A recent decision of Mr. Justice G. Lam in the Hong Kong Court of First Instance (“CFI“), Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirketi (HCCT 6/2015), has elucidated the Hong Kong courts’ approach to “anti-suit injunctions”.

Case Summary

Ever Judger Holding Co. (“the Shipowners“) owned the “MV Ever Judger“, chartered for delivering cargo by Kroman Celik Anonim Sirketi (“the Buyers“). The bills of lading incorporated an arbitration clause governed by English law, referring any dispute to arbitration in Hong Kong. When the ship arrived in Turkey, it was discovered that the cargo was damaged.

The Buyers applied for, and were granted, an arrest of the ship by the Turkish courts. The Shipowners managed to have the ship released after making a security payment. The Shipowners then obtained an ex parte “anti-suit injunction” in Hong Kong, on the ground that the agreement provided for resolution of disputes by arbitration in Hong Kong.

The Summons heard before the CFI was the inter partes Summons for the continuation of the ex parte injunction. Referring to authorities including Donohue v. Armco Inc [2002] 1 All ER 749, the CFI observed that a Hong Kong court should ordinarily grant an injunction to restrain the pursuit of foreign proceedings brought in breach of an agreement for Hong Kong arbitration (which, quite misleadingly, is often referred to as an “anti-suit injunction”), where the injunction was sought without delay and the foreign proceedings not too far advanced, unless the defendant can demonstrate strong reason to the contrary.

The Buyers relied on the following grounds in opposition to the application: (1) related proceedings in Turkey between the Buyers and their insurers; (2) the Shipowners had already filed a jurisdictional challenge in the Turkish court; and (3) the Shipowners were guilty of delay in seeking the injunction.

Regarding ground (1), the CFI found on the facts that refusing the anti-suit injunction would not result in a single composite trial involving the parties and the insurers in Turkey, and that it would not remove the risk of inconsistent decisions between the two courts in Turkey, as a result the instant case could be distinguished from previous authorities which had refused anti-suit injunctions on such grounds.

For ground (2), the CFI found that the Shipowners had put in the jurisdictional challenge because under Turkish rules of procedure, if they had not done so they could be taken to have submitted to jurisdiction. Further, there had not been any hearing of the jurisdictional challenge or any step taken by the Turkish court to determine it.

Ground (3) was also dismissed, as the Shipowners had moved swiftly from the moment of breach, when the buyers filed their points of claim in Turkey. The arrest proceedings could fairly be regarded as proceedings brought by the Buyers to obtain security for their claim rather than to have the substantive dispute determined and so was not a breach of the arbitration clause.

The CFI also ruled on the separate issue of whether the Shipowners came with “unclean hands”, as an injunction is an equitable remedy and subject to the doctrine of “clean hands”. For this defence to apply, the party must have had “unclean hands” and the conduct complained of had an immediate and necessary relation to the equity sued for.

The Buyers alleged that clean bills of lading had been fraudulently issued. The CFI held that because this was an interlocutory application argued on the basis of affidavit evidence, it was not appropriate to come to a finding of fraud on the basis of contested affidavit evidence. Where serious allegations of wrongdoing are involved, they must be proved by evidence of commensurate cogency and fraud or serious misconduct can only be inferred where such inferences are compelling. As such it was not established that the Shipowners had unclean hands.

Ultimately, the CFI ordered the continuation of the injunction.

Conclusion

The decision re-affirms the Hong Kong courts’ pro-arbitration approach and its willingness to grant anti-suit injunctions. The key takeaway from this case is that the Hong Kong courts see granting an anti-suit injunction due to breach of an arbitration clause, as giving effect to what the parties have agreed, and therefore there is a high threshold for a counterparty to meet in order to contest the granting of the injunction.