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

Capital Wealth Holdings Ltd And Others v 南通嘉禾科技投资开发有限公司

Judgment Cited authorities 10 Cited in Precedent Map Related
Vincent
Judgment Date04 February 2021
Neutral Citation[2021] HKCFI 272
Year2021
Judgement NumberHCCT66/2020
Subject MatterConstruction and Arbitration Proceedings
CourtCourt of First Instance (Hong Kong)
HCCT66B/2020 CAPITAL WEALTH HOLDINGS LTD AND OTHERS v. 南通嘉禾科技投资开发有限公司

HCCT 66/2020

[2021] HKCFI 272

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 66 OF 2020

________________________

IN THE MATTER of Section 45 of the Arbitration Ordinance, Cap 609 and Inherent Jurisdiction of the Court
and
IN THE MATTER of an Arbitration

________________________

BETWEEN

CAPITAL WEALTH HOLDINGS LIMITED
（資富控股有限公司）		 1st Plaintiff
ENCORE WEALTH INVESTMENTS LIMITED
（加豐投資有限公司）		 2nd Plaintiff
南通狮迈汽车科技有限公司 3rd Plaintiff
如皋萨林混合动力汽车科技有限公司 4th Plaintiff
南通威蒙汽车科技有限公司 5th Plaintiff
如皋积泰电动汽车科技有限公司 6th Plaintiff
and
南通嘉禾科技投资开发有限公司 Defendant

________________________

Before: Hon K Yeung J in Chambers

Date of Hearing: 20 January 2021

Date of Decision: 4 February 2021

________________________

D E C I S I O N

________________________


A. Introduction

1. Upon the application of the plaintiffs (“P1” to “P6”, and collectively “Ps”), Deputy Judge Sit SC by Order dated 19 October 2020 (the “19 Oct Order”) granted[1] on an ex parte with notice basis an interim anti-suit injunction (the “Interim Injunction”) restraining the defendant (“D”) from starting, continuing, pursuing or taking further steps in 4 specified proceedings commenced by D in the Mainland before the Nantong Intermediate People’s Court (“NIPC”) against inter alios P3 to P6 (the “WFOEs”). Those 3 of the 4 sets of proceedings which are against the WFOEs[2] have been referred by the parties as the WFOE Proceedings, which term I adopt.

2. By summons of 1 December 2020 (the “Summons”), D seeks (1) the discharge of the Interim Injunction in respect of the WFOE Proceedings, (2) a limited variation of the same, and (3) fortification of the undertaking as to damages.

3. On 4 December 2020, I dealt with the part of the Summons for variation. I gave directions on the filing of evidence in relation to the application to discharge. I then adjourned it to 20 January 2020 for substantive hearing. It now comes back before me.

4. Ps sought the Interim Injunction on 2 grounds[3]. The first one was that the WFOE Proceedings were commenced in breach of the arbitration agreement contained in the joint venture agreements that parties had entered into (the “Contractual Ground”). Whether they indeed were is hence the main issue. The law relating to the so-called “one-shop stop” presumption concerning the interpretation of dispute resolution clauses will need to be considered. The second ground was that the WFOE Proceedings are unconscionable, vexatious and oppressive (the “Unconscionable Ground”), which is more factual.

5. In the meantime, Ps themselves on 24 December 2020 took out another summons for variation of §1 of the Interim Injunction (the “Ps’ Variation Summons”). It is now also before me for substantive hearing.

6. Mr Anson Wong SC leading Mr Martin Kok appeared for D. Mr Ernest Yang of Messrs DLA Piper Hong Kong appeared for Ps.

B. The affirmations

7. Placed before me are the following relevant affirmations:

(a) For Ps:

(i) the first affirmation of Wang Xiaolin (“Wang” and “Wang/Aff1”);

(ii) the first affirmation of Zhang Jinying (“Zhang” and “Zhang/Aff1”);

(iii) the second affirmation of Wang (“Wang/Aff2”);

(iv) the second affirmation of Zhang (“Zhang/Aff2”); and

(v) the first affirmation of Stephen Mark Saleen (“Saleen” and “Saleen/Aff”).

(b) For D, the first and draft second affirmations of Zhao Lifeng (“Zhao”, “Zhao/Aff1” and “Zhao/Aff2”).

C. The agreements between the parties

8. Given the issues involved, it is important to first outline the relevant agreements that the parties[4] have entered into.

9. P1 and P2 are companies registered in the BVI. The WFOEs are companies incorporated in the Mainland. P3, P4, and P5 are wholly owned by P1, and P6 by P2 (hence their WFOE status).

10. On 28 January 2016, a joint venture agreement was entered into[5] (the “JVA”):

(a) It has 3 parties, who are: P1 as甲方, D as乙方, and “如皋市高新技术创业服务有限公司” as丙方(“JSAT”). JSAT is the intended vehicle for the joint venture. The WFOEs are not parties to it;

(b) D under the JVA has certain capital injection obligations. Further, according to Clause 2.5 of the JVA, D agrees at certain specific stage “to provide a guarantee in favour of the Project Company for liquidity financing … of not more than RMB 4 billion”, and to“coordinate with the local financial department to provide the Project Company a subsidy for the interest payable over the RMB 4 billion loan when it exceeds the benchmark interest rate …”[6]. There is no mention of any provision of loan by D to JSAT.

(c) Clause 12 of the JVA is a choice of law and arbitration clause[7], that:

「 對於本協議的任何爭議，三方友好協商解決，如協商不成，則交由香港仲裁委員會根據中華人民共和國的實體法和香港國際仲裁條例仲裁解決…」

11. On 21 July 2016, a supplemental joint venture agreement[8] was entered into (the “SJVA”):

(a) It has 3 parties, who are: 威蒙工业集团 (“WMI”) as “甲方”, P1 as “乙方” and D as “丙方”. WMI, including its interest in JSAT, has subsequently been acquired by P2;

(b) Clause 10.1[9] provides that:

「本合同適用中國法律，根據中國法律解釋。」

(c) Clause 10.2[10] of the SJVA is an arbitration clause (together with Clause 12 of the JVA, collectively the “Arbitration Agreement”), that:-

「 因訂立、履行本合同而產生的任何爭議或糾紛，均應首先通過友好協商解決。雙方未能達成一致意見的，任何一方均有權將此爭議提交香港仲裁委員會根據中華人民共和國相關實體法和香港國際仲裁條例仲裁解決。」

(d) The WFOEs are not parties to it, though they are mentioned in several clauses (eg 4 and 5).

12. On 15 October 2016, a further supplemental agreement[11] (“SSJVA”, and together with the JVA and SJVA, collectively the “JV Agreements”). Its four parties are WMI, P1, D and JSAT[12]. The WFOEs are again not parties to it.

13. In 2019, D as “甲方 (出借方)” (ie the lender), JSAT as “乙方 (借款方)” (ie the borrower), and the WFOEs jointly as “丙方 (擔保方)” (ie the guarantors) entered into a number of loan agreements (“Loan Agreements”). Save the amount of the loans, the terms of each of those Loan Agreements are materially the same. Pursuant to those agreements, D lent to JSAT loans in the total sum of RMB 2 billion.

14. The Loan Agreements do not contain any dispute resolution clause.

15. Each of the Loan Agreements bears a reference code.

16. To ensure parties’ performance of their obligations under the Loan Agreements[13], each of the WFOEs as the “出質人” (ie the pledgor), D as the “質權人” (ie pledgee), and JSAT as the “債務人” (ie debtor) entered into a number of “股權質押擔保協議” (the “Share Pledge Agreements”). Certain specified percentages of the WFOEs’ holding in JSAT were pledged thereby. The reference codes of the Loan Agreements which the Share Pledge Agreements individually relate to are expressly referred to and specified.

17. Apart from the identities of the pledgors, the amount of the loans, the percentage of the pledged shares concerned and the reference codes, the terms of each of those Share Pledge Agreements are materially the same. The following 2 terms are material:

(a) Clause 3[14], that:

「 … 當[JSAT]的債務未按約定履行正常還本付息及其他相關費用時 ... [D]均有權直接要求[WFOEs]在其擔保範圍內承擔擔保責任」;

(b) Clause 11 thereof (the “Mainland Jurisdiction Clause”), that:

「 如因本協議或有關本協議的任何爭議而產生爭議，雙方同意應盡力通過友好協商解決該爭議；協商不成的，任何一方有權將該爭議提交[D]所在地有管轄權的法院解決。」

18. In addition to the Share Pledge Agreements, JSAT has also agreed to pledge as securities for the Loan Agreements inter alia its facilities, immovable properties and land rights (the “JSAT Pledge”).

19. The aforesaid loan and security arrangements have, on the face of the resolutions adduced, been approved at the shareholder level by both JSAT[15] and each of the WFOEs[16].

D Proceedings in the Mainland and Hong Kong

20. On 8 June 2020, D commenced the WFOE Proceedings before the NIPC. Three sets have been started, as a result of the way the loans were grouped amongst the Loan Agreements and Share Pledge Agreements. Such details are not important, as each of the 3 sets are materially the same.

21. In relation to the WFOE Proceedings:

(a) D is the claimant;

(b) JSAT and the WFOEs are the defendants;

(c) The 3 民事起訴狀 have been produced[17];

(d) The contents of those 3 民事起訴狀 under the heading of “事實和理由” are noted. D is suing on the Loan Agreements, the Share Pledge Agreements and the JSAT Pledge;

(e) According to the “訴訟請求” therein, D is seeking repayment of the RMB 2 billion with interest, and should JSAT fail to, enforcement of the JSAT Pledge and the Share Pledge Agreements.

22. By notice dated 28 August 2020, Ps, Saleen Motors International LLC, and SMS Supercars, Inc as claimants initiated ad hoc arbitration proceedings in Hong Kong against D. The Arbitration Agreement is relied upon[18]. They claim[19](1) a declaration that D has breached the JV Agreements; (2) various forms of relief in relation to patents and confidential information; (3) D be ordered to purchase the claimants’ interest in JSAT at the amount of RMB 9.987 billion; (4) damages; (5) legal fees and interest.

23. On 5 October 2020, Ps issued the Originating Summons herein. They seek thereby an anti-suit injunction against D in respect of inter alia the WFOE Proceedings.

24. On 19 October 2020, Ps obtained the Interim Injunction.

25. On 1 December 2020, D filed the Summons herein.

E. Parties’ stances and main submissions

26. Originally, there is dispute between the parties about the validity of the Arbitration Agreement. It refers to “香港仲裁委員會”. There is however no arbitral body in Hong Kong which bears that name. Expert evidence has been called from both sides. Opinions have been expressed as to whether the validity of the Arbitration Agreement should be governed by Mainland or Hong Kong Law, and whether it is according to the proper governing law valid.

27. In the course of the hearing, Mr Wong informed me that for the purpose of the Summons and the hearing (and for such purposes only), and on a without...

To continue reading

Request your trial

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