XU HONGBIAO v. OASIS INVESTMENT GROUP LTD AND OTHERS

CAMP 350/2023, [2024] HKCA 854

On appeal from [2023] HKCFI 860

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 350 OF 2023

(ON AN INTENDED APPEAL FROM HCA NO 1963 OF 2020)

________________________

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(By Original Action)

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(By Counterclaim)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  There are three applications before this court, two by the 2^nd defendant (by Counterclaim) (“D2”) for (i) leave to appeal against the decision of Keith Yeung J on 29 March 2023 (“Decision”)[1] dismissing D2’s summons filed on 4 January 2022 (“D2’s Setting Aside Summons”); and (ii) stay of execution of the costs orders made by the judge in the Decision and the decision on 8 November 2023 refusing leave to appeal against the Decision (“Leave Decision”)[2]. D2 also seeks leave that the filing and service of the Defence be dispensed with or deferred, pending the final determination of the appeal if leave be granted. The remaining application is by the plaintiffs (by Counterclaim) for extension of time for 14 days to file and serve their statement in opposition to this renewed leave application of D2. For ease of reference, all references herein to plaintiffs or defendants are to those by Counterclaim, unless otherwise stated.

2.  D2’s Setting Aside Summons sought among other reliefs the following: (i) to set aside the order made by Master S H Lee dated 9 August 2021 granting leave to the plaintiffs to serve the sealed copy of their Counterclaim dated 29 April 2021 on D2 out of the jurisdiction (“Service Out Order”); and (ii) to strike out and dismiss the Counterclaim.

3.  By the Decision, the judge dismissed the Setting Aside Summons and ordered D2 to bear the costs of that summons with certificate for two counsel, to be assessed summarily. The judge accepted there is an arguable case that the Counterclaim is a common law action to enforce the awards rendered by the arbitral tribunal (“the Tribunal”) in an arbitration involving the parties[3]. He did not accept that the Counterclaim should be submitted to the Tribunal for arbitration[4]. He also did not accept that the Counterclaim amounts to collateral attacks by the plaintiffs on the rulings by the Tribunal in the arbitration proceedings or those by the foreign courts in various foreign proceedings relating to the parties’ disputes or that the plaintiffs are barred by issue estoppel in bringing the Counterclaim[5]. The judge further held that gateways 1(a), 1(c), 1(d) and 1(m) under Order 11 rule 1 of the Rules of High Court, Cap 4A (“RHC”) are open to the plaintiffs[6].

4.  By the Leave Decision, the judge refused to grant leave to D2 to appeal against the Decision and ordered D2 to bear the costs of and occasioned by the leave application before him with certificate for two counsel, to be assessed summarily. The judge granted a stay of execution of the costs order made in the Decision until in effect the final disposition of this renewed leave application.

5.  Stay of execution of the costs order made in the Leave Decision pending the final disposition of this renewed leave application was also granted by the judge on 19 March 2024.

6.  Having considered the papers and the submissions filed on behalf of D2 and the plaintiffs, we think it is appropriate to exercise our power under Order 59 rule 2A(5) of the RHC to determine the three applications on paper without an oral hearing.

Background

7.  The relevant background matters, taken largely from the Decision at §§8 to 31, may be stated as follows.

8.  The 2^nd to 4^th plaintiffs (“P2 to P4”), the 1^st defendant (“D1”) and Ke Zhengguang (“the Deceased”) used to be partners in a real estate development joint venture in Mainland China (“the Joint Venture”). It was operated in the name of the 1^st plaintiff (“P1”), a company incorporated in the British Virgin Islands, in which P2 to P4 were the controlling shareholders, holding together 66.67%, whereas D1 and the Deceased were the non-controlling shareholders, each holding 16.67%.

9.  P1 is the direct or indirect parent company of, relevantly, the following companies:

(1)  Shanghai Greencourt Property Development Co Ltd (上海綠庭房地產開發有限公司) (“PRC Greencourt” or “綠庭房產”);

(2)  Greencourt Properties Ltd (綠庭置業有限公司) (“HK Greencourt” or “綠庭置業”);

(3)  Shanghai Greencourt Kechuang Ecological Technology Co Ltd (上海綠庭科創生態科技有限公司) (“Greencourt Kechuang”); and

(4)  Shanghai Four Season Flower City Development Co Ltd (上海四季花城房地產開發有限公司) (“SJHC” or “四季花城”).

10.  The investments of P1 included, among other things, retail properties in Shanghai held through PRC Greencourt, and two residential villas held through SJHC, which are referred to as “九亭商舖” and “A2型别墅” in the arbitral awards rendered by the Tribunal in the arbitration.

11.  In 2009, D1 and the Deceased requested to quit the Joint Venture. To bring this into effect, the parties reached an agreement dated 28 April 2010 (“4.28 Agreement”). It contained a complex divestment scheme involving principally payment of cash, repurchase and transfer of shares and equity, and a property swap.

12.  As part of the divestment scheme, the parties agreed, among other things, that the plaintiffs would ultimately transfer the entire shareholding in SJHC to the entities controlled or designated by the defendants in the manner set out as follows:

(1)  pursuant to Clause 2.3.1 of the 4.28 Agreement, P1 shall transfer the entire shareholding in Global State Ltd (“Shibang” or “世邦公司”), a company incorporated in Hong Kong, to two companies controlled by D1 and the Deceased respectively after Shibang acquiring HK Greencourt’s 80% shareholding in SJHC; and

(2)  pursuant to Clause 2.3.3 of the 4.28 Agreement, P1 shall cause to transfer the remaining 20% shares held by Greencourt Kechuang in SJHC to Shanghai Luhao Trading Co., Ltd. (上海綠豪貿易有限公司) (“Luhao Trading” or “綠豪貿易”), a company incorporated in Mainland China as designated by D1 and the Deceased.

13.  Disputes subsequently arose between the parties in relation to the performance of the 4.28 Agreement. Relevant to D2’s intended appeal, one of the hotly disputed issues between D2 and the plaintiffs is whether Shibang was a direct subsidiary of HK Greencourt or of P1 for the purpose of transferring of shares in SJHC in accordance with the 4.28 Agreement. The significance is that if Shibang is a direct subsidiary of HK Greencourt (but not of P1) as contended by the plaintiffs, the transfer of HK Greencourt’s 80% shareholding in SJHC will be between a parent company and its direct subsidiary (as opposed to between the two subsidiaries of the same parent company). The consequence is that the transaction may receive special tax treatment under the relevant tax provisions of the PRC but may cause extra tax liabilities to D1 and the Deceased.

14.  In 2013, pursuant to Clause 4.2 of the 4.28 Agreement (“Arbitration Clause”), D1 and the Deceased commenced arbitration against the plaintiffs in Hong Kong. The Arbitration Clause stipulates as follows:

“因本協議或與本協議有關的爭議、爭執和索償，違約終止或合同無效等（以下稱‘爭議’）各方應友好協商解決。協商不成時，任何一方均有權將爭議提交香港國際仲裁中心以仲裁解決…仲裁結果是終局的，對各方均有約束力。”[7]

15.  In December 2013, the Deceased passed away. The Tribunal granted leave for D2, the joint administratrixes of the Deceased, to continue the arbitration on his behalf.

16.  On 28 February 2018, the Tribunal issued the final substantive award (“Final Substantive Awards”), which was modified by the clarification award dated 19 December 2018 (collectively, “the Awards”).

17.  By the Awards, 9 orders (respectively, “Order 1” to “Order 9”) were made in the following terms where the defendants were referred to as “申請人” and “參股股東” and the plaintiffs respectively as “第一被申請人” to “第四被申請人”:

“1. 命令被申請人（從裁決作出之日起的4週內）促使綠庭房產與申請人或其指定的第三方簽署一份有關九亭商舖的《上海市房地產買賣合同》並將九亭商舖的所有權轉讓給參股股東或其指定的第三方。（4.28協議第3.1條）

2. 命令被申請人（從有關更正作出之日起的4週內）促使第一被申請人指定的第三方與四季花城簽署A2型別墅的《銷售合同》並完成所有相關手續。

3. 命令各方按裁決第304至324段的裁示在裁決作出之日起的4週內清結並支付有關四季花城與第一被申請人的債務。（4.28協議第3.6條）

4. 命令申請人於本裁決作出之日起的2個月內向相關的審批機關提供一份審計報告。

5. 命令第一被申請人安排及促使世邦公司（從裁決作出之日起的2個月內）收購第一被申請人的子公司綠庭置業所持有的四季花城80%的股權。（4.28協議第2.3.1條）

6. 命令第一被申請人與參股股東（從裁決作出之日起的2週內）簽署及促使其子公司綠庭置業共同簽署有關世邦公司的股權購買權協議及託管協議。（4.28協議第2.3.1，2.3.2條）

7. 命令第一被申請人（從裁決作出之日起的2個月內）促使上海綠庭科創生態科技有限公司轉讓其所持有的四季花城20%的股權予綠豪貿易。

8. 命令被申請人（從上述第1-6項命令履行後的4週內）按4.28協議的第2.2.1(4)條款及裁決第232(4)(a)(b)(c)及第233段的裁示支付調整後的最終金額。

9. 命令第二被申請人、第三被申請人和第四被申請人共同支付給申請人人民幣10,346,211元的損失作為損失賠償 （以2017年8月8日作為計算損失的基準日）。”

18.  On 16 March 2020, the Tribunal issued a final award on costs and interests, which was amended by another award on costs issued on 26 June 2020, ordering the plaintiffs to, among other things, pay to D2 HK$6,599,822 as D2’s legal costs of the arbitration, and HK$1,377,978.55 as the arbitration fees of D2 (collectively, “Arbitration Costs”).

19.  Further disputes later developed over the performance and enforcement of the Awards, which have led to proceedings in the Maryland Court in the United States (“Maryland Proceedings”), proceedings in the Shanghai Courts in Mainland China (“Shanghai Proceedings”) and the present proceedings in Hong Kong.

Maryland Proceedings

20.  On 16 November 2018, D2 commenced the Maryland Proceedings against P2, initially only to recognise and enforce Order 9 to request for judgment in US dollars equivalent to half of the RMB 10,346,211 awarded under Order 9, and subsequently on 4 March 2019 to cover the entire Awards. On 8 April 2019, P2 filed a motion to dismiss D2’s enforcement petition in the Maryland Proceedings where P2 raised, among other things, a public policy defence that requiring her to pay the award outside Mainland China would violate the currency control laws of Mainland China. Relevantly in the Counterclaim, the plaintiffs’ pleaded case is that the plaintiffs asked D2 to provide PRC bank account to receive the payment awarded under Order 9, but D2 provided a Hong Kong bank account in order to receive the payment in Hong Kong dollars or other non-RMB currencies, and the transfer of funds to the designated Hong Kong bank account failed due to PRC currency control restrictions.

21.  On 21 February 2020, the Maryland Court granted D2’s request to recognise and enforce the Awards, and dismissed P2’s motion to dismiss. By the judgment of the Maryland Court dated 9 February 2023 (“Maryland Judgment”), P2 was ordered to pay D2 US$3,614,722.78, which was inclusive of D2’s Arbitration Costs.

22.  On 9 February 2024, P2 made payment into the Maryland Court by way of an appeal bond (“Appeal Bond”) fully covering the monetary sum awarded under the Maryland Judgment, upon which enforcement of the monetary portion of the Maryland Judgment was stayed pending P2’s appeal against the Maryland Judgment.

Shanghai Proceedings

23.  On 22 April 2019, HK Greencourt commenced proceedings against SJHC and its legal representative in the Shanghai Fengxian District People’s Court for the purpose of compelling SJHC to change the registration of 80% of its shareholding originally registered under HK Greencourt’s name to Shibang’s name. Shibang joined the Shanghai Proceedings as a third party seeking, among other things, (i) that if SJHC and its legal representative failed to go through the filing formalities for the change of 80% shareholding in SJHC as required, it would go through the filing formalities with the competent government department in its own name; and (ii) confirmation that it is a shareholder of SJHC and owns 80% of the registered capital of the same.

24.  On 30 June 2020, the Fengxian Court of Shanghai dismissed both HK Greencourt’s and Shibang’s claims. Their appeals were dismissed by the Shanghai Intermediate People’s Court on 31 December 2020. HK Greencourt’s application for re-adjudication was rejected by the Shanghai Higher People’s Court on 23 September 2022.

The present proceedings in Hong Kong

25.  In November 2020, D1 commenced the present proceedings in Hong Kong to enforce the Awards by way of common law enforcement. He filed his Statement of Claim on 8 March 2021, which was amended on 12 July 2021 with the main effect of adding D2 as the 5^th defendant (by Original Action) in the proceedings.

26.  On 29 April 2021, the plaintiffs filed their Defence and Counterclaim, denying D1’s allegations and counterclaiming against the defendants for obstruction of performance of the Awards in breach of their implied duty under the 4.28 Agreement “to comply with the Awards and to provide all necessary cooperation to enable the performance of the Awards”[8].

27.  The plaintiffs seek, among other things, “specific performance of the 4.28 Agreement and the Awards”, damages in lieu or in addition, and “[t]o the extent necessary an order that [the plaintiffs] be discharged from further performance of the Awards or any part of the same”.

28.  As mentioned earlier, on 9 August 2021, the plaintiffs obtained leave to serve the Counterclaim on D2 out of the jurisdiction. On 4 January 2022, D2 issued the Setting Aside Summons.

29.  The Setting Aside Summons was heard before the judge on 17 and 18 January 2023. On 29 March 2023, the judge handed down the Decision dismissing the Setting Aside Summons.

30.  The judge handed down the Leave Decision on 8 November 2023 refusing leave to appeal. D2 renewed the leave application to this court on 22 November 2023 and subsequently sought a stay of execution of the costs orders in both the Decision and the Leave Decision on 22 December 2023 pending disposition of the appeal (if leave is granted).

The plaintiffs’ time extension application

31.  Before we consider D2’s renewed leave application and stay application, the plaintiffs’ time extension application can be disposed of quickly.

32.  Pursuant to §13 of Practice Direction 4.1, the plaintiffs may file and serve their statement in opposition within 14 days of service of D2’s renewed leave application. They did not file their statement of objection on or before 6 December 2023, but instead took out this time extension application on the same date.

33.  Pending the determination of their time extension application, the plaintiffs nevertheless filed and served their statement in opposition without leave from the court on 20 December 2023, setting out their grounds of opposition to D2’s intended appeal.

34.  On 5 January 2024, the solicitors for D2 wrote to the court stating that D2 would not oppose the plaintiffs’ time extension application.

35.  In view of the grounds of opposition put forward by the plaintiffs and the application not being opposed by D2, we are satisfied there is no prejudice to D2 which could not be compensated by costs for the late filing of the plaintiffs’ statement in opposition. We grant retrospective leave to the plaintiffs for filing and serving their statement in opposition on 20 December 2023. The question of costs of the plaintiffs’ time extension application will be dealt with at the end of this judgment.

36.  We turn to consider the draft grounds of appeal.

The draft grounds of appeal

37.  In this renewed leave application, D2 put forward the following six grounds of appeal in the draft notice of appeal:

(1)  The judge erred in holding that the Counterclaim is a common law action to enforce the Awards (“Ground 1”);

(2)  The judge erred in refusing to hold that the Counterclaim in relation to Orders 4 to 7 of the Awards amounts to a collateral attack upon the judgments of all three levels of the Shanghai Courts in the Shanghai Proceedings and should be struck out as being vexatious and/or amounting to an abuse of process (“Ground 2”);

(3)  The judge erred in refusing to hold that the Counterclaim in relation to Order 9 of the Awards amounts to a collateral attack upon the rulings made by the Maryland Court in the Maryland Proceedings and should be struck out as being vexatious and/or amounting to an abuse of process (“Ground 3”);

(4)  The judge erred in refusing to hold that there are pleas in the Counterclaim which blatantly seek to re-litigate or mount collateral attacks upon the findings and rulings by the Tribunal in the Awards, and should be struck out as an abuse of process (“Ground 4”);

(5)  By reason of the errors under Grounds 1 to 4, the judge erred in holding that the jurisdictional gateways 1(a), 1(c), 1(d) and 1(m) are open to the plaintiffs (“Ground 5”); and

(6)  The judge failed to set aside the Service Out Order on the basis of material non-disclosure or misrepresentation on the part of the plaintiffs (“Ground 6”).

38.  We have compared the above grounds with those placed before the judge. The grounds placed before this court are substantially the same as those considered and dealt with by the judge in the Leave Decision.

39.  It appears to us that to a large extent, the submissions on behalf of D2 in this renewed leave application are in substance rehashing the arguments deployed at the leave application before the judge, which have been rejected for the reasons in the Leave Decision. We agree with Mr Abraham Chan SC, who appears for the plaintiffs throughout[9], that the intended appeal is essentially another challenge to an evaluative decision by the judge in hope that the Court of Appeal might be persuaded to a different view[10].

Legal principles

40.  Under section 14AA(4) of the High Court Ordinance, Cap 4, leave shall not be granted unless the intended appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard.

41.  To meet the threshold of reasonable prospect of success, it must be shown that the prospect of succeeding is more than fanciful, without having to be probable (SMSE v KL [2009] 4 HKLRD 125 at §17). In other words, the applicant is required to show more than just an arguable case, although he does not have to demonstrate that the appeal will probably succeed (Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515 at §19).

42.  As stated by the judge in the Leave Decision at §13, the Decision “involved an evaluative exercise balancing a large amount of countervailing facts and factors”. The Leave Decision set out at §§8 and 9 the legal principles governing the court’s exercise of power under Order 11 of the RHC in deciding whether to grant leave for service out of jurisdiction and and we are satisfied that they are correct. A decision of this kind involves not the exercise of a discretion, but an “evaluative, or a balancing, exercise”, albeit that the evaluative exercise is closely analogous to the exercise of a discretion (Bright Shipping Ltd v Changhong Group (HK) Ltd (No.2) [2019] 5 HKLRD 30 at §§9 to 11). We would add that an appellate court is obliged to pay sufficient regard to the decision of the court below and should be reluctant to interfere where the decision is based on the assessment or balancing of a number of factors (Ko Hon Yue v Chiu Pik Yuk & Ors (2012) 15 HKCFAR 72 at §83(5)(b)).

43.  Insofar as challenge is made to a judge’s exercise of discretion, the principles for granting leave to appeal are well established. The appellate court is not to exercise an independent discretion of its own. Its initial function is one of review only. The appellate court will not lightly interfere unless it can be shown that the judge had erred in principle of law, or had misapprehended material facts, or had taken into account irrelevant matters, or had failed to take relevant matters into account, or where the judge’s conclusion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible. It is only if the appellate court has reached the conclusion that the judge’s exercise of discretion must be set aside for one or more of these reasons that it becomes entitled to exercise a discretion of its own (Harbour Front Ltd v Money Facts Ltd and Others [2019] HKCA 916 at §6).

Grounds 1 & 6

44.  We will deal with these two grounds together as they are related.

45.  Under Ground 1, Mr Richard Khaw SC for D2[11] submitted that the Counterclaim cannot be a common law enforcement action for two main reasons.

46.  First, Mr Khaw argued that the plaintiffs as the “losing party” do not have any rights for enforcement under the Awards as the Awards only established the rights of the defendants who succeeded in obtaining the Awards in their favour. This is a repetition of the “loser” argument raised before the judge. We consider that the judge is plainly right in rejecting this argument for the reasons at §§46(b) to (i) in the Decision which he repeated at §17 of the Leave Decision.

47.  We agree with the judge on the mutual nature of the parties’ implied promise to honour an arbitral award. This proposition is well supported by the authoritative guidance of Ribeiro PJ in Xiamen Xinjingdi Group v Eton Properties Ltd (2020) 23 HKCFAR 348 at §118 (quoting from Lord Hobhouse of Woodborough in Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] 1 WLR 1041 at §9) and at §120.

48.  We also agree with the judge that there is no case authority from D2 to support the contention that the “losing party” has no locus to enforce an arbitral award. To support D2’s proposition that the Awards made in favour of the defendants ordering the plaintiffs to do or perform various acts have not established any rights of the plaintiffs for enforcement, Mr Khaw sought to rely on West Tankers Inc v Allianz SpA & Anor [2012] 1 CLC 312 at §36[12]. In that case, the owners of a vessel sought to enforce a declaratory award that they were under no liability to the charterers’ insurers pursuant to section 66 of the Arbitration Act 1996. The judge made a negative declaratory judgment to enforce the award. The English Court of Appeal held that a declaratory award can be so enforced as a declaratory judgment by the court in appropriate cases. It is one thing to say that only the rights established in an award can be enforced (as held in West Tankers), it is quite another to say that the rights established in an award are restricted to only the benefit of one party which the award favours. West Tankers does not assist D2 in this regard.

49.  Second, Mr Khaw argued that the Counterclaim, if properly analysed, seeks to ask the court to determine the continuing rights and obligations of the parties in respect of the performance of the 4.28 Agreement and the party at fault in the performance. The Tribunal has not ruled on these disputes as they were not submitted to the Tribunal for determination in the first place[13]. It was contended that the proper course is to submit these disputes to the Tribunal for determination pursuant to the Arbitration Clause, as opposed to allowing the enforcing court to “do something which, in effect, would be to substitute its own decision for the arbitrator’s decision on a matter within the arbitrator’s jurisdiction”, citing Dalmia Dairy Industries Ltd v National Bank of Pakistan [1978] 2 Lloyd’s Rep 223 at 302[14]. It was further contended that this raised a question of law that goes to the existence of jurisdiction, and the judge erred in holding it as a question of whether there is a good arguable case, citing Nilon Ltd v Royal Westminster Investments SA [2015] BCC 521 at §15(5)[15]. Mr Khaw submitted that the defect in the Counterclaim as to the legal basis of the plaintiffs’ claims cannot be cured by amendment. The same argument was summarised by the judge in the Leave Decision at §20 and rejected for the reasons at §§21 to 25.

50.  We agree with Mr Chan the real issue is whether the Counterclaim concerns disputes on enforcement of the Awards or fresh breaches of the 4.28 Agreement. It is well settled that determination of the parties’ rights and liabilities arising from the performance of an agreement is a matter for the arbitrators, and enforcement of the award made by the arbitrators is a matter for the enforcing court (Xiamen Xinjingdi at §119). Mr Khaw took issue with the express references in the Counterclaim to the 4.28 Agreement and in particular, to the “specific performance of the 4.28 Agreement” as sought by the plaintiffs in the prayer of the Counterclaim. Notwithstanding that, there have been clarifications in counsel’s submissions before the judge that those references should be understood as the “arbitration clause or agreement in the 4.28 Agreement”. The judge is plainly right in holding that any uncertainty that has arisen in this respect may be cured by amendment if deemed necessary.

51.  We also agree with Mr Chan that as the Awards were rendered by the Tribunal with reference to or to resemble the parties’ rights and obligations under the 4.28 Agreement, there is nothing unusual about the plaintiffs making reference to the 4.28 Agreement in the Counterclaim and, by doing so, it does not mean that the plaintiffs are seeking to enforce the 4.28 Agreement, as opposed to the Awards[16]. The judge cannot be faulted in concluding that there is no question of law arising from the Counterclaim that goes to existence of jurisdiction, and further it is at least reasonably arguable that the plaintiffs’ case in the Counterclaim is a common law enforcement action.

52.  Mr Khaw further submitted that the present case should be distinguished from Xiamen Xinjingdi. In Xiamen Xinjingdi, the enforcement court was asked to determine whether remedies alternative to the continued performance of the agreement awarded by the arbitral tribunal should be granted. In contrast, the plaintiffs in the Counterclaim ask for determination on “the substantive merits of the disputes on the parties’ continuing rights and obligations in the performance of the agreement not established in the Awards”[17]. As we have rejected the “loser” agreement and the contention that the Counterclaim is seeking to enforce the 4.28 Agreement as opposed to the Awards, we do not accept that Xiamen Xinjingdi is distinguishable from the present case as contended by Mr Khaw. Nor do we accept that allowing the Counterclaim to proceed and to be determined by the court would likely usurp the function of the Tribunal on the facts of this case. Plainly, one of the reliefs sought by the plaintiffs in the Counterclaim is damages in lieu of or in addition to specific performance of the Awards, and alternatively, an order discharging the plaintiffs’ obligations from further performing the Awards.

53.  To support the contention that the disputes embedded in the Counterclaim should be submitted to the Tribunal for determination and not to be determined by the court, Mr Khaw argued that the Tribunal has not become functus officio after rendering the Awards[18]. This is again on the basis that the Counterclaim was an attempt by the plaintiffs to seek the court’s determination of the issues concerning the continuing rights and obligations in the performance of the 4.28 Agreement (and not the Awards) at a post-award stage, which we have rejected for the reasons set out above.

54.  On the functus officio argument, Mr Khaw sought to distinguish the present case from A v B [2021] 1 Lloyd’s Rep 281 quoted by the judge in the Decision at §51(b) to set forth the interface between the court and arbitration proceedings as elaborated by Foxton J in A v B at §§29, 30 and 32[19]. Mr Khaw argued that unlike A v B, the 4.28 Agreement does not contain any provision to the effect that the Tribunal would become functus officio upon making the Awards. It is clear from the judgment of A v B that Foxton J’s holding that a final award would render the tribunal functus officio is not premised upon a particular clause in the agreement involved, but developed from the case authorities cited in his judgment[20].

55.  Mr Khaw relied on G v S [2021] HKCFI 1461 at §§1 to 6 to establish that any claim that has not been dealt with in the arbitration or occurs at the post-award stage is a matter to be determined in accordance with the Arbitration Clause[21]. He also relied on the consent award issued by the Tribunal on 25 July 2017 which states, among other things, that the Tribunal has power to make any other adjudication on any unresolved issues in the arbitration[22], and argued that the Tribunal has expressly retained its jurisdiction over the disputes in the Counterclaim.

56.  We agree with the judge’s reasoning in the Decision at §51 in dealing with the argument on submission of the Counterclaim for arbitration. In particular, the judge is plainly right at §51(d) in finding that that G v S is distinguishable on its own facts. In that case, the respondent S to an arbitration issued a fresh notice of termination of the agreement in dispute after the award, on grounds that the applicant G’s breaches of the agreement only came to light after the commencement of the arbitration and those claims had not been considered in the arbitration (§4 of G v S). There is no evidence before the judge or before this court that D2 has invited or submitted to the Tribunal to determine or adjudicate any particular issue raised by the plaintiffs in the Counterclaim. Nor has D2 made any application to stay the current proceedings for arbitration.

57.  Ground 1 is therefore devoid of merits.

58.  Under Ground 6, which relates to the functus officio argument and the “loser” argument under Ground 1, Mr Khaw submitted that in the ex parte application for leave to serve out of jurisdiction, the plaintiffs in one of the affirmations filed in support stated that the Tribunal was functus officio. In addition, the plaintiffs did not provide any basis to justify that their rights and obligations sought to be enforced in the Counterclaim had been established[23]. The functus point is dependent on the jurisdiction argument in Ground 1. Upon his finding on the nature of the Counterclaim, the judge did not accept that there is any non-disclosure and further found that the disclosure was adequate given the complicated history of the matter[24]. We see no basis to interfere with the judge’s assessment on the issue of material non-disclosure. Nor do we find any misrepresentation based on Mr Khaw’s submission in this regard. Ground 6 is rejected.

Grounds 2, 3 and 4

59.  Grounds 2 to 4 amount to another challenge to the judge’s evaluative decision in which he refused to strike out various parts of the Counterclaim for abuse of process on the grounds of collateral attack and/or res judicata. At §10 of the Leave Decision, the judge referred to Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748 at §16 which concerned the application of the principles in Johnson v Gore Wood & Co [2002] 2 AC 1 to an attempt to strike out a claim for abuse of process on the basis that the claim could and should have been brought in previous litigation. To this we add the following principles summarised in Poon Cho Fai v East Pacific (Holdings) Ltd [2020] HKCA 559 at §16:

(1)  The jurisdiction of the court to prevent the continuation of civil proceedings on the ground of abuse of process must be exercised with extreme caution. It is a very serious matter to prevent a party from commencing litigation or pursuing it and this should only be done where the court considers that it is the court’s duty rather than a discretion exercised by the court.

(2)  The doctrine against an abuse of process by way of collateral attack is founded on the extension to the res judicata doctrine. It recognises that where res judicata does not strictly apply, there might be circumstances in which a collateral challenge to a previous decision offends the principles underlying the doctrine. The objective is to prevent an abuse of the court’s process by seeking to re-litigate a decided issue, even though not between the same parties.

(3)  The burden of establishing abuse rests on the party who has chosen to raise the allegation. The court will scrutinise the relevant facts and all the circumstances carefully. The resolution of the question whether or not a collateral attack constitutes an abuse will be “highly fact sensitive” and “peculiarly a matter of judicial application to the facts of each case”.

(4)  It is not every collateral attack that will be held to be an abuse of process by the court. It will only be an abuse where the court finds that there will be “manifest unfairness” or “the bringing of justice into disrepute” if a plaintiff is allowed to continue with subsequent proceedings.

60.  Under Ground 2, Mr Khaw essentially argued that the Shanghai Courts at all three levels had already adjudicated and rejected the claims initiated by the plaintiffs through HK Greencourt and Shibang to facilitate and to compel the defendants to effect and complete the share transfer in SJHC relating to Orders 4 to 7 of the Awards which the plaintiffs now seek to enforce by the Counterclaim, and those claims in the Shanghai Proceedings arose from substantially the same facts as those in the Counterclaim. He also submitted there is a sufficient privity of interest and degree of identification, making it just to hold the plaintiffs bound by the rulings and outcomes of the Shanghai Proceedings because the plaintiffs (in which P2 has become the sole beneficial owner of P1 since 2017 and P3 and P4 are siblings of P2), D1 and D2 had in effect participated in the Shanghai Proceedings respectively through HK Greencourt, Shibang and SJHC.

61.  The judge rejected these contentions for reasons given in the Decision at §§61 to 64 where he conducted a broad and merit-based assessment having balanced all interests. As rightly pointed out by the judge, whether there is an abuse of process is a fact-sensitive question. It is clear that the judge had made a careful scrutiny of the relevant parts of the Counterclaim and the nature of the Shanghai Proceedings as submitted by Mr Khaw. Between the competing expert evidence filed by the plaintiffs and D2, the judge preferred and gave more weight to the evidence from the plaintiffs’ expert in his assessment. On a fair reading of the three judgments of the Shanghai Courts and the wordings of Orders 4 to 7, we do not see there is any adjudication or ruling by any of the Shanghai Courts on the issues of enforcement of Order 6 concerning the equity purchase option agreement (股權購買權協議) and custodial agreement (託管協議) among P1, HK Greencourt and the defendants or of Order 7 concerning the transfer of 20% shares in SJHC between Greencourt Kechuang and Luhao Trading. The judge’s finding that the Shanghai Proceedings are “company-related” proceedings has the support of the statement in the judgment of the Shanghai Higher People’s Court that “the Shanghai Proceedings concerned disputes on change of registration of company”[25].

62.  On the issue of privity of parties, Mr Khaw sought to rely on the principles set out in Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1 at §§99-103. It is not his submission that the approach adopted by the judge at §§63(g) to (m) of the Decision is wrong in principle or that the judge was wrong in applying the principles to the facts of this case. He merely criticised the judge’s approach represented a “more cautious view”[26].

63.  We see no basis to interfere with the judge’s assessment and we agree with the judge’s conclusion that D2 has not made out the claim of abuse of process based on the Shanghai Proceedings.

64.  Ground 3 concerns the unsuccessful payment by the plaintiffs to D2 for compliance of Order 9 which, as pleaded by the plaintiffs in the Counterclaim, is due to D2’s refusal to receive payment in RMB and the demand to have the payment in non-RMB currencies.

65.  Directing at §§59(j) and (k) of the Decision, Mr Khaw argued that the judge erred in misunderstanding the “real” issues raised in the impugned pleas of the Counterclaim and further erred in holding that they are not the same issues as those already ruled on by the Maryland Court in the Maryland Proceedings. That simply misses the point. The judge already explained in the Leave Decision at §34 that his remark at §59(j) of the Decision was given to show “by way of illustration how the constraints had affected the conduct of the Maryland Proceedings” and the plaintiffs’ public policy defence would be considered differently if raised in the present proceedings.

66.  For the reasons set out in the Decision at §§59 and 60, the judge was not satisfied that the Counterclaim should be struck out on the bases of issue estoppel and/or collateral attack upon the relevant rulings by the Maryland Court. We are satisfied that the judge had properly considered the differences in nature, the issues, the legal basis and settings, and parties between the Maryland Proceedings and the Counterclaim, and his conclusion cannot be faulted.

67.  Under Ground 4, D2’s challenge concerns two issues which, as submitted by Mr Khaw, were already ruled on by the Tribunal. First, the Tribunal already held that Shibang would be a direct subsidiary of P1 as per Clause 2.3.1 of the 4.28 Agreement. Second, the Tribunal held that the defendants were not responsible under Clause 2.3.4 of the 4.28 Agreement for the tax liability stemming from the transfer of 80% shareholding in SJHC to Shibang. It was contended that various pleas in the Counterclaim seeking to re-litigate these two decided issues should have been stuck out on the ground of res judicata and/or collateral attack.

68.  As set out in the Decision at §§66 and 69 respectively, having considered the paragraphs of the Final Substantive Award highlighted by Mr Khaw, the judge was not satisfied that the direct subsidiary issue had been specifically dealt with by the Tribunal or that there had been clear holding by the Tribunal on the tax liability issue. We agree.

69.  On the direct subsidiary issue, the paragraphs highlighted by Mr Khaw essentially show the Tribunal interpreted and construed the steps to be taken and the conditions to be fulfilled for the transfer of the entire shareholding in SJHC pursuant to the relevant clauses of the 4.28 Agreement, but none of these paragraphs shed light on the Tribunal’s holding on whether Shibang is a direct subsidiary of HK Greencourt or P1.

70.  As for the tax liability issue, it is clear from §282 of the Final Substantive Award that the Tribunal considered it unnecessary to give any explanation on this issue upon finding that the parties did not discuss the special tax treatment under the relevant tax regime of the PRC at the time of executing the 4.28 Agreement[27].

71.  We do not think there will be manifest unfairness or that justice will be brought into disrepute if the Counterclaim or any part thereof is allowed which the plaintiffs had commenced as of right to enforce the Awards based on common law principles. Grounds 2, 3 and 4 are all of no merit.

Ground 5

72.  Ground 5 is premised on the alleged errors of the judge under Grounds 1 to 4. As we have rejected Grounds 1 to 4, the arguments under Ground 5 could have no practical impact on the intended appeal and must be rejected.

73.  As correctly pointed out by the judge in the Decision at §74, the plaintiffs need only one gateway. Suffice it to say that gateway 1(m) is open to the plaintiffs as we agree with the judge’s holding that it is at least reasonably arguable that the Counterclaim is a common law action to enforce the Awards. It is not necessary for us to determine D2’s challenge in respect of gateways 1(a), 1(c) or 1(d).

The stay of execution application

74.  In light of our refusal to grant leave to appeal, D2’s application for stay of execution of the costs orders made in the Decision and the Leave Decision does not arise. We therefore dismiss the stay application.

75.  For completeness, we would add two further points.

76.  First, the crux of D2’s contention in support of the stay application is summarised at §27.4 of the affirmation of Ke Yeying filed on 22 December 2023 in support of the stay application. The complaint in this affirmation is that it is manifestly unfair and unjust for the plaintiffs to exert tremendous financial pressure on D2 by requesting D2 to pay immediately a large sum of costs pending appeal whilst the plaintiffs refuse and fail to pay the non-contentious Arbitration Costs despite D2’s repeated demands for payment.

77.  In his submissions for the stay application, Mr Jeffrey Lee for D2 did not dispute P1 is a company with substantial assets, but contended that this has no substance when P1’s liabilities are still unknown[28]. There is no evidence before us to suggest that P1’s liabilities in the proceedings will likely exceed its assets and it would be premature to speculate at this stage. Mr Lee’s argument does not assist the stay application.

78.  Second, Mr Lee took issue with the Appeal Bond that the plaintiffs put in the Maryland Proceedings to stay the execution of the monetary portion of the Maryland Judgment. Mr Lee disputed the nature of the Appeal Bond, and submitted that the funds would have to be returned to P2 in the event P2 should succeed in her appeal in the Maryland Proceedings[29].

79.  We are inclined to agree with Mr Henry Cheung for the plaintiffs in the stay application that D2’s position with regard to the Appeal Bond is confusing and conflicting[30]. It was D2’s case that the Maryland Court rightly decided on the issue of enforcement of Order 9 under the Awards, and yet it was suggested by D2 that it was reasonably likely that P2 may succeed in her appeal against the Maryland Judgment. Further, on a plain reading of §4 of the order made by the district judge of the Maryland Court on 2 June 2023[31], D2 will be entitled to obtain the deposited funds under the Appeal Bond if P2’s appeal against the Maryland Judgement is dismissed.

80.  We are not satisfied that there is any substantial prejudice suffered by D2 if the stay application is refused.

Conclusion and costs

81.  For all the above reasons, we are satisfied there is no reasonable prospect of success in the intended appeal, nor is there any other reason in the interests of justice that the intended appeal should be heard. We dismiss D2’s applications for leave to appeal and for stay of execution of the costs orders of the Decision and the Leave Decision pending the intended appeal.

82.  We make a further order under Order 59 rule 2A(8) of the RHC that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes as the applications are wholly without merit.

83.  We also order D2 to file and serve the Defence within 28 days from the date of this judgment.

84.  There is no reason to depart from the general rule that costs should follow the event. We order D2 to pay the plaintiffs’ costs of the renewed leave application and the stay application.

85.  Having considered the plaintiffs’ statement of costs lodged on 5 January 2024 in respect of the renewed leave application, we reduce the reasonable costs claimed from HK$458,612.50 to HK$300,000, noting that the grounds of appeal are essentially the same as those considered in the leave application before the judge, and that the plaintiffs have been represented by the same legal team throughout.

86.  The statement of costs lodged by the plaintiff on 5 January 2024 does not cover the plaintiffs’ costs of the stay application. We further order D2 to pay the costs of the plaintiffs of the stay application, to be taxed if not agreed.

87.  As for the plaintiffs’ extension of time application, we order the plaintiffs to pay D2’s costs summarily assessed at HK$1,040.

88.  Save for the costs of the plaintiffs’ extension of time application, the costs orders and summary assessment are orders nisi. If there is no application for variation within 14 days of the handing down of this judgment, the orders will be made absolute.