In Sea Powerful II Special Maritime Enterprises (ENE) v. Bank of China Ltd (CACV36/2016), the Hong Kong Court of Appeal (“CA“) upheld the Court of First Instance’s (“CFI“) decision in refusing to grant an anti-suit injunction because the party seeking relief had not acted promptly, even though the objecting party suffered no prejudice from the delay.

Facts

The Plaintiff was a ship owner who entered into a contract of carriage with a charterer by a bill of lading (“B/L“). It was expressly provided on the back of the B/L that all terms of a charter party would be incorporated, including a clause providing for arbitration in Hong Kong. The arbitration clause stated that any claim would be time-barred if it was not made in writing within 12 months from the final discharge of cargos (the “Limitation Period“). Later, the Defendant succeeded the charterer and became the holder of the B/L. The dispute arose out of the alleged wrongful delivery of cargos in China, as a result of which the Defendant commenced legal proceedings in the Qingdao Maritime Court (the “PRC Proceedings“).

Although the Defendant filed its claim within the 12-month period, the claim was only effectively served to the Plaintiff 8 months later through public notice, at which time the Limitation Period had expired. Although the Plaintiff subsequently filed a jurisdictional challenge to the Qingdao Maritime Court relying on the arbitration clause and the lapse of Limitation Period, such challenge was refused. Following this, the Plaintiff appealed to the Shandong Higher People’s Court. Before the appeal was decided, and only when a further 4 months had passed did the Plaintiff apply for an anti-suit injunction before the Hong Kong Court to stay the PRC Proceedings.

CFI and CA’s Holdings

The CFI rejected the anti-suit injunction application based solely on the Plaintiff’s delay even though the Defendant had not suffered any detriment due to such delay. The CFI observed that while the Hong Kong Court should ordinarily grant an injunction to restrict foreign proceedings in breach of arbitration agreements, such injunction should be sought promptly and only granted when the foreign proceedings are not too advanced, unless strong reasons would require a contrary result. It was found by the CFI that the Plaintiff had deliberately evaded the service of the PRC Proceedings and had delayed in seeking the anti-suit injunction. The “only motive” for the Plaintiff’s delay was to wait for the Limitation Period to expire. While the Court held that the Defendant failed to reasonably protect itself against the time bar, the Plaintiff’s delay can be a “free-standing” ground in refusing the anti-suit injunction. In particular, the Plaintiff should not wait until the outcome of the jurisdictional challenge to decide whether to apply for anti-suit injunction. It is in the public interest for the parties to act promptly and claim injunctive relief at an early stage to ensure comity between the courts and avoid wasting judicial resources. Although the judgment provided no specific guidance as to what constitutes delay, the CFI held that in practice the existence of delay is not difficult to establish by taking into account all the circumstances of the case. The relevant time for assessing the delay started to run when the party was aware of the foreign proceedings brought in breach of the arbitration agreement.

In the CA judgment, the Plaintiff asserted that mere delay did not amount to a strong enough standalone reason to disregard the arbitration agreement. It was argued that the sanctity of the parties’ contractual rights to arbitration should be respected. The only other reason for refusing the injunction was comity, which is “of minimal relevance” in contractual anti-suit injunctions. The CA rejected the Plaintiff’s arguments and found that the delay and comity are in fact related. The longer an action continues without any attempt to stop it, the less likely the Court is to grant an injunction and comity will have a greater impact. The CA upheld the CFI’s finding and dismissed the appeal accordingly.

Comments

This case delivers a clear warning from the Hong Kong Courts that parties should seek anti-suit injunctions promptly and should not wait for the outcome of jurisdictional challenges before taking steps to obtain injunctive relief.