BEIJING SONGXIANGHU ARCHITECTURAL DECORATION ENGINEERING CO., LTD v. KITTY KAM also known as WANG YUZHI

HCA 1289/2022

[2024] HKCFI 1657

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1289 OF 2022

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BETWEEN

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REASONS FOR DECISION

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1.  There would be before me to take place on 30 May 2024 the contested hearing of the Defendant (“Kam”)’s summons to strike out the Statement of Claim and to discharge the Mareva Injunction granted against Kam on 13 January 2023.

2.  By a long letter dated 21 May 2024 to the Court attaching a draft order, a bundle of authorities and a bundle of documents, Kam’s solicitors sought an order in terms of the draft. I directed a summons to be issued for the application which was to be returnable before me at 9:30 am on 30 May 2024 and that the hearing of the summons be closed to the public.

3.  On 23 May 2024, Kam accordingly took out a summons seeking an order (“the Confidentiality Order”) in gist that (a) the hearing on 30 May 2024 be closed to the public, (b) the decision to be given on the striking out summons (“the Striking-out Decision”) be not searched, inspected or published without leave of the Court, (c) documents in the Court file containing information relating to the Arbitration be sealed and not available for public inspection, or alternatively (d) such part of the hearing on 30 May 2024 during which “information relating to the Arbitration” would be disclosed be closed to the public, and (e) in the Striking-out Decision, the parties and a number of persons/entities be anonymized and all references to “information relating to the Arbitration” be redacted and the parties’ comments on the redaction be obtained before the Striking-out Decision would be released to the public.

4.  At the conclusion of the hearing of this summons, I dismissed it with written reasons to be provided. At the time, I expressly enquired with Mr Chain, counsel for Kam, as to whether Kam would have any objection against making these Reasons, which would contain no more information relating to the Arbitration as have already been disclosed in the decision of Anthony Chan J herein handed down on 13 January 2023 ([2023] HKCFI 159)(“the Mareva Decision”). Mr Chain confirmed that Kam has no objection.

5.  There are my reasons.

6.  In this action, the Plaintiff claims against Kam to recover 2 sums totalling about HK$253 millions, or damages, for fraud, dishonest assistance and conspiracy to injure by unlawful means. The background and other relevant matters are set out in the Reasons for the Striking-out Decision to be handed down at the same time as these Reasons, which I will not repeat here.

7.  Shortly after this action was commenced, a set of arbitration proceedings were commenced by the Plaintiff herein against an entity related to Kam (“the Arbitration”). As was mentioned in the Mareva Decision, “there are many common issues between the Arbitration and this action”^[1] and “there is much overlap between these proceedings and the Arbitration”^[2].

8.  Kam said that confidentiality is protected in the Arbitration under sections 16 and 18 of the Arbitration Ordinance Cap 609 (“the AO”) which provide :

“16. Proceedings to be heard otherwise than in open court

(1) Subject to subsection (2), proceedings under this Ordinance in the court are to be heard otherwise than in open court.

(2) The court may order those proceedings to be heard in open court—

(a) on the application of any party; or

(b) if, in any particular case, the court is satisfied that those proceedings ought to be heard in open court.

(3) An order of the court under subsection (2) is not subject to appeal.”

“18. Disclosure of information relating to arbitral proceedings and awards prohibited

(1) Unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to—

(a) the arbitral proceedings under the arbitration agreement; or

(b) an award made in those arbitral proceedings.

(2) Nothing in subsection (1) prevents the publication, disclosure or communication of information referred to in that subsection by a party—

(a) if the publication, disclosure or communication is made—

(i) to protect or pursue a legal right or interest of the party; or

(ii) to enforce or challenge the award referred to in that subsection,

in legal proceedings before a court or other judicial authority in or outside Hong Kong;

(b) if the publication, disclosure or communication is made to any government body, regulatory body, court or tribunal and the party is obliged by law to make the publication, disclosure or communication; or

(c) if the publication, disclosure or communication is made to a professional or any other adviser of any of the parties.”

9.  Kam’s stance was that the confidentiality is undermined by “this gap created by the Plaintiff’s decision to commence this [sic] parallel proceedings against [Kam]” and which “effectively left open a loophole that allows the Plaintiff to breach its confidentiality obligations … through the backdoor at its wishes”^[3].

10.  By this application, and as an alternative to making the hearing on 30 May 2024 closed to the public and the Striking-out Decision not available to the public, Kam sought private hearing and redaction of the Striking-out Decision whenever there would be disclosure of “information relating to the Arbitration”.

11.  Evidently therefore, the first important thing was to identify with some precision what “information relating to the Arbitration” means and encompasses. At the hearing, Mr Chain effectively said that as the allegations made by the Plaintiff and the evidence and documents proffered by the parties very much overlapped between this action and the Arbitration, Kam was essentially seeking to have all references to them kept private and be redacted.

12.  Therefore and effectively, Kam was alternatively seeking to have the majority part (if not the entirety) of the hearing be closed to the public and all the substantive contents of the Strike-out Decision redacted.

13.  This application was opposed by the Plaintiff.

Discussion

14.  As the respondent in the Arbitration is an entity related to Kam, the Plaintiff is thus suing different parties in the 2 sets of proceedings. Mr Chain said that the Plaintiff intended in their draft amendment to its Statement of Claim to plead a case that Kam and the entity was an alter ego of Kam. However, the intended amendment was strenuously resisted by Kam, who has refused to have it heard together with the Striking-out on 30 May 2024 and its substantive hearing therefore has yet to take place, this court would be considering this application on the parties’ present pleaded case.

15.  The starting point must be that open administration of justice is a fundamental principle of great importance. The relevant principles have been elucidated in the well-known judgment of A Cheung CJHC (as the Chief Justice then was) and Stock VP (as the NPJ then was) in Asia Television Ltd v Communication Authority [2013] 2 HKLRD 354. It is also provided and made clear by Article 10 of the Hong Kong Bill of Rights Ordinance Cap 383:

“… In the determination of … his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law. The press and the public may be excluded from all or part of a trial for reasons of morals, public order (ordre public) or national security in a democratic society, or when the interest of the private lives of the parties so requires, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice; but any judgment rendered … in a suit at law shall be made public except where the interest of juvenile persons otherwise requires or the proceedings concern matrimonial disputes or the guardianship of children.”

16.  Any departure from such openness in any given case must be justified by reference to the principles and the circumstances of the case in question. A central consideration is whether the due administration of justice requires the principle of open administration of justice to be compromised.

17.  Kam emphasized that she is entitled to arbitral confidentiality as is protected by section 18 of the AO.

18.  However, section 18(2)(a)(i) provides the exception that a party may disclose such information “to protect or pursue a legal right or interest of the party”. As pointed out by the Plaintiff^[4] and not disputed by Kam, Article 45.3 of the 2018 HKIAC Administered Arbitration Rules (which governed the Arbitration) provides similarly that a party is not prevented from disclosure of such information to protect or pursue a legal right or interest of the party.

19.  It is not disputed that the Plaintiff is entitled to bring this action against Kam as of right. The Plaintiff’s allegations, the evidence and documents it proffered in this action therefore are disclosed to pursue a legal right or interest of the Plaintiff within the meaning of section 18(2)(a)(i) and of the said Article 45.3 of the HKIAC Rules.

20.  Kam prayed in aid the English Court of Appeal case of CDE v NOP [2021] EWCA Civ 1908. There, and rather similar to the present case, the defendants in that action in the Commercial Court were accused of having orchestrated a fraud. Those same allegations were the subject of an arbitration against companies said to be connected with the defendants. The arbitrators produced an award finding that the claimant’s allegations were well-founded. The claimants said that the award was binding on the defendants as they were privy to it and sought to made the award public and admit the award as evidence in the action. The question of whether the award was binding (“the privity application”) would be determined in a coming hearing at which the claimant would apply for summary judgment. The broad issue argued on that appeal concerned the extent to which proceedings in that action, particularly the privity application, which involved reference to the contents of the award should be heard in public.

21.  In the judgment of Males LJ, agreed to by Popplewell LJ and Warby LJ, the learned Judge held:

a. The general rule under CPR r 39.2 is that a court hearing is to be in public, which reflects the long-standing and well-established principle of open justice.

b. “[A] hearing may only take place in private if, and even then only to the extent that, the court is satisfied of one or more of the matters set out in sub-paragraphs (a) to (g) of paragraph 3 [of CPR r 39.2] and that it is necessary to sit in private to secure the proper administration of justice. Necessity is a demanding test” (original emphasis)(§38).

c. The disclosure of the contents of the arbitral award falls within CPR r 39.2(3)(c), allowing the hearing to be held in private in that “it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality”; and the fact that arbitration and/or the award is confidential is sufficient to demonstrate confidentiality regardless whether its disclosure would cause harm over and above the fact of disclosure itself.

d. “The critical question, therefore, was whether it was necessary to sit in private to secure the proper administration of justice” (§41).

e. The first instance judge was right in holding the case management conference in private.

f. The CA upheld the order of the judge effectively making no decision whether the privity application should be heard in public and placing the burden on the claimant to seek a determination from the judge hearing the privity application to decide whether the hearing should be held in public or private. However, the CA replaced paragraph 2 of the order of the judge, which was wrong in principle, making clear that “The starting point is that the hearing of the privity application should be in public and any derogation from that position needs to be justified in accordance with the provisions of CPR r 39.2” (§47).

22.  Importantly, and relevant for the present purpose, Males LJ had this to say at the end of his judgment:

“50. That said, we make clear that the considerations which led us to conclude that the judge was right to hold the case management conference in private will not apply, or at least will not apply with anything like the same force, to the privity application. That will be an application for summary judgment at which the court will be required to adjudicate on the merits of the dispute. Moreover, if the court holds that the hearing should be held in public, there will be no question of any breach of article 30.1 of the LCIA Rules. That rules entitles a party to put the award in evidence before a state court in order to protect or pursue a legal right. That is what the clamant will do. If the applicable procedural rules mean that the court will sit in public to hear that application, these is no breach of article 30.1.” (my emphasis)

23.  Article 30.1 of the LCIA Rules reads :

“30.1 The parties undertake as a general principle to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save and to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right, or to enforce or challenge an award in legal proceedings before a state court or other legal authority.” (my emphasis)

24.  Thus and firstly, Males LJ saw it necessary to make clear that the considerations leading to the conclusion that it was necessary to have the case management conference heard in private did not have the same force if applied in the context of a hearing where the merits of the dispute would be considered and decided. This is pertinent here as the striking out application could potentially affect the Plaintiff’s substantive right.

25.  Secondly, the learned Judge mentioned twice that should the hearing of the privity application be decided under procedural rules to be heard in public, there would be no breach of confidentiality as such disclosure was in order to protect or pursue a legal right of the claimant.

26.  With the case of CDE v NOP so properly understood, I accept the Plaintiff’s submission that it does not assist Kam. Rather, and in my view, the judgment in that case reinforced that disclosure to protect or pursue a legal right of the party, as provided by section 18(2)(a)(i) of the AO, does not amount to a breach of the arbitral confidentiality.

27.  The arbitral confidentiality being so excepted by section18(2)(a)(i), it fell on Kam to satisfy the Court that there were otherwise cogent reasons in this particular case (save arbitral confidentiality) to justify a departure from open justice, or that due administration of justice requires the principle of open administration of justice to be compromised.

28.  Other than arbitral confidentiality, Kam did not put forth any such other reasons or justification.

29.  I therefore refused Kam’s application with costs to the Plaintiff.