[C] v. [D]

HCCT 29/2020

[2020] HKCFI 1596

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 29 OF 2020

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D E C I S I O N

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1.  This is an application by [C] for an interim anti‑suit injunction in respect of a set of proceedings brought by [D] for the winding up of [C] in the High Court of the British Virgin Islands (“BVI”).

2.  [C] is a BVI company, whereas [D] is a Cayman Islands company.

3.  The matter has arisen from a Share Sale and Purchase Agreement dated 28 December 2017 entered into by, among others, [C] and [D], which has been amended successively by two supplemental agreements. By that agreement as amended, in very broad terms, [C] agreed to sell and [D] agreed to purchase 3,494 shares in a Cayman Islands company called [H] for a total consideration of approximately US$40 million.  There is a clause in the agreement giving [D] the right to require [C] to buy back the shares if, inter alia, [H] had not completed an IPO by the end of 2018.  There is also a clause in the agreement providing that

“ [a]ny disputes or claims arising out of or in connection with this Agreement …, including any question regarding its existence, validity, termination, shall be referred to and finally resolved by arbitration in Hong Kong administered by the Hong Kong International Arbitration Centre … in accordance with the HKIAC Procedures for the Administration of International Arbitration in force as of the date of this Agreement … The seat of the arbitration shall be Hong Kong. …”

4.  What has happened — and this is not disputed — is that there was no completed IPO in 2018 and, as a result, [D] decided to exercise its right to require [C] to buy back the shares and served a notice on [C] accordingly in September 2019.  When [C] did not do so, [D] instituted proceedings in the BVI on 4 March 2020 for an order to wind up [C] and to appoint liquidators. 

5.  The first hearing of those proceedings was scheduled to take place on 11 May 2020.  On that date, [C] through its BVI lawyers filed a witness statement in the BVI court stating [C] had a bona fide and substantial defence to the claim for the buyback price on the ground that [D] no longer held the shares that were the subject matter of the buyback, having sold them in December 2019.  The statement said, however, that the negotiations for the buyback of the shares were still active and ongoing. The statement concluded by saying that if the (BVI) court considered that the nature of the buyback obligation needed to be clarified, that was a matter that should be referred to arbitration in Hong Kong pursuant to the arbitration clause in the Share Sale and Purchase Agreement.

6.  The next hearing of the BVI proceedings was scheduled for 22 June 2020. 

7.  On 16 June 2020, [C] issued a notice of arbitration to the HKIAC and to [D], claiming that the effectiveness of the buyback clause was subject to the condition that the shares must be held by [D] and that, in late 2019, [D] had transferred the shares in their entirety to another company or other companies.  [C], therefore, sought an arbitral award for a declaration, inter alia, that [D] was not entitled to require [C] to purchase any shares from [D] and that [C] was not obliged to purchase any shares from [D].

8.  On 19 June 2020, [C] filed notice of an application in the BVI proceedings asking for the winding up application to be adjourned to 27 July 2020 or, alternatively, to be stayed pending final determination of the arbitration just commenced.

9.  On 22 June 2020, the BVI court granted a further adjournment of the substantive hearing of the BVI proceedings, but only to 13 July 2020, ie next Monday.

10.  On 7 July, [C] issued the originating summons herein for anti‑suit relief and an inter partes summons returnable today for interim anti‑suit relief.  The papers, however, were only given to [D] at 6:15pm on 8 July.

11.  This court is concerned only with the question, at the moment, whether an interim anti‑suit injunction should be granted in relation to the hearing of the BVI proceedings next Monday. 

12.  Obviously any such injunction would be highly intrusive.  The parties as well as the BVI court might well be preparing for the Monday hearing in earnest now, and it would be a very strong thing for this court to grant an injunction on the eve of that hearing to bring it to a grinding halt.  In these circumstances I need to be satisfied to a high standard that [C]’s case is right before granting any such interim injunction: Giorgio Armani SpA v Elan Clothes Co Ltd [2019] 2 HKLRD 313, §31.  It seems to me, also, that in these circumstances comity considerations become particularly important because of, among other things, the considerable wastage of resources that would be caused by such an injunction: see the passages from Ecobank Transnational Incorporated v Tanoh [2015] EWCA Civ 1309 quoted by Kwan JA in Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2016] 3 HKLRD 352 at §21.

13.  I need also to take into account the question of fairness as between the parties given that [D] was only given the papers late on 8 July (and therefore deemed to have been served only yesterday: Order 65 rule 7).  In the limited time available, [D] has been able to lodge skeleton submissions and a short affirmation which, however, does not contain all the evidence that it would wish to place before the court had there been sufficient time.  [C] pressed upon this court the urgency of the matter but, on its own case, [C] knew of the winding up proceedings in April and learnt of the 13 July hearing date on 22 June.  Yet inexplicably it did not take out the present summons for injunction until 7 July.  The urgency and shortness of time is, it seems to me, self‑induced.

14.  There is not a lot of information before me as to what happened at the previous BVI hearings and for what reasons and purposes the hearings were adjourned.  [C]’s witness statement has been exhibited but [D]’s response to it, if any, has not.  Mr [X], a director of [C], said he had been informed by [C]’s BVI lawyers that the BVI court “may decide [D]’s application in the BVI Proceedings at the 13 July Hearing, or may stay the BVI Proceedings as requested by [C]”.  It seems to me that if that application has come to the point where the BVI court may be ready to determine it and pronounce its decision on 13 July, then clearly it has progressed to an advanced stage.  On the other hand, if, as submitted on behalf of [C], the BVI application is not at an “overly advanced stage”, then I do not see the need for granting an urgent interim injunction at today’s hearing, especially in circumstances where [D] has not been given a proper opportunity of fully responding to it.

15.  There is also a substantive argument as to whether the principles relied upon by [C] for anti‑suit injunction based on a breach of the arbitration agreement and the line of authorities in Hong Kong such as Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirketi [2015] 2 HKLRD 866 and Dickson Valora Group (Holdings) Co Ltd v Fan Ji Qian [2019] 2 HKLRD 173 are applicable to the present case.  Mr Lee submitted on behalf of [D] that they are not, because in commencing and pursuing an application for winding up in the BVI, [D] is not seeking to have any dispute arising out of or in connection with the contract “finally resolved” and determined otherwise than by way of arbitration, and is therefore not acting in breach of the arbitration agreement.  In making this submission he relied, inter alia, on the decision of Deputy Judge William Wong SC in Re Asia Master Logistics Ltd [2020] 2 HKLRD 423, §§66‑80.  Mr Lee also made the submission that the initiation of winding up proceedings against [C] in its place of incorporation is a statutory right that [D] enjoys under BVI law which should not be readily fettered by an anti‑suit injunction.  These points may or may not be found to be sound at the end of the day, but the matter certainly does not seem to me to be so plainly in [C]’s favour that I should grant the interim injunction sought, on the eve of the 13 July hearing and in the urgency created by [C] itself.

16.  For these reasons I decline to grant the interim injunction sought.