Case Commentary

Commercial Law – Court of First Instance refuses interim injunction to stay arbitration proceedings

The Court confirmed that it has jurisdiction to grant an injunction to restrain arbitration proceedings, however this discretion will be exercised sparingly.

Atkins China Limited v China State Construction Engineering (Hong Kong) Limited

Reference:                  [2020] HKCFI 2092

Court:                           Court of First Instance

Before:                         Hon Au-Yeung J in Chambers

Date of Judgment:     14 August 2020

Appearance:               Valerie Tang appeared for the successful Defendant

The Facts

The case concerns a design agreement under which the Defendant as contractor appointed the Plaintiff to design certain sections of the Hong Kong Zhuhai-Macao Bridge, including the construction of a seawall (“the Design Agreement”). The terms included an arbitration clause which required the parties to refer disputes arising out of or in connection with the Design Agreement to arbitration.

Subsequently, instability incidents occurred and part of the seawall collapsed. At the same time, payment for certain variation orders was outstanding and owing to the Plaintiff. Thereafter, the parties engaged in negotiations and entered into a settlement agreement, under which HK$10,000,883.65 was paid by the Defendant to the Plaintiff.

Several months later, the Defendant, by its insurers, served on the Plaintiff a Notice of Arbitration in relation to the Plaintiff’s defective design under the Design Agreement. In response, the Plaintiff sought an interim injunction to stay the said arbitration proceedings and invoked the Court’s jurisdiction to restrain vexatious and oppressive arbitration. The Defendant submitted inter alia that there was no urgency for interim injunctive relief, and that the arbitration clause was binding on the parties.

The Court’s Decision

In the Decision, the Court confirmed that it has jurisdiction to grant an injunction to restrain arbitration proceedings, although this discretion will be exercised sparingly: SA v KB [2016] 2 HKLRD 1249. In deciding whether to grant such an injunction, apart from applying the principles in American Cyanamid v Ethicon Ltd [1975] AC 396, the following factors will be considered:

• The injunction does not cause injustice to the plaintiff in the arbitration;

• The continuance of the arbitration would be oppressive, vexatious, unconscionable or an abuse of process; and

• Delay in making an application for injunction may be fatal to the application.

In the circumstances, however, the Court held that there was no urgency to grant an interim injunction on an ex parte with notice basis. The only urgency was the response to be given by the Plaintiff to the Arbitration Notice, and little prejudice would be caused to the Plaintiff by adjourning the matter to an inter partes hearing and by ordering evidence in opposition to be filed.

The Defendant was represented by Valerie Tang. The Plaintiff was represented by Mr. Charles Manzoni SC and Ms. Elizabeth Cheung. 

Valerie Tang

Valerie was called to the Bar in 2019. She obtained her law degree from the Chinese University of Hong Kong, and read International Relations at the London School of Economics and Political Science prior to her legal studies. She also served as a Legislative Council assistant from 2015 to 2018.

Since joining Chambers, Valerie has established a broad civil practice with an emphasis on commercial and company law. Apart from commercial matters, Valerie also has experience and regularly acts as sole advocate in matrimonial, land and probate cases. See her profile for more details.

Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case.