P1 and Another v. D

HCCT 59/2023

[2025] HKCFI 2446

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 59 OF 2023

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J U D G M E N T

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1.Introduction

1.1This is my judgment on an application made by the 1^st and 2^nd Plaintiffs (respectively “P1” and “P2” and collectively “Ps”) by their Amended Originating Summons (“AOS”) to set aside the Partial Final Award dated 6 April 2023 (“PFA”) as amended by the Addendum to the PFA dated 12 June 2023 in HKIAC/A21015 (“Arbitral Proceedings”) rendered by a panel comprising Ms Chiann Bao (as Presiding Arbitrator), Mr Jern-Fei Ng KC and Mr Ali Malek KC (“Tribunal”) on the following grounds:

(1)  The PFA deals 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, contrary to Article 34(2)(a)(iii) of the UNCITRAL Model law, as given effect to by section 81 of the Arbitration Ordinance Cap 609 (“AO”);

(2)  The arbitral procedure was not in accordance with the agreement of the parties, contrary to Article 34(2)(a)(iv) of the UNCITRAL Model Law; and/or

(3)  The PFA is in conflict with the public policy of Hong Kong, contrary to Article 34(2)(b)(ii) of the UNCITRAL Model Law.

1.2By the Tribunal’s order made on 28 November 2021, the Arbitral Proceedings were bifurcated. As set out at PFA §81, the order for bifurcation was to the effect that issues of liability would be heard during one week fixed in September 2022 (“Phase 1”) and issues of remedies at a later stage (“Phase 2”). The PFA is the Tribunal’s award in respect of the Phase 1 issues. On 31 July 2023, the Tribunal dismissed Ps’ application to stay the Arbitral Proceedings pending the resolution of the present challenge. As matters presently stand, the evidentiary hearing of Phase 2 is scheduled to commence in September 2025.

1.3At the hearing, I was ably assisted by Mr Charles Manzoni SC (leading Mr Simon Chapman[1]) appearing for Ps and Mr Bernard Man SC (leading Ms Esther Mak) for the Defendant (“C”).

1.4In the Arbitral Proceedings, the advocates for the parties were Mr Chapman KC for Ps and (principally) Mr Duncan Watson KC for C.

1.5As summarized by Mr Manzoni, 2 broad issues arise for consideration.

1.6The first concerns the Tribunal’s approach to the resolution of a contest about without prejudice privilege (“WPP”). As detailed below, the WPP issue was the subject matter of 3 applications made by Ps in the course of the Arbitral Proceedings respectively on 13 October 2021 (“First Privilege Application”), 14 February 2022 (“Second Privilege Application”) and 17 May 2022 (“Third Privilege Application” and collectively “Privilege Applications”). The Privilege Applications were made in the circumstances where, in Ps’ view, progressively more of what Ps considered to be “without prejudice” materials were sought to be relied on by C. A pertinent feature is that the Tribunal had decided on the first two occasions that the WPP issue should be deferred for determination at the evidentiary hearing. However, due to the then prevailing circumstances and considerations, the Tribunal eventually dealt with the Third Privilege Application substantively before the evidentiary hearing and issued a procedural ruling on 12 July 2022 (“Privilege Ruling”), by which 1 of the 3 categories of documents was held to be covered by WPP.

1.7Ps say that the above process was deeply prejudicial to them, in that:

(1)  The Tribunal allowed the contested material to remain on the record for almost a year before taking action and ultimately reviewed all the impugned documents before deciding that a significant portion was in fact inadmissible. In doing so, the Tribunal refused an application by Ps to engage an independent privilege expert to address the question, and also refused to adopt a process involving a privilege log thereby creating inevitable apparent bias;

(2)  Furthermore, despite having indicated that it would resolve the privilege contest without regard for witness testimony, the Tribunal ultimately did so by relying on witness evidence served by C in the substantive dispute, at a time before Ps had not served their witness evidence and Ps say that the foregoing had denied Ps equal treatment;

(3)  By reviewing the privileged material shortly before the evidentiary hearing, which commenced on 26 September 2022 around 2 months after the issuance of the Privilege Ruling, the Tribunal could not possibly “unsee” the materials, such that its determination of the substantive issues in the PFA was tainted with unconscious bias;

(4)  The Tribunal in fact prejudged a number of the key issues in dispute when resolving the privilege contest, at a time when Ps had not served their witness statements on the substantive dispute and Ps say that the foregoing amounted to a breach of natural justice.

1.8The second broad issue concerns the decision by the Tribunal to leave the question of whether there was a contractual breach of a non-compete obligation on Ps’ part to be determined in Phase 2 despite the fact that, it is said, the parties had agreed that the question would be determined in Phase 1. Ps contend that the foregoing decision is highly prejudicial and is infra petita, in that it has created a situation in which the Tribunal has provided C with a second bite of the cherry on a key issue in dispute.

1.9In addition to the above summary, it is pertinent to record the following clarifications made by Mr Manzoni in order to delineate the scope of the present challenge:

(1)  Although there is material to suggest that Ps are also relying on Article 34(2)(a)(ii) of the UNCITRAL Model law (namely Ps were unable to present their case), it is not a ground pleaded in the AOS as mandated by RHC Order 73, rule 5(4)(a). At the hearing, Mr Manzoni confirmed that no reliance is placed on this unpleaded ground;

(2)  Mr Manzoni also made it clear that the focus of Ps’ challenge is not whether the Tribunal was right or wrong in its determination of the WPP issue (which he rightly accepted as not being a basis to set aside the PFA) but is instead premised on the process adopted by the Tribunal in resolving the privilege contest. It is said that had the Tribunal followed a fair and impartial process, the outcome of Phase 1 could well have been very different.

1.10In terms of evidence, Ps have filed evidence from Ms xxxxxxxx (in support) and Mr Antony Jonathan Crockett (in reply), respectively an associate and a partner of the firm representing Ps in these proceedings and the Arbitral Proceedings. C has filed evidence from Mr John Rhie, a partner of the firm representing him in the Arbitral Proceedings. Whilst I have considered their evidence, it does not appear to me that it adds a significant dimension to the contemporaneous records and the factual and procedural matters already set out in the PFA.

2.The underlying dispute

2.1C is in the business of investment management and venture capital. He has extensive experience as an angel investor or early-stage investor in numerous start-ups and early-growth companies, including those in the xxxxxxxxxxxxxxxxxxxxxxxxx sectors.

2.2P1xxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxx is the sole shareholder of P2, a company incorporated under the laws of Hong Kong. Xxxxxxx  xxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxx.

2.3On xxxxxx2017, P1 and Ms xxxxx (“Ms H”)[2] launched xxxxxx. In doing so, P1 required financing, which was initially raised by issuing xxxxxxxxxxxx in xx  x 2017. Subsequently, in xxx xx 2017, xxx xxx entered into several investment agreements with a number of angel investors.

2.4On 22 August 2017, an Investment Framework Agreement (“IFA”) was entered into between C (as Investor), P1 (as Existing Shareholder) and P2 (as Target Company) pursuant to which C would pay RMB 25 million in return for an indirect 5% stake in P2. Recital (1) of the IFA provides that P2 was primarily engaged in the xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxbusiness of xxxx  x  xx. The term “Target Company or Company” is defined at Clause 1 as meaning “[P2] including but not limited to any newly established company that acquires the entire business and assets of the Company in the future”.

2.5Insofar as relevant to the present deliberation, the IFA makes provisions for two matters, namely an envisaged restructuring exercise and a prohibition against P1 (or his related parties) from competing with the business of P2.

2.6As regards the contemplated restructuring exercise:

(1)  Clause 2.1 provides: “Restructuring of the Target Company: Subject to the terms and conditions of this Agreement, to accept the investment by angel investors including [C], [P2] shall, within ninety (90) days of the date of execution of this Agreement, complete the following restructuring…” (“Restructuring Plan”);

(2)  The Restructuring Plan envisaged the setting up of (a) a Founder Platform Company in the BVI owned by P1 and Ms H, (b) a Domestic Company in the Mainland, (c) an Investment Platform Company in the BVI, (d) an Employee Platform Company in the BVI for the purpose of reserving shares for future employee stock ownership plan and (e) a Holding Company in the Cayman Islands;

(3)  It was contemplated that the Holding Company would hold 100% of the shares in P2;

(4)  The shares of the Holding Company would in turn be held by the Founder Platform Company, the Investment Platform Company and the Employee Platform Company;

(5)  Relevant to the underlying dispute is the provision set out at Clause 2.1.3 that “[t]he Investment Platform Company shall receive the investments by the angel investors, including [C] and issue a corresponding number of shares to [C], such that [C] indirectly holds 5% of the shares in the [P2]. The specific incorporation arrangements of the Investment Platform Company shall be discussed and determined by the Parties separately”.

2.7As regards the non-competition prohibition, Clause 6 of the IFA provides, inter alia:

“Starting from the Completion Date, except as provided in this Agreement or the operation related arrangements as approved by the board of directors of the Target Company, in the absence of the Investor’s prior written consent, [P1] or its related parties (other than [P2]) should not in any way (including but not limited to in the capacity of a shareholder, partner, director, supervisor, manager, staff, employee, agent or consultant etc.) directly or indirectly engage in any business which is or may be the same, similar or in competition with the business of the Target Company, or to hold any interest in any entity that is in a competitive business, or engage in any other acts that are harmful to the interest of [P2]…”

2.8C’s claim premised on a breach of IFA Clause 6 is financially significant. As noted at PFA §472, it provides C with a mechanism to pursue P1 personally against the possibility that any award obtained by C against P2 might not yield any practical utility[3].

2.9On 25 August 2017, C transferred the first payment of RMB 8 million to P1 under the IFA.

2.10Shortly thereafter, on xxxxxxxxxxxxxxxx, several PRC government agencies jointly issued an “Announcement xxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxx”, which prohibited the operation of xxxxxxxx xxxxxxxxxx in mainland China with immediate effect and expressly named xxxxxxxx as one of the targeted xxxx xxxx xxxx xxxx xxxx (“PRC Regulatory Ban”).

2.11On 15 December 2017, C transferred xxxxxxxx to P1 which at the time was equivalent to RMB 17 million.

2.12The Restructuring Plan was not implemented. Therefore, despite having paid the investment amount, C was never allotted any shares in the Investment Platform Company. As recorded at PFA §220, starting from the second half of 2019, C began to engage with the xxxxxxxx team to “confirm” his “equity” or “rights”. Such engagements included (1) a meeting on 23 October 2019 in Moscow which was attended by P1 and C’s representatives which was covertly recorded by one of C’s representatives (“Moscow Meeting”) and (2) a meeting in Singapore held on 21 December 2019 for negotiations on a “without prejudice” basis attended by P1, Ms H and C (“Singapore Meeting”).

2.13As no agreement was reached, C commenced court proceedings in Hong Kong (“CFI Proceedings”). On 12 January 2021, C obtained an ex parte injunction before Lisa Wong J restraining Ps from, inter alia, dealing with shares of any entities operating or holding any part of any xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx. On 22 January 2021, Linda Chan J declined to continue the injunction on the bases that (1) C failed to demonstrate that he had a proprietary interest in any or all of the xxxxxxxxxxxx, and (2) C did not have any basis for proceeding ex parte. A notable feature is that, in the CFI Proceedings, C had accepted in his affirmation the existence of a dispute having arisen between the parties and without prejudice discussions, which acceptance he later recanted in the Arbitral Proceedings.

2.14On 26 January 2021, C commenced the Arbitral Proceedings.

2.15As set out at PFA §233, the parties had compiled an Amended Agreed List of Issues for Phase 1 dated 22 September 2022 (“ALOI”) which set out 2 broad bases upon which C advanced his claims, namely on a contractual basis and an equitable basis. C was largely unsuccessful in his equitable claims but prevailed on its contractual claims. As I understand Mr Manzoni, relevant to the present deliberation are principally the following issues in the ALOI:

(1)  Issue 1: What was the interest that the parties agreed D would acquire under the IFA (“Interest Issue”);

(2)  Issue 4: Was the IFA discharged by operation of the doctrine of frustration (“Frustration Issue”);

(3)  Issue 5: If the IFA was not frustrated, did Ps breach any obligation of the IFA;

(4)  Issue 6: Is C entitled to rely on any of the rights under, inter alia, Clause 6 of the IFA.

2.16PFA §236 records the relief sought by C in Phase 1 which included, inter alia:

(1)  A declaration that the IFA is valid and binding;

(2)  A declaration that the IFA was not frustrated;

(3)  A declaration that C is entitled to rely on, inter alia, Clause 6;

(4)  A declaration that Ps breached the IFA by, inter alia, establishing and/or owning a direct or indirect interest in businesses in breach of Clause 6.

2.17As set out at Section O of the PFA, the Tribunal acceded to, inter alia, the declaratory relief set out at subparagraphs (1)-(3) of the preceding paragraph. However, in relation to relief set out at subparagraph (4), the Tribunal held that any issues in relation to the allegation of breach of Clause 6 and remedies were to be addressed in Phase 2, with further directions on the conduct of Phase 2 to be issued in due course. The Tribunal expressly reserved jurisdiction in relation to all matters not finally determined in the PFA.

2.18As I understand counsel’s submissions, the challenges advanced by Ps arising from (1) the Tribunal’s treatment of the WPP issue and (2) the reservation of the issue of breach of IFA Clause 6 to Phase 2 are amenable to be dealt with separately. I shall first deal with the former.

3.Procedural history relevant to the Tribunal’s treatment of the WPP issue

3.1In this section, I will recount the procedural history relevant to the Tribunal’s treatment of the WPP issue. In doing so, I have borne in mind Mr Man’s reminder of the following observations made in CNG v G [2024] 2 HKLRD 152 §1:

“Lest it should be unclear, parties should be reminded that arbitration is a consensual process of final dispute resolution to which they voluntarily agree, with whatever inherent defects and risks there may be, and there are only limited avenues of appeal and challenge to the award. The limited recourse parties have under the Arbitration Ordinance is not intended to afford them with an opportunity to ask the Court after the event to go through the award with a fine-tooth comb, to look for defects and imperfections under the guise that the tribunal had failed to act in accordance with its remit or the agreed procedure. Nor is any party entitled to rehearse once again before the Court arguments already made before the tribunal, or to have different counsel reargue its case with a different focus, in the hope that the Court may be persuaded to come to a different conclusion. First and foremost, the Court does not sit on appeal against the tribunal’s findings of fact or law. Further, the Court must not only respect the autonomy of the tribunal, but also leave the tribunal free to decide the dispute with the proper exercise of its case-management powers, when the tribunal is clearly in the best position to manage its own proceedings and procedure in the light of the issues put before it, the complexities of the case, and the time-table which best suits the tribunal, the parties and their legal representatives, with the aim of achieving a speedy resolution without unnecessary legal expense. Matters which should have been raised with the tribunal, on procedure, pleadings, and timing, but were not so raised or objected to, should not be brought before the Court as a matter of complaint at the time of resistance to enforcement or by way of setting aside of the award.” (emphasis added)

3.2It is appropriate to restate the above undisputed reminder at the outset, as Mr Manzoni has assiduously analyzed the Privilege Applications in great detail, on the basis that the present challenge requires what he describes as a “nuanced” analysis.

3.3I have taken on board Mr Manzoni’s submission and have endeavoured to set out the relevant procedural history in the level of detail commensurate with the approach set out at CNG above.

(i)  The First Privilege Application

3.4The debate on the WPP issue began when D filed his Statement of Claim on 15 September 2021. The First Privilege Application was made at the same time when Ps filed their Statement of Defence on 13 October 2021.

3.5In the First Privilege Application, the following matters were advanced by Ps:

(1)  The Tribunal had authority to determine the admissibility, relevance, materiality and weight of evidence. In particular, Article 22.3 of the 2018 HKIAC Administered Arbitration Rules (“HKIAC Rules”) provided that “The arbitral tribunal shall have the power to admit or exclude any documents, exhibits or other evidence”;

(2)  3 classes of correspondence were identified: (a) Telegram Messages between C and P1 from 4 to 7 November 2019, (b) Transcript of the Moscow Meeting on 23 October 2019 and (c) Documents created on or after 21 December 2019 (ie the date of the Singapore Meeting);

(3)  C’s evidence in the CFI Proceedings acknowledged that the negotiations from the Singapore Meeting and thereafter were “without prejudice” discussions;

(4)  C’s evidence in the CFI Proceedings also referred to other “without prejudice” discussions which took place from early November 2019 onwards and continued through December 2019;

(5)  Ps therefore requested Tribunal to direct that identified documents exhibited to the Statement of Claim (at that stage comprising 38 pages of documentary evidence) were inadmissible in the Arbitral Proceedings.

3.6At that stage, in addition to the First Privilege Application, there were other extant applications for the Tribunal’s determination. On 19 October 2021, the Tribunal confirmed that there would be an oral hearing on 2 November 2021 to deal with all the extant applications, and gave directions for the lodging of skeleton submissions and a joint hearing bundle by 28 October 2021.

3.7In C’s response to the First Privilege Application dated 28 October 2021, C pointed out the following:

(1)  Article 22.2 of the HKIAC Rules provided that the Tribunal “shall determine the admissibility, relevance, materiality and weight of the evidence, including whether to apply strict rules of evidence”;

(2)  In particular, the position taken by C was that the issue of WPP should not be determined at that stage, but “the appropriate course is to receive the evidence and give it such weight as the Tribunal considers appropriate following the evidentiary hearing (or, further alternatively, defer the ruling on this application until after a full factual enquiry)”.

3.8Prior to the hearing on 2 November 2021, the Tribunal wrote to the parties the evening before. The Tribunal observed that as only a limited time was set aside for the hearing, it was prepared to offer its provisional view on the extant applications, which offer was accepted by the parties. Therefore, prior to the hearing, the Tribunal offered its provisional views. In respect of the First Privilege Application, the Tribunal’s provisional view was that it was not persuaded that the First Privilege Application was required to be determined at that stage rather than at the evidentiary hearing. The Tribunal expressly invited observations from the parties as to the methodology that should be adopted to enable the substance of the First Privilege Application to be ultimately decided.

3.9At the hearing on 2 November 2021, the First Privilege Application only took up a minor portion of the time. The positions taken by the parties at the hearing were, inter alia, as follows:

(1)  Mr Chapman submitted that “The Tribunal’s proposal to hold off until the evidentiary hearing is probably not workable. The longer we wait the more difficult it will become. We need to know if these can be referred to in the witness statements, whether they can be shown to experts and whether prior statements of case need to be amended”;

(2)  Mr Watson contended that the course indicated by the Tribunal’s provisional views was workable “because a factual enquiry is required to resolve the claim to privilege which is best done at the evidentiary hearing”.

3.10On the following day, the Tribunal issued its orders and directions on the extant applications. In respect of the First Privilege Application, the Tribunal maintained its provisional views and ordered as follows:

“Regarding the [Ps’] Application to Exclude Evidence, the Tribunal is not persuaded that the issue as to whether the disputed documents are subject to without prejudice privilege needs to be decided at this stage of the arbitration proceedings. The Tribunal considers that it would be more appropriate for this issue to be heard at the substantive hearing, but with liberty being given to the Parties to apply for an earlier determination should there be a material change of circumstances so as to necessitate an earlier determination…” (emphasis added)

(ii)  The Second Privilege Application

3.11Between the determination of the First Privilege Application on 3 November 2021 and the Second Privilege Application made on 14 February 2022, C further relied on limited additional materials which Ps considered to be subject to WPP. As I understand the contemporaneous documentation, the impetus for Ps making the Second Privilege Application was not precipitated by the limited additional contested materials, but by Ps’ wish to pre-empt C from reliance on even further materials in C’s Reply Memorial to be filed on 30 March 2022.

3.12The Second Privilege Application was made by way of a letter dated 14 February 2022 from P’s solicitors (“HSF”) to the Tribunal, in which, inter alia, the following arguments were advanced:

(1)  It was apparent that C intended to continue to rely on “without prejudice” materials and Ps had a reasonable concern that C would again seek to refer to privileged and inadmissible evidence in his Reply Memorial;

(2)  Ps therefore requested the Tribunal to reconsider its earlier ruling and determine the issue of admissibility as soon as possible, and in any event before C’s Reply Memorial was to be filed on 30 March 2022;

(3)  It would not be appropriate, fair or proportionate for the Tribunal to wait until the evidentiary hearing to rule on the issue of admissibility. After privileged material had been introduced to the record, the Tribunal could not unsee it;

(4)  In the meantime, Ps would be further prejudiced by having to respond to the inadmissible material and make further submissions based on evidence which should never have been adduced at all. Delaying a ruling on admissibility until the merits hearing would also create obvious and avoidable practical difficulties in having to later redact, amend or strike out the extensive volume of documents and pleadings already exchanged by that stage of the proceedings.

3.13It may be seen from the foregoing that 2 principal arguments were advanced. The first was premised on the alleged prejudice caused by the Tribunal’s inability to unsee “without prejudice” material (subparagraph (3) of the preceding paragraph). The second was premised on practical considerations (subparagraph (4) of the preceding paragraph).

3.14On the following day, the Tribunal referred to its decision on the First Privilege Application (§3.10 above) and pointed out as follows:

“To the extent [Ps] wish to make any application on the same point decided in its 3 November 2021 decision, the Tribunal directs that such application make reference to the Tribunal’s decision, including reference to any material change in circumstances that warrants a review of its decision.”

3.15In HSF’s reply dated 18 February 2022, the following matters were stated:

(1)  There had been a material change of circumstances. Amongst other things, C had made significant changes to his case and the Tribunal had ordered a material adjustment to the procedural timetable (including the bifurcation of proceedings);

(2)  The arguments made in HSF’s letter of 14 February 2022 were largely repeated.

3.16C’s position was set out in a letter from his solicitors (“QEUS”) dated 25 February 2022:

(1)  First, C argued that there was no material change in circumstances;

(2)  Secondly, C disagreed that any prejudice would be caused as “in arbitration the general view is that a tribunal is sufficiently skilled to evaluate evidence without the need to be “protected” from seeing evidence the admissibility of which is contested” and “[t]hat is plainly true of this Tribunal” and as such “[t]here is no prejudice to [Ps], irremediable or otherwise, if the Tribunal [saw] the documents which [were] the subject of the application in order to resolve that application.”.

3.17HSF’s response was set out in their letter dated 1 March 2022, in which it was stated that it was not accepted that arbitrators were somehow better placed than judges to unsee privileged material and therefore avoid irreparable prejudice or unfairness. It was specifically pointed out that in circumstances where recusal was not a practical option for the Tribunal, it was even more important that the admissibility issue was determined at an early stage.

3.18On 2 March 2022, the Tribunal directed a hearing to be held to deal with the Second Privilege Application which eventually took place on 8 March 2022.

3.19At the outset of the hearing on 8 March 2022, the Presiding Arbitrator articulated, inter alia, the following matters for the parties’ comments:

(1)  Unlike court proceedings where the issue might be determined by a different judge, the Tribunal had to make a determination on whether the impugned materials were subject to WPP;

(2)  The Tribunal had the skills to exclude from its mind inadmissible evidence in a way that a jury might not be able to do so;

(3)  The effect of the Tribunal’s decision of 3 November 2021 was such that only if there was a material change of circumstances the Tribunal would revisit that decision.

3.20Both Mr Watson and Mr Chapman confirmed the correctness of the premises articulated by the Presiding Arbitrator.

3.21At a later stage of the hearing, another member of the Tribunal Mr Malek raised the following with Mr Chapman:

“… The desirability of dealing with this on an earlier occasion is very clear in the case of court proceedings so that you can have a different judge hearing the substantive merits to this particular application, so if it is held to be inadmissible then you don’t have the judge having seen this material, but in our case we can’t do that, and we can’t do that because we are arbitrators. I don’t think we can delegate this to a third party without the parties’ consent. I mean, in some cases the party might say, well, it would make sense to have a third party dealing with this and we therefore agree to a determination by, I don’t know, Queens Counsel, solicitors or whoever, or a retired judge, but that’s not happening here, so we are going to have to decide it, and the question is: why does it make any difference if we decide it now, rather than later? The advantage, I think, we identified in our decision is that we felt more comfortable deciding it in the context of having seen everything and forming a view, and I take your point that, you know, the parties will be expending time and effort of dealing with these points, but that can be, on one view, compensated by costs…” (emphasis added)

3.22Mr Chapman’s response was primarily directed at the practicalities:

“And just deal with that head on, you mentioned the point about not being able to unsee the evidence, and, in fact, it does now seem clear that there will be a significant amount of further material, further correspondence that is relevant to the same exchange of correspondence… that does raise an issue of prejudice because if we are right and you can determine the issue now, just on the basis of the limited material that is before you, and it is my case, obviously, that you can do, because the evidence that’s already on the record is sufficient to make it clear that those exchanges were without prejudice…

Now, if we are right on that and you can make that determination now, it means that you won’t have to deal with all the other evidence that the claimant is now threatening to put on the record with its next submission. We won’t have to go away and draft witness statements that deal with all of these privileged materials which we say shouldn’t be before you in the first place, so it is predominantly a practical issue because I accept what was said at the outset that tribunals are in a different position to domestic court judges…” (emphasis added)

3.23On 11 March 2022, the Tribunal gave its decision on the Second Privilege Application in the following terms:

”[3] During the 8 March Hearing, the Tribunal set out the following points:…

[c] The outcome of this dispute is going to be a ruling on the communications are either admissible or inadmissible. If admissible, the communications are evidence. If inadmissible, the communications have no status and will be disregarded.

[d] As an arbitral tribunal, we have to make a determination. This is unlike court proceedings where a judge can make the decision and if inadmissible, a different trial judge can determine the dispute. Also, we have the skills to exclude from our minds inadmissible evidence (in a way that a jury might not be able to do so).

[e] During the course of these proceedings, the Tribunal has had to make a case management decision on whether to decide the “WP” dispute now or later. The Tribunal had full written submissions and had the benefit of an oral hearing on 2 November 2021.

[f] There were competing considerations. Ultimately, the Tribunal decided that this dispute would be decided at the substantive hearing. At that stage, the parties’ respective cases will be better known, as will the context of these communications. No prejudice will be suffered by either party and in any event, any prejudice can be covered in a costs order to reflect our decision…

[g] In other words, only if there is a material change of circumstances, such as, for example, necessity, would we revisit this decision.

[4] At the hearing, both parties confirmed that the above points as set out by the Tribunal are correct…

[5] [Ps] submit that there has been a material change of circumstances. [Ps] rely on the fact that [C] is said to have made significant changes to his case and the tribunal has ordered a material adjustment to the procedural timetable… [Ps] also rely on the assertion that there will be extensive disclosure and witness evidence (as well as submissions) in relation to matters over which without prejudice privilege is claimed.

[7] The Tribunal accepts [C’s] submissions and considers that it had always been reasonably contemplated by the parties that additional material connected with the Moscow meeting would be covered by way of disclosure or witness evidence at subsequent stages in these arbitration proceedings. Differences in the parties’ expectations as to the volume of that additional material does not constitute a material change of circumstances. The Tribunal does not likewise consider the adjustments that have been made to the procedural timetable (including the making of a bifurcation order) to constitute a material change of circumstances so as to justify a reconsideration of the decision the Tribunal made on 3 November 2021.

[8] Accordingly, the Tribunal’s 3 November 2021 decision shall stand and [Ps’] Application is rejected.”

(iii)  The Third Privilege Application

3.24After the determination of the Second Privilege Application, C filed his Reply Memorial together with the witness statements on 1 April 2022 which referred to further contested materials. Mr Manzoni has characterized C as having been “emboldened” by the Tribunal’s decisions on the First and Second Privilege Applications. In particular, in C’s witness statement, he sought to resile from the position taken in the CFI Proceedings, on the issues of whether disputes or potential disputes had arisen between the parties and whether certain materials were subject to WPP.

3.25The Third Privilege Application was initiated by Ps on 17 May 2022, in the form of what the Tribunal termed as the Expert Application in the Privilege Ruling, by which Ps invited the Tribunal to appoint an independent privilege expert pursuant to Article 3.8 of the 2020 IBA Rules on the Taking of Evidence in International Arbitration[4] ("IBA Rules"). The following contentions were set out in the Expert Application:

(1)  The primary reason for raising the application was to safeguard the integrity of the Arbitral Proceedings and protect the independence and impartiality of the Tribunal, by calling for use of an independent privilege expert to assist the Tribunal, as opposed to the Tribunal itself examining contested materials from the outset at the risk of engendering unconscious bias;

(2)  As at C’s filings dated 1 April 2022, the volume of contested materials had increased to at least some 120 pages of factual exhibits, 60 pages of witness statements from 2 witnesses, and 70 paragraphs in the pleadings and other written submissions;

(3)  Ps had sought to engage constructively with C but C refused to consent, including on the grounds that there could not be the alleged prejudice flowing from the Tribunal being exposed to evidence which was later held to be inadmissible. Ps disagreed and contended that the then existing approach created a risk of serious and irreparable prejudice to Ps that would jeopardise the integrity of the Arbitral Proceedings;

(4)  Literature was adduced to support the proposition that judges could not entirely ignore evidence in their decision-making that was seen but then held to be inadmissible and the literature warned that, in such circumstances, any judge was subject to the potential for unconscious bias or perceptions thereof.

3.26In compliance with the Tribunal’s extended deadline, QEUS filed their response on 25 May 2022, in which it was contended, inter alia, that (1) the Tribunal was expressly permitted by law to review “without prejudice” material, by reference to section 47 of the AO and Article 22.3 of the HKIAC Rules, and (2) the literature adduced by Ps merely raised a potential issue for arbitrators to be aware of and did not support the conclusion that the Tribunal’s decisions on the First and Second Privilege Applications would violate due process.

3.27On 3 June 2022, Ps filed their reply on the Expert Application.

3.28As set out at Privilege Ruling §40, by an email dated 10 June 2022, the Tribunal ruled on the Expert Application, stating as follows:

“The Tribunal notes that [Ps] have now proposed that an independent expert be engaged to decide on the privilege issues. As the material at issue has already been disclosed and some of the material has been referenced extensively throughout the pleadings and submissions which have been filed in this arbitration, the Tribunal does not consider it either appropriate or proportionate to engage an independent expert at this stage in the proceedings. Instead, the Tribunal is of the view that it is well within the Tribunal's power to make a determination on the contested privilege documents and indeed, in light of procedural efficiency and due process, it would be appropriate for the Tribunal do so…

.... the Tribunal does accept the fact that the material that has been generated since the last application on this same issue is significant and that the body of potentially privileged material may have expanded more than earlier anticipated. In this context, and taking into consideration the likely prospect that there might be insufficient time to deal with this issue alongside the oral submissions and oral evidence during the course five days allotted for the merits hearing, the Tribunal is of the view that this issue should be decided now, and on an expedited basis.

Accordingly, the tribunal now directs the Parties to confer and agree upon the procedural framework for dealing with this issue no later than 15 June 2022 with a view of scheduling an oral hearing on 30 June 2022 at 6 pm HKT…” (emphasis added)

3.29As the Tribunal emphasized at Privilege Ruling §42, it was “pragmatic considerations which led the tribunal to decide that the privilege issues needed to be determined [prior to] and not at the evidential hearing in September 2022.”

3.30On 14 and 15 June 2022, the Tribunal was apprised of what the parties were unable to agree in respect of the procedural framework, which included whether the Third Privilege Application should be determined by reference to a privilege log and C’s witness statement. As regards the latter disagreement, Ps pointed out that Ps had by then not filed any witness statements as required under the procedural timetable.

3.31Having considered the parties’ submissions, the Tribunal in its email dated 15 June 2022 stated, inter alia, as follows:

(1)  It was not appropriate to determine the application by reference to a privilege log alone as (a) the disputed material was already before the Tribunal and had been referred to by the parties, (b) it might be necessary to consider some of the material for the purpose of determining whether WPP was engaged and (c) if any material was held inadmissible, the Tribunal would disregard it at the substantive hearing;

(2)  The Tribunal noted the Respondents’ submissions on subconscious bias but (a) considered it was able to exclude from consideration inadmissible evidence and (b) there was no other way forward of determining the application since the material was already before the Tribunal and no timely application was made to prevent this material from being seen and considered by the Tribunal;

(3)  Reference to any contested material should only be made when it was reasonable and necessary to do so;

(4)  Ps were at liberty to adduce factual evidence with their submissions if they wished and the Tribunal was prepared to adjourn the Third Privilege Application after Ps had served their witness statements in accordance with the procedural timetable;

(5)  Although the Tribunal considered that it could determine the WPP issues without reference to the witness statements that had been served to date, the Tribunal would leave open the possibility that it might be premature to determine the admissibility of certain documents at that stage if considerations of fairness and due process required further witness evidence to be served and/or cross-examination to take place.

3.32On 17 June 2022, Ps filed a document titled “Application for Exclusion of Privileged Evidence” with a privilege log (“Privilege Log”) in which Ps stated that “witness testimony adds very little”. In the covering email, HSF put on record that Ps disagreed with the Tribunal’s statement that there was no other way forward of determining the application since the material was already before the Tribunal and no timely application was made to prevent this material from being seen and considered by the Tribunal. Reference was made to the First and Second Privilege Applications. At the conclusion of the covering email, Ps stated as follows:

“[Ps] have the greatest respect for this Tribunal and will continue to comply with the Tribunal's directions as they have done from the very outset of these proceedings. The manner in which [C] has approached this dispute is deeply regrettable, and it is particularly unfortunate that we are now having to resolve an issue which could have been dealt with many months ago. In the meantime, and given the significant due process concerns which have yet to be addressed, [Ps] have no choice but to reserve their rights as to the fairness of these proceedings.”

3.33C filed his reply on 28 June 2022.

3.34The hearing on the Third Privilege Application took place on 30 June 2022 at the conclusion of which the Tribunal reserved its decision. On 12 July 2022, the Tribunal issued the Privilege Ruling.

(iv)  The Privilege Ruling

3.35It is notable that at Privilege Ruling §9, the Tribunal expressly stated that “Nothing appearing in this procedural ruling is intended to express any views on the merits of the claims or the defence.”.

3.36At Privilege Ruling §49, the Tribunal identified two distinct issues, namely:

(1)  How should the issue of admissibility be determined? This was a procedural matter that concerned the process by which the issue of admissibility to be determined;

(2)  Were the impugned materials protected by WPP and inadmissible.

3.37On the procedural issue, the Tribunal stated in the Privilege Ruling as follows:

(1)  There was no doubt that the Tribunal had the power to exclude inadmissible material (§50);

(2)  Procedural Order No 1 recorded that the Tribunal would be “guided” by, inter alia, the IBA Rules;

(3)  The Tribunal accepted that, as a general principle, it was desirable that the judge or arbitrator who determined the dispute as to whether something was without prejudice was not the same person as the person determining the substantive dispute, referencing Article 3.8 of the IBA Rules in the relevant footnote (§52);

(4)  In the context of an arbitration where the arbitrator would decide the dispute referred to the Tribunal and there was no power to delegate decision-making, the resolution of WPP issue could only be dealt with by a third party if the parties agreed to appoint a third party to determine the privilege dispute or the Tribunal appointed an expert pursuant to powers agreed by the parties. But the foregoing was effective only if the Tribunal had not seen the material in question. There was also a possible jurisdictional issue in the present case (that the Tribunal did not need to decide) as to whether the IBA Rules gave the Tribunal power to appoint a privilege expert where one party objected and where the IBA Rules only applied as guidelines and were not binding or mandatory (§53);

(5)  The contested materials had been extensively referred to before Ps submitted that the Tribunal should appoint a privilege expert. Some of the contested materials were referred to in the Amended Statement of Claim. More materials were referred to in C’s Reply Memorial served on 1 April 2022 and in the witness statements that accompanied those submissions (§54);

(6)  As confirmed by the parties at the hearing on 30 June 2022, Ps made no application to appoint an independent third party to review the alleged without prejudice materials until the Expert Application made on 17 May 2022. The timing of the application was simply too late to justify going through the process of appointing a privilege expert (§55);

(7)  Leaving aside the timing of the application, the Tribunal also considered that no issue arose concerning unconscious bias. Ps’ submissions on this were set out in their submissions dated 17 May 2022 which referred to scientific literature and it was argued that “no one can ever know whether evidence excluded on the basis of privilege has or has not coloured an adjudicator’s mind in some subliminal way” (§56);

(8)  The scientific material referred to was of academic interest. However, as the Tribunal had pointed out, experience showed that judges and arbitrators were required to exclude inadmissible evidence which they had seen. On occasion judges and arbitrators might have to deal with a situation where the same evidence was both admissible and inadmissible depending on the issue in question. A good example of this was a case of contractual interpretation where there was also a case in rectification or estoppel. Post-contractual material was inadmissible for the purpose of contractual interpretation but admissible for the purpose of rectification or estoppel. Reference was further made to Oceanbulk Shipping & Trading SA v TMT Asia Ltd [2010] UKSC 44 at §33 for another example (§57);

(9)  The Tribunal remained of the view that it was capable of excluding inadmissible material from its consideration (§58);

(10)  Another procedural question that arose was one of timing. Only C had served his factual evidence and Ps’ factual statements were not due until 3 August 2022. ln the course of their submissions, both parties referred to some of the witness statements served on behalf of C. The Tribunal considered that it was appropriate to determine the dispute without cross-examination. During the hearing, counsel for C indicated that the Tribunal should determine the WPP issue based on its understanding of the record before it. Counsel for Ps cautioned that if the Tribunal was not comfortable with rendering a decision on privilege because it wanted to await witness evidence from Ps then it should await the witness evidence. The Tribunal was of the view that it was able to render its rulings based on the record before it (§59).

3.38On the substantive issues, as set out at Privilege Ruling §78, the contested documents were broken down into 3 categories:

(1)  Category 1: This covered Telegram communications between C and P1 from July to September 2019;

(2)  Category 2: This covered the Moscow Meeting and in particular the transcript and there were a number of documents which were said to be related to the Moscow Meeting or contained negotiations from November to December 2019;

(3)  Category 3: This covered communications following the Singapore Meeting on 21 December 2019.

3.39By the Privilege Ruling, the Tribunal held as follows.

3.40In respect of Category 1:

(1)  There was not an extant dispute by this period (§84);

(2)  At Privilege Ruling §86, there was one reference to C’s witness statement §111;

(3)  Reference was made to the fact that when pressed at the hearing, Mr Chapman stressed that certain statements were made by Ms H and not by P1 (§89);

(4)  The Telegram exchanges painted a clear picture that Ps recognized that C had some interest in xxxxxxxx and there was no real question that the IFA continued. The Tribunal therefore considered that Category 1 was not covered by WPP (§97).

3.41In respect of Category 2:

(1)  The Tribunal considered that the Moscow Meeting was not covered by WPP as the issue dividing C and P1 at that stage was a commercial one, namely how best to accommodate each side’s priorities and was as such analogous to discussions of how an admitted liability was to be paid (§§102-104);

(2)  The Tribunal also considered that the messages exchanged between C and P1 from the Moscow Meeting leading up to the Singapore Meeting principally pertained to matters arising out of the Moscow Meeting. It was of the view that such exchanges represented the parties’ attempt to find a commercial alternative for C to monetize and whilst strong words might have been used, the Tribunal understood that such language was to progress discussions on how to structure an undisputed interest (§§105-108).

3.42In respect of Category 3, the Tribunal held that it was covered by WPP and the exceptions relied on by C for its admission, namely estoppel and delay, were not applicable (§§109-132). There was another reference at Privilege Ruling §110 to C’s witness statement §163.

3.43A consequential direction was made for the deletion of the documents under Category 3 from the record by amendments made to the pleadings and witness statements (§133).

3.44Mr Manzoni points out that the Privilege Ruling held that of the 28 classes of contested documents, 17 were held to be privileged and this resulted in the exclusion of 46 pages of factual exhibits, 76 paragraphs of witness statements and 29 paragraphs in the principal written submissions.

(v)  The evidentiary hearing and the PFA

3.45At the evidentiary hearing which commenced on 26 September 2022, the position taken by Mr Watson in opening was that by the Privilege Ruling the Tribunal had already made findings that the parties considered that IFA was valid even after the Regulatory Ban and that C owned a stake in xxxxxxxx. Mr Watson went on to criticize Ps for “just pretend[ing]” that those findings were not made but instead continued to assert that the parties all knew that the IFA had fallen away or was not binding in the first place.

3.46Mr Chapman in opening disagreed and submitted as follows:

“The second initial observation is that, reading the pre-hearing submissions and having heard from Mr Watson and Mr Rhie this morning, the claimant appears to be suggesting that you've already decided the case in his favour and that your decision in relation to the privilege application creates some form of issue estoppel with regard to certain key issues of fact, even before you have seen all of the evidence, even before you have heard from the witnesses, and you will see that the claimant has recast the key issues in dispute in his skeleton argument, so that they match the key issues that were determined in the privilege application. The point being made seems to be, "Well, you've already decided all of these issues, therefore we win".

That obviously cannot be right as a basic point of procedural fairness and I think the suggestion being made is that you've come to this hearing with a closed mind as to the evidence and, obviously on our side, we don't accept that, but if we're wrong, obviously let us know ASAP.”

3.47The Tribunal agreed with Mr Chapman unreservedly. Mr Malek said as follows:

“A few points. I think it's very important right at the outset to clarify the question as to whether or not we have actually made any findings of fact. Because if we have made finding of fact, that's going to affect the cross-examining because you wouldn't be cross-examining on something that the Tribunal's already made a finding of fact.

For my part, I think everybody should proceed on the basis that we have not made any findings of fact, and I say that -- happy to hear arguments to the contrary in due course, but I say that because the nature of the application is that we had to make a determination as to whether or not there were disputes. We were only doing that for the purpose of that particular proceeding. Had we been in a court situation, the likelihood is that that would have been decided by somebody else. But for reasons that we don't need to go into, that was not possible.

So although we did make statements, they are not findings of fact and I believe that that is explicit from the ruling where we said at paragraph 9 [§3.35 above], and I'm quoting:

‘It is unnecessary at this stage to go into the detail of the allegations made in these proceedings. What follows is a brief overview of the dispute for the purposes of providing context on the issues raised in the present application. Nothing appearing in this procedural ruling is intended to express any views on the merits of the claims or the defence.’

For my purpose, that is clear, but I speak for myself. We were not making findings of fact. We could not possibly make findings of fact. For my part, the parties should proceed on the basis that we have not made any findings of fact and the cross-examination should proceed on that basis.”

3.48The other members of the Tribunal thereafter expressed their complete agreement with Mr Malek.

3.49As mentioned above, the PFA was issued on 6 April 2023, and thereafter amended on 12 June 2023. I shall return to the contents of the PFA when I consider the issues of bias and prejudgment advanced by Ps.

4Ps’ challenges premised on the WPP issue

4.1As I understand Mr Manzoni, there are several layers to Ps’ challenges premised on the WPP issue.

(1)  First, there is a procedural complaint. It is argued that (a) Ps had promptly raised the issue of unconscious bias, (b) but the Tribunal ignored the risk of unconscious bias and declined to deal with the WPP issue when either the First or Second Privilege Application was made, before the “blossoming” in the volume of contested materials relied on by C and (c) the Tribunal additionally declined to determine the Third Privilege Application by acceding to the Expert Application or by way of the Privilege Log. All of the foregoing culminated in the Tribunal reviewing substantial contested materials (and a substantial part of that contested material was in fact held to be inadmissible) shortly before the evidentiary hearing (“Procedural Complaint”);

(2)  Secondly, there is a substantive complaint. Ps contend that the above exposed the Tribunal to the inevitable risk of apparent and/or subconscious bias because it was impossible for the Tribunal to exclude from their minds the concessions made by Ps in the privileged documents. Significantly, it is alleged that the Tribunal put itself in a position such that the only way for the Tribunal members to avoid being compelled to recuse themselves (and derail the entire arbitration) was to come to the decision that at least some of the contested materials were not privileged (“Bias Complaint”);

(3)  Thirdly, it is said that the Third Privilege Application was dealt with by the Tribunal unfairly and unequally, in that it relied on C’s substantive witness evidence at a time prior to when Ps were required to submit, and had not submitted, their substantive witness evidence (“Unfair Treatment Complaint”);

(4)  Fourthly, the Tribunal had prejudged the Interest Issue and the Frustration Issue in the Privilege Ruling (“Prejudgment Complaint”).

4.2In my view, the Procedural Complaint, the Unfair Treatment Complaint and the Prejudgment Complaint may be disposed of shortly and I shall deal with them in this section. The gravamen is the Bias Complaint which requires more extensive consideration and will be dealt with in a separate section below.

(i)   The Procedural Complaint

4.3There is no dispute between counsel that the court, in its supervisory role, must not only respect the autonomy of an arbitral tribunal, but also leave the arbitral tribunal free to decide the dispute with the proper exercise of its case-management powers, when the tribunal is clearly in the best position to manage its own proceedings and procedure in the light of the issues put before it, the complexities of the case, and the time-table which best suits the arbitral tribunal, the parties and their legal representatives, with the aim of achieving a speedy resolution without unnecessary legal expense: CNG §§1 and 3.

4.4As pointed out at §1.9(2) above, Mr Manzoni has rightly not premised the present challenge on the correctness of the Tribunal’s decisions on the Privilege Applications.

4.5In my view, there cannot be any legitimate complaints levied against how the Tribunal had procedurally dealt with Privilege Applications (encompassing the Expert Application).

4.6This foregoing is certainly true of the First and Second Privilege Applications as Mr Manzoni submits that the paradigm had shifted with the Third Privilege Application. But that paradigm shift is in substance squarely only coterminous with the Bias Complaint. The chronology set out at sections 3(i)-(iii) above shows that the procedures adopted by the Tribunal in dealing with the Privileged Applications are irreproachable and structurally sound. Without being exhaustive, the chronology shows as follows:

(1)  The parties were given ample opportunities to file submissions and present their arguments;

(2)  Although Ps did indicate in the course of the Second Privilege Application that there was potential prejudice caused by Tribunal being unable to unsee “without prejudice” materials (§3.13 above), in both the First and Second Privilege Applications, Ps had invited the Tribunal to itself consider the contested materials, and indeed, at the hearing of the Second Privilege Application, Ps did not object to the propositions adumbrated by the Presiding Arbitrator, including the fact that the Tribunal had the skills to exclude from its mind inadmissible evidence (§§3.19-3.20 and 3.23 above);

(3)  Prior to the Expert Application, there was no application to appoint an independent third party to review the contested materials (§3.37(6) above);

(4)  The Tribunal did not ignore the risk of unconscious bias and dealt with the issue on multiple occasions in the Second Privilege Application (§3.23 above), the ruling against deciding the Third Privilege Application by reference to the Privilege log (§§3.31(1) and (2) above) and the Privilege Ruling (§§3.37(1)-(9) above);

(5)  The Tribunal considered the parties’ arguments and gave reasons for rejecting the Expert Application and the proposal to determine the Third Privilege Application by reference to the Privilege Log (§§3.28 and 3.31(1) above).

4.7As has been made clear by Mr Manzoni, there is no substantive challenge against the correctness of the Tribunal’s decisions on the Privilege Applications in the present application. In my view, the Procedural Complaint does not provide an independent (or, for the reasons stated above, justified) ground to set aside the PFA.

(ii)  The Unfair Treatment Complaint

4.8There is no dispute between counsel that if an arbitral tribunal has violated principles of natural justice, an award may be set aside on that basis: LY v HW [2022] 6 HKC 129 §§36-36 and Song Lihua v Lee Chee Hon [2023] 5 HKLRD 488 §15.

4.9The complaints advanced by Mr Manzoni are that the Tribunal had initially decided that it would determine the Third Privilege Application without reference to the witness statements that had been served to date but it subsequently decided, without giving notice to Ps or an opportunity to be heard, to determine the privilege question in reliance on C’s written witness testimony but without Ps’ witness testimony or having D’s witness testimony tested and cross-examined by Ps. Mr Manzoni in particular refers to the fact that the Tribunal posed questions of fact to Mr Chapman at the hearing of the Third Privilege Application on 30 June 2022 concerning statements made by Ms H even though Ps’ witness statements had yet to be filed.

4.10In my view, the Unfair Treatment Complaint is not made out for the following reasons.

4.11First, as noted at §3.37(10) above, both parties had referred to some of the witness statements served on behalf of C at the hearing on 30 June 2022. Therefore, the mere fact that the Privilege Ruling refers to some of the evidence contained in witness statements served on behalf of C, is not, without more, unfair.

4.12Secondly, as noted at §§3.40(2) and 3.42 above, the Privilege Ruling (at §86 and §110) has made two references to C’s witness statement. The latter cannot be a source of complaint by Ps as that reference was made for the background to support the Tribunal’s view that Category 3 was covered by WPP. As to the former reference, it was one made in respect of Category 1 which was held not to be covered by WPP. C’s witness statement §111 is in the following terms:

“In mid-July 2019, I began to get a bit annoyed. I heard that xxxx had distributed xxxx to their own management team. I was annoyed that I had not shared in that distribution, and that I had no way of monetising my investment. In the text message chats that followed, I asked repeatedly for acknowledgement of my equity (“確權”). As I explained to both [P1 and Ms H] at the time, my priority was to get something tangible which recognised my interest in the business, so that I would be able to sell my interest (or part of it) if I wanted to. I did not have immediate plans to sell my shares (although I later tried to do so). It was more that I wanted to have the comfort of the acknowledgement of my equity so that I could sell as and when the opportunity or need arose. The other issue that I raised was transparency. I wanted to know more about how xxxx was performing and how it was organised. This was related to the first issue (because any buyer would need to know what they were getting), but it was also an investor relations issue. I felt I had a right to know more about the business I had invested in.” (emphasis added)

4.13Privilege Ruling §86 states as follows:

“In July 2019, [C] heard that xxxx had unlocked a substantial amount in    xxxxxx and distributed xxxxxxxxto their own management (which turned out not to be true). [C] felt aggrieved and in the text messages that followed, he asked repeatedly for an acknowledgement of his “equity” (確權) …” (emphasis added)

4.14Even in the Privilege Log prepared by Ps, the relevant class of document was described as Telegram Messages in which C and P1 communicated regarding the potential sale of C’s alleged rights under the IFA and a video call to address the confirmation of those rights.

4.15As such, I am unable to see how a reference to C’s witness statement §111 had added substantially to the description set out in the Privilege Log. In my view, the reference to C’s witness statement §111 was plainly only for background information and was not germane to the Tribunal’s determination on Category 1.

4.16I am therefore of the view that the Tribunal did not depart from its indication made on 15 June 2022, namely that it could decide the WPP issues without reference to the witness statements that had been served (§3.31(5) above), and this was in fact what it had done as expressly stated at Privilege Ruling §59 (§3.37(10) above).

4.17The foregoing 2 observations are sufficient to dispose of the Unfair Treatment Ground.

4.18Insofar as necessary, it is also plain from the Privilege Ruling that the questions posed to Mr Chapman were based solely on the contested (or related) documents (§3.40(3) above). In the Privilege Ruling, it is recorded as follows:

“[87] Notably, in the text messages between [Ms H] and [C], Ms H repeatedly and expressly assured [C] that he owned a stake in xxxxxx. For instance, [Ms H] said on 21 July 2019:

‘It is not that xxxxxx has disregarded the shareholders after it's earned money. You have a contract, you do not need to worry; just as you've seen the xxxxxx team has never cashed out xxxxxx. Right now, xxxxxx has a lot of challenges and issues ahead of us, and there is a matter of priority....

Right now, on the issue of shareholding, if there is an acquisition or distribution of dividends, your interests will be ensured. This you do not need to worry....’

[88] In response to [C’s] indication of his preference to sell a part of his interest, Ms H did not deny [C] had an interest to sell. Rather, she further assured [C] that the shareholders of xxxxxx did have rights as a shareholder, including "1) cashing out during IPO; 2) distribution of dividend by the company" and that:

‘When there is an IPO, M&A or distribution of dividends, shareholders or shareholding will be involved; right now such situation has not yet arisen, when it arises, we will allocate interest in accordance with shareholding percentage.’

[89] When pressed on this point during the hearing, counsel for [Ps] stressed that these were not statements made by [P1] and invited the Tribunal to look at the circumstances in which they were made. As pointed out by counsel for [C], at one point in the Moscow Meeting, [P1] specifically mentioned that Ms H could be [C’s] “private channel” to the company.” (emphasis added)

4.19It is plain from the references given in the footnotes to the above paragraphs of the Privilege Ruling that the above exchanges between the Tribunal and Mr Chapman were not based on the witness statements filed on behalf of C. In any event, if Mr Chapman had difficulties with the questions posed by the Tribunal, there was no specific application by Mr Chapman for the hearing to be adjourned to enable Ps to file witness statements and he only left it to the Tribunal to decide whether it was comfortable to decide the matter without awaiting Ps’ witness statements (§3.37(10) above). It bears emphasis that Ps’ professed position was that “witness testimony adds very little” (§3.32 above).

4.20The above exchanges between the Tribunal and Mr Chapman was on the issue of whether Ms H had the authority to bind P1. As matters turned out, the authority issue was not one which was realistically pressed by Ps at the evidentiary hearing, as recorded at PFA §§289-290.

4.21I am therefore of the view that there is no substance to the Unfair Treatment Complaint.

(iii)  The Prejudgment Complaint

4.22There is equally no dispute between counsel that prejudgment on the part of an arbitral tribunal, if established, is a form of apparent bias leading to a breach of natural justice: Kay Swee Pin v Singapore Island Country Club [2008] SGCA 11 §65.

4.23The relevant test is articulated CNQ v CNR [2022] SGHC 267 at §54:

“To establish prejudgment amounting to apparent bias, therefore, it must be established that the fair-minded, informed and reasonable observer would, after considering the facts and circumstances available before him, suspect or apprehend that the decision-maker had reached a final and conclusive decision before being made aware of all relevant evidence and arguments which the parties wish to put before him or her, such that he or she approaches the matter at hand with a closed mind.”

4.24Mr Manzoni says that the Tribunal had prejudged the Frustration Issue and the Interest Issue as the Tribunal had in the Privilege Ruling held that the IFA had continued (§3.40(4) above) and C had an undisputed interest (§3.41(2) above). The high-water mark of Ps’ case on prejudgment is that that the Tribunal had already made factual findings in the Privilege Ruling was the position adopted by C at the evidentiary hearing (§3.45 above).

4.25I am unable to accept Mr Manzoni’s submissions.

4.26First, insofar as the Tribunal had in the Privilege Ruling “found”, for the purpose of deciding the privilege contest, that the IFA had continued and C had an undisputed interest, such “findings” were qualified by the Tribunal as not expressing any views on the merits of the claims or the defence (§3.35 above).

4.27Secondly, as was common ground between the parties in the Third Privilege Application, in determining the privilege contest, the Tribunal had to determine the following issues (Privilege Ruling §68), namely at the time of the communication:

(1)  There was a dispute in existence between the parties;

(2)  Related legal proceedings had been commenced or were in reasonable contemplation;

(3)  The communication was made for a legitimate purpose in a genuine attempt to settle one or more issues in dispute.

4.28A particular argument advanced by C was that discussions which merely concerned ""whether, when and to what extent” the party could meet the claimed liability - and requests for concessions, accommodations or indulgences - did not engage the privilege. In other words, discussions which admitted or were otherwise premised on the existence of the claimed right (ie which were inconsistent with there being a genuine dispute about the right), were not privileged (Privilege Ruling §69(c)).

4.29Having perused the Privilege Ruling, I am of the view that the “findings” made by the Tribunal are those which are part and parcel of the Tribunal’s reasons for its determination of the privilege contest. The “findings” that the IFA had continued and that C had an undisputed interest are the Tribunal’s explanations on why it thought that there was no extant dispute for the periods covered by Categories 1 and 2. Whilst Mr Manzoni attacks the Privilege Ruling for going “far beyond deciding whether Ps had shown on balance that there was a dispute”, it seems to me that had the Tribunal simply stated that there was no extant dispute (without explaining why it came to that view), the cogency of the Tribunal’s reasoning might have been eroded.

4.30But even proceeding on the basis that the Tribunal could have stated its reasons in a more “neutral” manner, the fundamental point is that the Tribunal had prefaced the Privilege Ruling at the outset that the views stated therein were intended to express views on the claims or the defence. It must be emphasized that what transpired after the Privilege Ruling shows that Privilege Ruling §9 was not ceremonially stated. As is clear from CNQ §§57-62, the court, in assessing an allegation of prejudgment, should examine the manner in which an arbitral tribunal in fact decided the matter and whether it may be inferred from the “arbitration record that the arbitrator approached these issues with a closed mind.”

4.31As has been pointed out by Mr Man, Ps have made scant reference to the PFA. In my view, on any cursory reading of the PFA, the PFA dealt with the Interest Issue (Section K(a)) and the Frustration Issue (Section K(d)) meticulously and addressed wide-ranging arguments, both factual and legal, advanced by the parties which included:

(1)  On the Interest Issue: Whether the IFA was an agreement to agree, what was the interest acquired by C under the IFA and was there intention to create legal relations;

(2)  On the Frustration Issue: The test as it related to frustration, whether there was any relevant illegality under PRC law and whether performance had become “radically different”.

4.32Thirdly, in my view, the position taken by C at the evidentiary hearing has no bearing on the issue of prejudgment. C, for reasons which were tactically obvious, had ambitiously adopted the position that the Tribunal had already made certain findings adverse against Ps in the Privilege Ruling. That position was swiftly dispelled by the Tribunal, and in doing so, the Tribunal agreed with Mr Chapman (§§3.45-3.48 above).

4.33For all the above reasons, I am of the view that the Prejudgment Complaint has no merit.

5The Bias Complaint

5.1I now turn to the gravamen of the present challenge, namely the Bias Complaint.

(i)   Ps’ arguments

5.2Mr Manzoni first addresses the relevant test for apparent bias and relies on the following observations set out at Deacons v White & Case LLP & Ors (2003) 6 HKCFAR 322 at §27:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.”

5.3The above test applies to arbitrators as it does to judges: Jung Science Information Technology Co Ltd v ZTE Corporation [2008] 4 HKLRD 776 at §49.

5.4The attributes of the fair-mined and informed observer are as follows (Jung Science §52):

“The attributes of the fictitious bystander to whom courts defer have therefore been variously stated. Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances. The bystander would be taken to know commonplace things, such as the fact that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers. The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted. The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality. Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context. Finally, a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.”

5.5In the context of apparent bias arising from a tribunal having sight of “without prejudice” communication, Mr Manzoni refers to AZ v BY [2023] EWHC 2388 (TCC) and Tang Yau Keung v Tang Choi Yau [2014] 2 HKLRD 940.

5.6Tang Yau Keung §§10-11 observe as follows:

“[10] The problem of how a judge should deal with the improper disclosure of without prejudice correspondence was considered by Stanley Burnton J in Berg v IML London Ltd [2002] 1 WLR 3271. He said:

‘[20] The procedure of the court would be greatly hampered and the cost of litigation greatly increased if the court were too easily to come to the conclusion that the viewing of prejudicial irrelevant material necessarily disabled the court from continuing to hear the action. Prior to the Medicaments case, it was not the case that the court would necessarily come to that conclusion as I have already indicated. In my judgment the Medicaments case has affected the test to be applied in such circumstances, but the effect is not as substantial as suggested by the defendant in this case. The Court of Appeal in the Medicaments case described the effect of the change in law which it was finding and did not regard that change as a substantial change. It referred to a modest adjustment of the test in R v Gough [1993] AC 646: see [2001] 1 WLR 700, 726 to 727 [85].

[21] Where a question such as that which has arisen in this case arises, in my judgment there are two aspects to the decision of the court whose recusation is sought. The first question is whether subjectively the judge considers that he is disabled from fairly continuing with the case. If he decides that he is so disabled then that normally is the end of the matter. The matter must be transferred to another judge and it can be only in the rarest cases that an appeal court would intervene to order for the hearing to continue before that judge. The decision is often said to be one within the discretion of the court, but essentially the decision is a subjective decision. That, however, is not the end of the matter.

[22] As I have already indicated, there is a modified test as laid down in the Medicaments case, which is an objective test to be applied. There are circumstances, in my judgment rare circumstances, in which whatever the subjective feeling of the judge in question, he cannot continue with the case without there being a real possibility or a real danger of there being seen to be, by a fair-minded and informed observer, an unfair trial.

[23] The fair-minded observer will appreciate that the judge is not partial to either party, will appreciate that when the judge expresses his views as to whether or not he can continue, he is expressing those views honestly and unaffected by any connection with either party.’ (emphasis added)

[11] In Garratt v Saxby [2004] 1 WLR 2152, Dyson LJ at [19] considered that a judge should adopt the same approach laid down by Stanley Burnton J in Berg in dealing with the improper disclosure of a Part 36 offer or payment. At [20], Dyson LJ said:

‘It is for the judge to decide in each case whether the disclosure of a Pt 36 offer or payment makes a fair trial impossible and whether justice demands that he recuse himself. But judges should not be too ready to reach such a conclusion; the delay and extra cost occasioned by a recusal may be very considerable. Moreover, when exercising their discretion, judges should remind themselves that they ought to have little difficulty in analysing and deciding the issues in the case on their merits without being influenced by their knowledge of the amount of the Pt 36 offer or payment.’” (emphasis added)

5.7AZ §20 makes the following observations:

“… The apparent bias test (properly articulated in sub-paragraph (c) of the passage, reflecting Re Mediciments) will look at the objective perception of the influence exposure to the material may have had on the mind of the decision-maker. However, apparent bias does not depend, by definition, on actual influence. Take an obvious example: if the only issue for determination by the decision-maker is the proper construction of a contract, it is almost inevitable that the decision-maker will ultimately decide the matter by looking solely or primarily at the words of the contract, and (if, indeed, saying anything at all) expressing the view that the post-contract views expressed by one Party to the other about the merits of their position are entirely analytically irrelevant. Obviously, such post-contract material is analytically irrelevant. In this sense, it could always be said that the without prejudice communications were not ‘material’ to the decision, let alone primarily material upon which it was based. However, this does not mean that the test of apparent bias cannot be satisfied in these circumstances. A court may properly conclude on the evidence before it that the objective observer would consider that knowledge of one Party’s frank admissions as to the weakness of their legal case made under the cloak of without prejudice discussions gives rise to a legitimate fear that the adjudicator took the knowledge of a Party’s confessed weakness of their own case into account, possibly even only sub-consciously. Thus, the communications do not have to be ‘material’ in the sense that they can be shown to have been the basis of a particular conclusion; they do have to be ‘material’ in the sense they give rise, objectively, to a legitimate fear of partiality.” (emphasis added)

5.8Mr Manzoni then emphasizes the following matters:

(1)  The Tribunal’s own assessment of bias is irrelevant, referring to Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451 §19 and TGL v SDC & Anor [2024] HKCFI 1796 §40;

(2)  The risk of subconscious bias is well-documented in the case law by reference to Superb Quo Ltd v Lee Yuen Cheung Co Ltd & Ors, HCMP 29 of 2011, 14 February 2011 and ASM Shipping Ltd v TTMI Ltd [2006] 1 CLC 656 §39(3) in which it was pointed out that subconscious bias operates subtly and imperceptibly, and because of its very nature, hard evidence is seldom (if ever) available.

5.9Mr Manzoni relies on the scientific literature that was referred to the Tribunal (§3.25(4) above). I hope I will be forgiven for not referring to all of the voluminous material. The effect of the scientific literature is to support the proposition that studies have shown that judges may not be able to put inadmissible evidence out of their mind. It is only necessary to refer to one example. In Edna Sussman, Arbitrator Decision-Making: Unconscious Psychological Influences And What You Can Do About Them (2013) 24(3) The American Review Of International Arbitration 487, the following observations are made:

“It is not surprising that judges, and undoubtedly arbitrators, are not able to unring the bell, as these experiments demonstrate. The formal rules of evidence are generally not applied in arbitration. For example, the IBA Rules on the Taking of Evidence (the ‘IBA Rules’) provide some guidance, but in leaving it to the arbitrator to determine the ‘admissibility, relevance, materiality and weight of the evidence,’ they are a far cry from imposing standards of admissibility similar to formal rules of evidence…

But arbitrators should take care to try to counter this blinder. First and foremost, arbitrators should really do what they say they will do and consciously weigh the reliability of evidence they have promised to assess as to weight. Reviewing preliminary conclusions of the case to see if the outcome would differ if unreliable evidence admitted on that basis had not been introduced may serve as a check by showing the arbitrators the extent to which such pieces of evidence have influenced their thinking.

A special situation presents itself when the tribunal is asked to review documents to determine a privilege objection. If the determination cannot be made without a review of the documents and a demand is made for such a review, should the tribunal perform that task itself knowing that it may be influenced by what it sees? Article 3(8) of the IBA Rules, provides that in exceptional circumstances the tribunal may, after consultation with the parties, appoint an independent and impartial expert to conduct the review. While the appointment of such an independent expert may cost time and money, in light of the danger of prejudice, if a party asks for such an independent review, careful consideration should be given to all of the relevant factors before deciding on the tribunal 's response.”

5.10Mr Manzoni does not go so far to suggest that the exposure to “without prejudice” material would as a matter of course disqualify an arbitral tribunal. In my view, that concession is plainly correct given the effect of section 47(3) of the AO[5] and Articles 22.2[6] and 22.3[7] of the HKIAC Rules and the documented risks of unscrupulous litigants seeking to derail an arbitral process by adopting “guerilla tactics” involving exposing the arbitral tribunal to “without prejudice” correspondence: Jorg Risse: The WYSIATI-Effect and Biased Arbitrator (2021) ASA Bulletin (Scherer ed). Mr Manzoni contends that the issue of unconscious is fact-sensitive and the cardinal consideration is that the arbitral tribunal should resolve any privilege contest without the risk of unconscious bias.

5.11Mr Manzoni says that, in the present case, the Tribunal has failed to do so and the test for apparent bias is satisfied. He relies on the matters forming the subject matters of the Procedural Complaint (§4.1(1) above), emphasizing that Ps had promptly raised the unconscious bias issue, that the Tribunal had wrongly ignored the risk of unconscious bias and that it was C, not Ps, who extensively relied on privileged material. Reliance is placed on the observations made at AZ §124:

“In my judgment, I conclude that the fair-minded and informed observer considering all of the circumstances of this case would conclude that there was a real possibility that, having seen the without prejudice material, the Adjudicator was unconsciously biased. This is because:

(1) the without prejudice material was placed front and centre within the Adjudication by AZ and played a significant role in AZ’s case. It was put in terms that the material demonstrated that BY were taking a position materially inconsistent to its previously expressed views. The very purpose of without prejudice privilege is to prevent this from happening;

(2) that material contained implicit admissions by BY that were plainly inconsistent with its open position and the contractual position it was arguing for in the Adjudication. In particular, it accepted responsibility (in the context of a commercial negotiation) [REDACTED] (contrary to its open position) and [REDACTED] (contrary to its open position) and [REDACTED] (contrary to its open position);

(3) as such, the material was not just prejudicial and adverse to its interests but also related to central issues in dispute. The substance of the material cannot be likened in any way to an adjudicator knowing of the fact of an offer, or the fact of the existence of negotiations, which as the authorities make clear is something that a decision-maker would readily anticipate. It is much more akin to, and indeed potentially more prejudicial than, an adjudicator knowing the amount of an offer;

(4) regardless of the manner in which the Decision was expressed, there is in the circumstances of this case an inevitable question mark about whether the result of the adjudication, however inadvertently or sub-consciously, was shaped by the Adjudicator’s knowledge of the concessions/admissions in relation to key aspects of the open dispute made by BY in negotiations. I do not, in coming to this conclusion, intend to express any view as to the merits of either side’s contractual arguments;

(5) the inevitable question mark is even more acute when the Adjudicator had formed the view, also in error, that these matters had in fact been agreed (and not just put forward in a commercial offer which might be easier to put out of one’s mind).” (emphasis added)

(ii)  Analysis

5.12For the following reasons, I agree with Mr Man that the Bias Complaint is not made out.

5.13First, I agree with Mr Man that there is a distinction between apparent bias caused by (1) prior relationships on the one hand and (2) exposure to “without prejudice” material on the other. This is acknowledged in Tang Yau Keung, an authority relied on by Mr Manzoni (§5.6 above). Additionally, at Berg v IML London [2002] 1 WLR 3271 §§14-15 (a case relied on by DHCJ Eugene Fung SC in Tang Yau Keung), Stanley Burnton J observed:

“[14] In the present case it is not suggested that Master Trench was not independent. It is not suggested that he was partial to either party. The fact that this is not a case of partiality or bias has one important ramification. Where there is a doubt as to the independence or impartiality of a judge, what a judge says in relation to his ability to dispense justice, irrespective of the relationship or interest giving rise to the suggested partiality, must be considered with a degree of circumspection. An appeal tribunal may be required to scrutinise what is said by the judge whose recusation is in question in such circumstances because what he says obviously may be affected by the relationship or interest giving rise to the alleged partiality. That is not the case where there is no suggestion of such interest, no suggestion of any such relationship but rather a suggestion that the judge has seen material which may disable him from giving his ruling objectively on the evidence and arguments that are properly before him.

[15] In such circumstances, if a judge is of the view that he may sensibly disregard the material which is irrelevant or prejudicial, and that he is able to give judgment in accordance with the facts and evidence properly before him, there is not the same reason as in cases of lack of independence or partiality for an appeal court to scrutinise what he says, and less reason to scrutinise his decision….” (emphasis added)

5.14I therefore agree with Mr Man that the Super Quo line of cases, which deal with the situation where the court or tribunal has a relationship with one of the parties, cannot be directly transposed to the present case.

5.15Secondly, the qualification of the decision-maker is relevant. AZ §25 observes as follows:

“In Ellis Building Contractors Limited v Vincent Goldstein [2011] EWHC 269 (TCC), Akenhead J also undertook a review of the relevant authorities. At the outset he noted that adjudicators are under a duty to apply the rules of natural justice. He referred in this context to Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC) in which the second of the principles identified in that case was that ‘any breach of the rules must be more than peripheral, they must be material breaches.’ Following this, Akenhead J continued:

‘[25] The improper deployment of ‘without prejudice’ material in adjudication is something which happens in adjudication as in court although this Court has at least anecdotally seen an increase in this behaviour in adjudication. This often arises because parties represent themselves or are represented by consultants who are not legally qualified and, perhaps, they do not fully understand that truly ‘without prejudice’ communications are privileged and should not be referred to in any legal or quasi-legal proceedings, including adjudication. Whilst if ‘without prejudice’ communications surface in a court, the judge being legally qualified and experienced can usually put it out of his or her mind, it is a more pernicious practice in adjudication because most adjudicators are not legally qualified and there will often be a greater feeling of unease that the ‘without prejudice’ material may have really influenced the adjudicator. This Court can only strongly discourage parties from deploying ‘without prejudice’ communications in adjudication.’” (emphasis added)

5.16Thirdly, whilst the court in AZ was provided with the “without prejudice” materials to conclude that they played a significant role and related to the central issues in dispute, Ps have not placed the materials which were held to be covered by WPP for my consideration. This is particularly important given the context, since Categories 1 and 2 were held to be not protected by WPP and Category 3 was chronologically proximate in time (§3.38 above). Where there is no challenge against the correctness of the Privilege Ruling, it seems to me that it is relevant to assess the incremental effect of the content of Category 3 on the issues in dispute.

5.17Fourthly, I accept Mr Man’s submission that alleged perception of bias must be considered against the objective manner in which the Tribunal expresses its determination:

(1)  In Tse Tsz Chong v Law Sze Man [2015] 1 HKLRD 1120, the Court of Appeal set aside an order for interim payment made by a District Court judge. The finding of apparent bias was grounded on the facts that (i) there was no explicit statement by the judge to dispel any perception that she might have been influenced by a sanctioned payment and Calderbank offer which she had read; and (ii) the judgment, when read as a whole, showed that it was likely that the judge had been influenced by the improper disclosure of the sanctioned payment (§§25-26);

(2)  At Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] SGHC 67 §81, Chan Seng Onn J observed that reliance on mere perception or suspicion that the tribunal might have been unknowingly or subconsciously by disputed documents would be resting its case for setting aside the award on quick sand.

5.18Drawing the above threads together, even by reason of the procedural steps the Tribunal had put itself in a position to decide on the Third Privilege Application shortly before the evidentiary hearing, the fictitious bystander is taken to have known the following matters:

(1)  The Tribunal is eminent and experienced. Two of the arbitrators are leading counsel in England and the presiding arbitrator is a well-regarded figure in international arbitration;

(2)  The Tribunal is also independent, and therefore when it expressed the views as to whether or not it could continue, it was expressing such views honestly and unaffected by any connection with either party;

(3)  The conclusions sought to be drawn from the scientific literature have to be balanced against the fact that the Tribunal did consider them but nevertheless regarded itself as being capable to disregard the “without prejudice” materials. The concerns expressed in the scientific literature also have to balanced against the duties imposed upon the Tribunal by section 47 of the AO and Articles 22.2 and 22.3 of the HKIAC Rules to rule on admissibility and the doubt expressed by the Tribunal whether it could appoint a privilege expert without the parties’ agreement;

(4)  Throughout the Arbitral Proceedings, the Tribunal had on multiple occasions stated that it would and could disregard any “without prejudice” material in its determination of the substantive merits of the Phase 1 issues;

(5)  It is unclear what was the incremental effect of the Category 3 on the issues in dispute;

(6)  In the PFA, the Tribunal had comprehensively dealt with the arguments and the evidence, and gave detailed reasons for its conclusions, including dealing with the apparent conflicting positions adopted by C in the CFI Proceedings and the Arbitral Proceedings;

(7)  The manner in which the PFA dealt with the Phase 1 issues does not objectively suggest that the Tribunal was influenced by “without prejudice” materials.

5.19I have already set out the attributes of the fictitious bystander at §5.4 above. Although the fictitious bystander is not a lawyer, he is neither wholly uninstructed about the law in general of the issue to de decided. The hypothetical observer is also informed, reasonable and fair-minded and would not reach a hasty conclusion and is neither complacent, nor unduly sensitive or suspicious.

5.20With the above attributes, I am not satisfied that the fictitious bystander would conclude from the matters set out at §5.18 above that there was a real possibility or danger that the Tribunal was biased.

5.21I further do not accept Mr Manzoni’s serious allegation that the Tribunal put itself in a position such that the only way for the Tribunal to avoid being compelled to recuse themselves (and derail the entire arbitration) was to come to the decision that at least some of the contested materials were not privileged. As pointed out by Mr Man, such a serious allegation is entirely speculative and is made against the background that the correctness of the Privilege Ruling is not challenged. In any event, Mr Manzoni has not pointed to any reasoning in the PFA which might justify the aspersion.

5.22For the above reasons, the Bias Complaint is not made out.

5.23In such circumstances, it is unnecessary for me to consider the arguments made by Mr Man on waiver which was only raised during the course of the hearing after I made inquiry with Mr Manzoni on the interplay between an application to remove the Tribunal and an application to set-aside the PFA, as discussed in PT Central Investindo v Franciscus Wongso [2014] 4 SLR 978. In such event, I am not sure I have received full arguments on the issue.

6The infra petita ground

6.1The reasons for deferring the issue of breach of IFA Clause 6 for determination in Phase 2 are set out in the PFA as follows:

“[471] [C] suggests [referencing Reply Memorial filed on 1 April 2022] that further disclosure in Phase II is required in order to establish whether the non-compete obligation has been breached and the remedies. The Tribunal agrees. The Tribunal considers Clause 6 to be particularly important because [C’s] contractual entitlement under the IFA, as found by the Tribunal above, may well not reflect the reality of how the business/assets were organised. As the Tribunal observed in the course of exchanges at the hearing, even if [C] is eventually issued shares under Clauses 2.2 and 3.1(b), he may well discover that P2 in fact does not own the xxxxxxxx xxxxxx and therefore, it is just a shell. This is not mere speculation but a real possibility for the following reasons…

[472] In other words, there is a possibility that any award obtained by the Claimant against [P2] would not necessarily yield any practical utility, as it is unclear as to whether [P2] is an entity of means. However, the obligation under Clause 6 is directed at “[P1] or its related parties (other than [P2])”, Clause 6 provides the Claimant with a mechanism to pursue [P1] personally (be it damages, prohibitory or mandatory injunction). As the [C] notes in his Opening, he relies on Clause 6 to “bring back within the xxxxxx xxxxxx structure any business which wrongly sits outside it.”

[473] Accordingly, the issue of whether Clause 6 has, in fact, been breached and, if so, what relief should be awarded will be determined in Phase II, with the benefit of the further factual evidence that will be produced in Phase II.” (emphasis added)

6.2Mr Manzoni relies on the following propositions:

(1)  Where an arbitral tribunal fails to deal with an issue, such failure amounts to rewriting the tribunal’s mandate, which is an act beyond the arbitrator’s competence and the award is liable to be set aside on that basis: LY v HW [2022] 6 HKC 129 §§3-9;

(2)  The Court has to be satisfied that an issue which has been put to the tribunal was not dealt with expressly, or in composition with other issues, and that such fairly has caused substantial injustice: AI & ORs v LG II & Anor [2023] 4 HKC 135 §22(1);

(3)  Whilst a tribunal may have power to make several awards to deal with different issues, the exercise of such power is subject to agreement by the parties: Section 71 of AO;

(4)  An unagreed reservation of matters for future award is inherently unfair because the tribunal fails to provide finality to the issues contemplated and agreed by the parties: AG v Shimizu Corporation, CACV 81 of 1996, 17 January 1997;

(5)  In circumstances where a court determines that the tribunal failed to deal with an issue and considers if it is proper to remit the issue to the impugned tribunal, AAB v BBA [2024] 3 HKC 656 §64 is an authority for the proposition that the court has to consider whether there is a real risk, judged objectively, that even a competent and respectful arbitral tribunal, whose acts or omission have been held to amount to serious regularity causing substantial injustice, may subconsciously be tempted to achieve the same result as before.

6.3As pointed out above, the ALOI dated 22 September 2022 did include the breach of IFA Clause 6 as an issue for determination during Phase 1 (§2.15 above). Mr Manzoni points out that the ALOI postdated the filing of C’s Reply Memorial dated 1 April 2022 which was referred to at PFA §471 (§6.1 above).

6.4However, it is clear that the arguments ventilated in C’s Reply Memorial were also addressed by Mr Watson in closing, as is clear from, for example, the following exchanges:

“Mr Ng: I'm sorry, I do actually have a follow-up on my question in respect of relief, and it's this. Just looking at the formulation as currently set out in paragraph 417 of your reply, and just juxtaposing that against the discussion that we had earlier on about whether or not [P2] currently owns the assets which constitute the xxxxxx xxxxxx, if and to the extent it transpires, and I appreciate there has been no disclosure at this stage, but if and to the extent it transpires that [P2] does not at present own any of the assets which constitute the xxxxxx xxxxxx xxxxxx, how, in those circumstances, would the declaratory relief that you are seeking in paragraph 417 meaningfully help you?

Mr Watson: Let me explain how that works in a couple of ways. In respect of the contract claim, we say if you declare that we're entitled to rely on 4, 5, and 6, and if you go back to, I think it is the statement of claim, we have asked for mandatory injunctions to enforce clause 6. And so the way we envision that would work is that if the tribunal considers that company A or business unit A, whatever it is, should have fallen within the structure, but in breach of clause 6 currently sits without that structure, then we would be asking the tribunal for a mandatory injunction and that it be brought back within the structure. Now, there's obviously a lot to debate about that. That debate will be had in phase 2…

Mr Ng: Yes, I see. So in other words, you say that if and to the extent that the tribunal were to find in your favour on phase 1 and grant you the series of declaratory reliefs that you are seeking at paragraph 417, what that would effectively do is to make you legally, if you are not already equitably, a shareholder in the IPC, the investment platform company. And in any event, if it then transpires after you are legally a shareholder and you exercise your rights to information under clause 4 and it transpires that [P2] is but a shell of a company, you will then in phase 2 rely on the non-compete obligations in clause 6, which I note are targeted at the existing shareholder -- capital E, capital S -- and prohibit direct or indirect competition and obviously seek relief flowing from any finding which may or may not be made in phase 2, if any, in respect of breach of the non-compete obligations. Have I understood that correctly?

Mr Watson: Yes

Mr Ng: Thank you, that’s very clear.” (emphasis added)

6.5Further, a number of pertinent observations may be made on what transpired at a case management hearing during Phase 2 of the Arbitral Proceedings on 7 July 2023.

6.6First, Mr Chapman’s position was that the parties should “finish the liability phase before we move on to any discussion of remedies” and Ps had set out a proposed timetable for that to be done in HSF’s submissions of 26 June 2023, including document production. Ps invited the Tribunal to issue a second partial award on liability to deal with the residual questions from the parties’ ALOI, namely the issue of breach of IFA Clause 6.

6.7Secondly Mr Malek took the view that the issue of breach of IFA Clause 6 was linked to the question of specific performance, in that were specific performance granted (an issue to be dealt with in Phase 2), the issue of breach of IFA Clause 6 would fall away.

6.8Thirdly, Mr Malek also asked Ps to identity whether they had challenged C’s proposition that further disclosure in Phase 2 was required to establish whether there was a breach of IFA Clause 6. As pointed out by Mr Man, apart from references to Ps’ own submissions which appeared to simply assume that the issue of breach of IFA Clause 6, Ps could not identify any specific arguments to the effect that the Tribunal was required to address the issue in Phase 1.

6.9On 31 July 2023, the Tribunal issued its decision on the matters ventilated at the hearing on 7 July 2023 and held that it was open to it to accept C’s position that the issue of breach of IFA Clause 6 should be deferred for substantive determination until further disclosure had been provided and rejected Ps’ position that there should be an additional phase to deal with that issue before the questions of relief or quantum are addressed in Phase 2.

6.10The facts of the present case are plainly distinguishable from Shimizu. In Shimizu, unlike the present case, the parties had agreed that, the award (although an interim award) should include a determination of all the issues both as to liability and quantum and that there was nothing in the transcripts of the proceedings to suggest that any difficulties in the arbitral proceedings had the effect of abrogating the agreement concluded relating to the finality of the issues. However, in the present case, there were arguments made by C that the issue of breach of IFA Clause 6 should be deferred, which the Tribunal (1) agreed with and (2) noted that Ps did not seek to argue against.

6.11In any event, I further agree with Mr Man that Ps’ have not articulated how the Tribunal’s alleged failure to deal with the breach of IFA Clause 6 issue in Phase 1 has caused it substantial injustice. First, I do not see how the infra petita ground justifies the setting aside of the entire PFA. Secondly, as noted above, Ps’ own position for Phase 2 is that the issue of breach of IFA Clause 6 should be determined albeit as a preliminary issue in advance of quantum and relief. Third, the approach adopted by DHCJ Reyes SC in AAB was to remit the relevant award to the tribunal to take such action as in the tribunal’s opinion would obviate the setting aside of the relevant award for failure to deal with an issue. What transpired in Phase 2 already gives a clear indication on what would have happened had the PFA been remitted. I therefore do not agree with Mr Manzoni that what transpired in Phase 2 is irrelevant.

6.12It is important to note that the position taken by Ps in Phase 2 is not that the issue of breach of IFA Clause 6 should be considered without further disclosure. As such, there is no issue of affording C a second bite of the cherry. Indeed, the references given by Mr Manzoni at his Skeleton Submissions §152 shows that that submissions made by Ps in Phase 1 were predominantly on the issue of whether IFA Clause 6 was enforceable, which arguments the Tribunal dealt with at, for example, PFA §§465-470.

6.13I reject the infra petita ground.

7Conclusion

7.1For all the above reasons, I agree with Mr Man that Ps’ complaints fall far short of identifying any fault concerning the structural integrity of the Arbitral Proceedings, let alone a serious or egregious denial of due process which caused actual prejudice. I also do not regard Ps to have established that a fair-minded and informed observer would conclude that there was a real possibility or danger that the Tribunal was biased. It follows therefore that the present challenges based on the further ground of violation of public policy also fail, as there is nothing to show a substantial injustice so shocking to the court’s conscience as to render enforcement repugnant under Hong Kong public policy.

7.2The AOS is dismissed. I also make a costs order nisi that Ps do pay to C the costs of the AOS (including any costs reserved) on an indemnity basis. I also grant a certificate for 2 counsel.

Mr Charles MANZONI, SC leading Mr Simon CHAPMAN (Solicitor Advocate), instructed by Messrs Herbert Smith Freehills, for the 1^st - 2^nd Plaintiffs

Mr Bernard MAN, SC leading Ms Esther MAK, instructed by Messrs Gall, for the Defendant