Hong Kong’s District Court has refused to grant an injunction to restrain an arbitrator from acting in an arbitration, on the grounds that there was already another identical application before the court scheduled for hearing and that there was no urgency for granting an “interim-interim” injunction.
Lily Fenn was one of the claimants in an arbitration in which Mr Thomas So was the arbitrator. After Mr So had handed down an award against the claimants, Fenn brought an action against Mr So in the Hong Kong Court, challenging his ability to continue to act as arbitrator on the ground of partiality. In the meantime, Fenn also applied by way of summons for an interlocutory injunction to restrain Mr So from acting as arbitrator.
By consent of the parties, the court adjourned the summons to April 2021 for substantive hearing. After that summons had been adjourned, Mr So made a cost award against the claimants. As a result of the cost award, Fenn took out a second summons, seeking to stop Mr So from further acting as arbitrator in the arbitration proceedings.
Issues before the court
HHJ Phoebe Man dealt with two main issues in her decision:
- Whether the second summons was an abuse of process, in that there was already an outstanding substantially similar summons before the court; and
- Whether the court should grant an “interim-interim” injunction (pending the outcome of the first summons i.e. the interim injunction).
Abuse of process
On the abuse of process point, Mr So relied on case law to the effect that where an applicant brings two interlocutory applications which are identical in substance, the second should not be entertained unless there is a material change of circumstances.
Fenn did not dispute the principle relied on by Mr So. However, she argued that the handing down of the cost award was a material change of circumstances. She alleged that before the parties agreed to the adjournment, the defendant had, in his capacity as arbitrator, represented to the parties in the arbitration that he would not take any further steps until the court has dealt with the injunction application against him. Therefore, the cost award constituted a material change of circumstances.
The judge rejected Fenn’s argument. In so concluding, she relied on the events that took place after Mr So allegedly made the above representation but before the parties entered into the consent summons. In gist, during that period, Mr So’s solicitors had expressly rejected Fenn’s request for an undertaking not to continue with the arbitration proceedings and pointed out to Fenn that the consent summons was without prejudice to the defendant’s right to continue acting as arbitrator. Mr So’s solicitors also wrote a separate letter to Fenn stating that Mr So had reserved his right to continue to act as arbitrator. In light of these facts, the judge held that Fenn should have been well aware that Mr So might continue to act as arbitrator before the court determined her injunction application. It followed that the cost award subsequently rendered by Mr So could not constitute a material change of circumstances.
Interim interim injunction
In light of the conclusion that the court did not need to consider the second summons, the judge held that it was unnecessary to consider the merits of the “interim-interim” injunction.
The judge added that, in any event, the second application was baseless because the only outstanding matter in the arbitration when the application was made was the question of taxation on costs. Even if Mr So were to hand down an order on that issue, there would be no injustice to Fenn which could not be compensated by damages.
The significance of this case lies not so much in the legal principles discussed in this interlocutory decision, but rather in the fact that it is a relatively rare example of an arbitrator getting sued. As the substantive hearing has yet to take place, it remains to be seen how the court will deal with the substantive complaint.
For more information, please feel free to get in touch with any of the contacts below, or your usual Herbert Smith Freehills contact.