R v. A and Others

HCCT 54/2022

[2023] HKCFI 2034

(amended and redacted version)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 54 OF 2022

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BETWEEN

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D E C I S I O N

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Background

1.On 8 July 2022, the Plaintiff in these proceedings issued its Originating Summons (“OS”) under section 34 of the Arbitration Ordinance (“Ordinance”), to set aside the Partial Final Award on Jurisdiction dated 8 June 2022 (“Award”) made by the arbitral tribunal (“Tribunal”) in HKIAC/A20173 (“Arbitration”), and for the Court to decide the matter of the jurisdiction of the Tribunal. As amended on 1 November 2022, the OS seeks from the Court a declaration that the Tribunal has no jurisdiction over the 3^rd Defendant in these proceedings, and that the Plaintiff is the true principal and party to the 2^nd Amended LPA which was the subject of the dispute in the Arbitration, and an order that the Plaintiff’s costs be paid by the Defendants.

2.On 9 September 2022, the 3^rd Defendant issued her summons to strike out the OS (“Summons”) on the ground that it discloses no reasonable cause of action, in that the Award was not one on the Tribunal’s jurisdiction, and did not involve any true question of jurisdiction which is open to the Court’s review under section 34 of the Ordinance. It is also claimed that the OS is an abuse of process.

3.The Plaintiff is the Claimant in the Arbitration, being a company incorporated in Hong Kong, which is wholly owned and controlled by the XXXX brothers (“Brothers”), XXXXXXXXXX (“SA”) and XXXXXXXXXX (“SM”).

4.The 1^st Defendant is a company incorporated in the Cayman Islands, and the 1^st Respondent in the Arbitration. The 2^nd Defendant and 2^nd Respondent in the Arbitration is a partnership formed under the laws of the Cayman Islands, and was established by the XXXXXXXX Group (“Group”). The 2^nd Defendant is a special purpose fund of which the 1^st Defendant was at all material times the General Partner.

5.The 3^rd Defendant (“C”) is a resident of the Mainland. She applied to join in the Arbitration and was made the Additional Party.

6.The Plaintiff and the 1^st Defendant had entered into a limited partnership agreement, amended and dated around April 2018 (referred to in the Arbitration as the “2^nd Amended LPA”). It is not disputed that the Plaintiff and the 1^st Defendant were the only named parties and signatories, and C was never a signatory, nor was she named in the agreement.

7.On C’s case, the Plaintiff was her agent and nominee in making investments so as to mitigate the expense and delays from Mainland foreign exchange controls, overseas direct investment restrictions, and in order to facilitate banking transactions in Hong Kong. C claims that one of these investments she had made through the Plaintiff was the XXXXXXXXXXX Corporation in 2018 (“2018 Investment”), which was promoted and managed by the Group. According to C, the 2^nd Amended LPA was signed by the Plaintiff as agent for and on her behalf, and she was the principal and beneficiary entitled to all rights under and to enforce the 2^nd LPA.

8.The 2^nd Amended LPA contained an arbitration clause, whereby all disputes, controversies, differences or claims arising out of or in connection with the agreement, including the existence, validity, interpretation, performance, breach or termination thereof were to be referred to and be finally settled by the HKIAC.

9.The Arbitration was initiated when the Plaintiff sought and made a request for distributions in kind to be made in respect of the 2018 Investment, and the 1^st and 2^nd Defendants failed to comply with the Plaintiff’s instructions. On 10 August 2020, the Plaintiff issued its Notice of Arbitration against the 1^st and 2^nd Defendants, claiming their breach of the 2^nd Amended LPA. When C learned of the Arbitration, she made a request to be joined to the Arbitration, seeking declarations that, inter alia, she was the true principal of the Plaintiff in relation to the 2018 Investment and the beneficial owner of the investment.

10.The Plaintiff on its part challenged the right of C to be joined in the Arbitration.

11.C was granted the provisional right to intervene in the Arbitration, the HKIAC having notified the parties that the decision to grant C’s joinder request on a preliminary basis would not prejudice the right of the Plaintiff (as Claimant) to challenge the Tribunal’s jurisdiction over C, once the Tribunal had been fully constituted.

12.After some initial submissions were made by the parties, and upon the constitution of the Tribunal, a preliminary meeting took place and the Tribunal issued Procedural Order No 1 (“PO 1”) on 27 February 2021. In PO 1, the Tribunal noted that pursuant to an agreement reached between the parties (referring to the Plaintiff, the 1^st and 2^nd Defendants, as well as C as the Additional Party), the Plaintiff’s challenge to the jurisdiction of the Tribunal over the Additional Party (“the C Challenge”) “shall be dealt with as a preliminary issue”. It was further noted that the 1^st and 2^nd Defendants’ initial objection to the amendment of the Notice of Arbitration was withdrawn, and that the jurisdictional question whether the 2^nd Defendant is a proper party to the 2^nd Amended LPA shall be considered with the merits of the dispute. It was recorded further that firstly, the parties had agreed that there shall be an oral hearing of the C Challenge and that the Tribunal shall render a decision in writing. Secondly, it was recorded that whilst the Claimant had submitted that the Tribunal’s decision should be in the form of an Award, the Respondents maintained that the Tribunal should issue its determination “in the form of a ruling pursuant to section 34(1)(3) of the Hong Kong Arbitration Ordinance” (an inaccurate reference to Article 16(3) of the Model Law, applied by section 34(1) of the Ordinance).

Any ruling or decision on jurisdiction?

13.The first matter in dispute in these proceedings before the Court is whether the ruling made by the Tribunal in the Award was a decision on its jurisdiction. C and the 1^st and 2^nd Defendants contend that no decision had in fact been made by the Tribunal on its jurisdiction, such that the question of jurisdiction cannot be decided by the Court under section 34 of the Ordinance. According to C and the 1^st and 2^nd Defendants, the Award was a decision on the merits, but the Plaintiff is not applying to set the Award aside under section 81 of the Ordinance, and the time for doing that has expired.

14.PO 1 issued by the Tribunal expressly stated that the preliminary question to be determined by the Tribunal (“Preliminary Question”), as agreed, was formulated as:

“1. Is Claimant or the Additional Party the true principal and/or party to the 2^nd Amended LPA?

2. Therefore, does the Tribunal have jurisdiction over the Additional Party and/or Claimant?”

15.The Plaintiff highlighted the fact that PO 1 set out the timetable for the further conduct of the Arbitration. The timetable prescribed the dates for the parties to serve their respective submissions on jurisdiction limited to matters in respect of the Preliminary Question, referred to an oral hearing to be fixed for the Preliminary Question, and stated that the Tribunal will issue a written ruling on the Preliminary Question “in conformity with section 34(1) (3) of the Ordinance”.

16.Counsel for C pointed out that amendments had subsequently been made to PO 1, but it is clear that only the dates were amended and that the framework provided for in PO 1 remained substantially the same.

17.Rounds of submissions on jurisdiction were served, together with witness statements on the Preliminary Question. Discovery requests were made, contested and dealt with by the Tribunal.

18.Some time in July 2021, the 2^nd Defendant clarified to the Tribunal that it declined to take part in the preliminary phase of the Arbitration which concerned the Tribunal’s jurisdiction over the Plaintiff and/or C, but intended to participate in the “merits phase” of the Arbitration when the Tribunal will determine the 2^nd Defendant’s jurisdictional objection that it is not a proper party to the 2^nd Amended LPA or the arbitration agreement contained therein.

19.The Tribunal then invited the parties to consider the adoption of a suitable stipulation as regards the determination of the Preliminary Question. It proposed some suggested wording for the parties’ consideration in October 2021. Counsel for the 1^st Defendant and C considered that the stipulation suggested by the Tribunal did not meet the situation in which C succeeded in her application but did not then propose to pursue the claims made in the Arbitration. The Tribunal thereupon invited the parties to consider a stipulation with revised wording intended to accommodate those concerns.

20.At the hearing before this Court, Counsel for the Plaintiff explained that C’s position in the Arbitration had been that the Plaintiff’s request and demand for distribution in kind, and its commencement of the Arbitration, had not been authorized by C, and that if C should succeed in her application to be joined in the Arbitration and the Tribunal should rule that she was the true principal and party to the 2^nd Amended LPA, she would not be continuing the Arbitration, nor the claims made against the 1^st and 2^nd Defendants, such that a ruling in her favour would effectively be the end of the Arbitration.

21.By November 2021, the parties were able to agree on a “Stipulation”, which was recorded by the Tribunal in PO 7 dated 6 November 2021 as follows:

“The Tribunal acknowledges, records and confirms the agreement of the Parties to the following Stipulation:

‘For the purposes of its decision on the Preliminary Question, the Parties agree that whichever of the Claimant or the Additional Party is held by the Tribunal to be the beneficial owner of the 2018 XXXXX Investment shall be the true principal and/or party to the 2^nd Amended LPA.’”

22.PO 7 proceeded to record a revised timetable for C as Additional Party to serve her “Rejoinder on Jurisdiction”, for the Respondents to file their further supplementary submissions, and for opening submissions or skeleton arguments to be exchanged.

23.The hearing proceeded on a fully remote basis for 5 days commencing 7 March 2022. Witnesses including SM and C were called. On 8 June 2022, the Tribunal issued its “Partial Final Award on Jurisdiction”, whereby it was declared that C, and not the Plaintiff, is the true principal and true party to the 2^nd Amended LPA, and “all other claims, applications and requests relating to the Preliminary Question Issue” were dismissed.

24.In the Award, the Tribunal set out the Preliminary Question and the parties’ agreed Stipulation. It analyzed the evidence, and set out the reasons for its conclusion that the Plaintiff was C’s agent for the purposes of entering into and subsequently holding the 2018 Investment, that C was therefore the beneficial owner of the 2018 Investment, and that, in accordance with the Stipulation, the Tribunal found that C was the true principal and true party to the 2^nd Amended LPA, in the place of the Plaintiff.

25.Having considered the history of the Arbitration leading up to the Award, the parties’ formulation of the Preliminary Question, and the form as well as the substance of the Award, my finding is that the Award, and the ruling made therein, is a decision on the jurisdiction of the Tribunal over C and the parties to the Arbitration.

26.It is clear from the background leading up to PO 1 and PO 7, as reflected and recorded by the Tribunal in the Award itself, that all the parties including the Plaintiff, C and the 1^st and 2^nd Defendants had throughout sought a preliminary decision on C’s request for joinder as an additional party, and the Plaintiff’s objection thereto, and the Plaintiff’s challenge to the jurisdiction of the Tribunal over the claims made by C, on the basis that she was not a party to the 2^nd Amended LPA and had no rights thereunder. That was referred to in the Arbitration as the C Challenge. The timetable and all the procedural directions made by the Tribunal as contained in PO 1, and as subsequently amended, were for the purpose of the hearing of the C Challenge. What was subsequently framed as the Preliminary Question to be decided by the Tribunal was for the determination of the C Challenge, and the Stipulation framed and agreed upon by the parties was “for the purposes of (the Tribunal’s) decision on the Preliminary Question”.

27.Counsel for C highlighted that the Preliminary Question was formulated into two parts: the first to identify the true principal and party to the 2^nd Amended LPA, and the second to answer whether the Tribunal has jurisdiction over C as the additional party, and/or the Plaintiff as claimant. It was argued that the Tribunal only dealt with the first part of the Preliminary Question, and there was no determination on the second part, on jurisdiction.

28.The Plaintiff’s objection to C’s application to be joined, and its challenge to the jurisdiction of the Tribunal in respect of C’s claims and status in the Arbitration, were on the basis that C was not a party to the 2^nd Amended LPA, and that as such, there was no arbitration agreement between C and the Plaintiff to confer any jurisdiction on the Tribunal. C’s case is that the Plaintiff had entered into the 2^nd Amended LPA as her agent and had contracted on her behalf, such that as principal, she was entitled to the benefits and rights under the 2^nd Amended LPA. Hence, the Tribunal was tasked with deciding the Preliminary Question as to whether the Plaintiff, or C, was the true party, and who was the principal to the 2^nd Amended LPA.

29.Having considered the evidence, the Tribunal accepted C’s case that she had used the Plaintiff as her nominee and agent in entering into the 2^nd Amended LPA and in making the 2018 Investment, and that the Plaintiff had agreed to act as such. In deciding this issue, the Tribunal had considered the question framed as the Stipulation, and found in answer to the question, that it was C who was the beneficial owner of the 2018 Investment, having paid for the same, and that she was the true principal and party to the 2^nd Amended LPA.

30.Having read the entirety of the Award, I reject the contention that the Tribunal had only answered the first part of the Preliminary Question, and not the second part. In concluding and making the declaration that C was the true principal and party to the 2^nd Amended LPA, the Tribunal was in effect and substance deciding that she was the party to the arbitration agreement contained in the 2^nd Amended LPA, was entitled to enforce the rights and obligations conferred under the 2^nd Amended LPA including the arbitration agreement, and that as C was the true party to the agreements, the Tribunal had the jurisdiction to decide the dispute between the Plaintiff and C which arose out of or in connection with the 2^nd Amended LPA, its existence, and breach as alleged.

31.Mr Lam, Counsel for C, argued that having decided that C was the true party to the 2^nd Amended LPA, the Plaintiff having only contracted as agent on her behalf, it was in fact not necessary for the Tribunal to decide on the second part of the Preliminary Question, as to whether it had jurisdiction, and there was no express answer given by the Tribunal to that part of the question. Again, I do not accept such submission. By answering the first question in favour of C, the Tribunal had already and in effect answered the second part: that it did have jurisdiction over her as the principal and party to the 2^nd Amended LPA and the arbitration agreement contained therein.

32.Even if the Tribunal’s ruling and decision as contained in the Award was wider in scope than a decision on jurisdiction only, in that the Tribunal had decided on at least part, if not the entirety, of the merits of the claims made by the Plaintiff and C, including questions relating to how payment of the 2018 Investment was made and reimbursed, that does not by itself mean that there is no award on jurisdiction. The key is to ascertain whether the Award had dealt with and decided the question of whether the Tribunal has jurisdiction over the claims made by the Plaintiff and C respectively in the Arbitration.

33.Under Article 16 of the Model Law, an arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. The tribunal may of course rule on a plea that it does not have jurisdiction either as a preliminary question, or in an award on the merits. Under Article 16(3), if the tribunal rules as a preliminary question that it has jurisdiction, any party may, within 30 days after having received notice of that ruling, request the court to decide the matter of the tribunal’s jurisdiction. If the tribunal rules on a plea as to its jurisdiction in the substantive or final award together with the merits, then a party dissatisfied with the ruling may apply to set aside the award under section 81 of the Ordinance, by furnishing proof that the arbitration agreement was not valid, or that the award has dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.

34.In this case, it is clear that from the time when the Tribunal was first constituted, there had already been a challenge to C’s application to be joined as a party, and that the HKIAC’s decision to allow the joinder was preliminary only, and without prejudice to the right of the Plaintiff to challenge the jurisdiction of the Tribunal over C. It is also clear from the first formulation of the Preliminary Question, as contained in PO 1, that there was to be an oral hearing separately to determine the Preliminary Question, in accordance with a timetable devised and as amended, with the contemplation and clearly expressed intention of the Tribunal, pursuant to the request made by the 1^st/2^nd Defendants, that there would be a written ruling on the Preliminary Question in conformity with Article 16(1)(3) (by the erroneous reference to section 34(1)(3) of the Ordinance) - which was in the context of a tribunal ruling on a plea of jurisdiction as a preliminary question, and open to a decision by the Court on the same matter.

35.There is nothing which I have seen from the other procedural orders made by the Tribunal which indicate any departure or intention or agreement to depart from the statement in 2(j) of PO 1. All along, it was envisaged that the Tribunal would, after the preliminary oral hearing, issue a preliminary decision on its jurisdiction in accordance with Article 16(1)(3). If the Tribunal had understood from the parties and had intended to issue a final award to deal with the question of its jurisdiction together with the merits, it would have been a natural and simple thing for it to have so recorded this, either in the Award itself or in any procedural order before the Award. This was not done. Indeed, when the Award was issued, it was still named as “Partial Final Award on Jurisdiction”, befitting the contents, substance and effect of the Award itself. I therefore disagree that this is simply a matter of form or label. It aptly described what the Tribunal was in fact doing: deciding the Preliminary Question, and the question formulated as the Stipulation “for the purposes of its decision on the Preliminary Question”, as to who was the beneficial owner of the 2018 Investment and consequently the true principal and party to the 2^nd Amended LPA. In answering this question, the Tribunal was at the same time deciding (as it was necessary to do so) on the existence and validity of an arbitration agreement to which C was a party, which valid arbitration agreement confers jurisdiction on the Tribunal.

36.There is no basis to characterize the Award and the ruling made therein as anything other than one on a true question of jurisdiction. It is a finding on the existence of a valid and binding arbitration agreement as contained in the 2^nd Amended LPA, to which C was a true party and principal, as the Tribunal found. The matter may be looked at from the perspective of considering what the Tribunal would have to consider, if it was asked simply to decide on whether it had jurisdiction over C and the claims and assertions made by her in the Arbitration, leaving aside the Stipulation, and the parties’ formulation of the Preliminary Question. Clearly, it would be whether C was a party to any arbitration agreement made with the Plaintiff and the 1^st and 2^nd Defendants, so as to confer jurisdiction on the Tribunal. That was precisely what the Tribunal considered and found, by its analysis of the evidence, that the Plaintiff had agreed to act as C’s nominee and agent in entering into the 2^nd Amended LPA to make the 2018 Investment on her behalf, such that C was the principal and true party to the 2^nd Amended LPA, and the arbitration agreement contained therein.

37.As Counsel for the Plaintiff correctly pointed out, the identities of the parties to a contract are fundamental and go to the root of the question of whether a contract exists (The Starsin [2003] 1 Lloyd’s Rep 571 per Lord Millett; Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (3^rd edition) para 7.42) – and in this case whether there is an agreement to arbitrate. A tribunal only has jurisdiction over parties to the arbitration agreement, and it is only with the consent of those parties to the arbitration agreement that the power to join non-parties can be exercised. In my view, it cannot be disputed that a difference or disagreement over the proper parties to an arbitration agreement is a true matter of jurisdiction, and there are ample authorities to support this (the Plaintiff cited Peterson Farms Inc v C&M Farming [2004] 1 Lloyd’s Rep 603; LG Caltex Gas v China National Petroleum [2001] 1 WLR 1892; Central Trading & Exports Ltd v Fioralba Shipping Co, The Kalisti [2014] 2 Lloyd’s Rep 450).

38.The Stipulation was simply the parties’ agreement on the material evidence to provide the basis of the Tribunal’s finding as to the proper party to the relevant agreements – for the purposes of its decision on the essential question of the Tribunal’s jurisdiction. I do not see the Stipulation as being capable of changing the character of the Preliminary Question to be determined by the Tribunal.

39.The Plaintiff had indicated from the start, and throughout the Arbitration, that it objected to the joinder of C, claiming that the Tribunal has no jurisdiction over her claims, and that there should be a ruling pursuant to Article 16(3). I reject any suggestion that the Plaintiff had at any time unequivocally agreed that a ruling on the Preliminary Question would be or constitute a decision on the merits of the dispute, or that there was any ad hoc submission on the part of the Plaintiff. There was no such indication at all in any of the procedural directions or rulings made by the Tribunal which records such agreement, and no evidence to indicate in any way that the scope of the Tribunal’s power has been enlarged to the extent of ousting the power of the Court to review its decision under Article 16(3). If there had been such agreement or understanding, which would constitute a waiver by the Plaintiff of its statutory rights, it would have been natural for the Tribunal to record this in the Award, or in a direction or ruling.

40.The fact that C may have submitted to the jurisdiction of the Tribunal does not mean that the Plaintiff had accepted her as a party in the absence of an arbitration agreement (which was the Plaintiff’s stance). On the evidence, there can be no question of the Plaintiff having waived its challenge to the Tribunal’s jurisdiction.

41.Based on my analysis of the Preliminary Question and the Stipulation, I reject the contention that paragraph 18.1 of Procedural Order 2 of 27 March 2021, and the reference therein to the parties’ waiver of “procedural objections”, can be taken to mean a waiver by the Plaintiff of its challenge to the jurisdiction of the Tribunal in the Arbitration.

42.On behalf of C, it was also argued that the jurisdiction question was actually dismissed by the Tribunal, when it dismissed “all other claims, applications and requests relating to the Preliminary Question Issue” after declaring C to be the true principal and party to the 2^nd Amended LPA. It was contended that in the light of the Stipulation and the Tribunal’s finding on the true party, the question of jurisdiction became entirely academic, as the Plaintiff’s substantive claims in the Arbitration for distribution to itself as principal must fail in its entirety. Having found against the Plaintiff on the merits, it was argued that whether C was joined, and whether the Tribunal had jurisdiction over C, became moot.

43.The Tribunal’s dismissal of other claims, applications and requests relating to the Preliminary Question can be said to be unclear, but I do not agree that such dismissal can be determinative of the question of whether there is a decision on jurisdiction. Apart from the meaning contended for C, the dismissal may also be taken to mean the dismissal of the Plaintiff’s challenge, that the Tribunal has no jurisdiction to join C and to decide her claims. Of relevance is the background leading to the formulation of the Stipulation. As Mr Pow has explained, C had indicated to the Tribunal that she did not agree to the commencement of the Arbitration and the claims made by the Plaintiff against the 1^st and 2^nd Defendants for distribution, and that if the jurisdiction challenge was ruled in her favour, she would not pursue the Arbitration, and that it would not be necessary for the Tribunal to decide the substantive claims made by the Plaintiff. The 1^st Defendant had also voiced concerns, and was likewise anxious to have a Stipulation which dealt with the situation in which C succeeded in the C Challenge but did not propose to pursue the claims in the Arbitration. It was therefore clear to the Tribunal that if there was a ruling in favour of C, that would be the end of the Arbitration and it would not be necessary to pursue any other claims, applications and requests relating to or resulting from the Preliminary Question.

44.Finally, I reject the submission made for C that the issue of joinder is not a question of jurisdiction which can be reviewed and decided by the court de novo, but should be characterized as a decision of the Tribunal’s exercise of its procedural authority to join a party. Reliance was placed on the passage at page 2776 of Born on International Commercial Arbitration (3^rd edition). However, on careful review, what the learned author was referring to in the passages cited are cases of the tribunal’s exercise of its power to order consolidation and joinder in cases where the parties have an agreement to arbitrate, and such agreement incorporates institutional rules which provide for procedural actions of consolidation, joinder, or intervention. I do not read the observations made by the learned author, that the tribunal’s exercise of discretion, under the parties’ arbitration agreement or the applicable institutional rules, in ordering consolidation, joinder and intervention, should be afforded “very substantial deference” by the courts, to be applicable to a case where there is no arbitration agreement, or where the existence of the arbitration agreement is disputed. Where there is no arbitration agreement, it cannot be said that the tribunal’s power to order joinder is simply an interpretation of the procedural terms of the agreement.

45.In any event, the facts of the present case are distinguishable from C v D1 & ors [2015] EWHC 2126, where it was held that the tribunal had the power under the governing LCIA Rules 1998 to join a third party on the application of the defendants and to permit a counterclaim to be made by the third party, as the parties had not agreed otherwise (in accordance with the rules). In this case, the Plaintiff had throughout indicated its objection and challenge to C’s joinder, and the HKIAC had expressly indicated that its decision to permit the joinder was on preliminary basis only, and without prejudice to the Plaintiff’s challenge to the Tribunal’s jurisdiction over C, when the Tribunal has been fully constituted.

46.My conclusion, therefore, is that the Award is one on the jurisdiction of the Tribunal and as to the existence of an arbitration agreement between the Plaintiff and C. As such, it is open to review by the Court under section 34 of the Ordinance and Article 16 of the Model Law.

47.It is not plain and obvious that the OS should be struck out for failing to disclose a cause of action. The Summons to strike out is dismissed.

The review of the ruling on jurisdiction

48.The more difficult question is the consideration of whether the Tribunal was correct in its decision, that there was an arbitration agreement between the Plaintiff and C who was found to be the principal and true party to the 2^nd Amended LPA.

49.In deciding this question, it is clear from the authorities that the Court is in a position to consider afresh the evidence which is adduced before the Court. In Dallah Real Estate v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763, it was held that the tribunal’s own view of its jurisdiction has no legal or evidential value to the Court, irrespective of how full the evidence was before the tribunal, and no matter how carefully deliberated the conclusion of the tribunal. The hearing is de novo, and if necessary, witnesses can be called and the parties are entitled to put forward new arguments on the question of jurisdiction which the Court is entitled to consider (S Co v B Co HCCT 12/2013, the 24 July 2014). The rationale for this is that the Court should not be in a worse position to make an assessment on an issue of fact, and is therefore able to examine the evidence and the witnesses in the usual way.

50.I accept the submissions made on behalf of the Plaintiff, that on the Court’s review, it can receive evidence which is relevant and admissible (Central Trading & Imports Ltd v Fioralba Shipping Company (The “Kalisti”) [2014] EWHC 2397 (Comm)), regardless of whether it had been adduced, or could have been adduced, before the tribunal (Carrier Hong Kong v Dickon Construction [2005] 4 HKC 142). The Court is not bound by or limited to either the findings made by the tribunal in the award, or the evidence adduced before the tribunal. The Court is to make its own decision on the evidence before the Court (People’s Insurance Company of China v Vysanthi Shipping [2003] EWHC 1655 (Comm)). It does not simply review the decision of the tribunal, but makes its own decision on the evidence before it, but as is often the case, after the Court has considered the award and the findings of the tribunal, it may agree with the conclusions reached by the tribunal and may come to the same conclusions for the same reasons. This is partly due to the fact that whilst the evidence before the Court is not confined to what was adduced before the tribunal, it will include such evidence which had been adduced, had been considered by the tribunal and is referred to in the award, including the testimony of the witnesses who had been cross-examined before the tribunal and whose credibility had been assessed by the tribunal.

51.In the words of the “high-level summary” of the Plaintiff’s case, the gist of its case is that it had lent money to C’s mother (“X”) to acquire investments, which include the 2017 Investment, the XXXX Investment and the XXXXX Investment. By the end of 2017, X had incurred substantial borrowings from the Brothers and/or XXXXXXXX (“ZT”), which is a company controlled by the Brothers. When X approached the Brothers in relation to the acquisition of the 2018 investment, the Brothers refused to provide any further loan to her. The Plaintiff claims that some time in early 2018, the Brothers and X entered into a “Settlement-in-Kind”, pursuant to which X would transfer her beneficial ownership of the 2017 Investment and the XXXX Investment to the Brothers, the brothers’ corresponding loans to X would all be cancelled, and the Brothers would take up the opportunity of the 2018 Investment in X’s place.

52.On the Plaintiff’s case, it was as a result of the Settlement-in-Kind that the Plaintiff entered into the 2^nd Amended LPA for the purpose of the 2018 Investment, to acquire the beneficial interest for itself.

53.It was undisputed in the Arbitration that it was the Plaintiff which provided the funding for the 2018 Investment in US dollars. That was demonstrated in the documentation adduced before the Tribunal. What was in dispute in the Arbitration was whether C (or her family) had reimbursed the Plaintiff for this funding, by payment of Renminbi to the Plaintiff through its nominee(s).

54.On C’s case, X and her family had reimbursed SM for the 2018 Investment, by means of a remittance of RMB 300 million from XXXXXXXXXXXXX (“PJ”), which is a company owned by C’s parents (“300 million Remittance”). The 300 million Remittance was made to XXXXXXX (“Madam Z”), who is admitted to be a nominee of SM. The payment was arranged and implemented by one Mr XXXXXXXX (“W”), who was the assistant of C’s parents.

55.On the Plaintiff’s case, the 300 million Remittance was not the reimbursement as alleged by C. According to the Plaintiff, the sole purpose of the 300 million Remittance was to assist C’s parents in a share manipulation scheme, to acquire listed shares in XXXXXXXXXXXXX Co (“Listco”), a listed company which was controlled by the C family (“Scheme”). C’s father and W have both been found guilty by the Mainland Courts of being the masterminds of the Scheme.

56.The issue was summarized by the Tribunal at paragraph 267 of the Award, where the Tribunal stated:

“It is a sine qua non of (C’s) case that she can demonstrate the transfer of an RMB amount sufficient either to fund or to reimburse the XXXX Brothers for the payment by (the Plaintiff) into the XXXXXXX Fund of US$36.75 million on 23 February 2018, which enabled the 2018 Investment to proceed.” (Emphasis added)

57.The Tribunal found in favour of C, concluding that the foreign currency amount required to pay the 2018 Investment had been reimbursed to the Brothers on behalf of C, having been encompassed within a total of two sums of RMB 150 million transferred from the C family’s PJ account to Z on 23 February 2018. It therefore found, on the Stipulation of the Preliminary Question, that having paid for the 2018 Investment, C was the beneficial owner thereof and hence the true party to the 2^nd Amended LPA.

58.In the review of the Award, Counsel for the Plaintiff contended that the ruling of the Tribunal is erroneous. In gist, the Plaintiff argued that there is no credible evidence that there was any agency between C and the Plaintiff to entitle her to assert any right over the 2^nd Amended LPA. It claims that there is fresh evidence which conclusively demonstrates that any alleged agency is false, and that the 300 million Remittance was not reimbursement of the US dollars paid by the Plaintiff, but had been remitted for the sole purpose of the Scheme and had actually been used to acquire Listco shares under the Scheme. The Plaintiff further seeks to rely on evidence which shows that the 300 million Remittance was not derived from the C family, but was in fact derived from funds advanced by the Brothers to PJ and the C family on 26 February 2018, immediately before the 300 million Remittance, through two companies in Shenzhen under SM’s control (“Prior Remittance”).

59.The new evidence will be summarized in greater detail below, but the Plaintiff claims that it shows conclusively that there was in fact no reimbursement of the 300 million Remittance as alleged by C, and that there is no evidence that C had in fact paid for the 2018 Investment, to be the beneficial owner and true principal to the 2^nd Amended LPA, as she alleged.

60.According to the Plaintiff, the new evidence shows clearly: the existence of the Scheme; the ultimate destination of the 300 million Remittance; and the unbroken money trail which links the 300 million Remittance to the Scheme and its intended purpose of market manipulation. There are Mainland Court judgments and documents of criminal proceedings and investigations conducted on the Mainland, including criminal proceedings against ZT which have been released after the Arbitration, whereby it can be seen that admissions had been made by material witnesses as to the Scheme, its use for the purpose of market manipulation activities in which C’s father, her mother X and W had played essential roles (and were convicted therefor), and as to the involvement of trust schemes used for the purchase of Listco shares as part of and pursuant to the Scheme.

61.On behalf of C, it was argued that the so-called new evidence is not entirely new, as many of the documents now sought to be relied upon by SM were, or should have been, in the possession or control of the Plaintiff or ZT which the Brothers control. Counsel for C pointed out that SM has given no satisfactory explanation as to why these documents had not been produced and relied upon by the Plaintiff in the Arbitration, apart from the Plaintiff’s bare and hollow assertion that documents of ZT had been seized by the Shenzhen Public Security Bureau (“Security Bureau”) for investigations, and that SM and the Plaintiff did not have access to the new evidence at the material time of the Arbitration. It was argued that the Plaintiff had made no attempt to seek an adjournment of the evidentiary hearing in the Arbitration, to collect or to wait for the release of the new evidence, and that the Plaintiff should be estopped now from seeking to produce and rely upon the evidence. It was pointed out that at the time of the Arbitration, the Plaintiff could have asked employees of ZT to give evidence as to any relevant information contained in the ZT documents if they were indeed relevant to the Plaintiff’s claim, or to disprove the assertions made by C. Nor has the Plaintiff explained why it had not been possible to obtain a witness statement from SA, who had the relevant knowledge of the transactions and monetary dealings, to adduce the pertinent evidence to the Tribunal. As such, it was contended for C that the Plaintiff should not be permitted to rely now on the evidence, when it could have been obtained for use in the Arbitration with reasonable diligence. Counsel submitted that alternatively, the Court should give very little weight to the evidence to be given now, when the allegedly new evidence, such as documents generated in criminal investigations and proceedings on the Mainland, are selective, incomplete, provisional and/or hearsay in nature. By these, Counsel referred to excepts of judgments of the Mainland Courts, indictment opinions for Mainland criminal proceedings, interrogations/interview transcripts and other documents which had been produced to the Security Bureau.

62.In relation to the evidence sought to be produced to the Court for its de novo review of the Tribunal’s decision on jurisdiction, I agree with Counsel for the Plaintiff that in the light of the authorities, the Plaintiff does not have to show that the Ladd v Marshall conditions apply. As set out in paragraphs 49 and 50 above, the Court can in general receive evidence which is relevant and admissible, even if it might cause prejudice to the other side (The “Kalisti”). If there was evidence available at the time of the Arbitration but was withheld, and it is sought to be produced only at the time of the review, it is a matter for the Court to take into consideration as to the weight to be given to such evidence. Other matters such as whether the evidence is hearsay, or complete, also go to weight as opposed to admissibility.

63.The matter of the Court’s approach to new evidence in a review of an award was explained by Males J in The “Kalisti”, as follows:

“29. My starting point is that in general, as the cases show, a party is entitled to adduce evidence in a section 67 challenge which was not before the arbitrators. No doubt that is subject to the control of the court, but speaking generally, the court will not normally exclude evidence which is relevant and admissible, even if it may cause prejudice to the other side – for example, if a claimant has deliberately waited until the end of the limitation period to bring his claim and in the meanwhile the other side’s key witness has died. It is therefore necessary to consider the nature of the control which the court is to exercise and on what principle it should act in considering whether such evidence may be shut out in a section 67 case. Is there anything special in this respect about section 67 cases and, if so, what is it?

30. In my judgment the answer to these questions lies in the nature of a section 67 application as established by the cases cited above. In principle, this is no different from other contested applications where the court has to determine disputed questions of fact and/or law. Arbitration and the existence of an award which is the subject of the challenge provide the context in which the question arises, but do not fundamentally transform the nature of what the court has to decide or the way in which it should decide it. Thus a section 67 challenge is “a full judicial determination on evidence”, in this respect like any other. It is in general up to the parties here (as elsewhere within our adversarial system) to determine the evidence on which they wish to rely, and that evidence is not limited to whatever evidence was before the arbitrators. That does not mean, however, that the parties’ right to adduce evidence is unconstrained by the court’s rules of procedure. On the contrary those rules provide for the way in which evidence is to be received and enable the court to exercise control over the disclosure of documents, the service of evidence in the form of witness statements and, where necessary, experts’ reports, and the adducing of oral evidence with cross-examination. That control is to be exercised in accordance with established principles, in particular the overriding objective and the interests of justice.

...

32. I do not consider that the court has an unfettered discretion to exclude relevant evidence or that the only ground on which it may do so is that the admission of new evidence would cause prejudice to the other party. I doubt, moreover, whether “prejudice” in the abstract is a free-standing ground on which such evidence may be excluded and I do not read Aikens J in The Ythan as saying that it is. Undoubtedly, however, in a section 67 case as in any other, the court may refuse to allow a party to produce documents selectively where that would prejudice the other party. Equally, it may refuse to allow evidence which does not comply with the court’s rules for ensuring that evidence is presented in a fair manner, such as the rules relating to witness statements contained in CPR 32. That too is a form of prejudice which may not be capable of being remedied. Where that is the position, it may not be enough to say that the opposing party can make submissions as to the weight of the evidence. Fairness may require that the evidence is not adduced at all.

33. Further, the court is not bound by procedural rulings made by the arbitrators, for example as to the scope of disclosure to be provided by the parties. The court must reach its own conclusions about these matters. That is clear from what Colman J said in Kalmneft cited above and from Aikens J’s judgment in The Ythan at para 64. Nevertheless, depending on the circumstances of the particular case, a party’s failure to comply with an order made by the arbitrators may be a highly relevant consideration.”

64.I approach the new evidence with these general principles in mind. I bear in mind the fact that if a party is permitted to use an award as an advice on evidence (as argued by Counsel in The “Kalisti” in opposition) and to “plug the gaps in its case as identified by the arbitrators”, it might cause unfairness to the other side. Nevertheless, as emphasized in the authorities, the Court must decide the question of jurisdiction on its own, and it does so on the admissible evidence before it. If it considers that the new evidence sought to be introduced had been available to the applicant at the time of the arbitration but was withheld from the tribunal on the applicant’s own volition and for no good reason, the court may take the view that the source of the evidence is dubious, or that the evidence is not reliable, and attach little or no weight thereto.

The New Evidence and their relevance

65.The fresh and further evidence which the Plaintiff has produced to the Court (“New Evidence”) is summarized below. They were particularized and explained in SM’s two affirmations filed on 10 August 2022 and 7 February 2023.

66.First, there is the “Guangdong Judgment”, a decision of the Guangdong Higher People’s Court dated 10 January 2022. By the Guangdong Judgment, the appeal of C’s father and of W against the judgment of the Foshan Intermediate People’s Court of 17 November 2021 (“Foshan Judgment”) was dismissed.

67.Second, there is an affirmation by Mr XXXXX (“T”), a lawyer representing ZT in the criminal proceedings against ZT on the Mainland (“ZT Criminal Case”), which concern the offence of manipulation of securities market, based substantially on the same set of facts underlying the Foshan Judgment and the Guangdong Judgment. T deposed to the fact that he was the defence lawyer of ZT in the ZT Criminal Case, and that he had reviewed the files and documentary evidence in the ZT Criminal Case, but that the case files could not, at the material time of his affirmation, be disclosed to anyone apart from verifying the relevant evidence with the parties in the ZT Criminal Case.

68.Third, there is the affirmation of Mr XXXXXXX (“S”), an executive of ZT who was and is authorized by ZT to verify evidence on ZT’s behalf in the ZT Criminal Case. S deposed to the fact that T had verified the contents of the files and evidence of the ZT Criminal Case with him, and that in the process of verification, S had learned of the contents of the evidence, and that he took notes of such contents. S deposed further to the contents of the transcripts of testimonies of several witnesses in the ZT Criminal Case, including the transcript of what W had disclosed to the Security Bureau when interviewed. S also referred to the ledgers which had been provided by employees in ZT’s finance department, and the entry therein of the receipt of RMB 300 million on 26 February 2018, and the payment for 470 million worth of shares.

69.Fourth, there is a transaction statement of Shanghai Pudong Development Bank for account number 6217921156767793 in the name of Madam Z, for the period from 14 June 2017 to 13 June 2022 (“Z Bank Records”).

70.Fifth, there are documents for a trust scheme, XXXXXXXXX (“RT 1”) established by XXXXX Trust Co for the benefit of Mr XXXXXXXX (“F”), comprising issue documents, a trust contract and statements for the period from 27 February 2018 to 30 April 2018 (“F Trust Documents”).

71.In his 2^nd affirmation, SM also produced the evidence which had become public and were made available to him upon conclusion of the trial of the ZT Criminal Case, but not before the Arbitration. These include:

(a) two indictment opinions issued by the Security Bureau for the ZT Criminal Case, showing that members of ZT’s staff were charged with the crime of securities market manipulation in respect of a number of listed company shares, and that C’s father, her mother (X) and W were investigated for their role as decision makers in the conduct of securities market manipulation;

(b) the transcripts of the Security Bureau’s interrogation of C’s father, X, W and other employees of ZT, and of the evidence they gave;

(c) the ledgers of ZT;

(d) a report dated 9 November 2020, produced by the Shenzhen Lianzhou Audit Firm on the instructions of the Commercial Crime Bureau of the Security Bureau, in respect of its audit of the purchase and sale of Listco shares through 55 securities accounts, during the period from 1 November 2015 to 22 October 2018 (“Audit Report”).

Foshan and Guangdong Judgments

72.C has highlighted the fact that the Guangdong Judgment and excepts of the Foshan Judgment had been produced to the Tribunal, and had been considered by the Tribunal, such that they have no impact on the Award.

73.According to the Plaintiff, only excepts of the Foshan Judgment had been available at the time of the Arbitration and that it had not been able to obtain the full document. The Guangdong Judgment was simply the judgment dismissing the appeal against the Foshan Judgment.

74.The Tribunal found in the Award that the Brothers had given no credible alternative explanation that the 300 million Remittance from PJ to Madam Z, was other than for the purpose of reimbursement as C claimed, and it regarded the Plaintiff’s case that the 300 million Remittance was for the purpose of acquiring Listco shares under the Scheme to be “totally unconvincing” (paragraph 267(8)(i) of the Award).

75.The Plaintiff has emphasized that the Foshan Judgment and the Guangdong Judgment (which reinstated the findings of the Foshan Intermediate People’s Court) made it clear that from 1 November 2015 to 22 October 2018, C’s father and SM as the controller of ZT had collaborated and taken part in trading activities which were aimed at manipulating the trading volume and the stock price of Listco, namely the Scheme referred to by SM in the Arbitration. The Guangdong Judgment referred to ZT having advanced funds for the trading of Listco shares under the Scheme, and the Plaintiff claims that the Prior Remittance which enabled the 300 million Remittance was precisely one of such advancement of loans. C’s father, X, and W were all convicted and sentenced for their role in the market manipulation activities. The Plaintiff also highlighted the fact that despite X being a party in the criminal proceedings and giving evidence for C in the Arbitration, C had refused to produce the Foshan Judgment and the Guangdong Judgment to the Tribunal upon the Plaintiff’s request.

76.The findings made in the Foshan Judgment were that Mr C and W had used various nominee accounts controlled by ZT and SM to purchase Listco shares through 37 trust schemes, pursuant to the Scheme, and that the funds for the Scheme were primarily provided by Listco under the control of Mr C. The trust schemes established in furtherance of the Scheme included RT 1, and part of the funds for establishing RT 1 originated from the Prior Remittance, which then enabled the 300 million Remittance. The funds put into the 37 trust schemes were mostly sourced from Listco and channeled through PJ to ZT, to enable ZT to conduct the Scheme which was referred to by W and Mr C as “stock value management” of Listco.

Transcripts of witnesses’ evidence to the Security Bureau

77.The transcripts of the evidence given to the Security Bureau are enlightening as to the roles in the Scheme of not only C’s father, but W, PJ and X as well. The evidence includes transcripts of Mr C’s testimony to the Security Bureau, and his admission that he had collaborated with SM and ZT to conduct the stock value management under the Scheme since 2015, that Listco had transferred a total of RMB 12 billion into ZT in furtherance of the Scheme, that all profits and losses from transactions for the “stock value management” (i.e. the Scheme) were borne by Listco, and that X was involved in the Scheme by providing guarantees. Mr C’s evidence to the Security Bureau was that he had known ZT and SM to be in the business of financing (“融資”) and that he had engaged ZT and SM to operate the Scheme, but that there was no written agreement between them. It is also Mr C’s evidence to the Security Bureau that all the funds transferred to PJ had originated from Listco and were all used for the Scheme.

78.The New Evidence shows that PJ was a key participant in the Scheme. This was reflected in the findings made by the Mainland Court in the Foshan Judgment. The funds of RMB 13 billion used for the Scheme were transferred to ZT through PJ.

79.According to the transcript of the evidence given by C’s father to the Security Bureau, PJ had not operated any substantive business, was controlled by Listco, and all funds transferred to PJ were Listco’s funds which were applied for the purposes of the Scheme. The Plaintiff contrasted this with the evidence of C in the Arbitration, that PJ was a legitimate commercial entity operating a business of pawnbroking – which now appears to be misleading, if not untrue.

80.XXXXX, the general manager and minority shareholder of PJ, stated in his evidence to the Security Bureau that PJ was in some business of lending and security. According to XX, Mr C was the “boss” of PJ and he made the decision that PJ’s bank accounts would be “lent” to W and XXX of Listco for their use.

81.X’s evidence to the Security Bureau was also that there was a “stock value management” scheme for Listco, and that the funds used for the Scheme were either Listco’s own funds, or loans from banks or bonds, or loans from the controlling shareholders and related companies, but that all such funds were channeled through PJ. She was aware that ZT was in the business of lending (“資金拆借”), and that ZT had collaborated in the Scheme, though she claimed that she was not aware of the details. However, employees of Listco and PJ had given evidence to the Security Bureau that transfers to PJ of funds belonging to Listco, all in furtherance of the Scheme, were made under the orders and only with the authorization of Mr C and X.

82.The New Evidence includes transcripts of W’s evidence to the Security Bureau. According to W, X was the Executive Vice General Manager responsible for Listco’s financial matters. The transcripts show that on W’s evidence, approximately RMB 5 billion had been transferred from Listco and its associated company to the 16 personal securities accounts of SM and others, for the purchase of Listco shares. This was between November 2015 and October 2016. W confirmed that the money transferred to SM was sourced from Listco, which transferred the funds to PJ and another company, which then transferred the money to the accounts of SM and others. It is clear from W’s evidence and his admissions that ZT had been engaged and used by Mr C to run the Scheme and for making transfers of large amounts for the so-called market value management of Listco and Listco shares.

83.Throughout W’s evidence to the Security Bureau, he had made it clear that the funds for the purchases of shares under the Scheme were sourced from Listco through its borrowings from banks, or from financing raised by ZT from trusts and private funds.

84.Further, W’s evidence to the Security Bureau contradicts the evidence of X in the Arbitration, that there was no loan due from ZT to her. According to W, X controlled two companies (XXXXXXXXXXXXXX，XXXXXXXXXXXXX), at least one of which had borrowed RMB 1 billion from ZT in the form of a bridging loan, and there were many monetary transactions between ZT and the two X companies. According to the transcript of W’s evidence, the two X companies had throughout maintained a borrowing and lending relationship with ZT.

85.W also stated in his evidence to the Security Bureau that there were numerous cash transactions between ZT and the companies controlled by Mr C, and that the transfers were made through PJ, but of the total sum of RMB 12,000,000,000 which had been transferred to ZT, W was not aware how much had been used to purchase shares under the Scheme, although SM had reported to Mr C as to the quantities of Listco shares held.

86.It is pertinent that when W was asked by the Security Bureau why the purchase of shares under the Scheme had to be made by ZT and through the other nominee accounts, W had explained that this was to avoid disclosures to be made by the directors and associated companies of the listed company Listco, to avoid regulatory control and detection, as well as to avoid other accounting and reporting requirements. W acknowledged in the evidence that the purchase of shares under the Scheme was in breach of the regulations. It was also W’s evidence that PJ’s accounts were used for the transfers of funds, because PJ was in the licensed business of pawning and lending, such that it had the necessary corporate accounts to transfer funds to individual or private accounts for the purposes of the Scheme.

87.As for the question of whether any amounts were due to ZT, W’s evidence was that accounts between ZT and Listco/C’s side had never been taken before the criminal investigations. However, he also stated in his evidence to the Security Bureau that Listco had sustained losses in the trading in shares under the Scheme, that it was unable to pay for the margin, and that when the relevant security accounts used for the purchase of shares had been liquidated for repayment of the money due, SM had refused to transfer any money to PJ/Listco’s side.

Ledgers, statements of account and sums due

88.Ledgers of ZT have been referred to in the evidence of S, and were produced by SM in his 2^nd affirmation, upon conclusion of the ZT Criminal Case. These ledgers had been produced by ZT employees to the investigating authorities on the Mainland. These contemporaneous ledgers which had been kept by ZT record the movement of funds between Listco and ZT for the Scheme, and include an entry of RMB 300 million received by ZT on 26 February 2018, against which there is an entry of the “counterparty”, stating that 2 sums of 150 million had been received from PJ to “pay for 470 million worth of shares”. This, according to the Plaintiff, is direct evidence as to the purpose of the 300 million Remittance itself.

89.Other financial records of ZT included in the New Evidence comprise a statement of account for the period 2014 to 2018 (“Statement of Account”). This had in fact been referred to by a witness in the Arbitration, one Mr XXX who was the lawyer called as a factual witness of C (“C’s Lawyer”). His evidence to the Tribunal was that he had seen a Statement of Account prepared by XXX, a former finance department employee of ZT, and submitted to the Mainland authorities, which confirmed that an amount of RMB 4 billion was owed by ZT to “the Listco side”. It was on the basis of such and other evidence that the Tribunal found that there was in fact no evidence of any borrowing between X and the Brothers or ZT, and no debt due from X to the Brothers, as the latter alleged in the context of SM’s claim of the Settlement-in-Kind.

90.The full Statement of Account produced by SM presented a different picture. The first page of the statement set out total amounts which flowed into ZT from Listco, of RMB 19,735,167,297.89, and the total amounts which flowed out from ZT of RMB 15,697,403,261.83. An amount of RMB 7,941,883,522.26 was stated to have been utilized, an amount of RMB 3,904,119,486.20 was stated to have been repaid, giving a “balance” of RMB 4,037,764,036.06 - the evidence of the RMB 4 billion stated by C’s Lawyer to be due from ZT/the Brothers to Listco/X.

91.However, the second page of the Statement of Account set out more detailed particulars of the shares which had been purchased by ZT on behalf of Listco under the Scheme, the amounts paid for the purchases, and a calculation of the overall credit position between Listco and ZT for the period from 2014 to 2018. According to this table and breakdown of figures on the second page, there was a total loss attributable to Listco of RMB 6,723,842,852.41; cash dividends received and payable to Listco of RMB 546,235,284.88; interest payable to ZT of RMB 6,515,359,984.39 (in exchange for ZT advancing or arranging for funds to be made available for purchasing the shares); and, after giving credit for an amount of RMB 1,548,130,505.50 in respect of security or funds received from Listco, there was a net amount of RMB 11,144,837,046.42 receivable by ZT, and due from Listco, in relation to the trading in the shares purchased for Listco/C family under the Scheme.

92.The transcript of the evidence of XXX, an employee of ZT, given to the Security Bureau also confirmed that Listco was indebted to ZT in relation to Listoc shares purchased by ZT, and that Listco had not made payment to ZT in relation to the shares.

93.According to SM, these documents had been seized by the Security Bureau during their investigations, and the Plaintiff only recovered access to the documents on ZT’s financial position, as a result of the papers being made available upon completion of the ZT Criminal Case, which was after the hearing in the Arbitration.

PJ bank statements

94.The complete bank statements of PJ show a number of remittances made from PJ to nominees of ZT of about RMB 1 billion, apart from the 300 million Remittance. The Plaintiff claims that this supports its case that PJ was involved in the scheme.

Review of the evidence

95.The above summarizes the state of the evidence before this Court, in addition to the evidence presented to the Tribunal and as recorded in the Award. This Court does not have the advantage of hearing the viva voce evidence of any of the witnesses, for the full assessment of their credibility. I accept that, as reflected in the Award, the Tribunal was not impressed by SM’s evidence, and had remarked on the Plaintiff’s version of events as advanced by SM as inconsistent and self-contradictory (paragraph 282 of the Award), at odds with a wealth of contemporaneous documentary and other evidence to the contrary, and “manifestly false” (paragraph 66 of the costs award, as Counsel for C had highlighted). In particular, the Tribunal rejected SM’s claim of the existence of a Settlement-in-Kind, dismissing same as “fiction” which had never taken place (paragraph 279 of the Award). However, this was on the basis that in the opinion of the Tribunal, there was no evidence of the alleged extensive borrowing by X and the C family from the Brothers and/or ZT. At paragraph 259(6) of the Award, the Tribunal found that there was “credible evidence” that the Brothers owed money to the C family and/or Listco, and not the other way round. This was by reference to the evidence of C’s Lawyer on the incomplete Statement of Account, and X’s unsubstantiated claims of Listco’s loans to SM.

96.Further, the Tribunal had accepted X’s testimony at the hearing, that the Prior Remittance of two sums of RMB 150 million to PJ from ZT’s associated companies were made in repayment of a loan which had been advanced by Listco to the Brothers (paragraph 201 of the Award). In fact, according to the Tribunal’s finding, the Brothers had only played a role of providing a currency exchange service to C (paragraph 279(2) of the Award), and in respect of which there had been back-to-back advance RMB funding from the C family to the Brothers, and never any corresponding loans to be waived.

97.A further and main reason for the Tribunal’s rejection of the Plaintiff’s and SM’s case was that there was no contemporaneous documents or any evidence at all, from the Plaintiff of any specific ultimate investment purpose or destination for the RMB payments transferred to Madam Z from the PJ account at C’s request, and whether for the support of the Listco shares under the Scheme, or otherwise (paragraph 268(8)iii of the Award). It was in this context that the Tribunal made the observation that in the absence of such evidence from the Plaintiff, the two payments to Madam Z on 26 February 2018 “could, in the Tribunal’s view, just as easily have been directed to the 2018 Investment as anywhere else”.

98.In contrast, the Tribunal accepted that there were contemporaneous WeChat messages between C and W, which reflected that the 300 million Remittance was intended for the 2018 Investment.

99.With the availability of the New Evidence, Counsel for the Plaintiff submitted that it is now clear and beyond question that the ultimate investment purpose or destination for the 300 million Remittance was in fact the Scheme, and the purchase of shares for the purposes of the Scheme, as it went from Madam Z to F and the RT1 trust, for the purchase of Listco shares. Bearing in mind the modus operandi and the established pattern as apparent from the evidence, of the numerous transfers of funds between Listco/PJ and ZT, which were all used to acquire Listco shares for the so-called stock value management, the 300 million Remittance was, contrary to what the Tribunal concluded on the evidence adduced before it, more probably and likely to have been directed to the Scheme, rather than for the 2018 Investment, which C is required to establish.

100.I find no reason to reject the transcripts of the evidence given by the witnesses to the Security Bureau as being incomplete, or unreliable. C has not adduced any evidence to suggest that any of the evidence in the Mainland proceedings and investigations is untrue, or should not be believed.

101.With due respect to the Tribunal, I do not find it inexplicable or odd at all that there was no documentary evidence or contemporaneous exchange of written communications between the relevant parties as to the purpose of the funds transferred, or the intended destination of the funds, when all the parties concerned were well aware that the Scheme, being the purpose and destination of the funds, was unlawful. As W admitted in his evidence to the Security Bureau, the transfers through the different accounts and the indirect purchase of shares in the name of ZT and its associates and nominees, with funds from Listco or advanced by ZT, was all for the intended purpose of evading detection by the authorities, and to avoid regulatory and accounting controls and requirements. It beggars belief that anyone from the Plaintiff, Listco, or PJ would record in writing, by WeChat as suggested on C’s behalf, either that the monies transferred or to be transferred were for the purpose of buying shares of Listco on Listco’s behalf, in order to manipulate the price of its shares, or otherwise to record the role to be played by ZT/the Brothers. On the contrary, they were (until the criminal proceedings on the Mainland) all distancing themselves from the Scheme and the operations thereunder.

102.In my view, it is clear from the transcript of the evidence given by Mr C, W, and X to the Mainland authorities that they all had, in conjunction with the Brothers, been knowingly participating in unlawful and dishonest acts as part of and in furtherance of the Scheme.

103.The transcript of the evidence, the ledger entries and the Statement of Account also show that X was not telling the truth when she testified before the Arbitration that there was no debt due from her to the Brothers/ZT. Counsel for the Plaintiff highlighted the fact that X only claimed, for the first time in her testimony to the Tribunal, that the Prior Remittance was the Brothers’ repayment of a loan made by Listco, as this was never mentioned in her witness statement served in the Arbitration.

104.The witnesses’ evidence to the Security Bureau and in the ZT Criminal Case show that X and Listco/C family had accepted ZT/the Brothers as moneylenders. The evidence of C and X to the Tribunal, that the relationship between ZT/SM and X/the C family was purely that of ZT providing foreign exchange services, with back-to-back advances of RMB made by X/C/C family, was clearly untrue. In this respect, the Tribunal had made it clear that it had treated the individuals involved as one and the same as the companies they controlled. With this approach, there should be no distinction between debts due to ZT from X personally, and from the companies she owned and controlled. The Tribunal had placed erroneous reliance on its conclusion reached that ZT and the Brothers had only played a role of providing a currency exchange service to C, and had viewed the evidence of the 300 million Remittance in that erroneous light - namely that there must or most probably have been a back-to-back payment from C to ZT/SM as part of the money exchange.

105.The Tribunal appeared to have relied on a judgment of the Mainland Court involving ZT and Brothers (“ZT Judgment”), and the evidence of C’s Lawyer thereon, to support its conclusion that ZT was carrying on a money exchange business. Although the Plaintiff had argued in the Arbitration that the charges made against ZT in those proceedings were the illegal settlement of funds, and cannot show that ZT was in the business of money exchange, the Tribunal explained (at paragraph 261(4) of the Award) that settling obligations on a customer’s behalf outside the Mainland in a different currency from that received from the customer falls within the ambit of the crime “illegal settlement of funds” as charged in the proceedings, whether or not such currency exchange was associated with a loan, and that the crime for which ZT was charged in the ZT Judgment does not extend exclusively to foreign exchange transactions occurring as part of the lending arrangements.

106.Counsel for the Plaintiff pointed out that the Mainland Court had made no findings or conclusions in the ZT Judgment that the business carried on by ZT was that of foreign currency or money exchange. It had referred to “illegal private banks” (地下錢莊), but that cannot by itself mean that ZT had carried on a foreign exchange currency business, and that as the evidence in the ZT Criminal Case has revealed, the indictment in the proceedings (which was not available to the Plaintiff at the time of the evidentiary hearing in the Arbitration) was for the offence of “corporate to personal” practices, rather than any foreign currency exchange business. That can relate to a money lending business, as well as foreign currency exchange business. Suffices it to say that in my judgment, the evidence does not support any case that there was no lending by ZT to X/the C family/Listco.

107.C’s witnesses, including X and C’s Lawyer, had given evidence to the Tribunal that ZT was not owed any money by either Listco, or X. Such evidence in the Arbitration has been shown by the New Evidence to be untrue, and misleading. There was clearly an unsettled running account between Listco and ZT/Brothers, and as at 2018, there was an indebtedness and amount payable by Listco to ZT (as shown in ZT ledgers, the transcripts of the witnesses’ evidence, and the Statement of Account from the files on the ZT Criminal Case). In the Award, the Tribunal had emphasized (at paragraph 259) the fact that there had been no particulars provided by the Plaintiff as to loan amounts comprising RMB 2 billion claimed to have been owed by X, that the amount owed by mid-2019 was as startling as RMB 4 to 5 billion, and that no plausible explanation had been given as to why PJ was able to pay RMB 300 million to Madam Z at a time when SM had allegedly refused to make a further loan to X. (The New Evidence in fact shows that the Prior Remittance had been made to PJ from the Brothers to enable the 300 million Remittance for the Scheme.) In this respect, the conclusions reached by the Tribunal, that there was no evidence of any alleged extensive onshore borrowing from the Brothers and/or ZT by X and/or the C family (paragraph 279(1) of the Award), that there was lending in the opposite direction (based on C’s Lawyer’s incomplete and misleading evidence on the Statement of Account), and that the evidence was incompatible with any chronic indebtedness on the part of X and/or the C family, have been shown by the New Evidence to be far from the truth.

108.Hence, just as the Tribunal had dismissed SM as an incredible witness and rejected his case for the lack of contemporaneous documents, the evidence of X and C’s Lawyer as to the material issues of the indebtedness of X/Listco to the Plaintiff, the characterization of the 300 million Remittance and the Prior Remittance, and of the relationship between ZT and Listco/C family, have also been shown by the New Evidence to be unreliable, and contradicted by the written documents now available. If the bare assertions of the witnesses are to be rejected and written and contemporaneous documents are to be preferred, which was the approach taken by the Tribunal, then the weight of the written documents now available go more towards supporting the case of the Plaintiff.

109.The Tribunal itself pointed out at paragraph 241 of the Award that the burden of proof is on C (applying to be joined in the Arbitration as principal to the 2^nd Amended LPA) to prove her case and to establish her alleged beneficial ownership of the 2018 Investment, of which the Plaintiff is the undisputed legal owner. I agree with this, the basic principle being that the onus of proof is upon the person seeking to show that beneficial ownership is different from the legal ownership of property, and that in a case of sole ownership of property, it is for the non-owner to show that he has any interest in the property at all. In this case, the Plaintiff is named as the party to the 2^nd Amended LPA entitled to sole ownership of the 2018 Investment. The burden is accordingly on C to prove that, contrary to what is stated in the 2^nd Amended LPA, she should be the beneficial owner of the 2018 Investment.

110.On behalf of the Plaintiff, Mr Pow further argued that where a contract is signed by a party in its own name, such party is prima facie deemed to have contracted personally, and not as agent (Bowstead & Reynolds on Agency paras 9.036-9.038; Stellar Shipping v Hudson Shipping Lines [2010] EWHC 2985 (Comm). Extrinsic evidence is accordingly not admissible to show that, notwithstanding the terms of the contract, it was the intention of the parties that the party signing should not be personally liable under the contract, as such evidence would be contradicting the terms of the written agreement.

111.In this case, as the Tribunal pointed out, there is no written agreement between C and the Plaintiff as to the Plaintiff’s role as agent, and the question of whether C can be treated as the Plaintiff’s principal has to be decided by the surrounding circumstances. In my judgment, such circumstantial evidence has to be sufficiently cogent to support the finding that there was indeed an agency between C and the Plaintiff.

112.I agree with Counsel, that compelling evidence is required to displace the assumption that the party to the 2^nd Amended LPA was the Plaintiff. Mr Pow relies on Filatona Trading v Navigator Equities [2020] EWCA Civ 109, and the strict principles referred to therein as to the standard of proof required, Simon LJ describing it as a “heavy burden” sitting upon a party who seeks to argue that a principal who is both known and identified should be excluded as a party to the contract. Males LJ also observed that “there is a heavy burden of persuasion on a party who seeks to argue that a known and identified principal is to be excluded from a contract, and that any such intention must appear clearly and unequivocally from the terms of the parties’ contract”.

113.At paragraph 267 of the Award, the Tribunal stated:

“It is a sine qua non of (C’s) case that she can demonstrate the transfer of an RMB amount sufficient either to fund or to reimburse the XXXX Brothers for the payment by (the Plaintiff) into the 2^nd Defendant of US$36.75 million on 23 February 2018, which enabled the 2018 Investment to proceed.”

114.Although the Tribunal referred to the sine qua non, and accepted that there should be “clear and convincing” evidence that C was intended to be the beneficial owner of the 2018 Investment, Mr Pow argued that the Tribunal failed to apply the correct burden of proof when it came to its conclusion, that C was in fact the beneficial owner of the 2018 Investment and had made the reimbursement of the payment advanced by ZT, by the two sums of RMB 150 million transferred from PJ to Madam Z on 23 February 2018.

115.The Tribunal relied on the fact that as opposed to the absence of evidence from the Plaintiff of any specific ultimate investment purpose or destination for the RMB payments transferred to Madam Z, there were contemporaneous WeChat messages between C and W evidencing “the back-to-back funding arranged and implemented” between C and W for the payment by the Plaintiff for the 2018 Investment. The relevant messages are set out at paragraph 267 of the Award, including C’s message to W on 2 November 2017 when she inquired on “the cost of exchanging US$ and HK$ with SM”, and W’s reply of an exchange market rate of 1:6.5984 for US$10,000 in Hong Kong, and some service charge of RMB 1,000”. The WeChat messages considered by the Tribunal also include those summarized at paragraph 278 of the Award:

“(1) Ms. C to Mr. W on 24 January 2018: ‘The US$ will be transferred directly from their account to the designated party, then you pay them’.

(2) Ms. C to Ms. XX on 1 February 2018: ‘I will check to see if time allows because I didn’t know it was required, fund was prepared in advance based on payment by 26 February; I will check tomorrow and let you know’.

(3) Ms. C to Ms. XX on 3 February 2018: ‘...really hard to pay part of fund before the holiday because some funds have been secured for other projects since we are approaching the year end; we always arrange funds based on timelines; so it’s not easy to appropriate money now.’

(4) Ms. C to Ms. XX on 23^rd February: ‘I will check again whether the money can be fully prepared before 23^rd because we have been preparing based on 28^th.’

(5) When Ms. XX replied that this would be ‘too late’, Ms. C replied ‘OK, I’ll try to manage’.

(6) Ms. C to Mr. W ‘Uncle XXXXXX, this is updated request for funds. Please check with uncle [i.e., SM] to see if there is any problem and let me know, thanks.’”

116.As referred to in the preceding paragraphs of this Decision, it is clear from the New Evidence that there had been numerous transfers between ZT/Brothers and PJ/Listco, of substantial amounts for each transaction, and it is the admission of W and Mr C (amongst others) that these were transfers for the purposes of the Scheme. Against this pattern of transfers and payments, it is in my judgment more probable than not that the 300 million Remittance was part of the regular transfers of funds made for the Scheme, rather than for any other specific purpose such as for the private investment of C. It has to be borne in mind that in discharging the heavy burden of proof in this case, what C has to establish is that there was a payment made by way of reimbursement of the undisputed prior payment made by the Plaintiff for the 2018 Investment in US$, and C had identified the 300 million Remittance as the reimbursement alleged. It is therefore for her to prove the purpose of this particular transfer as she alleged, and not simply to identify the existence of any transfer of a corresponding or approximate amount as required. Even if I should accept that there was a transfer of RMB 300 million by PJ, that does not mean that such a transfer was indeed for the alleged reimbursement, when the figures do not even tally with the US$35 million required to pay for the 2018 Investment, as it could have been for the purpose of acquiring the Listco shares for the Scheme, in accordance and consistent with the purpose of other significant transfers made to ZT/its nominees.

117.The Prior Remittance of RMB 300 million to PJ from the Brothers’ companies, made just before the 300 million Remittance from PJ to Madam Z, in fact supports the pattern of transfers under the Scheme, as to funds being transferred from the ZT side to PJ, and then further transferred to nominees of ZT for ultimate purchase of Listco shares under the Scheme. However, the Tribunal dismissed this evidence as irrelevant, and simply accepted X’s testimony that the Prior Remittance from ZT/Brothers to PJ was a repayment of a loan due from them to her, despite the fact that there were no other contemporaneous or written documents to evidence her assertion (as the Tribunal had looked for in determining other contested matters).

118.I cannot agree with the Tribunal that the WeChat messages are sufficient to prove the actual payment made for the purpose C alleged, or that the 300 million Remittance was the reimbursement intended and instructed. At most, the messages show that C had instructed W to make arrangements for paying the RMB funds to SM, or that she or W had intended to make arrangements for the requisite reimbursement. With respect, I disagree that the messages evidence the actual implementation of the instructions and the payment of the funds as instructed for the purpose C instructed. C herself did not have personal knowledge of the actual payment to SM, or how it was paid. W may well have resorted to other means of making payment, and again, it must be emphasized that it is for C to prove that the transfer and the 300 million Remittance she identified was in fact the payment made for the reimbursement, as she had instructed in the WeChat messages. On the evidence available, I cannot find that this has been established by clear and cogent evidence. The mere assertion, after the event, by W in his WeChat message to C, that X’s funds had been used, that the C family’s company had paid SM for the 2018 Investment, and that the settlement funds had been arranged from C’s side remains a bare assertion, unsupported by clear evidence. W (convicted in the Mainland proceedings in respect of his role in the Scheme) had not given testimony in the Arbitration, nor in these proceedings, and the reliability and credibility of his evidence is open to question.

119.Moreover, as Counsel for the Plaintiff pointed out, C has relied exclusively on W’s recollection, three years after the transfer in 2018, in identifying the two payments of RMB 150 million made by PJ to Madam Z as the reimbursement in question. On C’s evidence, she had produced to W (in custody) a spreadsheet of PJ, showing the payments which had been made around the date of the 300 million Remittance, and W had identified the transfers in May 2021. I agree that it is simply not credible that W would be able, years after the transfers in question, to recall and identify, out of the countless transactions and transfers made by PJ, the two particular transfers of RMB 150 million made to Madam Z as the reimbursement in question of the 2018 Investment which was the subject of the WeChat messages. This is particularly so when the transfers were made to Madam Z (a nominee of ZT), and both PJ and Madam Z were key players involved in the Scheme, such that the transfers from PJ to Madam Z were more likely to be connected with the Scheme.

120.It is pertinent that the bank statements of PJ which were produced by C to the Tribunal were heavily redacted, showing only the two transactions which constitute the 300 million Remittance, but not the other transactions or remittances emanating from PJ. The complete bank statements of PJ now produced in evidence actually show that there was a total remittance of RMB 960 million from PJ to various nominees of ZT, by eight separate transactions in the month of February alone (two of which made up the 300 million Remittance). There is no clear evidence which can support a finding that the 300 million Remittance was different in purpose to the other remittances made for the Scheme.

121.Against this background, it is also noteworthy that the remittance of RMB 300 million, equivalent to approximately US$47.31 million, did not tally with the payment of US$35 million made by the Plaintiff and required for the 2018 Investment. The Tribunal dealt with this at paragraph 267(6) of the Award, accepting C’s evidence that the difference of US$12.31 million could be explained on the basis of payment of 5 years’ management fees, at an annual rate of 1% of the investment amount, although only the first year’s fee of US$350,000 was required to be paid on 23 February 2018. Another US$10 million was said to be for the funding of a different investment, and the remaining RMB amount, equivalent to US$560,000, was said to represent service charges to the Brothers for the “foreign exchange transactions”. In the Arbitration, SM disputed the amount of the service charge.

122.In the overall context, of the unclear state of the evidence as to whether the 300 million Remittance was, or was not, the reimbursement alleged by C, the discrepancy in the equivalent amounts of the US dollars is a matter to be taken into account.

123.On behalf of C, Counsel contended that the Tribunal had based its Award on other matters such as its findings against SM on his claim of the Settlement-in-Kind as being incredible. It may be that SM was not forthright in all aspects of his evidence, particularly with regard to aspects of the Scheme which are unlawful, and I agree that it would be unreliable to accept the evidence of the Plaintiff and SM in its entirety and without reservations. Nevertheless, given that the burden is on C to prove her case, the New Evidence has shown that there are considerable and important areas of the evidence adduced to and relied upon by the Tribunal which are piecemeal, or are untrue and at best misleading, for C’s evidence to be accepted without question, and for her case to be accepted on a balance of probabilities.

124.As for matters such as the evidence from the 1^st and 2^nd Defendants, that C had dealt with them as a principal, who appeared to have beneficial interests in the 2018 Investment, I find this to be of little significance. The 1^st and 2^nd Defendants, dealing with the Plaintiff as an entity, with no knowledge as to the relationship between the Plaintiff and C, would of course deal with C and treat her as the principal and beneficial owner of the investment. It is credible, and likely, that C herself had no detailed knowledge of the dealings and monetary transactions between the Plaintiff/Brothers and her mother, and may have assumed and acted on the basis that reimbursement had been made by X for the payment made by the Brothers.

125.On the entirety and the state of the evidence before me, I regret to conclude that I cannot be satisfied that C had made reimbursement of the payment made by the Plaintiff for the 2018 Investment. Bearing in mind the Preliminary Question and the Stipulation framed by the parties and considered by the Tribunal, C has not discharged her burden of proving herself to be the beneficial owner of the 2018 Investment and the true principal and party to the 2^nd Amended LPA. As she is not the party to the arbitration agreement contained in the 2^nd Amended LPA, the Tribunal had no jurisdiction over her claims purportedly made in the Arbitration, and the Award must be set aside as between the Plaintiff and C.

126.Despite the claims made by the 1^st and 2^nd Defendants, that the Tribunal had made findings on the merits which they claim are binding on the Plaintiff and on them, these are for argument and determination in the Arbitration between the Plaintiff and the 1^st and 2^nd Defendants. My finding in relation to the Award is that it was a ruling on the preliminary question of its jurisdiction under section 34 of the Ordinance, and upon setting aside the Award, the merits of the claims made by the Plaintiff against the 1^st and 2^nd Defendants will have to be resolved by the Tribunal in the Arbitration.

Disposition

127.The Summons for striking out the amended OS is dismissed.

128.I grant the relief sought in paragraphs 1 and 2 of the amended OS, to the extent of setting aside the Award on jurisdiction, together with the Partial Final Award on Costs dated 20 September 2022. A declaration is made that the Tribunal has no jurisdiction over C, and that the Plaintiff is the principal and party to the 2^nd Amended LPA.

129.The costs of the amended OS and of the Summons are to be paid by the Defendants, with certificate for Counsel, on indemnity basis. The 1^st and 2^nd Defendants appeared at the hearing and made submissions to contest the setting aside of the Award under section 34, on the basis that the Award was not one on jurisdiction, but on the merits. They failed on this substantial issue, and in my judgment it is appropriate that they should bear the costs of the unsuccessful opposition.

Mr Jason Pow SC and Mr John Hui, instructed by Michael Li & Co, for the plaintiff

Mr Val Chow, instructed by Morrison & Foerster, for the 1^st & 2^nd defendants

Mr Douglas Lam SC and Miss Jasmine Cheung, instructed by Ince & Co, for the 3^rd defendant