GLORY ASIA VENTURES LIMITED v VC EAST TRIUMPH HOLDINGS LIMITED

HCA 2060/2025

[2026] HKCFI 3888

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2060 OF 2025

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REASONS FOR JUDGMENT

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I.     INTRODUCTION

1.VC East and Fung (collectively, the defendants) apply to stay Glory Asia’s action against them.  I therefore must decide whether a stay is warranted. 

II.     BACKGROUND  

2.By its action commenced on 4 November 2025, Glory Asia seeks to enforce a share charge and guarantee both dated 2 December 2020 against VC East and Fung respectively. The share charge was between VC East as charger and Glory Asia as chargee.  The guarantee was between Fung as guarantor and Glory Asia as beneficiary.  The share charge and guarantee contain exclusive jurisdiction clauses providing for disputes arising in connection with them to be submitted to the Hong Kong court.

3.On 5 February 2026 Fung started an arbitration against Angela Chen, East Triumph Holdings (ETH) and 匯峰房地崖阔姿(河源)有限公司 (the Project Company) as respondents.  By the arbitration, Fung sought relief concerning a Joint Venture Agreement dated 16 July 2018 (the JVA) between Chen and himself.  The JVA contains an arbitration agreement. In the event of dispute among the parties, the JVA provides for there to be a Hong Kong-seated arbitration administered by the HKIAC and for Hong Kong law to govern the arbitration agreement. Any arbitration is to be conducted in Cantonese. Glory Asia was not a party to the JVA.

4.ETH is the sole shareholder of the Project Company.  Prior to the JVA, VC East was the sole shareholder of ETH and Fung was ETH’s owner. By the JVA, Fung agreed to sell 50% of his interest in ETH to Chen for RMB 900 million. Following the JVA Agreement, Fung and Chen executed three Supplemental Agreements (respectively, the 1^st, 2^nd and 3^rd Supplemental Agreements).

5.By the 1^st Supplemental Agreement dated 9 August 2018, Fung agreed to transfer 50% of ETH’s shares to a BVI company and thereafter to transfer the shares in that BVI company to Chen. In accordance with that agreement, VC East transferred a 50% shareholding in ETH to Glory Asia (a BVI company) and Glory Asia was then transferred to Chen.

6.By the 2^nd Supplemental Agreement dated 2 December 2020, Chen was to lend RMB 271,242,908 to ETH.  As security for the loan, VC East was to charge its 50% shareholding in ETH to Glory Asia and Fung was to provide a guarantee in Glory Asia’s favour.  The share charge and guarantee so executed are the subject matter of Glory Asia’s present action against VC East and Fung.  The share charge is in English, while the guarantee is in Chinese.

7.By the 3^rd Supplemental Agreement dated 8 February 2021, Fung and Chen agreed that the loan would be amended as being for the amount of RMB 280,142,908. The 3^rd Supplemental Agreement further stipulated in section 1, clause 5 (clause I.5):-

“If Party B [Chen] makes payments to the Target Company [ETH] through the company [Glory Asia] holding Party B's 50% equity interest in the Target Company pursuant to Clause 4 above, and the relevant project company(ies) is unable to successfully acquire for the Remaining Disposal Land in the listing process by 30 April 2021, unless Party B agrees otherwise, Party A must return to Party B, within one month after the completion of the bidding process, the amount paid by Party B through the company holding Party B's 50% equity interest in the Target Company together with all relevant interest.”

According to Glory Asia, the effect of clause I.5 is that the loan should have been (but was not) repaid by April 2023.

8.By the arbitration, Fung claims that the 2^nd Supplemental Agreement is voidable by reason of economic duress and fraudulent misrepresentation on the part of Glory Asia and its legal representatives. Fung further alleges that Glory Asia is estopped from enforcing the share charge and guarantee by a common understanding that Chen would only seek recourse against ETH for the loan.  Fung also argues that clause I.5 was never engaged because “its condition precedent was never satisfied” and, in any event, “any failure was … caused by [Chen’s] own failure”.  Finally, Fung suggests that Chen failed to provide RMB 480,000,000 under section I clause 4 of the 3^rd Supplemental Agreement and consistently lagged in providing funding. Consequently, Fung claims specific performance and damages under section I clause 4.

9.By their summons of 10 February 2026, VC East and Fung contend that Glory Asia’s action should be stayed pending determination of the arbitration.

III.     DISCUSSION

A.     Should there be a mandatory stay?

10.The defendants argue that there should be a mandatory stay of the proceedings under Arbitration Ordinance (Cap 609) (AO) s.20(1).[1] 

11.Fung, ETH and the Project Company are obviously parties to the arbitration clause governing the JVA and its Supplemental Agreements.  But it is not apparent that Glory Asia is a party to the arbitration agreement.

12.The defendants, however, submit that Glory Asia should be regarded as a party to the arbitration agreement. That is because (according to the defendants) the validity of the 2^nd and 3^rd Supplemental Agreements necessarily hinges on the outcome of the arbitration among Chen, Fung, ETH and the Project Company. Moreover, there is (the defendants say) an arguable case that Glory Asia agreed to the arbitration agreement through Chen acting as Glory Asia’s agent. Such agency is to be inferred from the fact that Glory Asia advanced the loan pursuant to the 2^nd Shareholder’s Agreement, despite the latter ostensibly being an agreement between Chen and Fung. In any event, it is the defendants’ case that the loan monies originated from Chen, not Glory Asia.  Otherwise, Glory Asia would be a stranger to the 2^nd Supplemental Agreement and (if so) the defendants ask rhetorically how Glory Asia can claim that it made the loan. Finally, in a submission entitled “Collusion,” the defendants submit that the court should not permit Glory Asia as Chen’s corporate vehicle to pursue litigation which in effect “wrest[s] from the agreed tribunal the very questions which the contracting parties agreed to refer to it”.

13.I am unable to accept that the mandatory stay provision in AO section 20(1) and Model Law Article 8(1) applies to the present situation.  Those provisions do not require the court to stay, in favour of arbitration, court proceedings initiated by a person who is not party to an arbitration agreement.

14.AO section 2 defines “party” to mean “(a) a party to an arbitration agreement; or (b) in relation to any arbitral or court proceedings, … a party to the proceedings”.  AO section 2 defines “arbitration agreement” by reference to AO section 19.  The latter incorporates Model Law Article 7 which defines an arbitration agreement to mean “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not”.  If one puts the foregoing definitions together and reads Model Law Article 8(1) in context, the word “party” in the expression “if a party so requests no later than when submitting his first statement on the substance of the dispute,” plainly refers to “a party to an arbitration agreement”. The word “parties” in the predicate “refer the parties to arbitration” clearly refers to both the party who initiated the court proceedings and the party requesting that the dispute be referred to arbitration. The word “agreement” in the proviso “unless it [the court] finds the agreement is null and void, inoperative or incapable of being performed” must refer to an arbitration agreement between those two parties, that is, the party who initiated the court proceedings and the party seeking that the dispute be referred to arbitration.  The proviso to Article 8(1) would not make sense otherwise. There would be no basis upon which a court could grant a mandatory stay on the basis of an arbitration agreement, unless persons are party to such arbitration agreement.

15.It follows that the first and third grounds relied on by the defendants for a mandatory stay under AO section 20(1) are inapposite.  Merely because the outcome of an arbitration may have ramifications on the outcome of court proceedings cannot be a basis for suggesting that the parties to the court proceedings should be treated as parties to an arbitration agreement and thus susceptible to the imposition of a mandatory stay.  As for the alleged “collusion” ground, I am unclear what is meant.  At heart, it is the same point as the first ground. The defendants are essentially saying that, because the outcome of the court proceedings may hinge on what happens in the arbitration, Glory Asia should not be permitted to “wrest from the agreed tribunal the very questions which the contracting parties agreed to refer to it”.  There is a further difficulty.  In contending that the arbitral tribunal is being denied the prospect of ruling on the questions which “the contracting parties agreed to refer to it,” the defendants appear to be asserting that which they are seeking to prove -- namely, that Glory Asia is a contracting party to the arbitration agreement.

16.That leaves the second ground -- namely, that it is at least arguable that Glory Asia is a party to the arbitration provision governing the 2^nd and 3^rd Supplemental Agreements.  However, the particulars relied upon by the defendants are insufficient to support even a prima facie inference that Glory Asia is a party to the relevant arbitration agreements via Chen’s agency.  The mere fact that a person X executes a contractual obligation through a party T does not turn the latter into X’s principal.  Nor would T’s action transform T into X’s principal in respect of all X’s obligations under the pertinent contract.  At best, the inference would be that T acted as X’s agent for the purpose of executing the particular contractual obligation which T performed. Consequently, the mere fact that Glory Asia advanced loan monies on (say) Chen’s instruction and behalf would not turn Glory Asia into Chen’s principal for the purposes of being bound by the arbitration clause governing the 2^nd and 3^rd Supplemental Agreements.

17.The fact that the monies loaned by Glory Asia originated from Chen (if that was the case) would not affect the foregoing analysis. If anything, it would fortify the conclusion that Chen alone is bound by the arbitration agreement as Glory Asia’s principal.  As for the rhetorical question, it is unclear how the question advances the defendants’ case.  Glory Asia advanced the loan monies because Chen caused it to do so.  The defendants argue that, by pleading in its Statement of Claim that Glory Asia lent to ETH, Glory Asia “necessarily” asserts that it is a party to the 2^nd Supplemental Agreement and thus to the arbitration clause regulating that contract. I am not persuaded. Assume that Chen caused Glory Asia to lend monies to ETH which then accepted such loan as the fulfilment of Chen’s obligation under the 2^nd Supplemental Agreement.  I am unable to see how those premises imply that Glory Asia should be regarded as a party to the 2^nd Supplemental Agreement. 

18.A significant portion of the defendants’ submissions is taken up by a “centre of gravity” analysis based on my judgment in AAAA v DDDD [2024] HKCFI 513, [2024] 1 HKLRD 1358 (16 February 2024). But that analysis is likewise inapposite. There is undoubtedly overlap between the scopes of the court and arbitration proceedings. But the fact of overlap would not transform Glory Asia into a party to the arbitration agreement, when it is not so, and when there are dispute resolution clauses in the guarantee and share charge giving the court exclusive jurisdiction over disputes arising out of those two documents.

B.    Should there be a discretionary stay?

19.The defendants alternatively apply for a case management stay as a matter of the exercise of my discretion under RHC Order O. 1B r. 1(e) or the inherent jurisdiction.

20.The defendants seek such a stay on four bases.  First, the defendants’ liability is said to be contingent on the outcome of the arbitration.  In particular, liability under the share charge and the guarantee are said by the defendants to be predicated on whether Fung or ETH is liable under the JVA and its Supplemental Agreements.  Second, the parties in these court proceedings will be bound (or are at least likely to be bound) by the findings in the arbitration.  Fung, as the claimant in the arbitration, will automatically be bound by the result in those proceedings. VC East has offered an undertaking to be bound by the determinations in the arbitration. It is “strongly arguable” that Glory Asia will be precluded from relitigating the findings in the arbitration.  This is because (according to the defendants) Glory Asia is Chen’s “corporate embodiment” or privy.  Any contrary position would be unfair, the defendants submit, as it would give Chen the chance through Glory Asia to re-litigate (“out-flank”) findings adverse to her in the arbitration.

21.I disagree with the defendants.

22.The share charge and the guarantee expressly refer to the Hong Kong court having exclusive jurisdiction to decide disputes arising in connection with the documents. It is artificial and contrived for this court to have to guess whether Glory Asia and VC East will or will not be bound by the findings of the tribunal in the arbitration which Fung has commenced against Chen, ETH and the Project Company.  Why does this court have to do so?  The issues in the two proceedings are similar but not necessarily identical. Much may depend on the pleadings in the arbitration and the specific findings of the arbitral tribunal.  Even the alleged undertaking by VC East (a non-party to the arbitration) to be bound by the tribunal’s determination is vague. I am concerned that granting a case management stay will be a recipe for future arguments before this court as to what the tribunal actually found or did not find on what specific issues and in what specific contexts.  See further Skatteforvaltningen v MCML Ltd [2026] UKSC 19 (UKSC), especially [40] to [53] on the narrow scope of the doctrine of issue estoppel. I fear that a case management stay is likely to be a recipe for much satellite litigation, running contrary to the express provisions giving this court the jurisdiction to determine differences between the parties in connection with the guarantee and the share charge. A conditional stay, of the sort explored with counsel in the course of their oral submissions, would be beset by similar difficulties.

23.Arbitration is an effective means of dispute resolution as between the parties to an arbitration agreement.  Where non-parties to an arbitration agreement are involved, court proceedings will typically be more efficient than arbitration as a means of resolving parties’ differences as a one-stop dispute resolution option. That is because RHC Order 15, rule 4 empowers the court to join parties (whether or not parties to the same contract) where (as here) common questions of fact or law arise from the parties’ transactions.  There is no equivalent extensive power of joinder in arbitration.

24.The defendants have submitted a draft Defence and Counterclaim in these court proceedings. Many of the defendants’ contentions in the arbitration have been raised in the draft by way of a defence or counterclaim.  Given the court’s power of joinder, it would be possible to join all the parties in the arbitration to these proceedings to ensure a time-efficient, cost-effective and logically coherent resolution of the parties’ differences.  The court would not have to divine whether this or that finding of the court will or will not bind the parties by way of issue estoppel, the principle in Henderson v Henderson ((1843) 3 Hare 100, 67 ER 313), waiver, and positive or negative res judicata.  Such position would not be attained if these proceedings were to be stayed as a matter of case management considerations, pending the outcome of Fung’s arbitration proceedings.

25.Of course, this court cannot compel Fung or Chen jointly to waive their contractual right to have their differences over the JVA and its Supplemental Agreements determined through arbitration.  AO section 20(1) safeguards the arbitration agreement governing those contracts.  If they are unable jointly to agree on pursuing litigation and (say) staying their arbitration, they must live with the possible consequences of a duplication of costs or inconsistent findings. The defendants also complain that court proceedings will mean that the matters that they had agreed to subject to the confidentiality of arbitration will be publicly ventilated in court. But that is a consequence of the conflicting dispute resolution clauses in the several agreements here.

26.The fact of parallel or near parallel proceedings in different forums is a common risk where there are conflicting dispute resolution clauses. It is primarily for the parties at the time of contracting to ensure that conflicting dispute resolution clauses are minimised or eliminated.  It is not the court’s task to go through semantic or other contortions merely to reconcile provisions that (as here) commercial parties themselves did not harmonise.  Certainly, it is not the court’s role to order a case management stay as a matter of discretion, when the court believes (as I do) that the most efficient and effective way forward would be for the present court proceedings to continue.

IV.     CONCLUSION    

27.The position is the reverse of that for which the defendants contend. It seems to me that the differences between the parties arising in relation to the guarantee and charge can most effectively and efficiently be resolved through the continuation of these court proceedings.  The defendants’ application is therefore dismissed.

28.I shall now hear the parties on costs and any consequential orders.

Mr Bernard Man SC leading Mr Sik Chee Ching, instructed by DLA Piper Hong Kong, for the Plaintiff

Ms Frances Lok SC leading Mr Paul Law, instructed by Haldanes, for the 1^st and 2^nd Defendants