Background

Section 81(4) of the Ordinance states that “[t]he leave of the Court is required for any appeal from a decision of the Court under article 34 of the UNCITRAL Model Law, given effect to by subsection (1).” The “Court” refers to the Court of First Instance (hereinafter, “CFI”).

In China International Fund Ltd v Dennis Lau & Ng Chun Man Architects & Engineers (HK) Ltd (2015) HKEC 1626, the Court of Appeal (hereinafter, “CA”) considered the constitutionality of section 81(4).

The Applicant sought leave to appeal against L Chan J’s decision (the learned judge dismissed the Applicant’s application to set aside an arbitration award). The Respondent contended that the CA has no jurisdiction to grant leave because of section 81(4), whilst the Applicant contended that this section is unconstitutional because it disproportionately restricts the Court of Final Appeal’s power of final adjudication (as per Article 82 of the Basic Law)

Judgment

The CA held that notwithstanding the apparent finality of section 81(4), it possesses a residual jurisdiction to supervise the process in the CFI as a means of redress in the rare case where a lower court’s decision to refuse leave cannot be regarded as a judicial decision.

The CA also held that section 81(4) imposes finality in respect of the CFI’s decision on whether leave to appeal should be granted, but this is subject to its residual jurisdiction (as aforementioned). The CA held that if multiple rounds of applications were to be allowed, the legitimate aims of dispute resolution by arbitration (that is, finality, speed and reduction of costs) would be undermined. Further, the limitation in section 81(4) was held to be not more than what is necessary to achieve the aforesaid legitimate aims.

Robotunits Pty Ltd v Juergen Karl Mennel (2015) VSC 268 is a case from the Supreme Court of Victoria concerning disputes arising from shareholders agreements.

The Defendant sought a stay of the proceedings and referral to arbitration on the basis that the parties agreed to submit disputes between them to arbitration. He sought to rely on the arbitration agreement in Clause 15(2) of the Amended Shareholders Agreement, which stated as follows:

“Each party irrevocably and unconditionally submits to arbitration in accordance with the arbitration guidelines of the Law Institute of Victoria.”

Is there an operable arbitration agreement? Croft J held that it was undisputed that on its face the arbitration agreement was pathological because “the arbitration guidelines of the Law Institute of Victoria” referred to” do not exist and do not appear to have ever existed.” The Claimant conceded that the agreement may be rendered effective with judicial assistance. Croft J found the words in Clause 15(2) to be strong words evincing a clear intention to submit disputes, falling with the scope of the arbitration agreement, to arbitration. As such, it was held that the arbitration agreement is operable and capable of forming the basis of the orders sought by the Defendant.

Croft J held that the whole of the proceedings should be stayed, but only the issue of whether the Shareholders Agreements provided a legal or equitable basis for the Defendant to cause the Claimant to make the share payment shall be referred to arbitration. It was further held that as a result of the pathologies of the arbitration agreement, the orders should be made on the condition that the parties (within 28 days) seek to agree on the arbitral seat and the rules of the arbitration.

On August 22 2015, SW Head of Business Development (China), Ms. Connie Yeung, was invited to speak about overseas allocation and asset protection, which was organized by the FWD Hong Kong. Ms. Yeung shared techniques in overseas asset allocation and asset protection with more than 30 senior insurance financial planners and their clients. Participants found the sharing useful, practical and in particular, on how a family trust with different insurance policies can help to secure cash flows.

Please contact our Connie Yeung for any enquiries or further information about this event.

On August 21 2015, Head of Business Development (China), Ms. Connie Yeung, was invited to train more than 40 private bankers from the Bank of China, Harbin on asset protection and succession planning. Ms. Yeung has been invited to the same training for two consecutive years, which was held in Wu Yi Mountain and previously in Nanjing. The participants came from different provinces and included private bankers and branch managers. Ms. Yeung shared her views on the difficulties of succession and the advantages and disadvantages of different tools including the use of wills, trusts and power of attorneys.

Please contact our Connie Yeung for any queries or further information about this event.

In Beijing Tong Gang Da Sheng Trade Co Ltd v Allen & Overy [2015] 3 HKLRD 247, the Court of Appeal maintained the lower court decision that a litigation funding agreement and assignment of a cause of action were champertous.

Background

The Defendants, a solicitors’ firm and a barrister respectively, were alleged to have provided negligent advice to a company (the Company) in about 2005 or 2006. The Plaintiff and the Company entered into a funding agreement whereby the Plaintiff agreed, inter alia, to lend $3.4 million to the Company at an interest rate of 25% for a term of 2 years for an intended litigation against the Defendants, guaranteed by the proceeds that the Company would recover from the Defendants, and entitling the Plaintiff to 20% of such proceeds. After the Company issued writs against the Defendant, the Company assigned to the Plaintiff the cause of action against the Defendant and, inter alia, the right to the proceeds arising from such action for $100,000 and 10% of the net proceeds of the action. The Defendants challenged that the assignment was champertous. The Plaintiff argued that it was a major creditor of the Company and its controlling shareholder and so had a genuine commercial interest in the enforcement of action.

Ruling

The Court of Appeal disagreed with the Plaintiff’s contention and upheld the court of first instance’s finding that both the funding agreement and the assignment were champertous. It was held that the Judge below had examined the totality of the facts in forming the views that the transactions would pose a genuine risk to the integrity of the court’s processes. The vastly disproportionate potential returns for the outlay in the funding agreement and the assignment created a serious doubt into the genuineness of the assertions of the Plaintiff.

General Principles on Maintenance and Champerty (as enunciated in the CFA decision Unruh v Seeberger [2007] HKLRD 414)

The core concepts of maintenance of champerty are as follows:
› Maintenance involves a person’s “officious intermeddling” in litigation in which he has no legitimate interest.
› Champerty is a particular kind of maintenance and involves a person taking a share of the proceeds of the litigation maintained.

There are several categories of exceptions:
› The common interest category which justified certain persons with a legitimate common interest in the outcome of litigation in funding it.
› Case involving access to justice considerations.
› A miscellaneous category of practices accepted as lawful including sale and assignment by a trustee in bankruptcy of an action commenced in the bankruptcy and the doctrine of subrogation as applied to contracts of insurance.

In considering whether a contract will be vitiated on the grounds of maintenance and champerty, public policy considerations shall be evaluated in light that:
› The fact that an arrangement may be caught by the broad definition of maintenance of champerty is not in itself sufficient to impose liability. It is necessary to examine the “totality of the facts” and ask whether they pose a genuine risk to the integrity of the court’s processes.
› Countervailing public policies must be taken into account, especially policies in favour of ensuring access to justice and of recognizing, where appropriate, legitimate common interests of a social or commercial character in the litigation.

The disciplinary inquiry in question was held in relation to a medical practitioner (“W”) in public. The initial sentence for a warning letter to be served on W was substituted by an order that W’s name be removed from the General Register for a period of 1 month after the Council was alerted by the media that W did not have a clear record. In the written decision given by the Council on the same day, the Council stated that they would expect legal representatives of a defendant to be frank with the Council in respect of the defendant’s disciplinary record in the future.

Enquiries on the identity of members sitting at the inquiry, the Legal Adviser of the Council and the defence counsel were made by a member of the public (“N”) who is unconnected with the case. N did not explain his purpose of the inquiry despite being repeatedly asked by the Council. N then applied for judicial review to quash the Council’s decision in refusing to disclose the requested information (“the Decision”). The Council relied on the Data Protection Principle 3 (“the Principle”) in Schedule 1 of the Personal Data (Privacy) Ordinance (Cap. 486) (“the PDPO”) to restrict disclosure to N.

The Court of First Instance allowed N’s application and quashed the Decision. Godfrey Lam J found that the Council had irrelevantly taken into account the Principle in making the Decision and failed to consider the requirements of the principle of open justice, which if applicable, would invoke section 60B(a) of the PDPO for exemption to the Principle.

Godfrey Lam J in his obiter stated that the principle of open justice was not limited to physical access to the court room where a judicial hearing is taking place and applied to all tribunals exercising the judicial power of the state. The public interest in the administration of justice and the accountability of the judicial process required basic information about the identities of the key persons who have taken part in a public judicial hearing should normally be published. If the information was not disclosed in the written decision of the tribunal, then it should be disclosed upon inquiry made at a time reasonably close to the hearing.