Lin Ming and Another v. Chen Shu Quan and Others

HCA 1900/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1900 OF 2011

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BETWEEN

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Before : Deputy High Court Judge P Ng SC in Chambers

Date of Hearing : 7 February 2012

Date of Judgment : 8 March 2012

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J U D G M E N T

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1.There are two applications before me.

2.First, there is a summons dated 29 November 2011 by the 1^st plaintiff for an injunction restraining the 27^th and 28^th defendants, as well as Gingero Associated SA (“Gingero”), from proceeding with and /or taking any further step in the arbitration Case No HKIAC/A11113 (“HKIAC Arbitration”) until the determination of this Action or further order (“Injunction Application”).  Gingero is not a party to this Action.  It is unclear on what basis the 1^st plaintiff joins Gingero in the Injunction Application.

3.Second, there is a summons dated 19 December 2011 by the 27^th and 28^th defendants for an Order that the 1^st plaintiff’s claims against them in this Action be stayed in favour of the HKIAC Arbitration (“Stay Application”).

4.On 9 September 2011, the HKIAC Arbitration was commenced by the 28^th defendant, the 27^th defendant and Gingero as the 1^st, 2^nd and 3^rd claimants against the 1^st plaintiff as the sole Respondent.  Both parties have filed their pleadings in the HKIAC Arbitration ‑ the 28^th defendant, the 27^th defendant and Gingero filed their Statement of Claim on 25 November 2011 and the 1^st plaintiff filed his Statement of Defence and Counterclaim on 6 January 2012.

5.On 4 November 2011, the plaintiffs issued the Writ of Summons in the present Action.  The plaintiffs’ Statement of Claim was dated 4 November 2011, and was subsequently amended on 18 November 2011.  The 27^th and 28^th defendants have not filed their Defence in this Action.

6.It is common ground between the parties that the facts and matters relied upon by the 1^st plaintiff in this Action are substantially the same as those in the HKIAC arbitration.  Indeed, the 1^st plaintiff’s case is that precisely because the issues raised by the parties in the two sets of proceedings are the same and the evidence to be adduced is also likely to be the same, it would be oppressive if the 1^st plaintiff has to handle two proceedings concurrently.

7.In support of his client’s case, Counsel for the 1^st plaintiff prays in aid two authorities viz. University of Reading v Miller Construction Ltd (1994) 75 BLR 91 and J Jarvis & Sons Ltd v Blue Circle Darford Estates Ltd [2007] EWHC 1262.  I shall come back to them later in this judgment.

8.The Stay Application is based on section 20 of the Arbitration Ordinance, Cap 609, which gives legal effect to Article 8 of the UNCITRAL Model Law (“Model Law”) :

“ (1) Article 8 of the UNCITRAL Model Law, the text of which is set out below, has effect‑

Article 8. Arbitration agreement and substantive claim before Court

(1) A Court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed…

(5) If the Court refers the parties in an action to arbitration, it must make an order staying the legal proceedings in that action.”

Background

9.The following background facts are taken from the amended Statement of Claim in this Action and the Statement of Claim and the Statement of Defence and Counterclaim in the HKIAC Arbitration.

10.The 1^st plaintiff and the 2^nd plaintiff, a company incorporated in the PRC, were at all material times engaged in the business of food processing and trading.  The 2^nd plaintiff owned a piece of land in Fuzhou, the PRC, with plants and equipments for seafood processing and trading.

11.The 1^st plaintiff was the sole director and shareholder of Win Power Investment Limited (“Win Power”), a company incorporated in the BVI.  He was also the indirect 100% shareholder of the 2^nd plaintiff, via Win Power, Fame Glory Holding Limited, another BVI company, and Jointa Limited, a company incorporated in Hong Kong.

12.On 18 January 2008, the 28^th defendant and the 1^st plaintiff entered into a Share Purchase Agreement (“Share Purchase Agreement”) whereby the 28^th defendant agreed to acquire from the 1^st plaintiff 1,000 shares of Win Power, representing 10% of its entire issued share capital (“Sale Shares”).  The consideration for the Sale Shares was RMB 115,000,000. 

(a)   Under Clause 10.6.1 of the Share Purchase Agreement, the 1^st plaintiff was to use his best endeavors to procure the occurrence of a “Qualifying IPO” within 24 months from completion.  “Qualifying IPO” meant an initial public offering undertaken by a special purpose vehicle on The Stock Exchange of Hong Kong Limited or other internationally recognized stock exchange.

(b)   Clause 12.1 of the Share Purchase Agreement provided that if no Qualifying IPO took place by 29 January 2010 (being two years following the Completion Date of the Share Purchase Agreement), the 28^th defendant might at any time exercise a put option by written notice to the 1^st plaintiff requiring him to purchase all of the Sale Shares.

(c)   The Share Purchase Agreement contained an arbitration clause at clause 19.2 in the following terms :

“19.2 Arbitration

19.2.1 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, (each, a “Dispute”) shall be referred to and finally resolved by arbitration in accordance with the provisions of this Clause 19.2…”

13.In November 2008, the 27^th defendant acquired the beneficial interest in 237 of the 1,000 Sale Shares from the 28^th defendant. This was evidenced by, inter alia, a Declaration of Trust dated 12 November 2008 executed by the 1^st plaintiff in favour of the 27^th defendant. Significantly, on 12 November 2008, the 1^st plaintiff issued a confirmation letter (“Confirmation Letter”) to the 27^th and 28^th defendants who also countersigned it.  The third paragraph of the Confirmation Letter provided as follows :

“Notwithstanding anything to the contrary in the Agreement, we hereby irrevocable and unconditionally give our written approval to the Proposed Transfer and waive our right of first refusal and tag-along right for the Proposed Transfer; provided, however, that [the 27^th defendant] shall assume and succeed all the rights and obligations of [the 28^th defendant] under the [Share Purchase Agreement] for 237 Shares subject to the Proposed Transfer. For the avoidance of doubt, [the 28^th defendant] shall remain to be bound by the [Share Purchase Agreement] for the remaining 763 Shares after the Proposed Transfer.”

14.It is the case of the 27^th defendant that it thereby assumed and succeeded all the rights and obligations of the 28^th defendant under the Share Purchase Agreement in relation to the 237 Sale Shares, including the arbitration agreement contained in clause 19.2 thereof.

15.On 30 January 2009, Gingero acquired the beneficial interest in 220 of the remaining Sale Shares from the 28^th defendant.  As in the case of the 27^th defendant, a similar declaration of trust and a confirmation letter, both dated 30 January 2009, were executed by the 1^st plaintiff.

16.On 26 August 2011, the 27^th and 28^th defendants and Gingero, through their solicitors, issued a notice under clause 12.1 of the Share Purchase Agreement requiring the 1^st plaintiff to purchase the Sale Shares.

17.The 1^st plaintiff having failed to comply with the notice, the 27^th and 28^th defendants and Gingero commenced the HKIAC Arbitration on 9 September 2011, seeking a sum of US$25,317,032.30 being the purchase price of the Sale Shares calculated in accordance with clause 12.1 from the 1^st plaintiff.

18.On 4 November 2011, the plaintiffs issued the Writ of Summons in the present Action.  The amended Statement of Claim runs to over 100 pages.  But in gist, the complaint is that the 1^st plaintiff’s group of companies have been unlawfully taken over by the defendants during his detention in the Mainland sometime in 2009 and 2010.

19.In order to facilitate a better understanding of the parties’ arguments in the two applications, I shall endeavour to give a very brief summary of the 1^st plaintiff’s pleaded case concerning the 27^th and 28^th defendants :

(a)   At or about the end of 2007, the 28^th defendant, an institutional investor, approached the 1^st plaintiff and showed interest in investing in his food processing business.  Subsequently, the 1^st plaintiff and the 28^th defendant entered into the Share Purchase Agreement by which the 1^st plaintiff agreed to transfer 1,000 shares in Win Power to the 28^th defendant at the consideration of RMB 115,000,000.

(b)   The 1^st plaintiff and the 28^th defendant contemplated that the 1^st plaintiff’s business would be listed in the future.  It was an implied term of the Share Purchase Agreement that the 28^th defendant, its agents or servants :

(i)   should not do any act which was harmful to the 1^st plaintiff and his group of companies or which hindered, obstructed or frustrated his listing plan ;

(ii)   should exercise reasonable diligence in assisting or cooperating with the 1^st plaintiff and his group of companies towards listing his business.

(c)   At the request of the 28^th defendant, the 1^st plaintiff held the 1,000 shares in Win Power on trust for 3 entities nominated by it viz. the 27^th defendant, the 28^th defendant and Gingero.  The 1^st plaintiff remained the legal owner of the said 1,000 shares in Win Power.

(d)   The 27^th defendant was the agent and nominee of the 28^th defendant.  They, together with the other defendants in this Action and certain Mainland government officials, had conspired to cause damage to the plaintiffs, with the predominant intent to injure or by unlawful means viz. converting the 1^st plaintiff’s shares in his group of companies and unlawfully obtaining ownership and control thereof, as well as converting and /or misappropriating the assets of the plaintiffs and Win Power.

(e)   Prior to 22 October 2009, the 1^st, 7^th, 17^th and /or 28^th defendants and /or their agents had unlawfully conspired to take over the management of the 2^nd plaintiff (“the Unlawful Scheme”).  Pursuant to the Unlawful Scheme, the 1^st, 7^th, 17^th and/or 28^th defendants and /or their agents had wrongfully caused the Mainland government authorities to arrest the 1^st plaintiff, his sister and another person.

(f)   By reason of the participation of the 27^th and 28^th defendants and /or their agents in the Unlawful Scheme and /or by reason of their agreement with the other defendants to misappropriate the funds and assets of the 2^nd plaintiff, they had acted in a manner totally inconsistent with and in breach of the implied term of the Share Purchase Agreement and frustrated the 1^st plaintiff’s listing plan.

(g)   The Share Purchase Agreement was terminated on the day when the first overt act pursuant to the Unlawful Scheme was carried out.

(h)   In the circumstances, the obligation of the 1^st plaintiff under the Share Purchase Agreement was discharged and the 27^th and 28^th defendants had lost their right to exercise the put option under the Share Purchase Agreement.  Further, since Gingero was controlled by the same group of people as the 27^th and 28^th defendants, it had also lost the right to exercise the put option under the Share Purchase Agreement.

(i)   In the prayer for relief, the 1^st plaintiff sought inter alia a declaration that the 27^th and 28^th defendants were in fundamental breach of the Share Purchase Agreement and that it had been terminated.

20.On 29 November 2011, the 1^st plaintiff issued the summons for the Injunction Application.  On 19 December 2011, the 27^th and 28^th defendants issued the summons for the Stay Application.

21.On 6 January 2012, the 1^st plaintiff filed a Statement of Defence and Counterclaim in the HKIAC Arbitration, basically repeating his case in this Action.

22.To complete the picture, the 1^st plaintiff has, prior to 6 January 2012, made a number of attempts to stay the HKIAC Arbitration on the basis that inter alia his proposed Statement of Defence and Counterclaim would be substantively similar to the claims he asserted in this Action.  The 1^st plaintiff’s stay applications were made by letters to the HKIAC and the arbitrator Dr Michael Moser.  The applications were rejected by both.

Stay under section 20 Arbitration Ordinance

23.The HKIAC Arbitration was commenced in Hong Kong on 9 September 2011, after the (new) Arbitration Ordinance, Cap 609, had come into effect.

24.Section 20 of the Arbitration Ordinance gives legal effect to Art 8 of the Model Law.  It sets out the basic principle that a Court before which an action is brought in a matter which is the subject of an arbitration agreement must refer the parties to arbitration unless it is established that the arbitration agreement is null and void, inoperative or incapable of being performed.

25.Once the conditions of Art 8 are satisfied, a stay of the legal action is mandatory : Astel‑Peiniger Joint Venture v Argos Engineering & Heavy Industries [1995] 1 HKLR 300; William Company v Chu Kong Agency [1995] 2 HKLR 139; Pacific Crown Engineering v Hyundai Engineering Ltd & Construction Co Ltd [2003] 3 HKLRD 440; Tommy C.P. Sze & Co v Li & Fung [2003] 1 HKC 418.

26.The case of the 27^th and 28^th defendants for a stay is straightforward :

(a)   There is a valid arbitration agreement between the 27^th and 28^th defendants and the 1^st plaintiff in terms of clause 19.2 of the Share Purchase Agreement.

(b)   The claims made by the 1^st plaintiff in this Action ie the 27^th and 28^th defendants had committed a fundamental breach of the Share Purchase Agreement whereby it was terminated and they had lost the right to exercise the put option, arise out of and relate to the Share Purchase Agreement, and fall squarely within the scope of the arbitration agreement.

(c)   The 27^th and 28^th defendants have applied for a stay of the 1^st plaintiff’s claims against them in this Action before filing their Defence.

(d)   The 1^st plaintiff does not challenge the arbitration agreement in question as being null and void, inoperative or incapable of being performed.

(e)   The 1^st plaintiff does not contend that the disputes between the 27^th and 28^th defendants and him fall outside the scope of the arbitration agreement ‑ on the contrary, the 1^st plaintiff maintains that the issues raised against the 27^th and 28^th defendants in this Action are substantially similar to those in the HKIAC Arbitration.

(f)   The requirements of Art 8(1) of the Model Law having been met, it is mandatory for the Court to stay the 1^st plaintiff’s claims against them.

27.As far as the existence of the arbitration agreement is concerned, while the 1^st plaintiff’s case is that the Share Purchase Agreement has been terminated by the 27^th and 28^th defendant’s fundamental breach, this would not affect the validity of the arbitration agreement as such. Art 16(1) of the Model Law provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement and, for that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.  Art 16(1) of the Model Law is now given legal effect in Hong Kong by virtue of section 34 of the Arbitration Ordinance.

28.In Fung Sang Trading Limited v Kai Sun Sea Products & Food Company Ltd [1992] 1 HKLR 40 at 50, Kaplan J observed that Art 16(1) of the Model Law enshrined the doctrine of separability which English law had partially recognised since Heyman v Darwins [1942] AC 356. Thus the arbitration clause is separable from the contract containing it so that even if the contract is repudiated and the repudiation is accepted, the arbitration clause survives the repudiation.

29.Subject to one point, there is nothing in the submissions of the 1^st plaintiff which argues against the case of the 27^th and 28^th defendants for a stay, as such.  Instead, the submissions of the 1^st plaintiff focus solely on why the HKIAC Arbitration should be restrained, to which I shall return later in this judgment.

30.The point is this.  At the hearing, Counsel for the 1^st plaintiff disputed the existence of any arbitration agreement between the 1^st plaintiff and the 27^th defendant. He seemed to be suggesting that the 1^st plaintiff and the 27^th defendant were parties to the substantive part of the Share Purchase Agreement, in so far as the 237 Sale Shares were concerned, but not the arbitration clause in the Share Purchase Agreement.  He prayed in aid the doctrine of separability, but somewhat turned it the other way round.

31.I do not agree.  In The Jordan Nicolov [1990] 2 Lloyd’s Rep 11 at 15, Hobhouse J (as he then was) made the following observations concerning the effect of legal assignment of a contract with an arbitration clause :

“But where the assignment is the assignment of the cause of action, it will, in the absence of some agreement to the contrary, include as stated in s136 [of the Law of Property Act 1925]all the remedies in respect of that cause of action. The relevant remedy is the right to arbitrate and obtain an arbitration award in respect of the cause of action. The assignee is bound by the arbitration clause in the sense that he cannot assert the assigned right without also accepting the obligation to arbitrate. Accordingly, it is clear both from the statute and from a consideration of the position of the assignee that the assignee has the benefit of the arbitration clause as well as of the other provisions of the contract.” (emphasis added)

In Hong Kong, section 9 Law Amendment and Reform (Consolidation) Ordinance, Cap 23, similarly provides inter alia that such an assignment is effectual in law to pass and transfer the legal right to such chose in action and all legal and other remedies for the same.

32.If one looks at the express terms of the Confirmation Letter, it seems reasonably clear that the intention of the parties who signed the letter viz. 1^st plaintiff, the 27^th and 28^th defendants, was that the 27^th defendant would thereafter assume all the rights and obligations of the 28^th defendant under the Share Purchase Agreement, in so far as the 237 Shares were concerned.  Whether one analyses the legal effect of the Confirmation Letter as an assignment of the 28^th defendant’s rights under the Share Purchase Agreement to the 27^th defendant or as a novation of the Share Purchase Agreement among the three parties is not important.  The important thing is there is nothing to suggest that they intended to leave out the arbitration agreement at clause 19.2 from the assignment or the novation.

33.In any event, the onus on the 27^th defendant is merely to demonstrate to this Court a good prima facie case, or a plainly arguable case, that an arbitration agreement exists between the 27^th defendant and the 1^st plaintiff, and if so, to refer the matter to the arbitrator for final determination : Pacific Crown Engineering v Hyundai Engineering Ltd & Construction Co Ltd [2003] 3 HKLRD 440 at §§6 & 12.  In my view, a good prima facie case has been so established.

34.In my judgment, the conditions of Art 8 of the Model Law having been satisfied, this Court is bound to give effect to it and grant the Stay Application by the 27^th and 28^th defendants in favour of the HKIAC Arbitration.

The Injunction Application

35.It should be immediately apparent that if this Court accedes to the Stay Application in favour of HKIAC Arbitration, it would be self‑defeating for this Court then to grant an injunction restraining the 27^th and 28^th defendants from proceeding with the HKIAC Arbitration.  Common sense compels this Court to adopt one or the other course, but not both.  Given that a stay under Art 8 of the Model Law is mandatory, the course which this Court has to adopt should be quite obvious.

36.Further, granting the injunction sought by the 1^st plaintiff would tend to undermine the object of the Arbitration Ordinance viz. to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense, and the principles upon which the Ordinance is based viz.

“(a) that, subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how the dispute should be resolved ; and

(b) that, the Court should interfere in the arbitration of a dispute only as expressly provided for in this Ordinance.”

See section 3 of the Arbitration Ordinance.

37.Solicitors for the 27^th and 28^th defendants go even further.  Their submission is that the Court has no power to restrain the HKIAC Arbitration at all. In this regard, apart from section 20, they also rely on section 12 of the Arbitration Ordinance which gives legal effect to Art 5 of the Model Law as follows :

“In matters governed by this Law, no Court shall intervene except where so provided in this Law.”

38.In the present case, the Injunction Application is not premised on anything expressly provided for in the Arbitration Ordinance or the Model Law.  Instead, Counsel for the 1^st plaintiff relies on the Court’s general jurisdiction to grant injunctive relief under section 21L of the High Court Ordinance, Cap 4, and the principles set out in the two authorities to which I now turn.

39.In University of Reading v Miller Construction Ltd (1994) 75 BLR 91, the university employed Miller to carry out construction work under two contracts.  The second contract (but not the first) contained an arbitration clause.  The university also employed HLM as architects and RSA as consulting engineers in connection with the building works.  Pursuant to the arbitration clause in the second construction contract, Miller brought arbitration proceedings against the university, claiming £1.8 million. The university then brought proceedings in the Official Referees’ Court, making claims against Miller, RSA and HLM in respect of the building works which had been the subject of both construction contracts.  Miller applied under section 4 of the Arbitration Act 1950 for a discretionary stay of those proceedings insofar as they related to the second construction contract.  Judge Bowsher QC dismissed the application for a stay.

40.The University then applied to the Official Referees’ Court for an injunction to restrain Miller and the arbitrator from taking further steps in the arbitration until after trial.  Judge Lloyd QC acceded to that application.

41.At p 111 B‑G, Judge Lloyd QC noted that the Court had the power to restrain the continuance of an arbitration but that power would only be exercised sparingly.  The relevant principles were those stated by Sellers LJ in The ‘Oranie’ and The ‘Tunisi’' [1966] 1 Lloyd’s Rep 477 at 487 viz.

(1)   the stay must not cause injustice to the claimant in the arbitration ;

(2)   the applicant for a stay must satisfy the Court that continuance of the arbitration would be oppressive or vexatious to him or an abuse of the process of the Court : in short, that it would be unjust.

42.In the circumstances of the case, his Lordship concluded that the proposed injunction would not cause injustice to Miller whereas it would be vexatious and oppressive for the University to be involved in concurrent proceedings before the Court and the arbitrator.  He therefore granted an injunction restraining Miller and the arbitrator from taking further steps in the arbitration until after the trial of the Court proceedings.

43.Unlike Art 8 of the Model Law, section 4 of the Arbitration Act 1950 conferred a discretion on the Court to grant a stay of legal proceedings where there was a submission to arbitration.  Judge Bowsher QC had earlier refused to exercise the discretion to grant a stay.  Hence, when subsequently Judge Lloyd QC heard the injunction application, there was no question of a stay of the legal proceedings.  His Lordship was only concerned with whether to allow the arbitration to proceed concurrently with the legal proceedings, or to restrain its continuance until after the trial of the legal proceedings.

44.University of Reading v Miller Construction Ltd was decided prior to the Arbitration Act 1996.  On 31 January 1997, the Arbitration Act 1996 came into force, and the principles upon which the Act was based effected a significant shift in the law of arbitration in England.  Two of the principles set out in section 1 of the Act are respect for party autonomy and self‑restraint by the Courts when intervening in the arbitral process.

45.In J Jarvis & Sons Ltd v Blue Circle Darford Estates Ltd [2007] EWHC 1262, the question before the Court was whether its jurisdiction to restrain continuance of an arbitration on the grounds identified in The ‘Oranie’ and The ‘Tunisie’ survived the enactment of the Arbitration Act 1996.  Jackson J, after reviewing the authorities, concluded that it did.

46.At paragraphs [39] and [40], his Lordship observed as follows :

“[39]…It is clear from two decisions of the Commercial Court (with which I respectfully agree) that the jurisdiction does survive, but its exercise will now be even more sparing than before. See Intermet FCZO v Ansol Ltd [2007] EWHC 226 (Comm) and Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm), [2007] 2 Lloyd's Rep 8 (Comm). In both of those cases the existence of the jurisdiction was acknowledged, but the Court refused to grant an injunction. …. Indeed, despite their industry, neither advocate has been able to find any case since 31 January 1997 in which the Court has granted an injunction to halt an arbitration.

[40] From this review of authority I derive four propositions :

(i) The Court’s power under s37 of the Supreme Court Act 1981 to grant injunctions includes a power to grant an injunction to restrain an arbitration from proceeding.

(ii) That power may be exercised if two conditions are satisfied, namely :

(a) the injunction does not cause injustice to the Claimant in the arbitration, and

(b) the continuance of the arbitration would be oppressive, vexatious, unconscionable or an abuse of process.

(iii) The Court’s discretion to grant such an injunction is now only exercised very sparingly and with due regard to the principles upon which the Arbitration Act 1996 is expressly based.

(iv) Delay by the party applying for an injunction is material to the Court’s exercise of discretion and may in some cases be fatal to the application.”

47.Counsel for the 1^st plaintiff made three points in support of the Injunction Application.

48.First, if the HKIAC Arbitration is allowed to continue, there will be two different tribunals of facts adjudicating upon the same matter based on the same factual matrix and evidence.  There is a risk that the facts found by the two tribunals will be different.  This is totally undesirable.

49.Second, there will be no injustice to 27^th and 28^th defendants and Gingero if they are restrained from proceeding with the HKIAC Arbitration pending the outcome of the present Action.  On the other hand, the continuance of the HKIAC Arbitration will be unjust to the 1^st plaintiff in that he has to apply his resources to two identical proceedings while the 27^th and 28^th defendants would only need to deal with one if the present Action against them is stayed.

50.Third, even if the 1^st plaintiff’s claims against the 27^th and 28^th defendants in this Action are stayed, the Action against the other defendants will continue.  As these defendants are sued inter alia as their agents, the 27^th and the 28^th defendants cannot be completely removed from this Action.

51.On the question of jurisdiction, presently, I am not convinced by the arguments of Mr Yang for the 27^th and 28^th defendants that sections 12 and 20 of the Arbitration Ordinance have the effect of ousting the Court’s jurisdiction under section 21L High Court Ordinance to grant injunctive relief in a case like the present.  I note that in England, where the concept of respect for party autonomy and self‑restraint by the Courts when intervening in the arbitral process is similarly endorsed, the Courts tend to assume that the wide jurisdiction to grant injunctive relief under section 37(1) of the Supreme Court Act 1981 continues to exist : Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618, [2005] 1 WLR 355 at paragraph 74; Intermet FCZO v Ansol Ltd [2007] EWHC 226 (Comm) at paragraph 20; Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm), [2007] 2 Lloyd’s Rep 8 (Comm) at paragraph 51; J Jarvis & Sons Ltd v Blue Circle Darford Estates Ltd op cit.

52.As I have not heard full arguments on the tension, if any, between the Arbitration Ordinance and the Court’s jurisdiction under section 21L of the High Court Ordinance, I shall refrain from expressing any concluded view on it.  The relationship between the two is a matter that requires detailed consideration and is eminently suitable for decision by the higher Courts.

53.I am content to assume there is jurisdiction to grant an injunction to restrain the continuance of an arbitration to which the Arbitration Ordinance applies, but that such jurisdiction must be exercised very sparingly and with great caution.  With this in mind, I turn to the three points raised by Counsel for the 1^st plaintiff.

54.As far as the first point is concerned, this Court accepts that it is in general undesirable to have parallel proceedings in this jurisdiction involving the same factual disputes, with the concomitant risk of inconsistent factual findings.  However, one should not lose sight of the fact that it was the 1^st plaintiff who created this risk by instituting the present Action two months after the commencement of the HKIAC Arbitration.  Where a litigant, like the 1^st plaintiff in this Action, chooses to sue multiple defendants, some of which are parties to an arbitration agreement while other are not, the costs and inconvenience of concurrent proceedings and the risk of inconsistent factual findings are almost inevitable.  Nevertheless, it lies ill in the 1^st plaintiff’s mouth to complain of oppression when it is his own decision which creates the oppressive situation.

55.The second and the third points can be dealt with together.

56.To start with, I am not convinced that there will be no injustice to the 27^th and 28^th defendants if they are restrained from proceeding with the HKIAC Arbitration until after the determination of this Action.  In the HKIAC Arbitration, they are asserting one claim against one party viz. the 1^st plaintiff, for buying back the Sale Shares pursuant to the terms of the Share Purchase Agreement.  On the other hand, in this Action, the plaintiffs are asserting a number of claims against a large number of defendants.  Compared with the HKIAC Arbitration, this Action is likely to take much longer to proceed to trial, and the trial is likely to last much longer.  Further, the progress of this Action will in no small ways depend on inter alia the pace at which the plaintiffs choose to prosecute their claims and the vigor with which the other 26 defendants choose to defend them.  This is something over which the 27^th and 28^th defendants have little control.  If the 27^th and 28^th defendants are restrained from proceeding with the HKIAC Arbitration until after the determination of this Action, they could face considerable delay before they can resume the HKIAC Arbitration.

57.Further, it seems to me a false point to suggest that the 27^th and 28^th defendants would only need to deal with one set of proceedings whereas the 1^st plaintiff will have to deal with two.  The simple reason is that there is no question of staying this Action so far as the 2^nd plaintiff is concerned.  The 2^nd plaintiff is not said to be a party to the arbitration agreement in question.  Its claims for damages for fraud, conspiracy, conversion and so on against all the defendants, including the 27^th and 28^th defendants, will remain in this Action, irrespective of the outcome of the applications before me.  Whatever inconvenience, expenses and strain on resources said to be suffered by the 1^st plaintiff in having to engage in two concurrent proceedings will likewise be suffered by the 27^th and 28^th defendants.  Equally, there is no question that the 27^th and 28^th defendants can be completely removed from this Action.

58.In the circumstances of this case, the 1^st plaintiff has not satisfied me that the continuance of the HKIAC Arbitration would be oppressive, vexatious, unconscionable or an abuse of process, or that the injunction sought would not cause injustice to the 27^th and 28^th defendants. Even if I am wrong on this, in view of the concerns that I express in paragraphs 35 and 36 above, I am in any event not inclined to exercise my discretion to restrain the 27^th and 28^th defendants from proceeding with the HKIAC Arbitration.

Order

59.Accordingly, I grant the stay sought by the 27^th and 28^th defendants and dismiss the 1^st plaintiff’s application for an injunction.  I also make a costs order nisi that the 27^th and 28^th defendants are to have their costs in both applications, such costs to be taxed if not agreed.

Mr Kelvin Leung, instructed by MCA Lai & Co, for the 1^st plaintiff

Mr Yang Ing Loong of Sidley Austin, for the 27^th and 28^th defendants

Please refer to HCMP552/2012 for the relevant appeal(s) to the Court of Appeal.