its Hong Kong bank account … [R2] did not provide a payment that could be accepted by the Estate’s Hong Kong bank account as requested.”[9]

24.The 2/2020 Memorandum Opinion was subsequently incorporated into the Consolidated Final Judgment of 9 January 2023. Judgment for legal fees, arbitration costs and pre-award interest on Order 8 and Order 9 were inter alia entered.

25.In April 2019, HK Greencourt commenced the Shanghai Proceedings in the Shanghai Fengxian District People’s Court against SJHC and its legal representative. They related to the Equity Consideration ordered by Orders 4 to 7. Their purpose was to compel SJHC to change the registration of 80% of its equity originally registered under HK Greencourt’s name to Shibang’s name. Shibang joined as the third party, seeking inter alia (1) that if SJHC and its legal representative fail to go through the filing formalities for the change of 80% equity of SJHC as required, it will go through the filing formalities with the competent government department in its own name and (2) confirmation that it is a shareholder of SJHC and owns 80% of the registered capital of the same.

26.The issue involved in the Shanghai Proceedings concerned whether, when effecting the aforesaid equity transfer of SJHC, Shibang should under the 4.28 Agreement be a direct subsidiary of R1, or whether it could be an indirect subsidiary of R1 through HK Greencourt. HK Greencourt and Shibang contended for the latter.

27.In June 2020, the Fengxian Court dismissed both of HK Greencourt and Shibang’s claims[10]. Their appeal was dismissed by the Shanghai Intermediate People’s Court in December 2020[11]. HK Greencourt’s application for re-adjudication was further rejected by the Shanghai Higher People’s Court in September 2022[12].

28.In November 2020, Xu commenced the proceedings herein. He filed his Statement of Claim on 8 March 2021 (the “SOC”, subsequently amended on 12 July 2021[13], the “ASOC”). He seeks to enforce the Awards by way of common law enforcement. He pleads that “there was an [Implied Promise] made by [Rs] to [Xu] or alternatively to [Xu] and [the Deceased] or the Estate jointly in the submission to arbitration that [Rs] would perform and fulfill any awards made in the arbitration proceedings”[14], that Rs have been in repudiatory breach of the Implied Promise by failing and refusing to perform Orders 1, 2, 5, 6, 7, & 8[15], alternatively that Rs have been in breach of the Implied Promise in failing and refusing to perform Order 1[16], that Xu has accepted the repudiation, and as a result has suffered loss and damage. He claims damages in the amount of RMB79,063,034, or damages to be assessed.

29.On 29 April 2021, Rs filed their Defence and Counterclaim (“D&CC”). They deny Xu’s allegations. They counterclaim against Xu and the Applicants for obstruction of performance of the Awards in breach of their implied duty. Relevantly, Rs plead that:

“67. Xu and [As] were and are at all material time fully aware of the obligations under the 4.28 Agreement and the Awards owed by Oasis and the Controlling Shareholders as well as the Non-controlling Shareholders. Xu and [As] each owe an implied duty under the 4.28 Agreement to comply with the Awards and to provide all necessary cooperation to enable the performance of the Awards.

68. By reason of the wrongful refusal to cooperate, obstruction and delay by the Non-controlling Shareholders as pleaded hereinabove, the Awards were unable to be performed or complied with. Each of the Non-controlling Shareholders have therefore breached their implied duties under the 4.28 Agreement to comply with the Awards.”

Having then pleaded “Particulars of Breach” under §68 and various other matters, the Respondents plead further that:

“69. By reason of the Non-controlling Shareholders’ breach of their implied duties under the 4.28 Agreement to comply with the Award as pleaded hereinabove, Oasis and the Controlling Shareholders have suffered loss and damages …”

…

76. Save and except that Oasis and the Controlling Shareholders deny the reason of the dispute pleaded by Xu, paragraphs 9 to 16 [of the Statement of Claim] are admitted. Oasis and the Controlling Shareholders aver that both Xu and [the Deceased] (including [the Deceased’s] Administratrix) have also submitted to Arbitration and made the implied promise that they would perform and fulfil any awards made in the Arbitration …”

90. By reason of the matters pleaded above, each of the Non-controlling Shareholders have each breached their implied duties to comply with the Award.

91. As a result of their breach, Oasis and the Controlling Shareholders have suffered loss and damages [sic] …”

30.Rs seek, inter alia, “specific performance of the 4.28 Agreement and the Awards”[17], damages in lieu or in addition[18], and “To the extent necessary, an order that Oasis and the Controlling Shareholders be discharged from further performance of the Awards or any part of the same”[19].

31.As stated above, the Respondents on 9 August 2021 obtained the Leave to Serve Out. On 4 January 2022, the Applicants took out the present Summons.

E. The Setting Aside Application

32.I consider the Setting Aside Application first.

E.1. The legal approach

33.In Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454, Cheung JA observed at §29 that:

“ In order to obtain leave under O.11 r.1, the plaintiff must satisfy the court that:

(a) There is a good arguable case (in the sense that there is a good prospect of success at trial, per Kempster J in Deak v Deak Perera Far East Ltd [1991] 1 HKLR 551) that his case comes within [one of the gateways].

(b) The discretion should be exercised in its favour in that:

(i) There is a serious issue to be tried on the merits of the case;

(ii) Hong Kong is the appropriate forum under the principle governing forum conveniens for the trial of the action.”

I will for ease of presentation call that approach the “Dynasty Line Approach”.

34.This Court in Chen Hongqing v Persons whose names are set out in the second column of the Schedule to the Re-amended Writ of Summons filed on 26 March 2018 [2019] HKCFI 2121 also applied the Dynasty Line Approach[20]. The same approach was reiterated by Cheung JA in Fong Chak Kwan v Ascentic Ltd & Ors [2021] 6 HKC 401 at §12.

35.Both Mr Khaw and Mr Chan accept that the Dynasty Line Approach is the one which this Court should apply.

E.2. The Applicants’ contentions in summary

36.Mr Khaw’s submissions may be summarized as follows:

(a) Mr Khaw starts off by submitting that the Respondents have failed to show that there is any serious issue to be tried on the merits of their Counterclaim. He chooses to do so (rather than starting off with the more fundamental jurisdictional gateways) because, as he explained in the course of the hearing, that if the merits of the Respondents’ Counterclaim cannot pass the lower threshold of “serious issue to be tried”, they would necessarily fail when the “good arguable case” threshold is applied upon consideration of the question of jurisdictional gateways;

(b) The Counterclaim offends rules against res judicata, amounts to collateral attack, and constitutes abuse of process;

(c) The Respondents cannot establish that their case comes within any of the gateways they rely on;

(d) Hong Kong is not clearly the forum conveniens; and

(e) Material non-disclosure on the Respondents’ part when seeking the Leave to Serve Out.

E.3. No serious issue to be tried on merits

E.3.a. Confusing basis of the Counterclaim

37.Mr Khaw submits that the legal basis of the Respondents’ Counterclaim is confusing, in that it is not clear whether the Counterclaim is a contractual claim, seeking to sue on some alleged implied terms of the 4.28 Agreement (and Mr Khaw points in particular to §§67 to 69 of the D&CC), or whether it is a claim at common law seeking to enforce the Awards. He submits further that the former is impermissible due to the Arbitration Clause, and that the disputes have been dealt with by the Awards.

38.I have set out above §§67 to 69 of the D&CC. Similar confusion can be found at §§19 and 25 of Ip/1 filed in support of the Respondents’ application for the Leave to Serve Out. There is some force in Mr Khaw’s submissions in this regard.

39.However, as I have also reproduced above, the Respondents at §76 of the D&CC make an admission to inter alia §16 of the ASOC, and plead in effect that the Xu and the Deceased have also submitted to the Arbitration and have made the same Implied Promise. That suggests quite clearly that the legal basis of the Counterclaim is a common law one to enforce the Awards.

40.Mr Chan has both in his written submissions and in the course of the hearing made it clear that the Respondents’ Counterclaim is one in common law to enforce the Awards. He submits further that any reference in the D&CC to “an implied duty under the 4.28 Agreement” should be readily understood as the “arbitration clause or agreement in the 4.28 Agreement”. That in my view is at least a possible understanding of those references.

41.The Respondents have now made their stance clear on record.

42.I accept Mr Chan’s submissions that if there remains any uncertainty in relation to the legal basis of the Counterclaim despite §76 of the D&CC and despite his clarifications, any such uncertainties may if deemed necessary be cured by amendment.

43.Given the overall effects of the pleadings, Mr Chan’s clarifications, and the possible avenue of amendment, I am not satisfied that the confusion submitted by Mr Khaw, whether by itself or together with the other matters discussed below, justifies the setting aside of the Leave to Serve Out.

E.3.b. The Implied Promise to honour the Awards at common law misconceived?

44.Mr Khaw next submits that the Implied Promise to honour the Awards at common law is misconceived.

45.The nature of the implied promise to honour an arbitral award in common law has been explained in Xiamen Xinjingdi Group v Eton Properties Ltd by the Court of Appeal ([2016] 2 HKLRD 1106, “Xiamen Xinjingdi (CA)”) and Court of Final Appeal Xiamen Xinjingdi Group v Eton Properties Ltd ((2020) 23 HKCFAR 348, “Xiamen Xinjingdi (CFA)”). In gist:

(a) A successful party can enforce the arbitral in either one of two ways: (a) by way of a statutory process, or (b) by way of a common law action on the award (per Yuen JA, §§97 and 104 of Xiamen Xinjingdi (CA));

(b) As a matter of law, the implied promise to honour an arbitral award exists as a contractual obligation separate and distinct from the obligation created by the underlying contract (per Ribeiro PJ, §102 of Xiamen Xinjingdi (CFA));

(c) It supports an independent cause of action, distinct from and not entangled with the original contract or the breach occurring from it (per Ribeiro PJ, §102 of Xiamen Xinjingdi (CFA), citing Agromet Motoimport v Maulden Engineering Co (Beds) Ltd [1985] 1 WLR 762 at 772);

(d) Failure to honour the award constitutes a breach of the implied promise. This creates a new cause of action and replaces the original cause of action under the substantive or matrix agreement (per Yuen JA, §§110 and 112 of Xiamen Xinjingdi (CA));

(e) In Xiamen Xinjingdi (CA)), Yuen JA:

(i) observed at §114 that:

“The essential ingredients of this new cause of action are thus a valid submission of a dispute to arbitration, an award in favour of the plaintiff and the defendant’s failure to honour it”;

(ii) explained further[21] at §151 the 3 facts which relate to the validity of the submission, namely (1) the making of a contract which contains the submission to arbitration, (2) that the dispute arose within the terms of the submission, and (3) that the arbitrators were appointed in accordance with the arbitration clause;

(f) In relation to the validity of the submission, the observations of Ribeiro PJ at §103 of Xiamen Xinjingdi (CFA) are to similar effects, that:

“As we have seen, MacKinnon J pointed out in Norske Atlas Insurance Co Ltd v London General Insurance Co Ltd[22] that the requirements for suing to enforce an award are that there was a submission; that the arbitration was conducted in pursuance of the submission; and that the award is a valid award, made pursuant to the provisions of the submission, and valid according to the lex fori of the place where the arbitration was carried out and where the award was made.”

(g) Relevantly, Ribeiro PJ also explained at §§119 and 120 of Xiamen Xinjingdi (CFA) the differences between the resolution phase and enforcement phase of the arbitration process, that:

“119. The line drawn is therefore between the determination of the parties’ mutual rights and liabilities, being a matter for the arbitrators, and enforcement of that award, being a matter for the court.

120. Mr David Joseph QC referred to a number of legal texts elaborating upon the two phases of the process. Conceptually, the parties’ submission to arbitration is contractual, giving a mandate to the arbitrators to resolve the disputes specified and containing a mutual promise, usually implied, that they will comply with the award. Once the final award is made, the arbitrators’ mandate is exhausted and, if the award is not complied with, a fresh cause of action arises for breach of the implied promise to honour the award. That cause of action lies within the enforcing court’s jurisdiction and is not within the power of the tribunal. Procedurally, enforcement may be pursued summarily … or by a common law action on the award …”

46.Arising from those and other authorities, Mr Khaw submits that the Counterclaim discloses no reasonable cause of action, and thus there is no serious issue to be tried. He puts forward two bases in support:

(a) First, he submits that insofar as the Respondents plead that the implied duty to comply with the Awards is under the 4.28 Agreement, that is misconceived as a matter of law[23]. I have dealt with above Mr Khaw’s complaint about the alleged confusing basis of the Counterclaim. For those same reasons, I do not accept Mr Khaw’s submissions in this regard;

(b) The second reason given by Mr Khaw is that:

“more fundamentally, the Respondents, being the losing parties as clearly held by the Tribunal in the Arbitration …, simply do not have the right to ‘enforce’ the Awards and thus have no locus standi to bring a claim to enforce the Awards at common law by suing on the implied promise.”[24]

(c) I do not accept Mr Khaw’s submission that only the “successful” party has in law the locus standi to enforce the award;

(d) Such labelling of “successful party” or “losing party” is neither precise nor principled. The submissions beg the question as to what those terms mean;

(e) As accepted by Mr Khaw in the cause of the hearing, there is in fact no authority which specifically, for the purpose of deciding locus, draws the distinction and dichotomy between a “successful party” and a “losing party”;

(f) In particular, whilst in the context of discussing the nature of the implied duty, the authorities (both cases and textbooks) do state that the successful party can enforce the award, no authority has expressly stated the converse, to any effect that the “losing party” has no locus to enforce the award;

(g) Given the mutual nature of the implied promise[25], such a converse position would in my view be contrary to the nature of the common law cause of action;

(h) The mutual nature of the implied promise is in this case also manifested by the express wording of the Arbitration Clause, that “… The outcome of arbitration is final and binding on all Parties”;

(i) In the course of the hearing, Mr Khaw in fact accepted that there could be cases in which the so-called losing party may enforce an obligation imposed upon the co-called successful party for the performance of the award. Whether the losing party can do so is dependent on the terms of the award.

47.For the above reasons, I reject both of the bases put forward by Mr Khaw.

E.3.c. Three further strands

48.As highlighted in his written supplemental submissions, and as elaborated upon orally in the course of the hearing, Mr Khaw has, relevant to the bases of the Counterclaim, developed 3 further strands, namely (1) the “implied implied duty” contended for by the Respondents not sustainable, that (2) the Respondents are by way of the Counterclaim seeking to “review, reinterpret and rewrite the Awards”, and that (3) the scope of the Counterclaim is within the Arbitration Clause and should be submit to the Tribunal for consideration.

49.Further strand #1: The alleged “implied implied duty”:

(a) This strand of Mr Khaw’s submissions is developed around §43 of Mr Chan’s written submissions;

(b) At §43 of his written submissions, Mr Chan submits as follows:

“The implied obligation to honour or comply with the arbitral award is by its very nature one that assumes mutuality and co-operation where necessary to effect the tribunal’s orders. It must entail an obligation on all parties to do all that is necessary to enable the party subject to an order to perform under the award, and conversely or alternatively, an obligation not to do an act which will prevent the other party from performing. Such obligations are analogous with other implied duties rooted in mutuality including those of co-operation in contract …” (Mr Chan’s original emphasis)

(c) With reference to that paragraph, Mr Khaw submits that “Apart from the implied duty to perform the Awards at common law, the Respondents rely on yet another layer of ‘implication’ in that there is an implied term that a party shall not ‘do an act which will prevent the other party from performing’ the acts required under the Awards”, and that “‘the implied implied duty’ is not sustainable”;

(d) In my view, it is artificial to label the Respondents’ case as basing upon any “implied implied duty”. The crucial issue is simply what the implied promise to honour an arbitral award at common law comprises;

(e) In support of his case on the implied obligation to honour the Awards, Mr Chan relies inter alia on Mackay v Dick (1881) 6 App Cas 251 at 263, that where in a written contract, it appears that both parties have agreed that something shall be done, which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary on his part to carry out that thing, though there may be no express words to that effect;

(f) I am of the view that the Respondents’ case in this regard is in law at least reasonably arguable;

(g) Mr Khaw relies on of London Steam-Ship Owners’ Mutual Insurance Association Ltd v Kingdom of Spain [2022] 1 WLR 3434 at §§122-125;

(h) From reading §122 of the judgment, I am of the view that the English Court of Appeal in London Steam-Ship was concerned with the position of a purely declaratory award, that:

“… there is in our judgment no support in any of the authorities to which we have been referred for the proposition that a purely declaratory award (such as exists in this case) is capable of creating any obligation breach of which gives rise to a cause of action for damages or equitable compensation”;

(i) In contrast, the Awards in the present case are not purely declaratory in nature;

(j) I have considered §125 of the judgment in London Steam-Ship which Mr Khaw submits is of general application. I am not satisfied that it is. At the very least, it is highly arguable that it is not;

(k) I do not accept Mr Khaw’s submission basing on the alleged “implied implied” nature of the implied duty relied upon by the Respondents, and the implications which he submits arise therefrom.

50.Further strand #2: Respondents seeking to “review, reinterpret and rewrite the Awards”:

(a) Mr Chan at the outset of his oral submissions stressed that the purpose of the Counterclaim is not to seek to review, reinterpret or rewrite the Awards, but to enforce them;

(b) I have considered the contents of the Counterclaim. I have also considered §17 of Mr Chan’s written submissions, which in my view accurately summarise the Respondents’ pleaded complaints, that:

“(1) In respect of Orders 1 and 2, despite repeated requests and demands, [Xu and As] initially failed to confirm how they proposed to divide ownership of the Jiuting Stores and subsequently failed to approve the transfer documentation and attend to the signing of the same. Without the cooperation of [Xu and As], [Rs] are unable to implement the transfers.

(2) In respect of Order 3, [Xu and As] failed or refused to provide unified instructions about the designated account for receiving payment, and [As] refused to accept payment in the PRC.

(3) In respect of Order 4, [Xu and As] have failed to provide necessary documentations to effect the transfer of SJHC’s shares.

(4) In respect of Orders 5 to 7, [Xu and As] failed to carry out the required procedures to procure the various share transfers. [Rs] were unable to complete the share transfers as the transfers were not approved by SJHC and its legal representative (which are under the control of [As’]). [Xu and As] have further obstructed performance by causing SJHC and its legal representative to resist the Shanghai Proceedings that sought to compel SJHC and its legal representative to approve the share transfer.

(5) In respect of Order 9, [As] refused to accept payment in the PRC. Payment to [As’] designated Hong Kong bank account was unworkable as [R2] attempt to do so was blocked due to PRC currency control restrictions.”

(c) On the pleaded case, I do not accept Mr Khaw’s submission that the Respondents are by the Counterclaim seeking to review, reinterpret or rewrite the Awards. I accept Mr Chan’s submissions that it concerns the performance of the Awards. At the very least, it is reasonably arguable that it is so;

51.Further strand #3: That the Counterclaim should be submitted for arbitration:

(a) I have set out above the observations of Ribeiro PJ on the differences between the resolution phase and enforcement phase of the arbitration process, which Mr Chan highlights at §54(2)(ii) of his written submissions;

(b) The interface between the court and arbitration proceedings have been explained in further details by Foxton J in A v B [2021] 1 Lloyd’s Rep 281 at §§29, 30 and 32, that:

“29. To the extent that an arbitration has resulted in a final award, the interface between court and arbitration proceedings is very different to that which arises in relation to a prospective or pending arbitration. Not only does a final award render the tribunal functus officio, but enforcement of the award is essentially a matter for national courts rather than arbitral tribunals, so much so that, at least under English law, the award itself gives rise to a cause of action enforceable in court, and the award can be turned into a judgment of the court or enforced as if it were. If an award is entered as a judgment, that generates another cause of action (an action on the judgment) which is itself capable of being sued upon in court. Disputes relating to attempts to enforce the award through national courts are matters for the relevant court, not a dispute to be referred to arbitration.

30. As I have noted, an English arbitration award creates a new cause of action – the implied promise to honour the award – which has long been recognised to give a claim which can be brought before the English court in an action on an award … Judgment in such actions is not limited to giving the relief set out in the award, but extends to awarding interest under section 35A of the Senior Courts Act 1981 … It has never, so far as I am aware, been suggested that such claims could be subject to a successful stay argument in favour of arbitration. Equally, it has long been recognised that, in trying an action on an award, it may be necessary for the court to resolve a dispute as to whether the award was settled or varied by subsequent agreement …

32. There will be cases in which, although it has issued a final award, the tribunal nonetheless retains jurisdiction in relation to certain issues arising as to its implementation (for example when the award grants specific performance in favour of the claimant conditional upon the reciprocal performance of the claimant’s obligations, and when the tribunal expressly retains jurisdiction over any issues arising from the carrying of its order into effect, which might include whether the claimant has performed its part of the bargain). This might be a context, therefore, in which both the court (when asked to enforce a final award) and the extant arbitral tribunal have jurisdiction. If the claimant brought a section 66 application to enforce an order contained in the award which was conditional in this sense, and issues arose as to whether the condition had been satisfied, there would be a very compelling case for the court to refuse an order under section 66 on discretionary grounds, as it is entitled to do … Similarly, in the event that an action was brought on the award in these circumstances, there would appear to be a strong case for the court to stay proceedings under its inherent jurisdiction.”

(c) In his written supplemental submissions[26], Mr Khaw repeatedly refers to the Respondents’ pleaded plea for “specific performance of the 4.28 Agreement”. I repeat Section E.3.a. above. It has been clarified and confirmed that the Counterclaim is one in common law to enforce the Awards, and that any residual uncertainties may if deemed necessary be cured by amendment;

(d) Mr Khaw relies on G v S [2021] HKCFI 1461 at §§1-6 per Mimmie Chan J. But there, Her Ladyship was concerned with a fresh notice of termination of the relevant agreement issued after the award, which grounds it was said only came to light after the commencement of the arbitration. It was in that context where Her Ladyship observed at §6 that:

“The Award does not by itself prohibit S from relying on new grounds to terminate the 2018 Agreement. Whether S was entitled to terminate the 2018 Agreement on the basis of breaches not dealt with in the Arbitration, or on the basis of events after the date of the Award, or on any other basis, is a matter to be determined in accordance with the dispute resolution mechanism contained in the 2018 Agreement.”

(e) I repeat my discussion above in relation to the nature of the Counterclaim. It relates to the enforcement and performance of the Awards;

(f) I note further the observation of Ribeiro PJ at §122 of Xiamen Xinjingdi (CFA), that:

“At the enforcement stage, in an action on the implied promise, the enforcing court may grant relief appropriate to the award. If it is a monetary award for payment within the jurisdiction, it may simply be a judgment enforcing the award as a debt. If it is a non-monetary award which has not been complied with, the court may fashion an apt remedy chosen from the full range of remedies available in an ordinary common law action.”

(g) I do not accept Mr Khaw’s submissions that the Counterclaim should be submitted for arbitration under the Arbitration Clause.

E.3.d. That Rs cannot prove their case?

52.Mr Khaw next submits that there is no serious issue to be tried because “[in] any event, in view of the facts pleaded and presented by the Respondents, the Counterclaim cannot come up to proof”.[27] Mr Khaw then sets out 5 pages of submissions endeavouring to explain why.

53.It is relevant for the present purpose to recite what Ke on the Applicants’ behalf has herself said at §22 of Ke/Aff[28], that:

“I have been advised and verily believe that it is not the function of this Honourable Court to resolve the substantive factual disputes in a jurisdictional challenge, a striking out application or a stay of proceedings application. I have been further advised that the more important question is whether any cause of action was accrued to [Rs], even assuming that the factual averments stated in the Counterclaim could be established.”

54.In my view, Ke is correct there.

55.I have in any event considered Mr Khaw’s submissions at section D1c of his written submissions (and in particular §§80-91 thereof). I have also considered the 5-page Schedule B submitted by Mr Chan on the second day of the hearing summarizing the status and state of compliance of the 9 Orders. The 4.28 Agreement involves a complex divestment scheme. There are clearly substantial disputes between the parties in the performance and enforcement of the Awards. This Court ought not embark upon a mini-trial on affirmations in any attempt to resolve them by way of summary determination. I accept Mr Chan’s submissions in this regard[29]. On the evidence before me, I cannot accept Mr Khaw’s submission that “the Counterclaim cannot come up to proof.”

E.4. Res judicata, collateral attack and abuse of process

E.4.a. The applicable law

56.Both Mr Khaw and Mr Chan have cited to me Lo Kai Shui v HSBC International Trustee Ltd [2021] HKCFI 1539, wherein Wilson Chan J has at §§51-57, 75-82, and 110-117 most usefully set out the applicable principles and considerations[30]. Mr Khaw has also cited to me Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1 at §87 per Reyes J. I respectfully apply them without reciting them here.

E.4.b. The Maryland Proceedings

57.I have considered the nature of the Maryland Proceedings as elaborated upon by Mr Khaw both in his written submissions[31] and during the hearing. I have set out the gist above.

58.Mr Khaw’s main submissions are that the Respondents are barred by issue estoppel and/or clearly mounting a collateral attack upon the Maryland Court’s ruling on the Order 9 Payment Obstruction Allegation. Mr Khaw relies in particular upon the part of the 2/2020 Memorandum Opinion which I have set out above. Mr Khaw submits that §64 of the D&CC[32] is a mirror image of the Order 9 Payment Obstruction Allegation, which the Respondents are seeking to re-litigate.

59.For the following reasons, I accept Mr Chan’s submissions that the part of the Counterclaim in relation to Order 9, when set against the Maryland Proceedings properly understood, does not offend any rule against issue estoppel or collateral attack:

(a) The purpose of the Counterclaim is, as has now been clarified and confirmed by Mr Chan, to enforce the Awards based on common law;

(b) The above is to be contrasted with the Maryland Proceedings, which, as stated by the Seiden Law Group LLP (who represents the Estate in the Maryland Proceedings), “are merely proceedings to recognize and enforce a foreign arbitral award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘New York Convention’) and the Federal Arbitration Act”[33];

(c) United States federal courts have only secondary jurisdiction over a foreign award, so that they may not vacate, set aside, or modify the award, but are limited to deciding whether the award may be enforced[34];

(d) The grounds for non-registration under the New York Convention are limited;

(e) I see force in Mr Chan’s submissions that the Maryland Court had only a binary choice: to recognise the Awards against R2, or not to;

(f) Issues raised in the Counterclaim on the alleged breaches of the Implied Promise were not before the Maryland Court; nor was “the full range of remedies available in an ordinary common law action”[35] available to it;

(g) Not all parties to the Awards are before the Maryland Court, which will render any further attempts to require compliance problematic;

(h) When addressing the absence of all necessary parties before it, the Maryland Court indeed observed that multiple concurrent proceedings might be launched in different jurisdictions[36];

(i) I accept Mr Chan’s submissions that the Maryland Proceedings and the ruling arising (including those parts which Mr Khaw relies upon) will therefore have to be understood in the light of their nature;

(j) In particular and for example, R2’s defence (that requiring her to satisfy Order 9 outside the Mainland would violate Mainland law) was considered by the Maryland Court within the parameter of the New York Convention, as to whether it came within the Convention’s public policy defence, which has to be “construed extremely narrowly”, leading to the conclusion that R2 had not met “the high bar of showing that the [Awards], or [the Maryland Court’s] confirmation of it, would violate the ‘basic notions of morality and justice’ ”;

(k) Any consideration of the same defence in the present action would entail very different considerations.

60.Given the differences between the Maryland Proceedings and the Counterclaim in terms principally of nature, issues, the legal bases and settings, and parties, I am of the view that the Applicants’ objections on the basis of issue estoppel and/or collateral attack are not made out.

E.4.c. The Shanghai Proceedings

61.I have considered the nature of the Shanghai Proceedings as elaborated upon by Mr Khaw both in his written submissions[37] and during the hearing. I have set out the gist above.

62.Mr Khaw submits that the Respondents are seeking to mount a collateral attack on the judgments and decisions in the Shanghai Proceedings[38]. The complaints relate to the Respondents’ Counterclaim in relation to Orders 4 to 7, and are summarized in §124 of Mr Khaw’s written submissions as follows:

“These averments and claims by the Respondents[39] amount to a blatant attempt to re-litigate what the three Shanghai Courts have concurrently found, namely (1) Shibang was agreed to be a direct subsidiary of R1, which has not been performed, and (2) the transfer of the equity in SJHC cannot unilaterally take place when Shibang is not a direct subsidiary of Oasis. However, the Respondents are now seeking (1) to re-argue that Ke acknowledged that Shibang was not a direct subsidiary of Oasis (which has been rejected by the Shanghai Intermediate People’s Court), and (2) to obtain an order which HK Greencourt failed to obtain from the Shanghai Courts.”

63.For the reasons set out below, I do not accept Mr Khaw’s submissions under this limb:

(a) I have set out above in gist Rs’ Counterclaim in relation to Orders 4 to 7;

(b) Rs have adduced expert evidence on the nature of the Shanghai Proceedings, in the form of an opinion by Mr Fang Jianwei (“Fang” and “Fang’s Opinion”)[40];

(c) According to Fang, the Shanghai Proceedings are company-related disputes under Article 32 of the Company Law of the People’s Republic of China (the “PRC Company Law”), under which SJHC has the obligation to complete registration of its new shareholder when there is a change[41]. He opines that the cause of action of the Shanghai Proceeding:

“is a dispute to compel the company to fulfill its obligation to complete the change of company registration … Such cause of action is a third-tier cause of action which is categorized into company-related disputes … This means that the nature of the Shanghai Proceedings are company-related disputes among the shareholders, the company and its legal representative, arising from the issue of whether the company has an obligation to conduct the registration for change of its shareholders pursuant to the Equity Transfer Contract with the competent registry authority under PRC Company Law.”[42]

(d) At §22 of Fang’s Opinion[43], Fang opines further that:

“In the light of the nature of the dispute and the claim and defence made by the litigants in Shanghai Proceedings, the issues before the courts include: (i) whether HK Greencourt and Shibang may request SJHC and SJHC’s Legal Rep to approve the registration for change of shareholder based on the fully executed Equity Transfer Contract; and (ii) whether the transfer of equity by HK Greencourt to SJHC must be approved by the board of directors of SJHC in circumstances where a valid written shareholders’ resolution confirming the equity transfer is already in place.”

(e) Fang states at §19 of Fang’s Opinion[44] that neither HK Greencourt nor Shibang brought a claim in relation to the enforcement of the Awards. He explains that pursuant to the Arrangements of the Supreme People’s Court on the Reciprocal Enforcement of Arbitration Awards by Mainland China and the Hong Kong Special Administration Region (the “Arrangements”), and Article 290 of the Civil Procedure Law, to enforce a Hong Kong arbitral award, prior leave from an intermediate People’s Court for recognition and enforcement is required. The Shanghai Proceedings are not enforcement and recognition proceedings with leave, and the Shanghai Court therein do not have jurisdiction to interpret, modify or grant any specific ruling in relation to the enforcement of the Awards;

(f) The forms of relief sought in the Shanghai Proceedings were different from what are being sought herein;

(g) The parties in the Shanghai Proceedings were also different from those before this Court;

(h) Mr Khaw submits that the difference is beside the point. He first refers[45] to China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 at §52. However, in that paragraph Stock JA only observed that the court will, in an appropriate case, in the exercise of its inherent power to prevent an abuse, occlude an attempt to re-litigate a decided issue, even though not between the same parties. Whether an instant case is an appropriate one for the court to do so involves consideration of other issues;

(i) I note also the observations by Bryan J in MAD Atelier International BV v Manès [2020] QB 971 at §75(3), that it will be a rare case where the litigation of an issue which has previously been decided, but not between the same parties or their privies, will amount to an abuse of process;

(j) Mr Khaw next submits[46] that all the necessary parties, through their related entities, participated in the Shanghai Proceedings and submitted to the jurisdictions of the Shanghai Courts. He submits that R2, being the 100% beneficial owner and president and founder of R1, which in turn wholly owned HK Greencourt, caused HK Greencourt to commence the proceedings, so that she was through R1 in reality the driver of HK Greencourt, that on R2’s case, the Applicants participated through SJHC, that Xu participated through Shibang, and that R3 and R4 were privies to R2 given their common and direct interest in the Shanghai Proceedings, and they being siblings of R2[47];

(k) However, when deciding privity of interest, the considerations are not simply corporate relationship or financial interest in the outcome – see Standard Chartered Bank (Hong Kong) Ltd v Independent Power Tanzania Ltd [2016] 1 All ER (Comm) 233 per Flaux J at first instance (“SCB”) at [145], and per Longmore LJ on appeal[48] at [31]. Rather, as observed by Wilson Chan J in Lo Kai Shui at §76:

“what must be shown is that, having regard to the subject matter of the dispute, there was a sufficient degree of identification between the two to make it just to hold that the decision involving Party A should be binding on Party B.”

To the same effects are the observations of Floyd LJ in Resolution Chemicals Ltd v H Lundbeck A/S [2013] EWCA Civ 924, [2014] RPC 153 (at [32]) (as cited by Longmore LJ in SCB on appeal at [31]), that:

“… a court which has the task of assessing whether there is privity of interest between a new party and a party to previous proceedings needs to examine (a) the extent to which the new party had an interest in the subject matter of the previous action; (b) the extent to which the new party can be said to be, in reality, the party to the original proceedings by reason of his relationship with that party, and (c) against this background to ask whether it is just that the new party should be bound by the outcome of the previous litigation.”

(l) I have also considered the observations of Bryan J in MAD at §70, citing SCB and Johnson v Gore Wood & Co [2002] 2 AC 1, at 60, that:

“… the court placed considerable importance on the fact that the company in the subsequent proceedings could have been joined to the original proceedings. Even if a shareholder’s control could establish a relevant common interest in proceedings, it does not lead to the conclusion that the parties to the proceeding were in reality the same, unless the shareholder or company could have been joined to the earlier proceedings.”

(m) In the present case, I regard the difference in nature between the Shanghai Proceedings and the Counterclaim herein as being important. The Shanghai Proceedings were company-related disputes. They are not enforcement proceedings. They could not have been enforcement proceedings given the requirement. I cannot say whether the consideration of the issues by the Shanghai Courts which the Applicants say the Respondents are now seeking to re-litigate would have been approached, whether legally or procedurally, any differently if the Shanghai Proceedings were enforcement proceedings. The forms of relief sought are different. The parties are different. In that regard, I accept Mr Chan’s submissions[49] that there is no suggestion that any of the Respondents could have been joined as parties to the Shanghai Proceedings, and that it is difficult to see how they could have been given that the Shanghai Proceedings were company-related disputes vis-à-vis SJHC, and none of them were its members or directors.

64.The issue of whether there is an abuse is a fact-sensitive one. Having conducted a broad and merits-based assessment, and having balanced all interests, I am not satisfied that the Applicants’ objections basing on the Shanghai Proceedings are made out.

E.4.d. Res judicata and collateral attack upon the Awards - other specific parts of the D&CC

65.Mr Khaw submits that in the D&CC, there are various pleas which the Respondents seek to re-litigate or mount collateral attacks upon the findings and rulings in the Awards[50]. I consider the impugned parts in turn.

66.Whether Shibang need to be a direct subsidiary of R1:

(a) The complaint again relates to the identity of the direct parent company of Shibang for the purpose of Orders 5 to 7. Mr Khaw submits[51] that the Tribunal held that the first step of the execution of the Equity Consideration entails that Shibang would be a direct subsidiary of R1 as per Clause 2.3.1 of the 4.28 Agreement, and R1 would then have to sign the Equity Purchase Option Agreement to transfer its 100% shares in Shibang thereof. Mr Khaw further submits that those parts of the Respondents’ Counterclaim which plead to the effect that Shibang need not be a direct subsidiary of R1 go contrary to those findings;

(b) I have considered the paragraphs of the Awards which Mr Khaw has highlighted (§§201, 245-246, 281 and Order 6). I am not satisfied that the precise corporate holding by R1 and/or HK Greencourt of Shibang (and in particular the question of direct vs indirect holding) has been specifically dealt with. I have considered the evidence (including the transcript of oral evidence given during the Arbitration) highlighted by Mr Chan, and in particular those he sets out in Schedule C he submitted to this Court on the second day of the hearing. There is clear force in his submissions that it was the parties and the Tribunal’s understanding that Shibang was HK Greencourt’s subsidiary, and no issue was specially taken in that regard during the Arbitration;

(c) I am not satisfied that any res judicata or collateral is made out in the above regard.

67.Whether the Controlling Shareholders were in breach of the 4.28 Agreement:

(a) Mr Khaw submits[52] that the Tribunal held that the Controlling Shareholders were in breach of the provisions in the 4.28 Agreement and that the Non-controlling Shareholders were not, and that the Respondents seek at §§30-31 of the D&CC to re-dispute their liability for breaching the 4.28 Agreement;

(b) Mr Chan submits[53] that, §§30-31 of the D&CC, read in context, simply summarise the Controlling Shareholders’ position going into the Arbitration, and that there is no intention to contradict or re-litigate any of the findings in the Awards. He submits further that if necessary, the Respondents undertake to amend and clarify §§30-31 of the D&CC.

(c) Given the equivocal effects of those paragraphs, and given Mr Chan’s clarifications, I am not satisfied that any res judicata or collateral attack is made out under this head.

68.The RMB 30 million:

(a) Mr Khaw complains[54] that the Tribunal has clearly held that Xu and the Applicants are entitled to RMB 30 million from the Respondents pursuant to Clause 2.1.2 of the 4.28 Agreement, but that the Respondents now plead at §77(a) of the D&CC that “Oasis and the Controlling Shareholder seeks to counterclaim in these proceedings that Xu and Ke Administratrix were disentitled to receive the additional compensation of RMB 30 million under Article 2.1.2 of the 4.28 Agreement by reason of their failure and refusal to complete the Equity Consideration”;

(b) I agree with Mr Chan’s submissions that what the Respondents are seeking to say is that the Non-controlling Shareholders are disentitled despite the holdings in the Awards because of their refusal to complete the Equity Consideration. Whether they will ultimately be successful in this plea is one thing, but the plea by itself is in my view not res judicata or collateral attack.

69.The tax liability:

(a) Mr Khaw submits[55] that the Tribunal has held that the tax liability of the Equity Consideration had been clearly agreed, and the Non-controlling Shareholders were not responsible under Clause 2.3.4 of the 4.28 Agreement for the tax liability stemming from R1’s compliance with the first step (which ought to have already been completed) regarding the completion of the transfer of the 80% shareholding in SJHC to Shibang;

(b) §§280 to 281 of the Awards are the most relevant ones. I have considered them in context. They concern what were included in the first sentence of Clause 2.3.4 of the 4.28 Agreement (for which the Non-controlling Shareholders should be responsible), and what were not included in the second sentence of the same (which requires further negotiation between the parties in due course);

(c) I do not accept Mr Khaw’s submissions that there has been the clear holding by the Tribunal as suggested;

(d) I am not satisfied that any res judicata or collateral attack is made out under this head.

E.4.e. Conclusion on res judicata, collateral attack and abuse of process

70.For the reasons set out above, I am not satisfied that the Applicants’ complaints under this head are make out.

71.I state for the avoidance of doubt that insofar as res judicata, collateral attack and abuse of process being relied upon by the Applicants also in support of their case that the Respondents have failed to establish any serious issue to be tried, I for the same reasons expressed in Section E.4. herein do not accept the same.

E.5. The gateways

72.The Leave to Serve Out was granted on the basis of gateways 1(a), 1(c), 1(d) and 1(m).

73.I deal with gateway 1(m) first:

(a) Gateway 1(m) permits service out where “the claim is brought to enforce any judgment or arbitral award”;

(b) At §149 of his written submissions, Mr Khaw repeats his earlier submissions that “the Respondents, as the losing party to the Arbitration, simply have no locus standi to enforce the Awards by suing on the alleged implied promise”;

(c) I have rejected those earlier submissions of Mr Khaw’s;

(d) In fact, in the course of the hearing, Mr Khaw informed this Court that he no longer maintained §149 of his written submissions;

(e) In my view, gateway 1(m) is open to the Respondents.

74.The Respondents need only one gateway. I have concluded that gateway 1(m) is open to them. It is therefore not necessary for me to deal with the other gateways in any detail. I will say only the following. R2 has in the Maryland Proceedings declared that the Estate is based and domiciled in Hong Kong[56]. I accept Mr Chan’s submission on the authority of Athena Resources Ltd v Yung Shu Wu (HCA 1447/2008, 20 October 2009) at §14 that gateway 1(a) is open to the Respondents. In respect of gateway 1(c), I do not accept Mr Khaw’s submissions, based also on his submissions (which I have rejected) that the Respondents have failed to establish any serious issue to be tried[57], and that their Counterclaim against Xu is bound to fail. In respect of gateway 1(d), I repeat the discussions above on the legal basis of the Respondents’ Counterclaim and Mr Chan’s clarifications thereof. I have also considered Clause 4.1 and 4.2 of the 4.28 Agreement. I am of the view that gateway 1(d) is also open to the Respondents.

E.6. Hong Kong not being the forum conveniens

75.There is no dispute that the burden is on the Respondents to show in the ex parte application for the Leave to Serve Out that Hong Kong is clearly the appropriate forum.

76.In submitting that the Respondents have failed to discharge that burden, Mr Khaw relies principally on the existence of the Maryland Proceedings, which he submits is “an extremely weighty consideration against the Court’s exercising the discretion to assume jurisdiction”[58].

77.I do not accept Mr Khaw’s submission in this regard. I repeat the discussions above on the differences in nature between the Maryland Proceedings and the Counterclaim. I accept also Mr Chan’s submissions that as the Maryland Court, apart from R2, lacks jurisdiction over the other parties to the Awards, any further attempts to require compliance with the Awards in Maryland will be subject to significant limitations.

78.I have also considered the other basis put forward by Mr Khaw arising from the apparent residence of the witnesses. Whilst relevant, but bearing in mind the ease of travel these days and if need be the possibility of remote hearing, I do not accept that that is in the overall scheme of the matter a significant consideration.

E.7. Material non-disclosure

79.In so far as Mr Khaw’s reliance upon his earlier submissions on the legal basis of the Counterclaim and alleged lack of merits of the same, I repeat my discussions about. In my view, material non-disclosure in those regards has not been made out;

80.In relation to the Maryland Proceedings:

(a) I also repeat my discussions above. Any allegation of material non-disclosure should be considered in the context of the difference in nature between those proceedings and the Counterclaim herein;

(b) Mr Khaw places emphasis on what Ip has said at §45 of Ip/1[59], that:

“… the Maryland Proceedings were commenced by Ke’s Administratrix solely against [R2] and not any other parties to the 4.28 Agreement, the Awards, and/or these Proceedings with the apparent intent to selectively enforce Orders 3 and 9 of the Awards which concern only monetary payments. Notably, Ke’s Administratrix have chosen to enforce the Award in a jurisdiction that is extremely unlikely to compel the specific enforcement portions of the other Orders. To date, Ke’s Administratrix have not sought to enforce the other Orders at issue in these proceedings pertaining to the transfer of shares and property, which is a crucial aspect of the multi-stage divestment scheme in the 4.28 Agreement.” (Emphasis added)

(c) I note on the other hand, as Mr Chan has pointed out, that the Respondents have pleaded at §66 of the D&CC that “On 4 March 2019, Ke’s Administratrix filed an amended complaint in the Maryland Proceedings to recognize and enforce the Awards in their entirety”;

(d) I accept Mr Chan’s submissions that any failure to disclosure the full scope of the Maryland Proceedings is not deliberate;

(e) In his written supplemental submissions, Mr Khaw refers and relies further on what IP has said at §§50 and 51 of Ip/1[60], that:

“50. Ke’s Administratrix may argue that the parties should refer any disputes arising from the 4.28 Agreement and/or interpretation of the Awards back to the Tribunal.

51. The Counterclaim Plaintiffs oppose on the basis that the Tribunal is functus officio upon making and clarifying the Awards. The applicable timeline for clarification and amendments had expired. The Counterclaim Plaintiffs consider that the Tribunal no longer has jurisdiction to decide on the matter.”

(f) In this regard, I repeat the discussions at Section E.4. above (and in particular E.4.c. and the interface between the court and arbitration proceedings).

81.Overall, I am of the view that the disclosure has been adequate given the complicated history of the matter. Any inaccuracy as discussed above in relation to the scope of the Maryland Proceedings I am satisfied is not deliberate. Material non-disclosure is not made out.

E.8. Conclusion on the Setting Aside Application

82.For all the reasons set out above, I refuse the Setting Aside Application.

F. The Striking Out Application

83.The grounds put forward in support of the Striking Out Application are primarily the same as those put forward in support of the Setting Aside Application, which I have deal with above.

84.I repeat also what I have recorded at §4(b) above.

85.I need however to deal with one discrete matter:

(a) The Respondents plead at §65 of the D&CC[61] that:

“65. Notwithstanding the Controlling Shareholders’ multiple attempts to comply with Order 9 as pleaded above, on 16 November 2018, Ke’s Administratrix filed proceedings against [R2] in the District Court of Maryland in the United States to recognize and enforce Order 9 … The Maryland Proceedings were brought by Ke’s Administratrix in bad faith to avoid the applicable PRC tax.”

(b) Mr Khaw submits[62] that the plea lacks particular, and hence is liable to be struck out;

(c) I accept Mr Chan’s submissions that a request to strike out may be refused if want of particulars can be remedied by request for the same;

(d) Mr Khaw further submits that §59 of the D&CC[63] should be struck out as being scandalous, frivolous and/or vexatious. The matter is facts sensitive, and I am not satisfied that a clear case for striking out has been demonstrated.

86.For the above reasons, I also dismiss the Striking Out Application.

G. The Stay Application

87.As I have recorded above, the Stay Application is no longer being pursued.

H. Overall conclusion

88.For the above reasons, I dismiss the Summons.

I. Costs

89.I make a costs order nisi that the Applicants should bear the costs of the Summons, with certificate for 2 counsel, to be summarily assessed. Any application for variation shall be made within 7 days from the date of this Decision by letter to this Court, upon receipt of which further directions will be given. Unless the costs order nisi has been varied, and for the purpose of assessment, the Respondents are directed to file their Statements of Costs within 14 days from the date of this Decision, the Applicants to file their Statement of Objection 14 days upon receipt, and the Respondents to file their reply 7 days thereafter, with the view of the assessment being conducted on the papers.

Mr Richard Khaw SC leading Mr Jeffrey Lee, instructed by DLA Piper Hong Kong, for the 5^th Defendant (by original action) and the 2^nd Defendants (by counterclaim)

Mr Abraham Chan SC leading Mr Danny Tang, instructed by Kobre & Kim, for the 1^st to 4^th Defendants (by original action) and 1^st to 4^th Plaintiffs (by counterclaim)