FENN KAR BAK LILY v. SO SHIU TSUNG THOMAS

DCCJ 2047/2020

[2020] HKDC 767

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2047 OF 2020

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DECISION

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Background history

1.  The present action arises out of an underlying arbitration which commenced on 30 May 2011 (the “Arbitration”).  On 16 August 2011, the defendant herein was appointed as the arbitrator in the Arbitration pursuant to an agreement entitled “Terms of Appointment for Appointment of Thomas S T So as Arbitrator”.

2.  The Arbitration involved a claim by the plaintiff, Mr Tse To Chuen and Ms Leung Wun Man Emba (together, the “claimants”) against Mr Au Siu Hong Tony (the “respondent”) based on a partnership agreement dated 11 May 2007 between the claimants and the respondent.  It was agreed that the HKIAC Administered Arbitration Rules 2008 should be adopted as the lex arbitri of those proceedings.

3.  On 27 March 2020, the defendant made a partial award in favour of the respondent in the Arbitration.  Although it is called a partial award, I was told by the parties there would not be any further substantive award given, unless a party applies for an additional award and an extension of time for making such award is given.

4.  On 21 April 2020, the respondent obtained an ex parte order from Mimmie Chan J in HCCT 13/2020 to enforce the partial award (the “Order”).

5.  By letter dated 2 May 2020, the claimants applied for a time extension to make an application for an additional award on profits tax to be reimbursed by the respondent and a correction of interest calculation on the partial award (the “Additional Award Application”).  By letter dated 4 May 2020, the respondents opposed the Additional Award Application.

6.  The claimants applied by summons dated 6 May 2020 to set aside the Order.

7.  By letter dated 6 May 2020, the respondent informed the defendant that he had obtained the Order and the claimants had applied to set it aside.  The respondent also enclosed a copy of the 1^st Affirmation of the plaintiff filed on 6 May 2020 (with no exhibits) and the 1^st Affidavit of the respondent in the letter.

8.  The defendant handed down his decision and dismissed the Additional Award Application on 13 May 2020.  References were made to the letter dated 2 May 2020 and the letter dated 4 May 2020.  There was no mention of the letter dated 6 May 2020.

9.  The plaintiff commenced the present action against the defendant by a Writ of Summons dated 19 May 2020 (subsequently amended on 23 June 2020).

10.  On 21 May 2020, the defendant wrote a letter seeking clarification of the basis on which the defendant’s ability to act as arbitrator is terminated, and whether the claimants seek to challenge the defendant’s ability to continue to act as arbitrator.

11.  The claimants gave no reply but instead, by a summons dated 23 July 2020, the plaintiff applied for an interlocutory injunction restraining the defendant from acting or continuing to act as the arbitrator in the Arbitration (the 1^st Summons”). 

12.  By summons dated 27 July 2020, the defendant applied to strike out the plaintiff’s statement of claim, the substantive hearing is scheduled to be heard on 1 April 2021.

13.  By consent of the parties, the 1^st Summons has been adjourned to 1 April 2021 for substantive argument, together with the defendant’s application to strike out the statement of claim in the present action.

14.  On 19 August 2020, the defendant handed down a partial cost award and directions, ordering the claimants to bear 75% of the costs of the Arbitration (other than costs that were already dealt with previously).  The respondent was further directed to file his bill of costs and the claimants to file their objections within 14 days.

15.  There being no court order or undertaking to the contrary, the Arbitration is still on-going, and the only outstanding matter seems to be the taxation of the costs.

Application

16.  By a summons dated 28 August 2020, the plaintiff applied for an order that pending the determination of the 1^st Summons, the defendant be restrained from acting or continuing to act as the arbitrator in the Arbitration (the “2^nd Summons”).  The 2^nd Summons is what is before the court now.  Both Mr Chan, senior counsel for the plaintiff, and Ms Cheung, counsel for the defendant confirmed that they did not consider this application to have the effect of bringing forward the determination of the 1^st Summons.

Abuse of process

17.  Ms Cheung took the preliminary and primary point that the 2^nd Summons ought to be dismissed as it was an abuse of process.  She argued that the plaintiff had already issued a virtually identical summons for an interlocutory injunction, namely the 1^st Summons (which also asked for the defendant to be restrained from continuing to act as arbitrator in the Arbitration).  The 1^st Summons was already adjourned, by consent, to be dealt with on 1 April 2021.

18.  Ms Cheung relied on the case of Beacon College Limited v Yiu Man Hau[1] for the proposition that where two interlocutory applications of the same type were sought, the court ought to consider:-

“Whether the applications are identical in terms of the statutory provision relied upon or the relief sought is not definitive of the matter. What is important is whether the substance of the applications or the issues involved are essentially the same. If they are, then the subsequent application should not be entertained, unless:

(1) There is material change of circumstances; or

(2) The grounds or evidence relied upon for the subsequent application are matters that could not reasonably be expected to be adduced at the earlier application.”

19.  Mr Chan SC did not fault with the proposition but emphasised that whether the court should entertain such an application was a matter of judicial discretion.  Mr Chan SC emphasised that at the time the parties entered into the consent summons dated 30 July 2020, the plaintiff considered there was no need to insist on the defendant giving an undertaking given the circumstances at that time.  However, the plaintiff subsequently felt extremely aggrieved because despite agreement by the parties that the substantive arguments of the 1^st Summons had been adjourned to 1 April 2021, the defendant still proceeded with handing down the partial cost award on 19 August 2020.

20.  Essentially, the matter turns on whether the plaintiff was entitled to take out the 2^nd Summons because the defendant handed down the partial cost award or as Ms Cheung framed it, whether the handing down of the partial cost award constituted “a material change of circumstances”.  To properly analyse this issue, a careful look at the relevant correspondence, (whilst bearing in mind the background history) is required.

Date	Event/Correspondence
19/5/2020	The claimants’ solicitors (Messrs Lily Fenn & Partners) wrote to the defendant purporting to terminate his appointment as the arbitrator.
	The plaintiff (as opposed to all the claimants) issued the writ against the defendant (the present proceedings).
21/5/2020	The defendant wrote to the claimants and the respondent, asking the claimants to provide the basis of their assertion of partiality.  The defendant also noted that there were established procedures to follow if the claimants were in fact challenging his ability to continue acting as the arbitrator.
9/6/2020	The defendant wrote to the claimants and the respondent, noting that there was no comment from the claimants despite his request for clarification on the basis of conflict of interest in the letter dated 9/6/2020.  The defendant also urged the claimants to follow Article 11 of the HKIAC Administered Arbitration Rules 2008 if they were challenging his ability to continue acting as arbitrator.
16/6/2020	The respondent urged the defendant to hand down his ruling on costs, and said any delay caused by the claimants should be addressed by way of interest.
23/7/2020	The plaintiff took out the 1st Summons.
27/7/2020	The defendant’s solicitors (Deacons) wrote to the plaintiff’s solicitors proposing to deal with the call-over hearing (for the 1st Summons) originally fixed for hearing on 31/7/2020 by way of consent summons.
28/7/2020	The plaintiff’s solicitors replied to the letter from Deacons dated 27/7/2020:- “As regards your proposed directions, we are instructed that they are, in principle, agreeable, provided that your client gives his personal undertaking to the effect that he will not act as the arbitrator of the relevant arbitration in the interim pending the outcome of the [1st]summons.” A draft consent summons containing the said undertaking was attached.
	Deacons wrote to the respondent and informed him of the 1st Summons taken out by the claimants, seeking an injunction restraining the defendant from acting as arbitrator in the Arbitration.  Deacons also informed the respondent as an interested party about the upcoming hearing before HHJ Yee on 31 July 2020.
	The defendant (as arbitrator) wrote to the claimants and the defendant:- “The Tribunal also refers to the letter of Messrs. Deacons dated 28 July 2020, which has been copied to the Tribunal.  The matters referred to in that letter, and the hearing scheduled for Friday this week, clearly impinge upon the matter of this arbitration.  The Tribunal is reflecting upon these matters and will revert to the parties in due course regarding the outstanding matters in this arbitration.
29/7/2020	Deacons refused to provide the undertaking sought by the plaintiff:- “Our client, as the Arbitrator … is under a duty to treat all parties equally and fairly, and to proceed with the arbitration without undue delay.  As [the respondent and the other two claimants], who are parties to the underlying arbitration, are not parties to the Action, it would be inappropriate for our client to give any undertaking (or for the court to make any order) the result of which would be to affect their interests ...  In this regard we invite your client to join to the Action as parties  [the respondent and the other two claimants] or at the very least serve the summons … so that they are all afforded an opportunity to attend and be heard at the hearing on 31 July 2020”
30/7/2020	The plaintiff’s solicitors wrote back to Deacons:- “We refer to your letter of 29th July 2020.  Having re-considered the matter, and purely out of expediency, we are instructed to agree on most of your proposed directions …” A draft consent summons not including any undertaking was attached to the letter.
	Deacons wrote back, accepting the terms of the draft consent summons, but added:- “For the avoidance of doubt, our client’s agreement to your client’s proposed directions is without prejudice to the exercise of his rights and duties as Arbitrator, our client’s position on our Summons dated 27 July 2020 [the striking out summons]…, our client’s position and rights to have the Action transferred to the High Court Arbitration List, and the outstanding points made in our letter dated 29 July 2020 which have not been dealt with in the draft Consent Summons.”
	The plaintiff and the defendant entered into a consent summons, agreeing on directions on the disposal of the 1st Summons, including the adjournment of substantive arguments to 1 April 2021.  No undertaking was provided in the consent summons.
	HHJ Yee granted the order by consent and vacated the hearing originally fixed for 31/7/2020.
6/8/2020	Letter from the respondent’s solicitors to the defendant, referred to the letter from the defendant to the parties on 28 July 2020:- “We note … the Tribunal will reflect upon the impact of DCCJ 2047/2020 … our understanding is that there is at present no court order whatsoever prohibiting the Tribunal from exercising its powers and/or performing its functions/duties in the captioned arbitration proceedings …  As such, we look forward to receiving the Tribunal’s proposals on moving forward the captioned arbitration proceedings, including but not limited to its ruling on costs.”
19/8/2020	The defendant handed down the partial cost award and directions.

21.  Mr Chan SC relied heavily on the defendant’s letter dated 28 July 2020 where the defendant said:“The Tribunal is reflecting upon these matters and will revert to the parties in due course regarding the outstanding matters in this arbitration.”  Mr Chan SC said that the plaintiff was entitled to rely on this as an indication that no further steps in the arbitration would be taken until the defendant had considered and reverted back.  As the defendant handed down the partial cost award without any warning on 19 August 2020, the plaintiff was entitled to treat that as a change in circumstances and was entitled to bring the present application.

22.  Ms Cheung went through the correspondence between the parties and demonstrated that the defendant had made clear before entering into the consent summons that:-

(1) The defendant had rejected giving any undertaking by letter dated 29 July 2020;

(2) In the same letter, the defendant had made clear that he deemed the giving of an undertaking inappropriate as the other two claimants and the respondent were not parties in this action.

(3) In Deacons’ letter dated 30 July 2020, it was made clear that his agreement to enter into the consent summons was without prejudice to the exercise of his rights and duties as Arbitrator.

23.  Ms Cheung submitted that as such, the contents of the letter from the defendant dated 28 July 2020 indicating he would consider and revert had been overtaken by subsequent events.  Ms Cheung argued that there could have been no confusion on the plaintiff’s part that the defendant intended to proceed with continuing with his role as arbitrator in the Arbitration, before entering into the consent summons.

24.  Mr Chan SC disagreed.  He drew a distinction between letters sent from the defendant in his capacity as the Arbitrator (which were on Mayer Brown letterhead) and letters sent by the Deacons, as solicitors for the defendant in the present action (which were on Deacons letterhead).  In particular, he relied on the fact that the letters from Deacons to the plaintiff’s solicitors dated 29 July 2020 and 30 July 2020 respectively were not copied to the other parties to the Arbitration.  As such, Mr Chan SC argued that it was unclear to the other parties to the Arbitration that the defendant had formed the view that he was under a duty to treat all parties equally and fairly, and to proceed with the Arbitration without undue delay.  This, Mr Chan SC said, was supported by the fact that the respondent wrote to the defendant on 6 August 2020 asking him to proceed with the handing down of the partial cost award.

25.  Whilst I could accept that the other parties might not have been privy to the position taken by the defendant subsequent to the 28 July 2020 letter, for the following reasons, I do not accept that the plaintiff could claim that she was surprised by the handing down of the partial cost order by the defendant:-

(1) As shown in the affirmation of the plaintiff dated 21 July 2020 (filed in support of the application for an injunction under the 1^st Summons), the plaintiff was very much aware of the possibility of the defendant proceeding with the arbitration: “… it is anticipated that the Defendant will hand down his decision on the issue of costs any minute.  In fact, [the Respondent] has repeatedly been chasing and urging the Defendant to issue a ruling on the cost issue”.

(2) The plaintiff had specifically asked, by letter dated 28 July 2020 for an undertaking from the defendant to prevent him from acting as the arbitrator in the meantime until the resolution of the 1^st Summons.

(3) Deacons had, by letter dated 29 July 2020, expressly rejected giving an undertaking and indicated that the entering into of the consent summons was without prejudice to the defendant’s right to continue acting as the Arbitrator.

(4) Deacons had made clear, by letter dated 30 July 2020, that the defendant had reserved his right to continue to act as arbitrator, and had intimated that the defendant was responsible to all parties in the Arbitration to proceed without undue delay.  Coupled with the knowledge that the respondent had repeatedly been asking for the arbitrator to proceed despite the present action, a reasonable reading of the respective letters from Deacons between 28 to 30 July 2020 would lead to the conclusion that there was a real possibility of the defendant continuing with his duty as the arbitrator on what was remaining in the Arbitration. 

(5) It is not open for the plaintiff to claim that on the one hand she was aware of the defendant’s stance as set out by Deacons in the respective letters between 28 to 30 July 2020 in her capacity as the plaintiff in the present litigation; but on the other hand, as a claimant in the Arbitration, she was unaware of what the defendant had intended to do and was entitled to rely on the promise by him to revert before proceeding further. The plaintiff and the claimant are the same person, Ms Lily Fenn.  Any expo facto attempt to differentiate her capacity as a party in the arbitration and the plaintiff in the present action is artificial and unsustainable.

(6) Whether the other parties to the Arbitration knew about the defendant’s stance subsequent to his letter dated 28 July 2020 is neither here nor there.  What we are concerned with here was whether the plaintiff (not the others) knew about that possibility of the defendant continuing to act as arbitrator before she entered into the consent summons.  The fact that the other parties did not know about the defendant’s stance did not mean that the plaintiff could claim to be in the same position, when she was clearly informed by the letters from Deacons.  I find that as an experienced solicitor, she must have been or she should have been aware of the possibility of the defendant continuing to act in the Arbitration when she entered into the consent summons.

26.  I thus agree with Ms Cheung’s submission that the defendant’s handing down of the partial cost award did not constitute a material change of circumstance enabling the plaintiff to apply for an injunction once again.

27.  Accordingly, I will not exercise my discretion to consider the 2^nd Summons, which seeks substantially the same relief as the 1^st Summons. 

Injunction – Applicable legal principles

28.  Parties agree on the application of the following principles[2] in relation to the grant of an interlocutoryinjunction:-

(1) There are serious issues to be tried;

(2) The balance of convenience is in favour of grant;

(3) Damages would be an inadequate remedy.

29.  Regarding an application for interim interim injunction:

(1) Interim interim relief is meant to be an urgent temporary stop-gap measure and the circumstances were such that the court has to do practical justice on the balance of fairness even though it may not have sufficient time to consider the matter fully[3].

(2) The assessment is context dependent and the court will consider the various factors at play including inter alia the effect of the grant or refusal of the relief and the subject matter at stake[4].

(3) The court will therefore take whichever course appeals to carry the lower risk of injustice if it should turn out that it is wrong[5]

30.  Given my decision above that there is no material change of circumstances entitling the plaintiff any urgent temporary relief, I do not consider there needs to be any “urgent stop-gap measure” to do practical justice.  In response to Mr Chan SC’s argument that without an interim interim injunction, the 1^st Summons would be rendered nugatory as the defendant would have fully discharged his duty 1 April 2021, again this fact would have been apparent at the time when the consent summons in relation to the 1^st Summons was entered into.  If the plaintiff did not consider an undertaking/injunction was necessary at that time, I do not see why one is necessary at this time.

31.  In any event, parties agreed that at the time of the hearing, the only thing outstanding in the Arbitration will be submissions concerning the taxation on costs.  Even if the defendant were to hand down his final award on costs after taxation, I do not see any irreversible prejudice that will be caused to the plaintiff which cannot be compensated by damages.  I do not consider there to be any risk of injustice.

32.  As both Mr Chan SC and Ms Cheung agreed that this application should not be treated as bringing forward the arguments under the 1^st Summons, I will not seek to consider whether there is a serious issue to be tried, balance of convenience and adequacy of damages and will leave those to be dealt with on 1 April 2020. 

Parties

33.  The issue of whether the other two claimants and the respondent ought to be joined into the present proceedings (or at least served) was also relied upon by Ms Cheung as to why the court should not entertain the plaintiff’s present application, or indeed, the 1^st Summons. 

34.  The argument is that the granting of an injunction would affect the interests of all the parties in the arbitration and they ought to be afforded an opportunity to make representations in the present proceedings if deemed necessary. 

35.  Given my disposition, it is unnecessary for me to deal with this point.  I am also comforted by the fact that from the correspondence in the bundle, it seems clear that all the parties to the Arbitration were well aware of the present litigation, the 1^st Summons and the 2^nd Summons.  Mr Chan SC also informed the court that the other two claimants had already written to indicate that they agreed to be bound by any decision of the court in the present proceedings.  It is certainly not my wish for more parties to be unnecessarily added to the present litigation, which has, in my view, already been blown out of proportions in terms of the costs incurred vis-a-vis the ultimate relief sought.  It is up to the plaintiff to decide whether a written confirmation from the two other claimants alone is sufficient for the purposes of Order 15 Rule 4(2) of the Hong Kong Civil Procedure 2020 in the future conduct of the present proceedings.

Order

36.  The plaintiff’s summons dated 28 August 2020 is dismissed.

Costs

37.  Costs follow the event, although Ms Cheung in her written submissions had asked for indemnity costs to be ordered against the plaintiff to signal the court’s displeasure in litigation conduct, both Mr Chan SC and Ms Cheung indicated they would reserve submissions on costs to after the handing down of this decision.  Without prejudice to further submissions on costs, I will just remark that whilst the 2^nd Summons is dismissed, with the materials currently before me, it seems to me that the plaintiff (rightly or wrongly) genuinely believed she had a sound basis for taking out the 2^nd Summons.

38.  I thus make an order nisi that the plaintiff is to pay the defendant’s costs of and incurred in the summons dated 28 August 2020, with certificate for counsel, to be taxed, if not agreed. 

39.  It remains for me to thank Mr Chan SC and Ms Cheung for their helpful submissions.