X v. Y

HCCT 76/2025

[2025] HKCFI 4796

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 76 OF 2025

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J U D G M E N T

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1.  There is before the court an Originating Summons filed by the Plaintiff on 2 June 2025 (“OS”)  seeking an anti-suit injunction (“ASI”)  in respect of the proceedings commenced by the Defendant in the Commercial Court of the BVI (“BVI Court”)  against Z xxxxx xxxx xxx XXXXXXX xxxxxxxxx (“BVI Proceedings”).

2.  The Plaintiff has also taken out a Summons filed on 2 June 2025 (“Summons”)  seeking an interim ASI pending the determination of the OS.

Issues

3.  There are 4 issues raised in these matters.  In logical sequence, they are :

(1)  Whether there is a valid arbitration agreement;

(2)  If there is a valid arbitration agreement, whether it has been breached;

(3)  Whether comity and public policy are consistent with the grant of an ASI;

(4)  Whether relief should be denied to the Plaintiff by reason of its termination of the arbitration agreement, waiver and abuse of process.

4.  There are sub-issues raised under these issues. Indeed, a litany of arguments has been raised by Mr Wong SC, who appeared with Mr Hui and Mr Law for the Defendant.  Sensibly, in his viva voce submissions Mr Wong had highlighted the important arguments.  The court shall deal with these arguments.  Those of little relevance or strength do not require individual treatment.

Background

5.  There are many controversies over the facts of this case.  Where appropriate, it is necessary to identify the respective case of the parties.  Z is a limited partnership registered under the laws of the BVI on 19 February 2020.  It has no separate legal personality under BVI Laws. The Plaintiff and the Defendant are respectively the general partner and limited partner of Z. 

6.  By the BVI Proceedings, the Defendant seeks to have Z wound up on just and equitable ground, and have liquidators appointed over the same (“WU Application”).  In addition, the Defendant has applied (under the BVI Proceedings)  to have provisional liquidators appointed over Z (“PL Application”). 

7.  The Plaintiff says that Z was established primarily for wealthy investors to invest in funds that are not ordinarily accessible by private banking institutions.  However, it is undisputed that Z has only one investor, ie, the Defendant, although the Plaintiff says that it has always been contemplated that more investors would subscribe to Z and become its limited partners.  As its general partner, the Plaintiff is responsible for managing Z. 

8.  In around November 2018, the Defendant sold his successful fitness business in the Mainland for over US$200 million (“Proceeds”). 

9.  One of the Plaintiff’s directors, A, a private banker by profession, knew the Defendant and his wife, Xx Xxx Xxx since 1997.  It is undisputed that A and B, who was introduced to the Defendant by A, assisted the Defendant in making investments with the Proceeds after the sale of his business.  The details of this part of the background are not important. 

10.  According to the Plaintiff’s case, the Defendant was interest in investing in private funds.  However, the private funds were normally unavailable at private banking institutions’ platform.  A and B suggested to the Defendant to become a limited partner of Z (which was formed after they had started advising the Defendant)  which could have easier access to the private funds.  As a result, the Defendant became interested in investing in Z. 

11.  The Plaintiff says that in about August 2020, at the Defendant’s request, A sent to him the Partnership Agreement[1], Subscription Agreement[2] and other relevant subscription documents relating to Z.  On about 26 August 2020, 6 documents were sent to the Defendant by A at his request, amongst which were (a)  a letter of authorisation for Defendant to transfer US$10m to Z; (b)  a document called “[Z] Subscription agreement individual certification” in respect of the Defendant’s tax residence; and (c)  a document called “[Z] Subscription agreement signing page” (“Signing Page”). 

12.  Those documents were sent to the Defendant via a WeChat group made up of A, B (xxxxx xx Xxxxx), the Defendant and his personal assistance, C.  The Signing Page was executed by the Defendant with C signing as witness, and returned to A on the same day. Subsequently, the Defendant was accepted by the Plaintiff as a limited partner of Z and his Subscription Agreement (with the executed Signing Page attached)  was backdated to 26 August 2020.

13.  Upon the Defendant’s execution of the Subscription Agreement and the Plaintiff’s acceptance of the same[3], the Defendant became bound by the “Amended and Restated Limited Partnership Agreement related to [Z]” (“Partnership Agreement”)  pursuant to clauses 2.1 and 2.3 of the Subscription Agreement, and Recital C to the Partnership Agreement.

14.  Between November 2020 and March 2022, the Defendant signed a number of documents to transfer funds to Z.  The beneficiary of the transfers was stated to be Z in those documents.

15.  It is the Defendant’s case that Z was a fraud from inception, and he became a limited partner of it without knowledge or consent.  He says that in around December 2018, he reached an oral agreement and/or common understanding with B and A for them to provide investment services to him in accordance with his objective of preservation of capital and assurance of steady return (“Objective”)  in return for a performance fee of 10% of the aggregate profits made from his investments. 

16.  On around 27 August 2020, via WeChat, the Defendant was sent 6 documents by A, and C was asked to arrange for them to be signed by the Defendant.  These documents included (a)  the Signature Page; (b)  a borrowing notice under which the Defendant applied for an advance of US$10m from Citibank (“10m Loan”); and (c)  a letter of authorisation under which the Defendant authorised a transfer of US$10m to an account owned by Z.

17.  At the time, the Defendant believed that the documents were related to the 10m Loan.  This, says the Defendant, is evident by his WeChat voice message sent after he signed the documents :

“我找了個店家，麻煩他們幫我們打印一下，那你快點，你看看，確認一下，如果沒問題的話，趕快，好吧，那個，這個[B] 你確認一下，有問題吧，因為車子在門口等著呢， 好吧，因為我也是借了個人家地方，希望能夠在兩點鐘之前，好吧，這個就是一千萬美元的這個借款的這個一些手續，是吧，就全部我看了很多張吧，簽了，簽了大概有七八張，那麼是不是簽了對不對，一個簽了對不對，還有一個有什麼問題吧，好吧，儘快”

[emphasis added]

18.  In response, B said “收到，不著急。銀行的沒問題了”.  A further asked “沒問題了吧”, to which B replied “沒問題”.

19.  It is common ground that the Signature Page was subsequently affixed to a “Subscription Agreement relating to [Z]” backdated to 26 August 2020 (“Subscription Agreement”).

20.  Under Clause 2.1 of the Subscription Agreement, it was stated that the Defendant was applying to be a limited partner in Z.  Clause 11 of the document incorporated Clauses 21.6 to 21.8 of the Partnership Agreement.  Under Clause 21.6, BVI law is the governing law of that Agreement and the Subscription Agreement, and applies to any dispute or claim arising out of or in connection with the same.  Clause 21.7 provided as follows :

“All the parties irrevocably agree that any dispute, controversy, difference or claim arising out of or relating to this Agreement or any Subscription Agreement or the acquisition of Capital Commitments, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to this Agreement, whether or not governed by the laws of BVI shall be referred to and finally resolved exclusively by the Hong Kong International Arbitration Centre (“HKIAC”)  in accordance with the HKIAC’s Administered Arbitration Rules in force when the notice of arbitration is submitted in accordance with such rules, except where such rules are modified herein or by mutual agreement of the Partners ... Each Partner expressly consents to and agrees to be bound by and comply with all the terms and conditions of this clause 21.7. During arbitration, the Partners must continue the performance of all their respective obligations under the Agreement other than those obligations and matters that are the subject of the arbitration” (“Arbitration Agreement”)

21.  Allegations have been made by the Defendant against A and B on the non-disclosure of Z.  He said that the first time he saw the Subscription Agreement was on around 27 February 2023 when documents were received from A.  Prior to that, the Defendant was informed by B in February 2022 that Z was his “personal fund”, which he understood to be another bank account arranged by B and A to engage in investments generally and the “personal fund” belonged to him.

22.  The Defendant also alleges that Z has been operated in manner prejudicial to him :

(1)  He is the sole limited partner of Z and funded the entirety of its capital.  The terms of the Partnership Agreement are unfair and oppressive to him, eg, he is tied to Z for at least 10 years, subject to extension of up to 2 one-year periods at the sole discretion of the Plaintiff, but he has no say over the management and affairs of Z;

(2)  Z has engaged in high risk investment (hedge funds and equity funds), which is contrary to the Objective;

(3)  Z has suffered loss of US$29,577,326.22 (44.15%), and it has never been profitable;

(4)  Without his knowledge or consent, the Defendant was charged substantial management fees and subscription fees totalling US$2,047,627;

(5)    There are also questionable expenses and fees charged for the operation of Z totalling nearly US$10m.

23.  There is a summary of the 5 allegations made by the Defendant in support of the WU Application, which can be found in his 2^nd Affirmation filed on 22 August 2025, [60] :

“(a)  Fraud in the inception of [Z]: [Z] is a limited partnership that is the equivalent of a ‘bubble company’, in that it was formed at the instigation of [A] and [B] for the purpose of obtaining funds from me and without any bona fide intention to carry on business in a proper manner (paragraph 32 therein).

(b)  Secret Profits: By reason of (amongst other things)  [A's ]directorship of the Plaintiff and [A] and [B's] wrongdoing in relation to me and [Z], it is to be inferred that [A] has indirectly received the benefits via the Plaintiff (paragraphs 33 to 37 therein).

(c)  I became a limited partner of [Z] without my knowledge or consent and thereby lost control of my investments: [Z] was formed and I became its sole limited partner thereof without my knowledge or consent (paragraphs 38 and 39 therein).

(d)  Terms of the Partnership Agreement: The terms of the Partnership Agreement are unfair and oppressive, in particular in circumstances where I was, against my will, the sole limited partner of [Z] (paragraphs 40 to 43 therein).

(e)  My loss of confidence in the management of [Z] and lack of cooperation: I had a justifiable and irretrievable loss of confidence in the management of [Z] on account of the wrongdoing on the part of [A], [B], the Plaintiff and/or [D] and/or the improper management of [Z's] investments and losses caused thereby. (paragraphs 44 to 45 therein)  .”

24.  In respect of the PL Application, the Defendant seeks the appointment of provisional liquidators pending the determination of the WU Application on the following grounds :

(1)  There is a real risk of dissipation in respect of Z’s assets, which were solely contributed by the Defendant;

(2)  Even in the absence of fraud, joint provisional liquidators are required in order to stabilize matters and prevent further significant losses.  In addition, they are needed to ensure that no further extortionate fees or charges are made; 

(3)  The provisional liquidators can (and should)  investigate the use, transfer, misappropriation and whereabouts of the assets of Z, thereby assist in the maintenance of the value of Z’s assets. They can also investigate the questionable expenses, identify the recipients of payments made by or through Z against whom there may be claims, and take any steps necessary to preserve those claims.

Hong Kong proceedings

25.  On 17 November 2023, the Defendant commenced proceedings in Hong Kong, XXXX xxxxxxxxx, to seek pre-action discovery against, inter alios, B, A, and the Plaintiff in respect of his investments (“Discovery Application”).  On 2 October 2024, the Defendant obtained an order to discontinue that application on the condition that he should pay the costs of the defendants, including the Plaintiff. 

26.  On 28 February 2025, the Defendant issued proceedings in Hong Kong, XXX xxxxxxxxx, against B, A, D and the Plaintiff (“HCA Proceedings”)  to seek relief in respect of his investments.  It appears from the Statement of Claim filed in the HCA Proceedings that it is primarily a claim against B and A for breach of their duties in relation to the investments made on behalf of the Defendant, and the corporate defendants are sued for knowing receipt and dishonest assistance.

27.  On 9 May 2025, the Plaintiff applied to stay the HCA Proceedings in favour of arbitration.  This stay application is opposed by the Defendant and pending substantive determination.

28.  The HCA Proceedings were followed by the BVI Proceedings issued on 12 May 2025, and then by the OS and the Summons, both taken out on 2 June 2025.

29.  On 6 June 2025, an Order was made by DHCJ MK Liu, granting an interim-interim ASI to the effect that the BVI Proceedings are held in abeyance pending the determination of the OS and the Summons.

Applicable principles

30.  The court has power under both s 45 of the Arbitration Ordinance, Cap 609 and s 21L of the High Court Ordinance, Cap 4 to grant an ASI to restrain proceedings instituted in breach of an arbitration agreement: Giorgio Armani SpA v Elan Clothes Co Ltd [2019] 2 HKLRD 313, [23].

31.  The applicable principles were summarised by M Chan J in Bank A v Bank B [2024] 5 HKLRD 250, [32]-[35] :

(1)  Foreign proceedings instituted in breach of an arbitration agreement will ordinarily be restrained by the grant of an injunction, unless there are strong reasons shown to the contrary;

(2)  For contractual anti-suit injunctions of this kind, there is no need to prove that the arbitral tribunal is the more convenient forum, since it is not a case of forum non conveniens;

(3)  Nor is there any need to feel diffidence in granting the injunction, or to exercise the jurisdiction sparingly and with great caution, for fear of giving an appearance of undue interference with proceedings of a foreign court.  This is because the restraint is directed against the party which has promised not to bring proceedings otherwise than in accordance with the arbitration agreement, and effect should ordinarily be given to the agreement in the absent of strong reasons for departing from it;

(4)  The strong reasons must be sufficient to displace the other party’s prima facie entitlement to enforce the contractual bargain and all the facts and circumstances of the particular case are to be considered.

32.  There is no requirement that an injunction claimant should, before seeking a contractual ASI, make a prior application to the foreign court for a stay of the foreign proceedings: The Anti-Suit Injunction, Raphael QC, 2^nd edn, [7.17], [8.45]-[8.46].

Whether there is a valid arbitration agreement

33.  There is much dispute on the facts.  However, recognising the difficulty in resolving factual disputes without cross-examination, Mr Law SC, who appeared with Mr Yeung for the Plaintiff, made his case based on abuse of process.  It is contended that the Defendant had adopted the Subscription Agreement in the WU Application, and it is not open to him to approbate and reprobate.

34.  Before turning to the arguments, it should be noted that whilst there are WeChat messages produced before the court to support the Defendant’s case that he thought that the Signing Page which he put his signature on was one of the documents for the 10m Loan, the messages were not all in favour of his case.  As recorded, prior to the 26 August 2020, the Defendant had shown a keen interest in investments.  Apparently, he took the initiative to do some research himself and made some assessment on the market, which he shared with others, including B.  The Defendant’s messages suggest that he was not an unsophisticated investor (this is fortified by the fact that he is a very successful businessman), notwithstanding that he did not understand English.

35.  The Defendant’s personal assistant, C, did understand English.  There is no reason to believe that she did not read the Signing Page and explained what it was to the Defendant prior to his signing. Further, apart from the transfer of US$10m to Z on about 26 August 2020, the Defendant had been transferring substantial funds to the same entity since November 2020 (the allegation that he was informed that Z was his “personal fund” does not assist him because that occurred in February 2022 (see para 21 above)).  It is inherently unlikely for the Defendant, with his sophistication and the assistance at his disposal, not to know why he was doing so.

36.  Turning to the law on abuse of process, it is an abuse of process for a litigant to advance inconsistent positions in two pending actions.  It is no less abusive for the litigant to take inconsistent positions or assumptions on the same issue in different proceedings than when he makes inconsistent allegations in such proceedings: Re Minloy Ltd & Ors [2020] HKCFI 2215, per Linda Chan J, [31].

37.  If a party seeks to raise new matters in separate proceedings or seeks to reverse a previous assumption that has been the basis of earlier proceedings in new proceedings, that amounts to an abuse of process and he is estopped from doing so.  A fortiori, if the earlier proceedings are still in existence: Berthier Godown Ltd v E Wah Realty Ltd & Anr [1986] HKC 8, per Mortimer J (as he then was), 14H-15A.  The principles are applicable where the party has raised inconsistent positions in foreign proceedings: Re Shun Tak Holdings Ltd [2009] 5 HKLRD 743, per Kwan J (as she then was), [83]-[90].

38.  Mr Law submitted that it is not open to the Defendant to disown the Arbitration Agreement by claiming that he has never agreed to enter into the Subscription Agreement.  This position is inconsistent with the basis on which the WU Application is pursued and therefore abusive. 

39.  In the WU Application, the Defendant maintains that he is a limited partner of Z.  This provided him with the locus to bring the WU Application, and to contend that the affairs of Z have been conducted in a manner oppressive, unfairly discriminatory and unfairly prejudicial to him pursuant to s 93 of the Limited Partnership Act (of BVI).  Unless he is a partner of Z, he would have no locus to rely upon s 93.  Section 93(2)  provided that: “the Court may appoint a liquidator … if, on the application of a partner …” [emphasis added].  

40.  The Defendant also relies upon various provisions of the Partnership Agreement in support of his case that they are unfair and oppressive (paras 40 and 41 of the Originating Application for the WU Application).

41.  The stance taken by the Defendant in the WU Application necessarily assumes that the Subscription Agreement (with the Arbitration Agreement therein incorporated)  is valid and binding on him.  Such stance is inconsistent with the case that the Arbitration Agreement (and the Subscription Agreement)  is invalid.  The Defendant is not allowed to blow hot and cold.

42.  Mr Law also submitted that the Defendant has adopted the Arbitration Agreement by conduct.  The Defendant could have but did not raise the plea of non est factum in respect of the Subscription Agreement.  Instead, he chose to rely on the document as binding: Misrepresentation, Mistake and Non-Disclosure, 6^th edn, by Cartwright, [13-63]. Once this election is made, the Defendant would be bound by it and cannot nullify the contract afterwards: Pepper v Prudential Trust Co Ltd [1965] SCR 417, 421 (Judson J)  & 425 (Spence J).

43.  The Defendant’s election may be communicated expressly or impliedly by conduct.  The test is objective.  A party will be treated as having elected to affirm and thereby lost the right to rescind if he speaks or acts in a way which would reasonably be understood as consistent only with that party having made an informed choice to treat the contract as valid (whatever his subjective intention): The “C Challenger” [2021] 2 Lloyd’s Rep 109, per Foxton J, [203(i)-(ii)].  Further, for a party to elect, he must be aware both of the facts giving rise to the inconsistent rights, and of the legal rights to which those facts give rise: The “C Challenger”, [202(i)].

44.  The only answers provided by the Defendant to these submissions are that (a)  in the WU Application he also contends that he did not consent to the Arbitration Agreement (or the Subscription Agreement); and (b)  there was no clear and unequivocal adoption of the Arbitration Agreement. 

45.  I am unable to agree with the Defendant. Firstly, whilst it is true that in the WU Application the Defendant has also pleaded his case on lack of consent over the Arbitration Agreement, I find the plea conceptually ambiguous.  There can be no doubt that absent adoption of the Subscription Agreement, the Defendant would have no locus to make the WU Application.  Further, there is no relief claimed flowing from the lack of consent plea.  The only relief prayed for in the WU Application are the winding up of the limited partnership and the appointment of liquidators over the same (together with costs and “such further and other orders as the Court considers appropriate”).

46.  Even in the HCA Proceedings, the Defendant does not seek to have the Subscription Agreement rescinded. 

47.  Secondly, there can be no serious question that the Defendant is aware of the factual assertions he is advancing in the WU Application.  Moreover, he is legally represented in those proceedings (the court was informed by Mr Wong that the Defendant is represented by senior counsel in those proceedings).  There is a presumption, which is consonant with plain common sense, that the Defendant had received appropriate advice from his legal team on the legal right to avoid the Subscription Agreement by reason of fraud: see The “C Challenger”, [202(v)]. 

48.  In the premises, I hold that it is abusive for the Defendant to contradict his position in the WU Application by impeaching the validity of the Subscription Agreement (and the Arbitration Agreement it incorporates)  in these proceedings.  He is estopped from doing so.  I also hold that the Defendant had unequivocally elected to affirm the Subscription Agreement by bringing the WU Application.  He has therefore lost the right to challenge the Arbitration Agreement (at least for the present purpose).

Breach of the Arbitration Agreement

49.  There are some common ground here: (a)  the WU Application do not fall within the Arbitration Agreement because they are grounded on the statutory power of the BVI Court; (b)  commencement of the WU Application, or the PL Application, was not a breach of the Arbitration Agreement; and (c)  the issue here is governed by the principles adumbrated in FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands)  Holding Corp [2024] Bus LR 190, UKPC.

50.  The BVI law experts of the parties are in agreement that the BVI Court would follow the authoritative decision in FamilyMart. In very simple terms, the applicable ratio of that decision is that where winding up proceedings are based on matters which are arbitrable under the terms of an arbitration agreement (referred to as “precursors” for the court to determine whether the company should be wound up on just and equitable ground), those matters should be decided by arbitration. 

51.  In the present case, the terms of the Arbitration Agreement are very wide.  Disputes which fall within it include the “existence, validity, interpretation, performance, breach or termination thereof …”.

52.  In respect of the underlying factual disputes (precursors)  of the WU Application, they appear from para 60 of the Defendant’s 2^nd Affirmation (see para 23 above).  In my view, each of those 5 matters is caught by the Arbitration Agreement.

53.  There is a more detailed list of the underlying factual disputes set out in paras 67.2 to 67.5 of the Plaintiff’s Skeleton Arguments.  I agree that those matters are arbitrable under the Arbitration Agreement. 

54.  In the premises, subject to the Defendant’s argument on exercise of discretion by this court, prosecution of the WU Application would breach the Defendant’s negative covenant not to litigate outside the scope of the Arbitration Agreement, and the breach should be restrained by an ASI.

55.  Turning to the issue of discretion, I agree with Mr Law that given that the seat of arbitration under the Arbitration Agreement is Hong Kong and the OS was served on the Defendant in Hong Kong, it is perfectly natural for the Plaintiff to come to this court to invoke its supervisory jurisdiction over these matters.  This court would require a good reason why it should not restrain a breach of the Arbitration Agreement with an ASI: see UniCredit Bank GmbH v RusChemAlliance LLC [2024] 3 WLR 659, SC, [70]-[71] and Enka Insaat ve Sanayi AS v OOO “Insurance Co Chubb” [2020] 1 WLR 4117, SC, [179].

56.  I am unable to see any good reason why this court should abdicate its responsibility by deferring these matters to the BVI Court to decide whether to stay the WU Application in favour of arbitration as suggested by Mr Wong.  The Defendant has not made out a good case which militates against the grant of an ASI based on discretionary considerations.

57.  Finally, the PL Application merits different consideration.  It is uncontroversial that (a)  it falls outside the Arbitration Agreement; (b)  an arbitration tribunal appointed under the Arbitration Agreement would not have the power to grant the relief in question; and (c)  the making of an order for appointment of Provisional Liquidators would not require resolution of the underlying disputes in the WU Application[4].

58.  In the premises, it is difficult to see that the prosecution of the PL Application would constitute a breach of the Arbitration Agreement.  Mr Law’s only answer here is that the wide scope of the order sought by the Defendant under the PL Application is an attempt to outflank the Arbitration Agreement. 

59.  I am unable to agree.  First, the Plaintiff’s BVI law expert, Mr Collings KC, takes the view that the BVI Court has no power to appoint Provisional Liquidators over a limited partnership.  Although the experts disagree on this point, the Defendant’s expert has not identified any statutory provision which explicitly provided such power.  It appears to me that the point is open to debate, and should be resolved by the BVI Court. 

60.  Second, what power would ultimately be granted to the Provisional Liquidators is a matter for the BVI Court in the event that it decided in favour of the Defendant on the jurisdiction to grant relief.  It is somewhat sterile to debate about the power to be granted to the Provisional Liquidators when the power to appoint them is unclear.  In any case, such power would have to be exercised in furtherance of the purpose for which the Provisional Liquidators are appointed, namely, to maintain the value of Z’s assets (see para 24 above). 

61.  For these reasons, I do not believe that there is justification for an ASI against the PL Application.

Comity and public policy

62.  With respect, it is now trite that in the context of an ASI sought on the ground of breach of contract, comity has a little if any role to play (see paras 31(1)  and (3)  above and Enka Insaat, [180]).

63.  Hong Kong has adopted a pro-arbitration policy, which is reflected in its law.  I am unable to see anything advanced by the Defendant under this issue which would undermine the grant of an ASI.  

The Plaintiff’s conduct

64.  On this final issue, the Defendant contends that the Plaintiff has lost its right to arbitrate by virtue of its position taken in the Discovery Application.  The contention is based on 3 points :

(1)  In the Discovery Application, the Defendant affirmed that he would not observe the Arbitration Agreement by stating that he intended to bring a High Court Action and sought pre-action discovery on that basis.  This amounted to renunciation of the Arbitration Agreement;

(2)  The Plaintiff did not resist the Discovery Application by invoking the Arbitration Agreement.  Instead, its evidence was that the application was unnecessary.  In particular, the Plaintiff claimed that: “… the mere fact that [the Defendant] … is unable to particularize every minute aspect of the quantum does not prevent him from commencing the intended action, and does not justify the present application for pre-action discovery” (Affirmation of A filed on 12 April 2024, [46(4)]);

(3)  It follows that the Plaintiff had accepted the Defendant’s renunciation.  It is inconsistent and untenable for the Plaintiff now to claim continued reliance on the Arbitration Agreement. Once the contract is terminated, the Plaintiff cannot subsequently unilaterally revive the Arbitration Agreement.  The Defendant relies on Mustill & Boyd: Commercial and Investor State Arbitration, 3^rd edn, [3.153]. 

65.  With respect, I can find little substance in the contention.  As pointed out by the Plaintiff, the nature of the underlying disputes which grounded the Discovery Application is different from those in the WU Application.  The former envisaged civil claims against the Plaintiff for “ancillary liability” [5], whereas the latter is a claim for the just and equitable winding up of Z.  The Plaintiff’s conduct in the Discovery Application cannot affect its right to an ASI against the WU Application as the substance of the two disputes is different.

66.  Further, there was no formulated claim (as opposed to an indication of the nature of the claims)  against the Plaintiff under the Discovery Application.  It cannot be said that the Plaintiff’s right to arbitrate had accrued because, absent a formulated claim, it was unclear whether the disputes between the Defendant and the Plaintiff would fall within the Arbitration Agreement. 

67.  Whether the Defendant had renounced the Arbitration Agreement (para 64(1)  above)  depends on the formulation of its claims and whether they fall within the Arbitration Agreement.  Indeed, in response to the Plaintiff’s application to stay the HCA Proceedings in favour of arbitration, the Defendant contends that its claims against the Plaintiff lie outside the ambit of the Arbitration Agreement because (a)  they are “entirely accessory to the primary wrongs of [B] and [A] and do not relate to the affairs of [Z]”; and (b)  the “substance” of the HCA Proceedings is “concerned with [B] and [A’s] breaches of fiduciary and/or common law duties”[6].

68.  In any case, the Discovery Application was subsequently discontinued with adverse costs consequence to the Defendant. 

69.  The Plaintiff relies on La Donna Pty Ltd v Walford AG, 194 FLR 26, Supreme Court of Victoria, for the proposition that circumstances may allow a party to rationally take the view that it was desirable to participate in certain steps under interlocutory proceedings even though it believed, and intended to persuade the Court at an appropriate time, that the dispute should be arbitrated. 

70.  It appears to the court that the Plaintiff took the view that the Discovery Application was unsound and that it was entitled to oppose it on merits.  This was a perfectly rational stance to take.  I see no good reason why such a stance would prejudice the Plaintiff’s entitlement to arbitrate when the need arises.

71.  Finally, there is no answer to the Plaintiff’s contention that any waiver on its part has to be in writing (or fall within applicable exception)  pursuant to clause 19.1 of the Partnership Agreement, which provided that: “Except as otherwise provided in this Agreement, this Agreement may be … waived (whether in whole or in part)  either in accordance with clause 19.2, or by the written consent of the General Partner and of the Limited Partners …”.

Disposition

72.  By reason of the aforesaid, I grant an ASI against the WU Application pending the determination of arbitration between the parties.  I decline to do so in respect of the PL Application.  The terms of the relief sought under paras 1 and 2 of the OS will have to be modified in according with the rulings in this Judgment. 

73.  The Summons is now academic.  I make no order on it.  A draft order should be submitted by the Plaintiff for the approval of the court.

74.  As for costs, the parties have each succeeded to a limited extent.  They should endeavour to agree the appropriate costs order within 7 days from the date of this Judgment, failing which they should each lodge and serve a skeleton argument on costs, limited to 3 pages printed in font size 13 and 1.5 line spacing with normal margins, within 7 days thereafter.  The skeleton arguments should be accompanied with a statement of costs.  Reply submissions (if any)  and comments on the opposition’s statement of costs should be lodged and served within 3 days thereafter (limited to 2 pages with the same format as aforesaid).  Reply to the comments (if any)  to follow within 2 days thereafter (limited to 1 page with the same format).  The issue will then be disposed of on paper if the court sees fit. 

75.  Lastly, I am grateful for the assistance of counsel. 

Mr Law Man Chung SC, Mr Cedric Yeung and Mr Danny Tang (by written submission only), instructed by Jones Day, for the Plaintiff

Mr William Wong SC, Mr John Hui and Mr Paul Law, instructed by Zhong Lung Law Firm LLP, for the Defendant

[1]   See para 13 below.

[2]   See para 19 below.

[3]   The Plaintiff also signed the Subscription Agreement: B1/tab 22/p 301.

[4]   See the expert report of Mr Collings KC at B9/T109/2283, [31].

[5]   B5/50/1214-1215, [127].

[6]   A/8/115, [57].