FENN KAR BAK LILY v. SO SHIU TSUNG THOMAS

DCCJ 2047/2020
DCCJ 220/2021
(Heard Together)

[2021] HKDC 719

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2047 OF 2020

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IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 220 OF 2021

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DECISION

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1.  The main protagonists in these two actions are Madam Fenn and Mr So. All the parties in these two actions save Mr So are parties to an ongoing arbitration concerning their disputes arising from a partnership agreement (“the Arbitration”). Mr So is the arbitrator of the Arbitration.

2.  Madam Fenn is unhappy with the conduct of Mr So in the Arbitration. First, she alone instituted proceedings against Mr So in the District Court under DCCJ 2047/2020 (“the 1^st Action”) on 19 May 2020. Then, on 15 January 2021, she and her two co-claimants in the Arbitration, namely, Mr Tse and Madam Leung (collectively “the Claimants”) commenced another action in the District Court against Mr So as the 1^st defendant and Mr Au as the 2^nd defendant under DCCJ 220/2021 (“the 2^nd Action”) on 15 January 2021. Mr Au is the sole respondent in the Arbitration.

3.  In these two Actions, there are altogether 5 summonses taken out by the parties. They are:

In the 1^st Action

(1)   A summons taken out by Madam Fenn dated 23 July 2020 for an interlocutory injunction to restrain Mr So from acting or continuing to act as the arbitrator in the Arbitration (“the Interlocutory Injunction Summons”);

(2)   a summons taken out by Mr So dated 27 July 2020 for an order that Madam Fenn’s Statement of Claim be struck out and the action be dismissed with costs on an indemnity basis (“the 1^st S/O Summons”); and

(3)   a summons taken out by Madam Fenn dated 1 March 2021 that the 1^st and 2^nd Actions be consolidated (“the 1^st Consolidation Summons”).

In the 2^nd Action

(4)   A summons taken out by the Claimants dated 1 March 2021 for an order that the 1^st and 2^nd Actions be consolidated (“the 2^nd Consolidation Summons”); and

(5)   a summons taken out by Mr So dated 1 March 2021 for an order that the Statement of Claim as against Mr So be dismissed with costs on an indemnity basis (“the 2^nd S/O Summons”).

4.  It is logical for me to determine the 1^st and 2^nd S/O Summonses first. Obviously, if I allow these applications of Mr So, the remaining applications will become otiose.

5.  I should mention the position of Mr Au. He is a party to the 2^nd Action only. By his 5-paragraph skeleton argument, Mr Au indicates that he has no objections to the 2^nd S/O Summons but he objects to the 2^nd Consolidation Summons as the matter now stands. Mr Tong, for Mr Au, at the hearing confirms this position and makes no further submission.

6.  I shall first set out the uncontroversial background facts and the factual allegations of Madam Fenn, Mr Tse and Madam Leung in their pleadings.

7.  The following factual account is distilled from the Decision of HH Judge Phoebe Man in the 1^st Action handed down on 10 September 2020 (“the Decision”) and the skeleton submissions of Ms Cheung, for Mr So, filed for the purposes of all these applications. I have heard no dispute about the account.   

8.  The Claimants and Mr Au were previously equity partners of and in a firm of solicitors known as Lily Fenn & Partners (“the Firm”). All of them are privy to a written partnership agreement dated 11 May 2007 (“the Agreement”). The Claimants had a dispute with Mr Au and they resorted to the Arbitration to resolve their differences. The Arbitration was commenced on 30 May 2011. Under the Agreement, the Hong Kong International Arbitration Centre (“the HKIAC”) Administered Arbitration Rules 2008 (“the Rules”) should be adopted as the lex arbitri of the Arbitration.

9.  Pursuant to an agreement entitled “Terms of Appointment for Appointing Thomas S.T. So as Arbitrator” dated 16 August 2011 (“the Appointment Agreement”), the Claimants and Mr Au as Respondent appointed Mr So as the arbitrator of the Arbitration. Mr So is a practising solicitor and the former president of the Law Society of Hong Kong. He is an arbitrator on the panel of arbitrators of the HKIAC.

10.  Substantive hearings of the Arbitration were held in the wake of his appointment.

11.  On 27 March 2020, Mr So made a partial award, partly in favour of the Claimants and partly in favour of Mr Au (“the Partial Award”). After a setting-off exercise, the upshot is that the Claimants are liable to pay Mr Au a sum of HK$790,928.45 together with interest thereon.

12.  On 21 April 2020, Mimmie Chan J granted Mr Au’s ex parte application and made an order for him to enforce the Partial Award as a judgment pursuant to section 84 of the Arbitration Ordinance, Cap. 609 and Order 73 rule 10(1)(d), Rules of the High Court (“the Order”).

13.  By a letter dated 2 May 2020, the Claimants applied for an extension of time to make an application for an additional award on profits tax to be reimbursed by Mr Au and a correction of interest calculation on the Partial Award (“the Additional Award Application”).

14.  By a letter dated 4 May 2020 (“the 4/5 Letter”), Mr Au made submissions against the application of the Claimants to Mr So.

15.  By summons dated 6 May 2020 (“the 6/5 Summons”), the Claimants made an application to set aside the Order (“the Setting Aside Application”). By a letter of the same date, Mr Au informed Mr So of the Order and the Setting Aside Application of the Claimants (“the 6/5 Letter”). The Setting Aside Application was subsequently dismissed by consent.

16.  On 13 May 2020, by way of a letter of the even date, Mr So handed down his decision in which he dismissed the Additional Award Application (“the Dismissal Decision”).

17.  Less than a week later, Madam Fenn commenced the 1^st Action against Mr So.

18.  On 19 August 2020, Mr So handed down a partial costs award (“the Partial Costs Award”) hereby the Claimants are ordered to bear 75% of the costs of the Arbitration. Mr So further directed Mr Au to file his bill of costs and the Claimants to file their objections thereto.

19.  Shortly afterwards, by summons dated 28 August 2020, Madam Fenn applied for an interim injunction pending the determination of the Interlocutory Injunction Summons. HH Judge Phoebe Man heard the summons and dismissed the application by the Decision.

20.  After the Decision was handed down, the Claimants commenced an action in the High Court under HCA 1744/2020 against Mr So and Mr Au (“the High Court Action”) on 12 October 2020.

21.  On 31 December 2020, Mimmie Chan J granted Mr So’s application by summons dated 11 December 2020 and made an order to transfer the High Court Action to the Construction and Arbitration List with indemnity costs against the Claimants. The High Court Action was allocated a new number of HCCL 1/2021.

22.  On 7 January 2021, the Claimants filed a Notice of Discontinuance against Mr So to discontinue the High Court Action.

23.  On 15 January 2021, the Claimants commenced the 2^nd Action against Mr So and Mr Au.

Legal principles relating to striking out applications

24.  The legal principles relating to striking out applications are well-settledand the parties have no disagreement about them. Ms Cheung has made the following summary of the relevant passage in Hong Kong Civil Procedure 2021, Vol.1 (§18/19/4):

(1)  It is only in plain and obvious casesthat the court should exercise its summary powers to strike out the indorsement on any writ or any pleading under this rule.

(2)  Where the limb of lack of reasonable cause of action or defence is relied on, no evidence is admissible.  The court should only look at the pleadings and decide whether on the assumption that the facts as pleaded are true the cause has some chance of success: O. 18, r 19(2), Rules of the High Court.

(3)  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.

(4)  If the Court does not think the matter to be clear beyond doubt or if it fails to be satisfied that there is no reasonable cause of action or that the proceedings are frivolous or vexatious, then, there should be no striking out.  One must be careful not to drive a plaintiff from the judgment seat nor should the Court decide difficult points of law.

25.  For the proposition that in a striking out application, the factual allegations in the pleading in question under attack must all be taken as true, G Lam, J (as he then was) had this to say in Lam Kit Sing v Chungshan Commercial Association Hong Kong and Ors. (unreported, HCA 2011/2014, 29.6.2016) at §18,

“… is in my view too widely stated. There are authorities that show that the court’s power to strike out a pleading can be exercised where it is plain and obvious that the plaintiff’s case has no factual basis: Oh Jae-Hoon, Eugene v Richdale [2004] 4 HKC 315, at paragraph 15, or has no “solid basis capable of proof” and is a “myth” with “no substantial foundation”, per Lord Herschell in Lawrence v Lord Norreys (1890) 15 App Cas 210, 220, or presents “a tissue of improbabilities which ought not to be sent to proof”, per Lord Watson at page 222; see also Overseas Trust Bank v Coopers & Lybrand [1990] 1 HKLR 568 at 583. Thus if a plaintiff pleads as a fact something which can clearly be shown to be incontrovertibly false, then on an application to strike out on that basis the court is not bound to accept the allegation as true and to proceed on a fictional basis.”

26.  G Lam J (as he then was) in his recent judgment in Chinachem Charitable Foundation Limited v Chan Wai Tong Christopher and Ors. [2021] HKCFI 1347[1] allowed an application for striking out parts of the statement of claim on the ground that those allegations are scandalous, frivolous and vexatious. Such allegations of dishonest conduct amounting to criminal conduct were made against the joint and several administrators of the estate in question.

27.  After the learned judge quoted his own words in Lam Kit Sing cited above, he went on to say this at §22,

“Where fraud or serious dishonest conduct is being alleged, it is especially important to examine the foundation of the pleading. It is the well-established approach of the courts that such pleas are to be scrutinised with care.

…

    Needless to say, this power is to be exercised with the greatest care, lest the plaintiff be wrongly deprived of his right to a trial, but it is also proper to have regard to the requirements of fairness to the defendant for, as Deputy Judge Carlson said in Global Bridge Assets Ltd & others v Sun Hung Kai Securities Ltd (HCA 317/2008, 12 May 2011) at §43, the underlying notion is that no one should have an allegation of fraud levelled against him in a pleading unless it can be backed up by credible material.”

28.  I find this authority to be of particular relevance to the present case. Similarly, a professional person is being accused of serious dishonest conduct in the course of the provision of his professional service here and this court cannot simply accept the allegations in the pleadings under attack at face value for the present purposes. It is imperative to ensure that there is proper foundation of the pleading to support such allegations.

The Claimants’ pleaded allegations

The 1^st Action

29.  The core complaint in the 1^st Action is about the Dismissal Decision whereby Mr So dismissed the Additional Award Application. The gravamen of Madam Fenn’s claim is that Mr So breached the Appointment Agreement in that he used and relied on certain documents disclosed to him by Mr Au by way of annexures to the 6/5 Letter without leave of the High Court. Mr So knew or ought to know that such documents were confidential and could not be disclosed to the parties without leave. Such documents were the 6/5 Summons and the supporting affirmation and affidavit respectively affirmed and sworn by Madam Fenn and Mr Tse (exhibits annexed thereto excluded) filed for the purpose of the Setting Aside Application (“the Documents”).

30.  Madam Fenn says that the Documents are confidential and privy to the parties to the Setting Aside Application only and subject to the implied undertaking not to use them for any other purposes other than for the Setting Aside Application or further proceedings in the High Court Action.

31.  Madam Fenn complains that Mr So’s breach was dishonest and was committed in bad faith. She also complained that Mr So should have given directions to the parties in the Arbitration so that the Claimants could be given an opportunity to make full representations to support their Additional Award Application especially after Mr Au had made submissions. In the circumstances, Mr So was in breach of the rule of natural justice as well.

32.  Furthermore, Madam Fenn complains that, after the institution of the 1^st Action, Mr So is in the position of an apparent and/or potential conflict of interest vis-à-vis Madam Fenn and he should have resigned or terminated his appointment as the Arbitrator or otherwise recused himself from dealing with the Arbitration proceedings any further.

33.  Allegedly, Madam Fenn has suffered certain monetary loss as a result of the breach of the Appointment Agreement. She claims both damages and an injunction that Mr So be restrained from acting or continuing to act as the Arbitrator in the Arbitration. The latter is subject matter of the Interlocutory Injunction Application.

The 2^nd Action

34.  In the 2^nd Action, Madam Fenn added Mr Tse and Madam Leung as her co-plaintiffs and Mr Au as Mr So’s co-defendant.  

35.  There, the Claimants again allege bad faith on the part of Mr So in the Arbitration and they have come up with 5 allegations. First, the Claimants complain about the suggestion of the adoption of the Arbitration Ordinance, Cap. 609 (“the New Ordinance”) without opting into Schedule 2 thereto.

36.  The New Ordinance came into effect on 1 June 2011, two days after the commencement of the Arbitration. The Arbitration was originally governed by the repealed Arbitration Ordinance, Cap. 341 (“the Old Ordinance”).

37.  Schedule 2 to the New Ordinance expressly provides the rights to appeal against or challenge arbitral awards. Such rights were provided by the Old Ordinance.

38.  In gist, the Claimants allege that Mr So strongly suggested, procured and even exerted pressure on the parties to the Arbitration to agree to the adoption of the New Ordinance but intentionally omitted to mention or suggest to them the adoption of Schedule 2 (“Non-adoption of Schedule 2 Issue”). The omission was intentional and in bad faith with a view to his immunity from challenge or appeal at the expense of the interests of the Claimants and Mr Au.

39.  Secondly, the Claimants complain about Mr So’s breach of the rules of natural justice repeating the same allegations arising from the Dismissal Decision.

40.  Thirdly, the Claimants make the same complaint about Mr So’s alleged misuse of the Documents in his determination of the Additional Award Application.

41.  Fourthly, the Claimants basically make the same complaint about Mr So’s refusal/failure to recuse himself and insistence on acting as the Arbitrator despite the alleged conflict of interest arising from the 1^st Action. They further added an allegation that Mr Au by a letter dated 21 May 2020 provided legal advice to Mr So as to how to deal with the 1^st Action and Mr So failed to warn or otherwise stop him from issuing such legal advice. It is unknown as to how the Claimants want to make a claim out of this allegation.

42.  Fifthly, the Claimants make a new allegation arising from the Partial Costs Award. Apparently, this is an instance of Mr So’s continuing to act as the Arbitrator notwithstanding the conflict of interest and his acting in bad faith.

43.  The Claimants rely on the foregoing 5 complaints and allege that they have suffered damage and loss as a result. They claim for, among other things, damages to be assessed and some declarations relating to the Appointment Agreement and the Partial Costs Award.

44.  Bearing in mind the high threshold that an applicant of a striking out order should meet and the need to examine the factual basis of all the grave allegations against Mr So, I should examine the merit of the allegations in turn.

The Dismissal of the Additional Award Application

45.  The dismissal of the Additional Award Application has given rise to two allegations in both Actions, namely, Mr So’s alleged misuse of the Documents and his failure or refusal to allow the Claimants an adequate opportunity to make further submissions to support the Additional Award Application before its dismissal in breach of the rule of natural justice.

46.  I have studied all the correspondence exchanged among the parties from the date of the application by Madam Fenn and the date of the Dismissal Decision. I do not intend to set out all the contents of those correspondence here and they are self-explanatory. I just highlight the following for the purpose of assessing merit of the allegations of Madam Fenn.

47.  By the letter dated 2 May 2020, Madam Fenn made the Additional Award Application out of time under Articles 34 and 35 of the Rules for an additional reward award on tax reimbursement which was allegedly omitted from the Partial Award and a consequential reduction of the interest on the Partial Award from HK$279,616.47 to HK$237,564.01. She claimed that she is entitled to seek reimbursement of 15% of profits tax taxed on the Partial Award (HK$663,589.16) amounting to HK$99,538.37. In the said letter, Madam Fenn made full submissions in support of her application.

48.  By the 4/5 Letter in the form of submissions, Mr Au made a short point that Article 35 of the Rules does not assist the Claimants because there was no alternative claim for tax reimbursement in the arbitral proceedings. A copy of this letter was emailed to the Claimants.

49.  Madam Fenn sent an email to Mr So with a copy sent to Mr Au on 5 May 2020 (“the 5/5 Email”). At the outset of the 5/5 Email, Madam Fenn specifically referred to the letter of Mr Au dated 29 April 2020 regarding the question of costs of the Arbitration. That letter was a reply letter to Mr So’s letter to the parties dated 28 April 2020 (“the 28/4 Letter”). The 28/4 Letter invited the Claimants’ comment on the “split” approach to the costs assessment suggested by Mr Au.

50.  The 5/5 Email apparently did not relate to the Additional Award Application. There, Madam Fenn mainly addressed Mr So on the costs issue of the Arbitration and she submitted that the question of costs should be dealt with only after the disposal of the Additional Award Application in fairness to the parties.

51.  By the 6/5 Letter, Mr Au alerted Mr So to the Setting Aside Application which was scheduled to be heard on 27 May 2020 (“the Return Date”). Mr Au urged Mr So to dispose of the Additional Award Application promptly and if possible before the Return Date. He enclosed with the 6/5 Letter the 6/5 Summons and the supporting affirmation and affidavit without their exhibits. It is noteworthy that he did not make any submissions on such documents.

52.  By a letter dated 11 May 2020 (“the 11/5 Letter”), Madam Fenn wrote to Mr So enclosing a cheque of HK$100,000 being the Claimants’ payment on account in respect of his costs to be incurred in deciding on the two remaining matters of the Arbitration. She expressly referred to the costs assessment and the Additional Award Application.  At the last part of the 11/5 Letter, it was stated that they looked forward to receiving Mr So’s directions in due course.

53.  Two days later, Mr So handed down the Dismissal Decision. In paragraph 7 thereof, Mr So first observed that the Claimants’ present claim for profits tax to be reimbursed by Mr Au in the sum of HK$99,538.37 is based on the sum of HK$663,589.16 awarded to Mr Au in the Partial Award only. Their claim was not and could not be included in their Statement of Claim. Nor was it included in their Defence to Counterclaim.

54.  Mr So explained his decision in the ensuing paragraphs in the following terms,

“As stated in the letter from the Claimants’ solicitors dated 2 May 2020, the Claimants’ application for an additional award on profits tax to be reimbursed by the Respondent is as a result of the Partial Award. In other words, the Claimants’ said claim is a new claim resulted from the findings in the Partial Award. It is not a claim already presented to the Tribunal but omitted from the Partial Award.

…

 In any event, the payment obligation of the sum of HK$663,589.16 arose from the Partial Award which was stated 27 March 2020. Should there be any tax payable on this payment of this sum such tax should be assessed in the year 2020/2021 which is outside the jurisdiction of this Tribunal in this reference.”

55.  Mr So went on to conclude that the Claimants’ application does not fall within the ambit of Article 35 of the Rules and therefore dismissed the Additional Award Application.

56.  There was no reference to either the 6/5 Letter or the Documents in the Dismissal Decision at all.

57.  In his Affidavit, Mr So explained that the parties did not make any request for making further submissions between 6 and 13 May 2020. In accordance with Article 14.1 of the Rules, he as an arbitrator should avoid unnecessary delay and so in view of the patent lack of merit of the Additional Award Application, he handed down the Dismissal Decision. He considered that the parties had had a reasonable opportunity to be heard and to have presented their full arguments already.

58.  As regards his alleged misuse of the Documents, Mr So stated categorically that he had neither relied on nor taken into account the 6/5 Letter and the Documents. He found them to be totally irrelevant and so he disregarded them completely.

59.  In her 3^rd affirmation, Madam Fenn contends that by the 11/5 Letter, the Claimants were asking Mr So to give directions regarding the further conduct of the Additional Award Application. They expected Mr So would give, among other things, a timetable for the making of further submissions by the parties.

60.  Madam Fenn further alleges that the 6/5 Summons revealed to Mr So the Return Date. Therefore, Mr So hastily disposed of the Additional Award Application before the Return Date pursuant to the request of Mr Au.

61.  I accept the evidence of Mr So. It is plain and obvious to me that there is absolutely no substance in the complaints of the Claimants concerning the Additional Award Application.

62.  There is no evidence that Mr So did rely on the Documents at all. His reasons given in the Dismissal Decision lend credence to his denial. The fatal problem of the Additional Award Application lies in the very nature of the additional claim itself.

63.  Mr Lai, for Madam Fenn, submits that Mr So failed to state unequivocally in his affidavits that he had received the Documents from Mr Au but he did not take them into account in his determination of the Additional Award Application. He further submits that Mr So should be cross-examined about his state of mind at trial.

64.  I cannot accept his submissions. Madam Fenn’s allegation is simply absurd in the first place. The only piece of information alleged to have been disclosed by the Documents and have been misused by Mr So is the Return Date. I fail to see how the Return Date can have any bearing on the well-founded conclusion in the Dismissal Decision. The mere fact that the Dismissal Decision was handed down before the Return Date is a matter of no concern and does not begin to cast doubt on the professional integrity of Mr So.

65.  Mr So was cognizant of all the relevant facts in his disposal of the Additional Award Application and his analysis was both legalistic and logical.  In truth, it appears to me an open and shut case as to whether the Additional Award Application falls within the ambit of Article 35 of the Rules. Mr So had more than enough time to make the right decision and I can find no haste in his delivery of the Dismissal Decision.

66.  The allegation that Mr So denied Madam Fenn’s right to be heard and hence in breach of the rule of natural justice is a mere fiction. Upon receiving the 4/5 Letter containing Mr Au’s full submissions, Madam Fenn should have expressly asked for time to file her reply submissions if deemed necessary. She never did so in her subsequent correspondence with Mr So before the Dismissal Decision was handed down.

67.  Her present reliance on the 11/5 Letter is misplaced and clearly an opportunistic move. When one reads all the antecedent letters starting from the 28/4 Letter, it would be clear that the directions sought were actually for the determination of the costs assessment issue and not for the Additional Award Application. For the former, according to paragraph 5 of the 28/4 Letter, Mr So wished Mr Au to furnish further explanation as to why his “split” approach is necessary if the Claimants did not indicate that the same is acceptable by them. For the latter, Mr Au made his opposing submissions without any direction.

68.  Had any one of Madam Fenn, Mr Tse and Madam Leung found it necessary to make a submission in reply to Mr Au’s submission, they should have done so without ado and no specific directions was required. There were no outstanding matters calling for further directions in respect of the Additional Award Application.

69.  Besides, in light of Mr Au’s demand for a prompt determination of the Additional Award Application by the 6/5 Letter, the Claimants should feel the need to make an express request to Mr So for time to file their reply submission in their subsequent letters if they genuinely wished to do so. The Claimants should expect that in the absence of any form of indication that they need to make a reply submission, Mr So would proceed with his preparation of the Dismissal Decision.  No one but the Claimants themselves deprived them of the chance to make submissions at all. 

70.  On the evidence I am unable to find any factual foundation upon which a conclusion that Mr So had acted dishonestly and/or in bad faith in his determination of the Additional Award Application can possibly be drawn.  These scandalous, frivolous and vexatious allegations should not be allowed to remain in the Statement of Claim in the 1^st Action and must be struck out in my judgment.

71.  The only remaining allegation is the alleged conflict of interest by reason of Madam Fenn’s institution of the 1^st Action against Mr So.

72.  Given the complete lack of merit in the allegations of dishonesty and bad faith, Madam Fenn should not have commenced the 1^st Action. It would be unreasonable for a party to allege conflict of interest and prevent an arbitrator from further acting in the arbitration simply on the ground that he/she has issued a writ against the arbitrator with a baseless claim.

73.  As pointed out by Ms Cheung, Madam Fenn actually has recourse under section 26(1) of the New Ordinance (and Art.13(1) of the Model Law) to challenge Mr So if she has any conviction in her allegations. It should be noted that even if such challenge procedure is invoked, the challenged arbitrator may continue the arbitration and make an award: Art.13(3) of the Model Law: Gong Benhai v Hong Kong International Arbitration Centre [2015] 2 HKLRD 537 at §21.

74.  In the premises, the contrived attempt of Madam Fenn to conflict Mr So out by the commencement of the 1^st Action must fail. I agree with Ms Cheung that no objective, fair-minded and informed observer, au fait with the relevant background facts, would consider there to be any conflict nor a real possibility that Mr So was biased in continuing to handle the Arbitration on the application of the litmus test adopted by Deputy Judge Lisa Wong SC (as she then was) in Jung Science Information Technology Co Ltd v ZTE Corporation [2008] 4 HKLRD 776 at §§49-50.

75.  In conclusion, I opine that none of the grave allegations has any solid factual basis capable of proof. They are scandalous, frivolous and vexatious and are mere myths. It is indeed an abuse of process to string them together and make a dubious claim against Mr So. The 1^st Action must be struck out.

The Non-adoption of Schedule 2 Issue

76.  As explained above, in the 2^nd Action, the Claimants basically rely on the same causes of action in the 1^st Action and only add some new allegations to substantiate such causes of action.  First, I look at the Non-adoption of Schedule 2 Issue, which is just a new allegation of bad faith on the part of Mr So in his handling of the Arbitration.  

77.  According to the allegations pleaded, Mr So was sinister indeed in that he pressurised the parties into adopting the New Ordinance without opting for Schedule 2 thereto. The pleaded case is that Mr So first at a preliminary meeting held on or about 17 April 2013 (“the 17/4 Meeting”) suddenly strongly suggested and procured the parties to adopt the New Ordinance under the pretext that it would offer them much better protection.

78.  Then, after almost 2 years, Mr So issued a letter dated 17 March 2015 (“the 17/3 Letter”) exerted pressure on the parties to adopt the New Ordinance, failing which he would direct the parties to make submissions.

79.  The pleaded accusation is that Mr So intentionally omitted to mention and/or suggest the parties to opt into the New Ordinance Schedule 2, whereby the rights to appeal and or challenge the arbitrator’s decisions enjoyed under the Old Ordinance would be preserved. It is pleaded that this omission was intentional and made in bad faith to give Mr So himself an immunity from challenge or appeal at the expense of the interests of the parties. This is alleged to be contrary to the object stated in section 2AA(1) of the Old Ordinance and section 31 of the New Ordinance as well.

80.  Subsequently, by an order dated 7 July 2015, Mr So applied to the New Ordinance to the Arbitration without opting into Schedule 2 thereto.

81.  It is remarkable that Mr Au in his Defence does not accept these allegations and he denies that Mr So had ever applied any pressure on the parties including the Claimants concerning the adoption of the New Ordinance.

82.  I have examined all the relevant evidence and in particular the 17/3 Letter and it appears to be plain and obvious to me that these allegations are devoid of factual basis.

83.  I start with the 17/4 Meeting. Strictly speaking, there is no allegation against Mr So on that occasion in the pleaded case. There is nothing untoward for an arbitrator to strongly suggest the adoption of the New Ordinance unless it can be shown that he did so with ulterior motive and a sinister intention that such an adoption would benefit himself at the expense of the parties’ interests. There is no such allegation in the pleading.

84.  I then scrutinize all the evidence of Madam Fenn relating to the 17/4 Meeting. Apart from the alleged omission on the part of Mr So to mention about the adoption of Schedule 2, she made no allegations against Mr So on that occasion. I am aware that she alleged that Mr So put pressure on the parties to agree to his suggestion; otherwise the parties had to make written submissions on why they refused to do so. She probably referred to the 17/3 Letter rather than the 17/4 Meeting.

85.  I now turn to the 17/3 Letter. I perused the same to look for any slightest material indicative, however remotely, of any pressure or coercion whereby the parties were made to agree reluctantly to the adoption of the New Ordinance without opting into Schedule 2. I can find none.

86.  Paragraphs 12 to 14 of the 17/3 Letter related to the adoption of the New Ordinance. Mr So merely invited the parties to agree that the New Ordinance applies to the Arbitration. Then he said this,

“Failing such an agreement, I will give further directions for the parties to make submissions in this respect.”

87.  Mr So asked the parties to revert to him within the 14 days thereafter.

88.  By his letter dated 26 March 2015, Mr Au, among other things, indicated his agreement to the adoption of the New Ordinance.

89.  By her email dated 2 April 2015 (“the 2/4 Email”), Madam Fenn, among other things, informed Mr So that the Claimants agree that the New Ordinance applied to the Arbitration. She also wished Mr So a happy Easter holiday. She made no complaint about any pressure or coercion whatsoever.

90.  Mr So denies all these allegations. Before I consider his evidence, on the incontrovertible documentary evidence and Madam Fenn’s own evidence, the allegations of the Claimants are demonstrably false and do not have any measure of truth.

91.  Even if Mr So had suggested the adoption of the New Ordinance at the 17/4 Meeting, however strongly he had done so, any pressure or coercive effect due to his strong suggestion should have vanished by the time when the 17/3 Letter was issued. By then, the Claimants and Mr Au were already seasoned legal practitioners and Madam Fenn had practised in Hong Kong for more than 3 decades. They had almost two years to think carefully about the suggestion of Mr So.  

92.  Had Mr So had any ulterior motive with a view to his personal benefit in his suggestion of the adoption of the New Ordinance, it is simply inexplicable that he had said nothing further about the same to the parties and followed up the matter with intensified pressure during the 23 months, not even in his subsequent letters to the parties including the one dated 9 May 2013.

93.  More importantly, the 17/3 Letter could not have put any pressure on the Claimants on any view of its contents. It was professionally written and the parties were expressly permitted to make submissions against the adoption of the New Ordinance. There could be no pressure on a feeble-minded person, let alone a group of experienced legal professionals. I fail to understand how the 17/3 Letter could possibly be alleged to have pressured the Claimants into agreeing the suggestion of Mr So. There was nothing to prevent the Claimants from indicating their disagreement with Mr So’s suggestion either. And all what they were required to do was to make submissions to explain for their refusal to agree. Making submissions was only their right.

94.  Had the Claimants felt any pressure from Mr So, they could not have been written the 2/4 Email in the way it was written. There, they just embraced the proposed adoption without reservation. I can discern no reluctance. The 2/4 Email flatly negates the allegations of the Claimants.

95.  There is an important document which shows that the present allegations of the Claimants are frivolous and vexatious. Mimmie Chan J on 22 December 2016 handed down “Reasons for Decision” (“the Reasons”) in HCMP 1014/2016 in which the application of the Claimants to set aside a decision of Mr So in the Arbitration (“the Rejected Application”) was dismissed with indemnity costs.

96.  Curiously enough, the Rejected Application made by way of Originating Summons dated 22 April 2016 was taken out purportedly pursuant to Schedule 2 to the New Ordinance. Mimmie Chan J held that Schedule 2 had not been opted for by the parties and so it had no application to the Arbitration. As a result, pursuant to section 3(2) of the New Ordinance, the court should not entertain the Rejected Application of the Claimants. The Claimants did not say that the parties’ failure to opt for Schedule 2 had anything to do with Mr So.

97.  The position of the Claimants taken in the Rejected Application is irreconcilable with their present position. There was no complaint that Mr So had deliberately failed to bring to the attention of the parties that they could opt for Schedule 2. The Rejected Application was made on the basis that Schedule 2 was applicable.

98.  In any event, after the Reasons, in December 2016, the Claimants must be aware of the non-application of Schedule 2 and should be very aggrieved if it was due to the omission of Mr So to mention about or suggest Schedule 2 to them, deliberate or otherwise. It is only inexplicable that Madam Fenn did not say a word about this afterwards and even did not include this allegation in the 1^st Action. It was only first raised in the 2^nd Action more than 4 years later. The validity of this allegation, or lack of it, is just too obvious.

99.  The New Ordinance no doubt has its benefits and the adoption of the same itself cannot be an issue. The Claimants did not argue otherwise. The Non-adoption of Schedule 2 Issue boils down to the omission of Mr So to mention or suggest to the parties the inclusion of Schedule 2. This plea, however, is bad in law and is doomed to failure.

100.  In Gong Benhai v Hong Kong International Arbitration Centre [2015] 2 HKLRD 537, Mimmie Chan J struck out Mr Gong’s claim against the HKIAC. His claim was made on the ground that the HKIAC had dismissed his challenge to the arbitrators appointed in his arbitration and his application to replace them. Mr Gong alleged that the arbitrators were unfair, incompetent and unqualified.

101.  The judge said this at §12,

“Ignorance of the law is no excuse. HKIAC is not under any duty to give legal advice to the plaintiff or to refer the plaintiff to all the relevant and applicable provisions of the law.”

102.  At the hearing, Mr Lai maintains that Mr So had failed to explain to the parties the consequences of adopting the New Ordinance without opting for Schedule 2. He submits that whether Mr So as the arbitrator owed the Claimants such a duty to explain remains to be an issue to be tried in light of all the circumstances of the case.

103.  I cannot accept his submissions. He appears to have put the cart before the horse.  If, in law, Mr So could not have owed the Claimants such a duty, there is no reason why he should be cross-examined in the hope that his evidence may somehow assist to constitute a claim against him.

104.  Moreover, it is indeed startling that the Claimants being legal experts themselves try to blame Mr So for his omission to advise fully and properly on the implication of the adoption of the New Ordinance.

105.  To sum up, the Non-adoption of Schedule 2 Issue has no factual basis and is a complete non-starter. It must be struck out.

106.  The remaining allegations in the 2^nd Action can be disposed of briefly. The allegations of breach of the rule of natural justice and the wrongful use of the Documents are sheer repetition of the same complaints in the 1^st Action. For the reasons given above, they are plainly untenable and have no merit.  

107.  The Claimants further repeat the complaint of Mr So’s insistence on acting in the Arbitration despite the alleged conflict of interest arising from 1^st Action citing the Partial Costs Award. I have already explained why I do not accept that there could be any conflict of interest.

108.  The only allegation against Mr Au is that by his letter dated 21 May 2020 (“the 21/5 Letter”) under the pretext of making submissions in the Arbitration, Mr Au provided legal advice to Mr So as to how to deal with the 1^st Action. Mr So failed to stop or warn against him. This allegation was made as an instance of Mr So’s continuing to act despite the alleged conflict of interest.

109.  I do not understand this allegation, which appears to be absurd on the face of it. It ignores the context of the 21/5 Letter. I have perused the 21/5 Letter and on a fair reading of the same, Mr Au only stated his view of the 1^st Action and explained to Mr So why he should continue to act in the Arbitration notwithstanding the alleged conflict of interest. Mr Au did not need to advise Mr So, who is a consummate solicitor himself. There is no reason why Mr So had to stop Mr Au from writing to him either. In any event, I fail to see how this allegation can give rise to any cause of action.

110.  In the premises, I come to the conclusion that the Statement of Claim filed in the 2^nd Action against both Mr So and Mr Au should be struck out in its entirety. This is so despite the fact that Mr Au has not applied to strike out the 2^nd Action as against him. He merely supports the application of Mr So but it only relates to the claims against Mr So only. For the reasons given, there is no viable cause of action against Mr Au in the pleading at all and the allegation is hopeless. I believe I should exercise my discretion and strike out the claim against Mr Au as well under the inherent jurisdiction of this court.

Abuse of Process

111.  For completeness, I should also make it clear that each of the Statement of Claim in both Actions should be struck out as an abuse of the process of the court. First and foremost, as explained above, both Actions are grounded on baseless allegations. In my judgment, both Actions lack bona fides and amount to an abuse of process.

112.  I also accept Ms Cheung’s submission that the multiplicity of proceedings constitutes an abuse. As Madam Fenn herself points out in her affirmation, the 1^st and 2^nd Actions concern the same Arbitration and involve the same parties. All their complaints arose from the Arbitration. The causes of action in both Actions are identical. The High Court Action should not be overlooked though it was discontinued shortly before the commencement of the 2^nd Action. Mr So’s repeated requests before the 2^nd Action to add Mr Tse, Madam Leung and Mr Au as parties in the 1^st Action were unreasonably turned down. In my judgment, Madam Fenn, Mr Tse and Madam Leung should have avoided the High Court Action and the 2^nd Action by commencing the 1^st Action together with all their complaints included therein.

113.  The 2^nd Action was instituted with the addition of the Non-adoption of Schedule 2 Issue and there is no reason why the Issue could not have been included in the 1^st Action. I agree with Ms Cheung’s submission that the 2^nd Action was commenced for the sheer purpose of avoiding Mr So’s further acting in the Arbitration in light of the Partial Costs Award.

114.  Unfortunately, Mr So has been vexed with three actions (including the High Court Action) comprising the same unmeritorious complaints. In my view, the 1^st and 2^nd Actions are plainly an abuse of process.

115.  Lastly, as explained by Mimmie Chan J in the Reasons, without Schedule 2, under section 3(2) of the New Ordinance, the court should interfere in the arbitration dispute is expressly provided for in the Ordinance and the Model Law. The Claimants should know very well that they cannot challenge Mr So and his decisions under the New Ordinance in the wake of the Rejected Application.

116.  In the premises, I am persuaded by Ms Cheung that the 1^st and 2^nd Actions are an abuse of process and should be struck out on this ground too.

The Interlocutory Injunction Summons and the 1^st and 2^nd Consolidation Summonses

117.  In light of my conclusion on the 1^st and 2^nd S/O Summonses, the Interlocutory Injunction Summons and the 1^st and 2^nd Consolidation Summonses are academic.

118.  There can be no triable issues in either Actions and there is no basis on which and interlocutory injunction can be granted. Even if there was, I would not exercise my discretion to grant an injunction sought by Madam Fenn or the Claimants for want of any irreparable loss. The only outstanding matter in the Arbitration is the question of costs. There is no evidence that Mr So and Mr Au are not good for an award of monetary damages. The Introductory Injunction Summons must be dismissed.

119.  Likewise, the 1^st and 2^nd Actions being struck out, there is no need to consolidate the two actions. I dismiss the 1^st and 2^nd Consolidation Summonses accordingly.

Conclusion and Order

120.  For the reasons given above, I conclude that both the 1^st and 2^nd S/O Summonses should be allowed. In the 1^st Action, the Statement of Claim should be struck out on the ground that it is scandalous, frivolous and vexatious and that it is an abuse of process. The 1^st Action should be dismissed.

121.  In a similar vein, in the 2^nd Action, the Statement of Claim should be struck out in its entirety on the same basis and the 2^nd Action should be dismissed as against both Mr So and Mr Au.

122.  I should dismiss the Interlocutory Injunction Summons and the 1^st and 2^nd Consolidation Summonses accordingly.

123.  Costs should normally follow the event and I have an order for indemnity costs in mind. Ms Cheung asks this court to make a costs order nisi so that she can address this court further in light of my decision. Mr Lai has already indicated his objection to the imposition of indemnity costs. 

124.  In the circumstances, it would be appropriate for me to invite the parties to make full submissions on costs before I make any costs order. I direct Mr So and Mr Au to lodge with this court their respective written submissions (not more than 5 pages each) within 21 days from today.  The Claimants should do the same with the same page limit within 21 days thereafter. I shall dispose of the costs issue on paper.

125.  I also order that the time for any application for leave to appeal against this decision to run only from the date of my determination of the costs issue.

126.  It remains for me to thank the legal representatives of all the parties for their assistance in this matter and in particular Ms Cheung for her able submissions.