XU HONGBIAO v. OASIS INVESTMENT GROUP LTD AND OTHERS

HCA 1963/2020

[2023] HKCFI 2887

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1963 OF 2020

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(By Original Action)

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(By Counterclaim)

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D E C I S I O N

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A.  Introduction

1.  I refer to my Decision handed down on 29 March 2023[1] (the “Decision”). I adopt the same terms and abbreviations I used therein, save that to avoid any confusion, I will in this Decision refer to the Summons before this Court on 17 and 18 January 2023 as the “Setting Aside Summons”[2]).

2.  Arising from that Decision, 3 matters were originally before this Court for paper disposal:

(a)  the Applicants’ application for leave to appeal against that Decision (the “Leave Application”);

(b)  the Applicants’ application for a stay of the execution of the costs order which I made in §89 of the Decision (the “Costs Order” and the “Stay Application”); and

(c)  the Summary Assessment of the costs of the Setting Aside Summons (the “Summary Assessment”).

3.  I record that parties appeared before this Court on 8 June 2023 in relation to the Stay Application. Some agreed directions were placed before this Court. Having had sight of those proposed agreed directions, I pointed out to parties that given the agreed timetable for the filing of evidence and submissions in relation to the Stay Application, the Stay Application would only be ready for consideration at least 70 days after 8 June 2023, which would be beyond the time when the Leave Application would itself be ready for consideration. Parties accepted that that would be inevitable on their agreed schedule. So as not to truncate the matters, parties agreed that the Leave Application and the Stay Application should be considered in one single Decision, with an interim stay of the execution of the Costs Order (including any summary assessment thereof) pending disposition of the Stay Application – hence this combined Decision.

B.  The Leave Application

4.  I consider the Leave Application first.

5.  In As’ draft Notice of Appeal (“Draft NA”), 6 proposed grounds have been set out (“Proposed Ground #1” to “Proposed Ground #6”).

6.  Mr Khaw and Mr Chan have filed their respective submissions in support and opposition (“As’ Sub/Leave” and “Rs’ Sub/Leave” respectively).

B.1. The threshold for leave

7.  The threshold for leave is set out in section 14AA(4) of the High Court Ordinance Cap 4. The prospects of the proposed appeal succeeding must be “reasonable” and therefore more than fanciful, without having to be probable – T v W [2021] HKCFI 160 at §§4 and 9 per Mimmie Chan J and the cases cited therein.

8.  As observed by Deputy Judge Le Pichon at §8 in China Baoli Technologies Holdings Ltd v Orient Equal International Group Ltd (HCA 1399/2016, 10 November 2017):

“An appeal under Order 11 requires leave. In VTB Capital plc v Nutritek International Corp [2013] UKSC 5, the House of Lords held that the Order 11 power involves not the exercise of a discretion but ‘an evaluative, or a balancing, exercise’: at §§97 and 156.”

9.  The evaluative or balancing exercise is closely analogous to the exercise of a discretion. In Bright Shipping Ltd v Changhong Group (HK) Ltd (No.2) [2019] 5 HKLRD 30, Kwan V-P observed that:

“4. … as stated by the Court of Final Appeal in SPH v SA at [65], the application for a stay for forum non conveniens involves the exercise of a discretion and the Court of Appeal may only interfere with the exercise of the judge’s discretion in accordance with the well-established principles in Hadmor Productions Ltd v Hamilton [1983] 1 AC 191.

…

9. It is correct that in more recent English authorities, the exercise carried out by a judge in an application to stay or set aside proceedings on the ground of forum non conveniens has been described as not in the nature of a discretion but an ‘evaluative, or a balancing, exercise’ … But notwithstanding this change in the characterisation of the exercise of the judge’s power, it does not appear there is material difference as to the approach of the appellate court …

…

11. It seems to us that the evaluative exercise is closely analogous to the exercise of a discretion. For the approach of the appellate court in this kind of appeal, we will take as the guiding principle the law as stated in SPH v SA at [65].”

10.  Mr Chan has further cited Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748. That appeal before the English Court of Appeal concerned the application of the principles set out in Johnson v Gore Wood & Co [2002] 2 AC 1 to an attempt to strike out a claim for abuse of process on the basis that the claim could and should have been brought in previous litigation. In §16, Thomas LJ observed as follows:

“In considering the approach to be taken by this court to the decision of the judge, it was rightly accepted … that the decision to be made is not the exercise of a discretion … It was a decision involving the assessment of a large number of factors to which there can, in such a case, only be one correct answer to whether there is or is not an abuse of process. None the less an appellate court will be reluctant to interfere with the decision of the judge where the decision rests upon balancing such a number of factors …”

11.  I apply the above.

B.2. The “Overview” in As’ Sub/Leave

12.  Section A of As’ Sub/Leave contains an Overview (§§1 to 13). I note the contents. I will deal with them as appropriate when considering the Proposed Grounds.

13.  But as part of the overview, it should also be noted that the matters are complicated factually and procedurally. As I have observed in §14 of the Decision, the 4.28 Agreement is by any standard not a straightforward one, and that its implementation has involved a complex process. The disputes subsequently developed are even more complicated. Proceedings of different natures have been commenced, which included the Arbitration, the Shanghai Proceedings, the Maryland Proceedings, and then the present action. The hearing bundles prepared for the hearing of the Setting Aside Summons topped 3,500 pages, and that is exclusive of submissions and authorities. This Court’s decision involved an evaluative exercise balancing a large amount of countervailing facts and factors. All the above are obvious on the face of the Decision.

B.3. Proposed Grounds #1 and #6

14.  The 2 Proposed grounds are related. Mr Khaw deals with them together. I do the same.

15.  The gist of Proposed Ground #1 is that this Court ought not to have held that “the legal basis of the Counterclaim is a common law one to enforce the Awards” (§39 of the Decision) and/or that the “Counterclaim is one in common law to enforce the Awards” (§40 of the Decision).

16.  As part of his Overview, Mr Khaw submits that one key issue in the present case concerns the dichotomy in terms of the powers and functions between the arbitral tribunal and the enforcing court. In that regard, he, with reference to §111 of Rs’ written submissions made in opposition of the Setting Aside Summons, further submits that “Rs have acknowledged that a‘CFA Point’ is involved ”.

17.  To start with, and as Mr Chan has pointed out in Rs’ Sub/Leave, Rs have not acknowledged any CFA point in respect of the said dichotomy issue. Mr Chan’s submissions in §110 of his previous written submissions were made with reference to As’ “ground that the common law action on the award is not open to a ‘losing’ party.” That is a different point, which I have dealt with and dismissed in §§46(b) to 46(i) of the Decision.

18.  There is in fact little dispute on the law in so far as the dichotomy issue is concerned. That is apparent on the face of the Decision. In Rs Sub/Leave, Mr Chan has further made that clear – see §§18 to 19 thereof.

19.  I do not accept that any CFA point on the dichotomy issue is engaged. I do not accept that that somehow constitutes a question of law which should have been adjudicated upon by this Court[3], or that the granting of leave to appeal is thereby justified based on the limb of “some other reason in the interests of justice”.

20.  In As’ Sub/Leave, Mr Khaw submits as follows. Rs’ Counterclaim, in view of its nature, purpose and substance, essentially seeks to ask the enforcing court to determine the continuing rights and obligations of the parties (arising from the post-Award disputes which have never been adjudicated by tribunal) in respect of how the 4.28 Agreement should be implemented. They do not fall within the jurisdiction of the enforcing court and shall be submitted to the Tribunal as they are caught by the arbitration clause. The fundamental flaw in Rs’ Counterclaim cannot be amended; and none has been made. Xiamen Xinjingdi (CFA) and A v B are distinguishable on their own facts. As such, there can be no merger in the present case triggering the doctrine of functus officio.

21.  I referred to Xiamen Xinjingdi (CFA) and A v B for those Courts’ observations on the differences between the resolution phase and the enforcement phase, and the interplay between court and arbitration proceedings. Those observations are in my view of general application, and are not specific or confined to the facts in those cases.

22.  I agree with Mr Chan’s characterization of the Proposed Ground #1. The real point being raised is whether the Counterclaim concerns disputes on enforcement or fresh breaches of the 4.28 Agreement.

23.  That is a fact-sensitive point.

24.  I repeat my observations made in the Decision, and in particular those in sections E.3.a (under the heading of “Confusing Basis of the Counterclaim”, with the conclusion in §43), §50 (rejecting Mr Khaw’s further strand #2 arguing that Rs are seeking to review reinterpret and rewrite the Awards, with the conclusion in §50(c)), §51 (rejecting Mr Khaw’s further strand #3 arguing that the Counterclaim should be submitted for arbitration), and section E.3.d. (rejecting Mr Khaw’s submissions that Rs cannot prove their case, and concluding in §55 that there are clearly substantial disputes between the parties in the performance and enforcement of the Awards, and that this Court ought not embark upon a mini-trial on affirmations in any attempt to resolve them by way of summary determination).

25.  I deal with one further matter arising from §50 of the Decision. I reiterate that the points dealt with there is fact-sensitive. Mr Khaw’s own submissions are made “in view of [the Counterclaim’s] nature, purpose and substance”. I do not accept, as I have alluded to above, that there existed any point going to jurisdiction which this Court should have adjudicated on. That and other conclusions which this Court has reached relevant to the Proposed Ground #1 were reached after this Court had carried out an evaluative and balancing exercise. They are not purely question of law.

26.  I am of the view that Proposed Ground #1 has no reasonable prospect of succeeding to the extent that the Court of Appeal will intervene.

27.  Proposed Ground #6 is linked to Proposed Ground #1. Its basis is that as there can be no merger in the present case triggering the doctrine of functus officio, there was hence material non-disclosure during the ex parte application for leave to serve out. For the same reasons, I am of the view that it has no reasonable prospect of succeeding to the extent that the Court of Appeal will intervene.

B.4. Proposed Ground #2

28.  Proposed Ground #2 focuses upon the Shanghai Proceedings. It seeks to complain that this Court erred in refusing to hold that the Respondents’ Counterclaim amounts to a collateral attack upon the judgments of all three levels of Shanghai Courts in the Shanghai Proceedings.

29.  In As’ Sub/Leave, Mr Khaw sets out various matters which this Court is said not to have taken into account, or ought to have considered, or failed to capture.

30.  As said, the matters are complicated factually and procedurally. Amongst others, competing expert evidence has been filed. I had considered all matters which I considered material. As I have stated in §64 of the Decision, the issue of whether there is an abuse is a fact-sensitive one, and having conducted a broad and merits-based assessment, and having balanced all interests, I was not satisfied that the Applicant’s objections basing on the Shanghai Proceedings are made out (and see in this regard in particular §63(m) thereof).

31.  I am not satisfied that the Proposed Ground #2, seeking to reverse the results of this Court’s evaluative and balancing exercise, has any reasonable prospect of succeeding to the extent that the Court of Appeal will intervene.

B.5. Proposed Ground #3

32.  Proposed Ground #3 focuses upon the Maryland Proceedings. It seeks to complaint that this Court erred in failing to hold that the Respondents’ Counterclaim amounts to a collateral attack upon the rulings made by the Maryland Court in the Maryland Proceedings.

33.  The nature of Proposed Grounds #2 and #3 is in fact similar.

34.  I have in §59 of the Decision pointed out the clear differences in nature between the present proceedings and the Maryland Proceedings. I pointed out that the grounds for non-registration under the New York Convention are limited. I gave in §59(j) by way of illustration how the constraints had affected the conduct of the Maryland Proceedings. Factually, not all parties to the Awards are before the Maryland Court, which would render any further attempts to require compliance problematic. I concluded that overall (in §60), given the differences between the Maryland Proceedings and the Counterclaim in terms principally of nature, issues, the legal basis and settings, and parties, the Applicants’ objections on the basis of issue estoppel and/or collateral attack are not made out.

35.  I am not satisfied that the Proposed Ground #3, seeking to reverse the results of this Court’s evaluative and balancing exercise, has any reasonable prospect of succeeding to the extent that the Court of Appeal will intervene.

B.6. Proposed Ground #4

36.  Proposed Ground #4 focuses upon the Awards. It seeks to complain that this Court erred in failing to hold that there are pleas in the Respondents’ Counterclaim which blatantly seek to re-litigate or mount collateral attacks upon the Tribunal’s findings and rulings in the Awards.

37.  In As’ Sub/Leave, Mr Khaw points to 2 specific areas said to have been dealt with in the Shanghai Proceedings: whether Shibang needs to be R1’s direct subsidiary, and the tax liability.

38.  I repeat §§66 and 69 of my Decision.

39.  I am not satisfied that the Proposed Ground #4, seeking to reverse the results of this Court’s evaluative and balancing exercise, has any reasonable prospect of succeeding to the extent that the Court of Appeal will intervene.

B.7. Proposed Ground #5

40.  Proposed Ground #5 is related to Proposed Grounds #2 to 4. It seeks to complain that for those same reasons, this Court erred in holding that the jurisdictional gateways 1(c), 1(d), 1(m) and 1(a) are open to the Respondents.

41.  I repeat §73 of the Decision.

42.  As I have recorded in §73(d) of the Decision, in the course of the hearing, Mr Khaw informed this Court that he no longer maintained §149 of his written submissions.

43.  §149 is the only paragraph in section D3d of Mr Khaw’s written submissions. That section deals with gateway 1(m).

44.  The entire §149 is as follows:

“O.11 r.1(1)(m) concerns where ‘the claim is brought to enforce any … arbitral award’. As submitted in Section D1b above, the Respondents, as the losing party to the Arbitration, simply have no locus standi to enforce the Awards by suing on the alleged implied promise.”

45.  I have in any event rejected those submissions on which §149 is based.

46.  In my view, gateway 1(m) is clearly open to Rs, which I so ruled.

47.  I have said, Rs only need one gateway.

48.  I respect of the other gateways, I repeat §74.

49.  I am not satisfied that the Proposed Ground #5 has any reasonable prospect of succeeding.

B.8.  Overall conclusion

50.  For the above reasons, I refuse As’ Leave Application.

51.  I make a costs order nisi that As shall bear the costs of and occasioned by the Leave Application, with certificate for 2 counsel, to be assessed summarily.

C.  The Stay Application

52.  The following affirmations have been filed:

(a)  On behalf of As, in support and in reply, Ke’s 2^nd and 3^rd affirmations; and

(b)  On behalf of Rs and in opposition, R2’s 2^nd affirmation.

53.  As submit that their intended appeal has good prospects of success. On top, they rely on one factual ground. They say that Rs have failed up till now to pay the legal and arbitration fees of the Arbitration (of close to HK$8 million) which the Tribunal and Maryland Court have ordered Rs to pay. They say that given Rs’ previous conduct, they would continue to deploy all possible tactics to stall and avoid repayment of any costs which As may pay them, thereby causing further prejudice and problems in the process of enforcement should As succeed on the appeal.

54.  Rs submit that the intended appeal is not arguable. They further say that R2 has posted an appeal bond to the Maryland Court for the entirety of the monetary portion of the Judgement of the Maryland Court, which is inclusive of the costs order in respect of the legal and arbitration fees of the Arbitration.

55.  I have now refused the Leave Application.

56.  Given that, the factual ground is in my view in itself not sufficient to support any stay. In particular, I accept Mr Tang’s submissions that Rs will be jointly and severally liable to return any costs paid if the intended appeal is successful, and that R1 is a company with substantial assets.

57.  However, given the avenue for As to renew their Leave Application before the Court of Appeal, on the facts of the case, and for avoidance of unnecessary time (including in particular of the courts’ time) and expenses being incurred, I am prepared to grant As a short stay of the Costs Order until final disposition of any renewed leave application which As may make to the Court of Appeal, or the expiry of the period for As to apply if they ultimately do not make one.

58.  I direct further that that short stay apply also to the Summary Assessment, and the time for As to file their defence[4].

59.  I make a further costs order nisi that As shall bear the costs of and occasioned by the Stay Application, but with certificate for one counsel only.

60.  Any application for variation of either or both of the costs orders nisi made above shall be made within 14 days from the date of this Decision by letter to this Court, upon receipt of which further directions will be given.