Summary of facts

The plaintiff (P) applied for an injunction in aid of arbitration under section 45(2) of the Arbitration Ordinance (Cap. 609), which was due to be commenced at the Singapore International Arbitration Centre (SIAC) (the Intended Arbitration). P also applied for an interim-interim injunction pending the substantive hearing of the interlocutory injunction.

A third-party company, Luen On, and the first defendant (D1) were equal parties to a joint venture agreement (JVA) in respect of the second defendant (D2). P owned 50 per cent of Luen On, with the other 50 per cent being owned by another company, Luen Thai. P said it would be seeking leave from the Companies Court (by way of an unfair prejudice petition) to commence the Intended Arbitration in the name of Luen On as Luen On was deadlocked.

Clause 8 of the JVA set out a list of “Reserved Matters” which required the unanimous written consent of all shareholders, i.e., D1 and Luen On, or the chairman of the board and president of D2.

P alleged that certain matters occurred in late 2020 and early January 2021 which warranted an interim-interim injunction, including the “self-arrogation” by the beneficial owner of Luen Thai and CEO of D2, Mr Willie Tan, of the created position of “interim President” of D2 with the ability to approve Reserved Matters without the consent of Luen On or P, and the boards of D2 and its subsidiaries and Mr Tan as “interim President” purporting to approve the Reserved Matters.

P applied for injunctive relief to prevent the carrying into effect of board resolutions passed in respect of Reserved Matters, and to ensure that Mr Tan did not continue to act through the title of “interim President” to try to approve any further Reserved Matters.

Decision

The Hon. K. Yeung J (the Judge) held that, for interim-interim relief, the court had to do practical justice on the balance of fairness even though it may not have sufficient time to consider the matter fully (China Shanshui Cement Group Ltd v. Zhang Caikui [2018] HKCA 409). The Judge then declined to grant interim-interim relief due to delay, lack of urgency and absence of an arbitration on foot.

Absence of any arbitration on foot

Section 45(2) of the Arbitration Ordinance applied where “any arbitral proceedings…have been or are to be commenced in or outside Hong Kong”.  No arbitration had been commenced before the SIAC and P said it would seek leave from the Companies Court (by way of an unfair prejudice petition) for leave to commence the Intended Arbitration in the name of Luen On as Luen On was deadlocked.The Judge declined to grant injunctive relief because the unfair prejudice petition would be contested and, in any case, the court may grant other types of relief such as a buy-out.  It would be highly prejudicial to the defendants if, in the meantime, they were subject to an interim-interim injunction for an uncertain period of time.

Delay and lack of urgency 

The Judge held that P had failed to satisfy the court as to the urgency for interim-interim relief and that there had been delay on its part in seeking such relief. The Judge found that P had not identified how the resolutions it was seeking to impugn were not in the interests of the defendants and its subsidiaries and how P would suffer actual harm from their adoption.  Further, the Judge found that, since late 2019, Mr Tan had been vested with all the powers of the president, including those in relation to the Reserved Matters; therefore the dispute between the parties on the powers of Mr Tan was a “stale” one. Lastly, P or its director/shareholder had started a number of similar legal actions since 2019 and P had not sought any interim-interim relief in any of those actions.

Concluding remarks

While the Judge made it clear that this was not the appropriate case to consider whether a party seeking to invoke section 45 of the Arbitration Ordinance (Cap. 609) must have the right to commence arbitration, future applicants should be cautious about seeking court-ordered interim relief before obtaining the right to commence arbitration on behalf of the claimant in the intended arbitration given the decision in this case. It should also be borne in mind that all interim relief should be sought urgently; otherwise there is a risk that any application will be declined on the ground of delay alone.