GENG FENG v. A.I. INTERNATIONAL TECHNOLOGY LTD AND ANOTHER

HCA 3355/2016

[2022] HKCFI 1023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3355 OF 2016

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DECISION

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1.  This is the Defendants’ application for leave to appeal against the Decision of this court dated 8 September 2021 by which their application for a temporary stay of this action pending the final determination of the Arbitration[1] was dismissed.

2.  The unusual feature of the stay application was the fact that the Arbitration was not one between the parties to this action[2]. However, the Defendants had an opportunity to agree to, but resisted, Geng’s application to have them joined as parties to the Arbitration[3]. This action was commenced after the unsuccessful joinder of the Defendants[4].

3.  The issue in the stay application was identified in paras 16 and 17 of the Decision.  It was one of exercise of discretion by the court to serve the ends of justice between the parties and the administration of justice generally. 

4.  The applicable principles of law were set out in paras 18 and 19 of the Decision.  They were not in dispute. 

5.  At the risk of diversion, it is contended by the Defendants that the court “erred in dismissing the relevance of the Singaporean case of Trinity Construction [cited in para 29 of the Decision]”.  With respect, there is nothing in the point.  The authorities cited by the Defendants were considered, and it was held that they did not diverge from the basic tenets of the principles set out in paras 18 and 19 of the Decision[5].

6.  In particular, the court did not take the view that the stay application solely depended upon the lack of identity of parties.  It was a matter of exercise of discretion as explained above. However, (a) the fact that Geng brought this action as of right and (b) the lack of identity of parties were very important considerations for the exercise of discretion (Decision, §§21 and 22). 

7.  The applicable principles for the present application are settled, and can be summarised as follows :

(1)  The court has to be satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  Leave to appeal is “not lightly granted”: SMSE v KL [2009] 4 HKLRD 125, [17].

(2)  “Reasonable prospects of success” is a higher threshold than showing that the appeal is “arguable” and “not fanciful”: Ho Yuen Ki Winnie v Ho Hung Sun Stanley, unrep, HCMP 1009/2009, 24 August 2009, [16];

(3)  An appeal will not be entertained from an order which was within the discretion of the judge to make, unless it can be shown that the discretion was made under an error or law or in disregard of principle or under a misapprehension of facts; or that the judge took into account irrelevant matters or failed to exercise his discretion or the conclusion reached was “outside the generous ambit within which a reasonable disagreement is possible”: HKCP 2022, vol 1, [59/0/54].

8.  There are 8 grounds of appeal advanced in the draft Notice of Appeal.  It is readily apparent that a “throwing the kitchen sink” approach is adopted by the Defendants.  Many of the grounds are repetition of the arguments previously made for the stay application, and they do not address the key issue of lack of identity of parties.  To that issue (Ground 2) I now turn.

9.  There is force in the submission of Mr Tang, who appeared for Geng, that it is ambiguous whether the Defendants are contending that there is identify of parties in that the parties in both this action and the Arbitration are the same.  It was not so contended by the Defendants at the hearing of their stay application[6].  In any case, it is idle to contend that the parties are identical.

10.  In respect of the Defendants’ arguments under Ground 3 that there was in fact no jurisdictional challenge in the Arbitration and that the court had somehow misunderstood the respondents’ Re-Re-Amended Statement of Defence (“RRAD”) dated 4 June 2021[7] (as pointed out by the Defendants, the relevant part of the pleading can be found in Geng’s skeleton arguments for the stay application, §§33 and 35), they are very difficult to understand and were not the position adopted by the Defendants at the stay application. 

11.  In fairness, Mr Chan SC, who appeared for the Defendants with Mr Liu, Mr Lai and Ms Hung, informed the court at the hearing that upon reflection on their merits, paras 23 and 24 of the Defendants’ skeleton arguments were not pressed.  However, there was no withdrawal of Ground 3.

12.  In any case, I find the submissions disingenuous.  Para 167D(4) of the RRAD pleaded an averment that Geng’s rights under the Share Transfer Agreement dated 21 March 2005, “whether they are substantive rights or the right to arbitrate”, had been “extinguished or replaced by new rights” under a later 25 April 2005 Share Transfer Agreement. Under the later Agreement, the parties had agreed to refer their dispute to the Shenzhen Intermediate People’s Court.  Plainly, if the contention is upheld by the Arbitral Tribunal, it means that (a) the Tribunal has no jurisdiction over the dispute[8] and (b) the Arbitration may not result in any relevant finding, which will render the Defendants’ agreement to be bound by the same futile[9].

13.  The Defendants also contend that the issue of identity of parties is now academic because the respondents had applied to the Tribunal to amend the RRAD to remove the jurisdictional challenge.  This took place after the Decision, and I fail to see why it is relevant to this application for leave to appeal against the Decision.  As submitted by Mr Tang, this is not a fresh application for temporary stay by reason of change of circumstances. 

14.  In Ground 1, it is contended that the court had “got the basic facts of the case wrong”.  Para 6 of the Decision, which set out the background facts, stated that “[i]t was acknowledged in the Share Transfer Agreement that Geng would retain his interest in the shares in Shenzhen Jinzhi”.  This was indeed erroneous.  Possibly, the error could be traced to para 12.4 of the 2^nd Affirmation of Wong Tze Wei filed on 23 July 2021. 

15.  However, I agree with Mr Tang that there is no merit in Ground 1.  It is wrong for the Defendants to categorize the error as a “finding”.  The court was not required to, and did not, make any finding of fact in the determination of the stay application.  More importantly, the exercise of discretion by the court in rejecting the application did not depend on the merits of the parties’ cases in the Arbitration or this action.  In short, the error had no material impact upon the Decision. 

16.  As part of Ground 1, the Defendants also contend that the court had failed to take any or sufficient account of the Defendants’ and/or respondents’ case.  The preceding paragraph is sufficient to dispose of this point.  In any event, the Defendants’ case was summarised in their skeleton arguments for the stay application, which was considered by the court.

17.  In his viva voce submissions, Mr Chan emphasised that it would be unjust for Geng to have 2 bites of the cherry in that if he loses on the Arbitration, he will be able to run his case again in this action.  With respect, firstly, the Defendants could have avoided that situation had they agreed to be joined in the Arbitration.  Secondly, the point could have been forcefully made had there been no jurisdictional challenge made by the respondents in the Arbitration.  Thirdly, in light of the jurisdictional challenge, the Arbitration may not result in any relevant finding.

18.  Mr Chan also emphasised that there was a binding agreement between Geng and the Defendants on a stay of this action (Ground 7). The issue was addressed in paras 33 to 35 of the Decision.  I do not believe that the arguments demonstrated a reasonable prospect of success on this Ground.

19.  With respect, I am unable to find merit in the remainder of the Grounds, much of which are repetition of the arguments advanced in the stay application. 

20.  For these reasons, this leave application is dismissed.  There is no issue that upon dismissal the costs of and occasioned by the application should be paid by the Defendants.  I so order, and summarily assess the costs of Geng at HK$250,000.  In reducing such costs from HK$352,210, I accepted Mr Liu’s submissions that the amount of time spent by the solicitors is excessive, and took a broad brush approach on the reduction.

21.  I am grateful to counsel for their assistance.