GORTHY ANIL KUMAR v. PACIFIC ALLIANCE INVESTMENT MANAGEMENT (HK) LTD AND ANOTHER

HCA 3040/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3040 OF 2016

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MISCELLANEOUS PROCEEDINGS NO 282 OF 2017

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D E C I S I O N

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The applications

1.  There are two summonses before the court.  They are two sides of the same coin.  Both applications, by PAG Holdings Ltd (“PAGH”), are designed to achieve the same end, namely the completion of arbitration proceedings between the parties before any other proceedings between the parties continue.

2.  In HCA 3040/2016 Mr Gorthy has brought proceedings against his former employers, Pacific Alliance Investment Management (HK) Ltd (“PAIMHK”) and PAG Consulting Ltd (“PAGC”).  PAIMHK and PAGC apply to stay the action in favour of arbitration proceedings between PAGH and Mr Gorthy (“the stay application”).    

3.  In HCMP 282/2017 PAGH applies for an injunction to restrain Mr Gorthy from commencing or continuing proceedings in any court (including but not limited to HCA 3040/2016), which are related to, connected with or arise out of matters that are being adjudicated in arbitration proceedings between PAGH and Mr Gorthy at the ICC International Court of Arbitration (ICC arbitration case 22294/PTA) (“the injunction application”).

The factual background

4.  These background facts do not appear to be in dispute. 

5.  PAIMHK, PAGC and PAGH belong to the same corporate group, conveniently referred to as PAG Group.  PAGH is now the ultimate shareholder of all of the PAG Group companies.

6.  Mr Gorthy began employment with PAIMHK in August 2009.  Mr Gorthy’s employment was governed by a written letter of employment dated 30 April 2009.  The letter of employment did not contain an arbitration provision, but did contain the following provision:

“ Governing Law. This Agreement shall be governed by, and construed, interpreted, and enforced in accordance with, the internal laws and not the laws pertaining to choice or conflict of laws, of Hong Kong Special Administrative Region.”

7.  In the absence of an arbitration provision it may be inferred that the parties anticipated that any dispute arising in respect of the contract of employment would be dealt with in the Hong Kong courts according to Hong Kong law.

8.  Prior to joining PAIMHK, Mr Gorthy was employed by Deutsche Bank where he had earned substantial unvested deferred benefits which would be forfeited upon leaving that employer.  In order to persuade him to join the PAG Group, and to compensate him for the losses, Mr Gorthy was offered, and acquired, 300,000 ordinary shares in Pacific Alliance Group Ltd (“PAGL”), the then holding company of the PAG Group.  On 31 December 2009, Mr Gorthy purchased a further 540,000 shares in PAGL, bringing his total shareholding to 840,000 shares.

9.  In November 2010, the PAG Group underwent a group restructuring process which involved the incorporation of PAGH to become the new holding company of the PAG Group.

10.  On 1 November 2010, an unsigned copy of an “Employee Shareholder Agreement” (“the ESA”) with PAGH was sent to Mr Gorthy for review. On 4 November 2010, Mr Gorthy signed the ESA.  The document gives rise to a contractual relationship between Mr Gorthy and PAGH.

11.  Pursuant to the ESA, PAGH issued 881,467 ordinary shares in PAGH to Mr Gorthy in exchange for the 840,000 ordinary shares Mr Gorthy held in PAGL.  PAGH also issued 213,563 preferred shares in PAGH to Mr Gorthy in exchange for a US$750,000 co-investment note previously issued to him by PAGL on 15 October 2010.  The co‑investment note was issued to Mr Gorthy as consideration for his investment in the restructuring of PAG Group. 

12.  The ESA contains a “Repurchase upon Termination” clause in the following terms:

“ 2.7(a) In the event that [Mr Gorthy’s] services to [PAGH] and its Subsidiaries are terminated voluntarily by [Mr Gorthy], [PAGH] shall have the right to purchase all or any portion of the Shares held by [Mr Gorthy], whether directly or indirectly (including shares held by [PAGH’s] Estate Planning Vehicles and Controlled Companies), (i) in the case of Preferred Shares or any Conversion Shares, at a price equal to the Fair Market Value (as determined by the Board in good faith in accordance with the definition of ‘Fair Market Value’) of such Preferred Shares or Conversion Shares and (ii) in the case of Ordinary Shares (other than Conversion Shares), for one Dollar ($1.00); provided, however, that if (Mr Gorthy) shall be fifty-five (55) years or older on the date of such termination, the aggregate price for the Shares shall be Fair Market Value (as determined by the Board in good faith in accordance with the definition of ‘Fair Market Value’).”

13.  The ESA also contains the following provisions, which are relevant to the issues before the court:

“ 4.7 Governing Law. This Agreement shall be governed by and is construed in accordance with the Laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the Laws of any other jurisdiction other than the State of New York; provided, however, that with respect to any corporate governance matters arising with respect to the Company under this Agreement, the laws of the Cayman Islands shall apply.”

“ 4.8 Dispute Resolution. Each of the Parties irrevocably agrees that all Actions relating to this Agreement or the transactions contemplated hereby shall be finally settled by binding arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce by a single Arbitrator appointed in accordance with the said Rules. The place of arbitration shall be Hong Kong. The language of the arbitration shall be English.”

14.  On 1 January 2013, Mr Gorthy’s employment with PAIMHK was transferred to PAG Consulting Ltd (“PAGC”), another company in the PAG Group.  On 16 September 2014, Mr Gorthy gave notice of his voluntary resignation from his employment with PAGC in order to work for another investment management firm in Hong Kong.  His last day of employment with PAGC was 25 November 2014.

The distinction between the parties

15.  It is significant that:

(i)   Mr Gorthy’s contract of employment was with, first, PAIMHK, and subsequently, PAGC; and

(ii)   The ESA is made between Mr Gorthy and PAGH.

16.  The inevitable consequence of the terms of the two contracts is that any dispute in respect of the contract of employment must be litigated between Mr Gorthy, against PAIMHK and PAGC, in Hong Kong courts in the Hong Kong law.  Subject to its governing law, any dispute in respect of the ESA will be litigated between Mr Gorthy against PAGH in Hong Kong, in a private arbitration, applying New York State law.

The disputes arise

17.  On 21 November 2014, after receiving Mr Gorthy’s notice to resign, PAGH informed Mr Gorthy that it was exercising its right pursuant to the ESA to repurchase all of his ordinary shares for US$1.00, and all of his preferred shares at fair market value.  In compliance with the ESA, Mr Gorthy sold all of his 213,563 preferred shares back to PAGH at a fair market value which was agreed at US$810,000.

18.  Mr Gorthy refused to sell his ordinary shares back to PAGH for US1.00 in accordance with the ESA.  He instead demanded that PAGH pay him US$4 million for the ordinary shares he held.  As a result of that refusal, on 6 November 2015, PAGH exercised what it considered to be its right to effect a unilateral repurchase of Mr Gorthy’s ordinary shares.  On that day, PAGH transferred US$1.00 to Mr Gorthy.

Mr Gorthy’s letter before action

19.  On 12 September 2016, nearly a year after the unilateral repurchase by PAGH of Mr Gorthy’s ordinary shares, Mr Gorthy’s solicitors sent a letter before action to PAIMHK, PAGC, and PAGH threatening legal action if they did not pay Mr Gorthy US$15 million and all unpaid dividends on the ordinary shares.  A draft statement of claim was enclosed with the letter before action. 

20.  In the draft statement of claim Mr Gorthy was named as the plaintiff, PAIMHK as the first defendant, PAGC as the second defendant, and PAGH, formerly known as Pacific Alliance Group Holdings Limited, (“PAGL”), as the third defendant.  PAIMHK was named as Mr Gorthy’s employer from August 2009 to December 2012, and PAGC as his employer from January 2014 to November 2014.  PAGH was named as the holding company of PAGL, and all four companies named were described as companies within the group known as PAG Group.

21.  The essence of the claim against PAIMHK was, first, that PAIMHK was in breach of implied terms in the employment agreement by failing to draw to Mr Gorthy’s attention critical differences between an earlier draft “Shareholding Agreement” that had been initialled and attached to the employment contract, and the ESA (“the breach issue”).  The claim against PAIMHK was, second, a claim of misrepresentation in relation to the terms of the ESA (“the misrepresentation issue”).  Virtually identical claims were made against PAGC.

22.  The claim against PAGH is a virtually identical claim in respect of the misrepresentation issue.

PAGH’s response to the letter before action

23.  PAGH alone responded to the letter before action by filing, on 26 September 2016, a “Request for Arbitration” (“the Request”), with the ICC International Court of Arbitration in respect of a:

“... dispute relating to an Employee Shareholder Agreement, dated 4 November 2010 by and among [PAGH] and [Mr Gorthy].”

In §18 of the Request the draft statement of claim was referred to, but not exhibited.  It is asserted by PAGH that the allegations of misrepresentation in a statement of claim were denied.  PAGH asserted further that Mr Gorthy’s claims in the draft statement of claim were claims “relating to” the ESA and are accordingly subject to the arbitration provision in the ESA.  The ESA is exhibited to the Request. 

24.  By this method, PAGH sought to bring the claim signalled in the draft Statement of Claim against PAIMHK and PAGC under the umbrella of the submission to arbitration in the ESA.

25.  The “Statement of Relief Sought” by PAGH in the Request is the following terms:

“By this arbitration, [PAGH] seeks the following relief:

(a) A determination that [Mr Gorthy’s] allegations in the draft Statement of Claim and threatened claims arising therefrom are subject to arbitration under Section 4.8 of the [ESA] because they are claims ‘relating to’ the [ESA] and the transactions (share repurchases) contemplated by it;

(b) A determination that those claims and allegations are without merit and denial thereof without prejudice;

(c) A determination that the [ESA] is a valid and binding agreement between the parties, which governs the parties’ rights with respect to the Ordinary Shares formerly held by [Mr Gorthy];

(d) A determination that [PAGH] validly exercised its share purchase rights under Section 2.7(a) of the [ESA] when, inter alia, it repurchased [Mr Gorthy’s] Ordinary Shares for US$1.00;

(e) An award of arbitration costs to [PAGH] under Article 37 of the ICC Rules.”

Mr Gorthy’s Labour Tribunal claim

26.  On 6 October 2016, Mr Gorthy filed a claim in the Labour Tribunal in Hong Kong, in which the claim was set out in the terms of the draft statement of claim.  However, now, the claim comprised only two defendants, PAIMHK and PAGC. 

27.  PAGH was no longer cited, and the paragraphs in the draft statement of claim which had referred to PAGH were deleted, and substituted with references to the Request, and an assertion that Mr Gorthy intended to file a counterclaim against PAGH in respect of the breach and misrepresentation issues in the arbitration. 

28.  Shortly thereafter, plainly quite correctly, having regard to the nature of the issues involved, Mr Gorthy’s Labour Tribunal claim was transferred into this court as HCA 3040/2016.

Mr Gorthy’s Answer to the Request and Counterclaim

29.  On 26 October 2016, Mr Gorthy filed an Answer to the Request and a Counterclaim in the arbitration proceedings.  As signalled in the statement of claim, the counterclaim raised the breach and misrepresentation issues against PAGH.

30.  Mr Maurellet said that the allegations in the draft statement of claim against PAIMHK concerning the “breach issue” and the “misrepresentation issue” were essentially the same as Mr Gorthy’s assertions against PAIMHK in the answer and counterclaim in the arbitration.  He said further that the allegations in the draft statement of claim concerning the PAGH “breach issue” were essentially the same as Mr Gorthy’s assertions against PAGH in the answer and counterclaim in the arbitration. 

31.  Mr Pao did not seek to challenge those submissions.

32.  Mr Gorthy asserted in the Answer to the Request that he did not dispute the description of the content of the ESA, and he denied that PAGH was entitled to any relief sought by the Request.

PAGH’s Reply and Application for Joinder of PAIMHK in the arbitration

33.  PAGH plainly recognised that the arbitration had arisen under the ESA, to which neither PAIMHK nor PAGC were parties.  On 21 November 2016, PAGH filed a reply to the counterclaim in the arbitration, and in the same document made application to join PAIMHK as an additional party to the arbitration, asserting that Mr Gorthy had chosen to place allegations and claims against PAIMHK in issue in the arbitration. 

34.  On 23 December 2016, Mr Gorthy replied to the request for joinder, opposing that request.

PAGH seeks to stay the Hong Kong proceedings in favour of arbitration

35.  On 16 December 2016, PAGH filed the application to stay HCA 3040/2016, and on 7 February 2017, in a separate application, in HCMP 282/2017, sought the anti-suit injunction against Mr Gorthy to restrain him from continuing the proceedings in HCA 3040/2016.  The principle basis for the injunction was that the matters in HCA 3040/2016 were “related to, connected with or would arise out of” the matters that were being adjudicated in the arbitration.

The Partial Award on Joinder and Jurisdiction

36.  On 15 May 2017, the Arbitrator, having heard the parties, issued a Partial Award on the issues of joinder and jurisdiction.  The Arbitrator’s award was in the following terms:

“ 110 Having carefully considered all of the evidence and submissions in this arbitration to date, and for the reasons set forth above, and pursuant to Article 6(5) of the ICC Rules, the Tribunal hereby AWARDS as follows:

(i) [PAGH’s] and [PAIMHK’s] Request the Joinder is inadmissible;

(ii) The Tribunal has no jurisdiction over the disputes between [PAIMHK] and [Mr Gorthy];

(iii) [PAIMHK] is therefore dismissed from, and is no longer a party to, this arbitration;

(iv) [costs dealt with]

(v) All other requests for relief submitted in connection with the Request for Joinder are dismissed; and

(vi) All other claims in this arbitration are reserved for determination in a future of award”

The Arbitrator then set out certain procedural directions for the future conduct of the arbitration.

The (nearly) final manoeuvres

37.  The applications for stay and injunction were set down to be heard in this court on 14 June 2016.

38.  On 12 June 2017, the solicitors for Mr Gorthy wrote to the Arbitrator and the solicitors for PAGH.  In that letter the following statement was made:

“ 4. In the circumstances, [Mr Gorthy] considers that there is no longer any meaningful or useful purpose in proceeding with this Arbitration, given that [Mr Gorthy’s] claims have always been in the nature of an employment dispute, and conducting this Arbitration in parallel will only unnecessarily increase costs. Accordingly, we write to inform the Tribunal and PAGH that Peter has decided not to proceed with his defence and the arbitration or to pursue his counterclaim herein.

5. We would emphasise that this decision is entirely without prejudice to [Mr Gorthy’s] claims in the High Court Action. We would further submit that this Arbitration was issued prematurely and inappropriately by PAGH, and that the Tribunal’s decision on the Joinder Application demonstrates that PAGH’s position has been incorrect from the outset ….”

39.  PAGH’s solicitors responded by replying on 13 June 2017, asserting to the Arbitrator:

“ We write on behalf of Claimant, [PAGH], and at the Tribunal’s invitation to respond to the letter from [Mr Gorthy] dated 12 June 2017 informing the Tribunal and ICC Secretariat that [Mr Gorthy] ‘has decided not to proceed with his defence in this Arbitration or to pursue his counterclaim herein.’

….

[Mr Gorthy] may choose, if he wishes, to offer no defence to [PAGH’s] claims and requested relief in this arbitration.  That is his prerogative.  But it does not make the arbitration go away, or defeat the Tribunal’s jurisdiction to decide the matters which have been put before it by [PAGH] that are within the Tribunal’s jurisdiction to decide.  [Mr Gorthy] agreed to arbitrate with [PAGH] ‘all Actions relating to’ the parties’ [ESA].  That arbitration agreement is binding on [Mr Gorthy] in respect of all matters that fall within its scope; it is not optional at [Mr Gorthy’s] election.”

40.  The letter proceeds over a total of six further pages to mount what in essence is an argument asserting that the Arbitrator was wrong in his decision in the Partial Joinder Award.

Mr Gorthy’s position on the arbitration

41.  In the course of the hearing before me, Mr Pao expanded upon the position of Mr Gorthy as set out in his solicitors’ letter of 12 June 2017 (see §38 above).  Mr Pao said that he was instructed to say that Mr Gorthy was content to concede items (c) and (d) of the Statement of Relief Sought in the Request (set out in §25 above). 

42.  Mr Pao next said the relief sought in item (a) was effectively determined by the Arbitrator in the Partial Joinder Award, and that the only conclusion that could be drawn from §§110(i), (ii) and (iii) of the Partial Joinder Award (see §36 above), was that the Arbitrator had determined that Mr Gorthy’s breach and misrepresentation claims against PAIMHK were not subject to arbitration.

43.  The submission was that, if, as the Arbitrator had determined, the Tribunal had no jurisdiction over the disputes between PAIMHK and Mr Gorthy, it could not make a determination as sought by PAGH in item (b) of the Statement of Relief Sought (see §25 above).

Events after 14 June 2017, the final manoeuvres

44.  While I was in the course of preparing this decision, correspondence between the parties and the Arbitrator continued.  The correspondence was copied to me. 

45.  In the light of that further correspondence, I directed that a bundle be prepared containing the correspondence, the Supplementary Award from the Arbitrator, and the reasons for the Supplementary Award.  I then directed that the matter be set down for further hearing.  I heard the parties again on 17 July 2017.

The Supplementary Award

46.  On 18 June 2017, having heard the parties by correspondence, the Arbitrator said:

“ The Tribunal declines Respondent’s invitation to terminate these proceedings. Claimant’s claims have not been withdrawn and will be adjudicated in this arbitration. Furthermore, pursuant to Section 68 of the Hong Kong Arbitration Ordinance (Cap 609), Respondent’s counterclaims against Claimant may not be unilaterally withdrawn where Claimant objects and the Tribunal recognises Claimant’s legitimate interest in obtaining a final settlement of the dispute. For the avoidance of doubt, and without drawing any conclusions or making any inferences as to the merits of the dispute, the Tribunal recognises Claimant’s legitimate interest in obtaining final resolution of its claims and Respondent’s counterclaims. The Tribunal’s reasons for this decision are not stated in this letter in the interest of time. However, either Party may request a reasoned explanation of this decision within one week from the date of this letter.”

The Arbitrator then proceeded to give procedural directions for the future conduct of the arbitration.

47.  Following further correspondence with the parties, on 30 June 2017, the Arbitrator set out his reasons for the Supplementary Award. 

48.  Yet further correspondence by the parties with the Arbitrator followed, but nothing turns on that.

The Law

49.  Where a plaintiff has instituted proceedings as of right, and not in breach of an arbitration agreement or an exclusive jurisdiction clause, he is not to be deprived of carrying on those proceedings unless very good reasons exist to the contrary: see Linfield Ltd v Taoho Design Architects Ltd [2002] 2 HKC 204 where, at §14, Ma J (as he then was) said:

“ One starts with the basic principle: what would serve the ends of justice between the parties to the litigation and as far as the administration of justice is concerned?”

And further at §16: 

“ Even if there are multiple sets of proceedings involving similar or even the same issues, if there is no identity of parties, I fail to see how it is desirable or even possible for one or more of such proceedings involving different parties to be stayed pending the resolution of any other set or sets of proceedings. The determination of any issues in proceedings between different parties would not be binding on any other party in another set of proceedings.”

50.  A stay of proceedings properly brought in a jurisdiction can only be granted in rare and compelling circumstances: see AIG Europe Ltd v Fast-Link Express Ltd (unreported, 10 January 2017, HCAJ 114/2014, per Ng J), citing Princess of the Stars [2012] EWCA Civ 1341 per Longmore LJ at §21.

51.  In the context of this case, it is of significance to note that Leggatt J, in the English Commercial Court in ED&F Man Sugar Ltd v T&L Sugars Ltd [2016] EWHC 272 (Comm) confirmed that prior findings in arbitration proceedings are not binding in later court proceedings involving different parties.

52.  The court certainly has jurisdiction to order a case management stay of court proceedings in favour of a pending arbitration, but it is clear that as a matter of discretion such stays would only be granted in rare and compelling circumstances: see Reichhold Norway ASA v Goldman Sachs [2002] 1 WLR 173, per Lord Bingham at 186C.

53.  The court must consider what would serve the ends of justice between the parties to the litigation and the administration of justice generally.  A stay must not cause injustice to the plaintiff who has brought the proceedings as of right. Nor should he be deprived of the right to bring the proceedings in the absence of very good reasons.  The applicant for the stay, in this case the PAG Group, must satisfy the court that continuing the proceedings would be unjust to him.

54.  I have had regard to the post CJR change in litigation culture which promotes active case management by the courts in facilitating the expeditious resolution of disputes.

55.  Mr Maurellet sought to persuade me that I should follow the principles expressed by the Singapore Court of Appeal in Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57. Despite his argument however I am satisfied, on the facts of this case, that it is not necessary for me to examine whether or not the principles as to the grant of a stay should be extended in the manner in which the Singapore Court of Appeal appears to have acted.

Discussion

56.  Ms Tong sought to argue that the decision of the Arbitrator lacked proper reasoning or justification.  The arbitration is governed by New York State law and there is no evidence before me in respect of New York State law as to this point.  I do not believe that it is open to me to say that the Arbitrator was wrong.  However it is open to me in the proceedings now before me to interpret the Arbitrator’s decision.

57.  The decision of the Arbitrator as to the involvement of the dispute between PAIMHK and Mr Gorthy in the arbitration was quite clear.  He said, in terms, that he had no jurisdiction in the matter.

58.  That conclusion was entirely consistent with the stand taken by PAGH in its Statement of Claim.  PAGH was at pains to point out that PAIMHK:

“ 82 Third, the [ESA][1] was not an employment contract between [Mr Gorthy] and his employer. The [ESA] was a shareholder’s agreement between [PAGH] and [Mr Gorthy] as shareholder in [PAGH]. It is not properly considered a term of [Mr Gorthy’s] employment with PAIMHK. PAIMHK as employer was not even a party to the [ESA], and nor was it a contemplated party to the draft form of shareholding agreement on which [Mr Gorthy] relies. PAGH is not aware of any law requiring that [PAGH], as issue of shares to [Mr Gorthy], owed employment law or other implied or quasi-fiduciary duties in his capacity as a shareholder when negotiating the terms that would govern his shares. Nothing in the draft form of shareholding agreement, much less the ‘mutual understanding’ [Mr Gorthy] alleges, prevented PAGH from repurchasing [Mr Gorthy’s] unvested PAGL shares through a corporate reorganisation, on such terms as it was willing to offer.

83  Nor is PAGH aware of any law that PAIMHK, which was not a party to the [ESA], nevertheless owed [Mr Gorthy] special or implied duties in respect of a shareholder agreement between [Mr Gorthy] and a third party that PAGH allegedly could have induced PAIMHK to breach.”

59.  That stand is entirely consistent with the Arbitrator’s finding that he had no jurisdiction in the dispute between Mr Gorthy and PAIMHK.  It is entirely contradictory to PAGH’s position now that the dispute between Mr Gorthy and PAIMHK should be determined within the context of the arbitration.

60.  Mr Maurellet drew my attention to §28 of Mr Gorthy’s Answer to the Request for Arbitration and Counterclaim and said that Mr Gorthy had agreed to submit PAGH’s claims and his counterclaims to arbitration.  But it is necessary to look at the clause as a whole:

“ Paragraph 24 of the Request is not admitted. Without prejudice to [Mr Gorthy’s] position as set out herein, [Mr Gorthy] agrees to submit [PAGH’s] claims as set out in the Request and [Mr Gorthy’s] counterclaims as set out in Section VI of this Answer and Counterclaim to arbitration conducted in accordance with the ICC Rules, by a single arbitrator, in English, in Hong Kong.”

61.  Subsequently, PAGH applied to the Arbitrator to join the dispute between PAIMHK and Mr Gorthy into the arbitration.  Mr Gorthy, having stated his position on a “without prejudice” basis, was perfectly entitled to oppose that joinder.  He was successful in that opposition, and the Arbitrator found that he had no jurisdiction over that dispute.

62.  With the greatest respect to the Arbitrator I simply cannot see how, if, as he plainly correctly says, he has no jurisdiction in respect of the dispute between PAIMHK and Mr Gorthy, they not being parties to an arbitration agreement, and PAIMHK not being a party to the arbitration agreement giving rise to the arbitration that is underway, he can subsequently say that the arbitration ought to continue in order to determine that dispute.

63.  In my view the matter is simply that clear and that plain.

64.  Mr Maurellet pursued the matter on the basis of expediency and reduced expense. Those are undoubtedly appropriate considerations.  But weighed against that are a number of factors. 

65.  It was always open to the parties to include arbitration provisions in the employment contract between PAIMHK and Mr Gorthy, or to make the arbitration provision in the ESA and “all disputes” provision which encompassed PAGH and its subsidiaries.  But they elected not to do that.  The consequence is that Mr Gorthy brings his proceedings in respect of the employment contract in this court as of right, and only in the strongest circumstances should he be deprived of that right.

66.  Next, Mr Maurellet said that to allow the High Court action to continue would constitute an abuse of process, because the arbitration will be determined for the conclusion of the High Court action, and if Mr Gorthy lost he would be setting up the same case again.  In this respect he relied upon Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1.

67.  I accept Ms Tong’s submission that, first there is no adverse decision against Mr Gorthy, second, Mr Gorthy is not pursuing any claims in the arbitration and will not do so, and third, the issues and causes of action in the dispute between Mr Gorthy and PAIMHK and PAGC are quite different from his claim against PAGH, that has led to the arbitration.  As Ms Tong said, no authority was cited to support an argument that a court should impose a stay on the basis that a possible future decision in an arbitration may give rise to an estoppel or abuse arguments in a court action.

68.  In Linfield, Ma J recognised the risk of different decisions.  At §16 he said further:

“ As I understand the learned judge’s reasoning, he must have treated the two sets of proceedings as more or less involving the same parties. It was for this reason that the existence of common issues, the risk of inconsistent findings and the inevitability of increased costs therefore became important features. These would not have been important features at all if the parties had been completely different. Even if there are multiple sets of proceedings involving similar or even the same issues, if there is no identity of parties, I fail to see how it is desirable or even possible for one or more of such proceedings involving different parties to be stayed pending the resolution of any other set or sets of proceedings. The determination of any issues in proceedings between different parties would not be binding on any other party in another set of proceedings. I recognize immediately that this may give rise to a risk of inconsistent findings, but where findings made in earlier proceedings (even on the same issues) are not binding in later proceedings, the risk is inevitable. However desirable it may be to have consistency, findings made in different proceedings between different parties cannot be made binding on other persons.”

69.  Mr Maurellet sought to argue that PAIMHK and PAGC would be bound by the decision in the arbitration as privies of PAGH.  The basis for this assertion was that each of the companies belongs to the same corporate group. 

70.  I accept Ms Tong’s submission that this contention must fail.  As Ms Tong said, although privity is a matter of substance and not form, and cannot this be exhaustively defined, the description set out in Spencer Bower & Handley: Res Judicata 4^th edn at §9.38, referred to by the Court of Appeal in China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 at §81, per Stock JA:

“ The required commonality is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action: Genesee Enterprises Ltd v Abou-Rached 84 BCLR (3rd) 277, so that:

Privies include any person who succeeds to the rights or liabilities of the party upon death or insolvency, or who is otherwise identified in estate or interest. …”

71.  Plainly, the mere fact that each of the companies belong to the same corporate group is not sufficient to meet this definition.

72.  Ms Tong sensibly said that if PAGH is concerned about multiple proceedings and potentially inconsistent findings if the claims are pursued in different forums, that concern can be simply resolved by PAGH agreeing to the termination of the arbitration, given that Mr Gorthy does not intend to pursue any further claims against PAGH in the arbitration.  In the arbitration, by concession, PAGH has succeeded in achieving a determination that it need pay only US$1.00 for Mr Gorthy’s shares in PAGH.  That was the issue that arose under the ESA.  The only remaining matters to be resolved is that of costs, which, if the arbitration is terminated now will not be particularly significant.

Disposal

73.  For the foregoing reasons I am satisfied that this is not a case where I should exercise my discretion either to stay the High Court action or to issue an anti-suit injunction.

Costs

74.  There will be an order nisi that PAIMHK and PAGC must pay Mr Gorthy’s costs of and occasioned by the stay summons in HCA 3040/2016, and PAGH must pay Mr Gorthy’s costs of and occasioned by the Originating Summons in HCMP 282/2017.  In both cases there will be a certificate for counsel.