Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

廈門新景地集團有限公司 Formerly Known As 廈門市鑫新景地房地產有限公司 v Eton Properties Ltd And Another

Judgment Cited authorities 7 Cited in 1 Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date18 May 2023
Neutral Citation[2023] HKCFI 1327
Subject MatterConstruction and Arbitration Proceedings
Judgement NumberHCCT98/2022
Year2023
HCCT98/2022 廈門新景地集團有限公司 formerly known as 廈門市鑫新景地房地產有限公司 v. ETON PROPERTIES LTD AND ANOTHER

HCCT 98/2022

[2023] HKCFI 1327

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 98 OF 2022

____________________

IN THE MATTER of Section 21L of the High Court Ordinance (Cap. 4)

____________________

BETWEEN

廈門新景地集團有限公司 formerly known as
廈門市鑫新景地房地產有限公司		 Plaintiff

and
ETON PROPERTIES LIMITED
(裕景興業有限公司)		 1st Defendant
ETON PROPERTIES (HOLDINGS) LIMITED
(裕景興業(集團)有限公司)		 2nd Defendant

____________________

Before: Hon Mimmie Chan J in Court
Date of Hearing: 20 March 2023
Date of Judgment: 18 May 2023

_______________

J U D G M E N T

_______________

Background

1. This case has a remarkable history in terms of the long and winding course the parties have taken through the courts at all levels.

2. From its source of an ex parte application made in HCCT 54/2007 for leave to enforce a Mainland arbitral award made in October 2006 (“1st Award”) for the continued performance of an Agreement made between the Plaintiff and the 1st and 2nd Defendants (“Agreement”) and for statutory judgment to be entered on the 1st Award, the Plaintiff’s action to enforce the 1st Award by HCCL 13/2011 (“HCCL 13”) (formerly HCA 961/2008) has gone through a trial on liability at first instance, with appeals all the way to the Court of Final Appeal (“CFA”). The matter has now returned to the Court of 1st Instance for trial on quantum, but the parties have continued their skirmishes at each and every turn. Only the essential developments more relevant to the latest dispute are outlined below.

3. The Court of Appeal, by its judgment of 15 April 2016 (“CA Judgment”), overturned the initial trial judge’s dismissal in June 2012 of the Plaintiff’s claims made in HCCL 13. In the CA Judgment, the Court of Appeal allowed the Plaintiff’s claim against the 1st and 2nd Defendants for breach of their implied promise to honour and perform the 1st Award (“Promise”), but held that the Plaintiff should elect between (i) maintaining the judgment entered on the 1st Award for continued performance of the Agreement, or (ii) obtaining judgment for damages for the Defendants’ breach of the implied Promise. After some procrastination, the Plaintiff on 9 October 2017 elected to enter judgment for damages. Upon such election, the statutory judgment in HCCT 54/2007 was set aside.

4. On 30 April 2018, the trial for assessment of damages in HCCL 13 was stayed pending the determination of the appeal against the CA Judgment by the Court of Final Appeal (“CFA”).

5. The CFA judgment was handed down on 9 October 2020 (“CFA Judgment”), whereby the Defendants’ appeal against the CA Judgment was dismissed. Consequently, directions were made on 6 November 2020 for the trial on quantum and assessment of damages in HCCL 13 to proceed, with hearing dates scheduled in September 2023, and for further pleadings to be filed on quantum. As was customary to these parties, various interlocutory skirmishes and appeals followed, but leave was granted in August 2022 for the pleadings to be amended, and directions issued for expert evidence to be adduced on issues of valuation.

The current dispute

6. In the midst of the preparations for the trial on quantum in HCCL 13, on 17 June 2022, the Defendants commenced a new arbitration against the Plaintiff on the Mainland (“New Arbitration”). In the New Arbitration, the Defendants seek from the tribunal the following orders (“Relief”):

(1) that the Agreement is terminated;

(2) that upon termination of the Agreement, which cannot and has not continued to be performed, the rights and obligations of the parties including compensation for loss shall be determined according to the governing law of the Agreement, being the laws of the PRC;

(3) that the compensation for loss arising from the claim made in the arbitration is a dispute arising from the performance of the Agreement, and both parties are obligated to submit the dispute for arbitration pursuant to the arbitration clause contained in the Agreement; and

(4) that in relation to the compensation for loss, the Defendants’ liabilities should be limited to the principle of penal deposit, namely making an additional payment of the deposit in the amount of RMB 5 million, or any amount as determined by the tribunal to be appropriate under PRC laws.

7. The Defendants claim that the New Arbitration was commenced by them as a result of the PRC Civil Code coming into effect on the Mainland on 1 January 2021 (“Civil Code”). Article 580 of the Civil Code (“Article 580”) allows any party to an agreement, regardless of whether it is the party in breach or the innocent party, to terminate the agreement in circumstances specified in the provision. This was in contrast to the former provisions of Article 110 of the PRC Contract Law, which limits the right to seek a discharge of an agreement to an innocent party which was not in breach thereof.

8. The Defendants highlighted the fact that the New Arbitration concerns the rights and obligations of the parties under the Agreement, which is separate and distinct from the enforcement proceedings in Hong Kong which concern enforcement of the Promise to perform the 1st Award. They maintain that the issues raised in the New Arbitration for determination by the tribunal have not been litigated before in Hong Kong, as they concern the Defendants’ right to terminate the Agreement under the new provisions of the Civil Code, and concern the amount of compensation payable by the Defendants upon such termination of the Agreement in accordance with Article 580. The Defendants pointed out that the New Arbitration has been accepted by CIETAC, according to its notice issued on 9 October 2022.

9. On 3 November 2022, the Plaintiff issued the Originating Summons in this action, seeking an injunction to restrain the Defendants from taking any steps to pursue the New Arbitration or the claims therein, and to compel them to take steps to discontinue the New Arbitration. The Plaintiff claims that the New Arbitration was commenced by the Defendants in bad faith, with a view to relitigating issues already determined in the enforcement proceedings in Hong Kong and to deprive the Plaintiff of the fruits of the 1st Award. The Plaintiff argued that the New Arbitration is an attempt to frustrate the enforcement of the 1st Award, which is vexatious, oppressive and abusive, such that the injunction sought should be granted in order to protect the Hong Kong judicial process, and prevent attacks against the judgments made by the Hong Kong Courts.

10. Despite the emphases placed by the Defendants on the fact that the New Arbitration was commenced as a result of the change in law effected by the New Code, Counsel for the Plaintiff has pointed out that the Request for Arbitration (“Request”) served by the Defendants in fact made no mention of Article 580 or of the Civil Code itself as the alleged basis of their claims in the New Arbitration. What the Defendants did refer to was the Plaintiff’s claim for damages in HCCL 13, as being a claim for compensation of its loss for the Defendants’ breach of the Agreement, the Defendants claiming in the Request that such a claim of the Plaintiff was in breach of and inconsistent with the Agreement which provides for the parties’ reference to arbitration for assessment of damages under the Agreement. The Plaintiff argued that the Defendants’ stance, as reflected in the Request, demonstrates that they are seeking to relitigate in the New Arbitration matters which have already been finally decided by the CFA and the Court of Appeal, namely, that the Plaintiff’s claim for damages in HCCL 13 is one for the Defendants’ breach of the Promise, and not for breach of the Agreement, and further, that the arbitration clause in the Agreement only covers disputes arising from the performance of the Agreement, and not disputes relating to the Promise to perform the 1st Award.

11. The Plaintiff submitted that the New Arbitration was commenced 20 years after the Defendants’ breach of the Agreement (and nearly 18 months after the Civil Code came into effect), in an attempt to argue yet again that the Plaintiff should not be entitled to damages at common law, because such claim for damages should be governed by PRC law and should be submitted to the CIETAC tribunal for determination. On behalf of the Plaintiff, Counsel argued that the Court should infer from all the circumstances of this case that the Defendants were mala fide in commencing the New Arbitration, and that it is clear that the New Arbitration is vexatious, initiated for the purpose of undermining or hampering the enforcement of the 1st Award - which should not be allowed.

The currently decided and indisputable matters

12. It is helpful to set out and summarize what, in my judgment, are indisputable matters.

13. In the 1st Award, the tribunal recorded that the Defendants had repudiated the Agreement, and that the Plaintiff had refused to accept termination. The tribunal rejected the Defendants’ argument that performance of the Agreement was impossible due to the change of circumstances, namely the construction activities which had already taken place on the land in question, the sale of the residential units, and the restructuring of the Eton Group which had been carried out, as a result of which the Defendants’ shareholding/control in Legend Properties (Xiamen) Company Limited (“HK Legend”) which owned the Mainland company Legend Properties (Xiamen) Company Limited (“PRC Legend”) which in turn had the right to develop the land in Xiamen (“Land”) had been transferred to another entity (“EPGL”) in the Eton Group (“Restructuring”). By the 1s...

To continue reading

Request your trial
1 firm's commentaries
  • Hong Kong Court Grants Anti-Arbitration Injunction To Protect Enforcement Of Prior Award
    • Hong Kong
    • Mondaq Hong Kong
    • 2 June 2023
    ...the enforcement in Hong Kong of a prior arbitral award (廈門新景地集團有限公司 formerly known as 廈門市鑫新景地房地產有限公司 v. Eton Properties Ltd and Another [2023] HKCFI 1327). The decision is the latest in the long-running proceedings between Xiamen Xinjingdi Group Co Ltd ('XJ') and Eton Properties Limited and......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT