Legal Update: Anti-Suit Injunction restraining a Defendant in a Hong Kong Court action from continuing proceedings it commenced in the People’s Court

On behalf of China City Construction (International) Co., Limited (In Creditors’ Voluntary Liquidation) (“CCCI”) and Dingway Investment Limited (In Compulsory Liquidation) (“Dingway”), both acting through their liquidators, Tanner De Witt successfully obtained an Anti-Suit Injunction (“ASI”) against China City Construction & Development Co., (HK) Limited (“CCCDHK”), restraining CCCDHK from continuing with proceedings it had commenced in the People’s Court in Beijing.

ASIs are comparatively rare injunctions, in part because they are often (erroneously) equated with one court asserting some kind of supremacy over the court of another jurisdiction, which the principles of comity would of course discourage. The Judgment of Deputy High Court Judge Maria Yuen [2025] HKCFI 710 makes clear that this is not the case and that in an appropriate case, a party can (and should) be restrained from bringing or continuing proceedings in another court. The Judgment also confirms that in this context, where application is made in Hong Kong, the courts in Mainland China are to be treated as a “foreign” court when applying ASI principles, notwithstanding Hong Kong being part of China.

Background

The application for the ASI arose in a long-running dispute by which CCCI and Dingway seek to recover the sale proceeds of a valuable piece of land in Miami, USA (the “Recovery Action”). The asset had been held by Dingway (a BVI company) through intermediate Delaware corporations. CCCI is the majority shareholder of Dingway but CCCDHK claims to be the beneficial owner of Dingway under a trust arrangement with CCCI (“Alleged Trust”). CCCI denies the existence of the Alleged Trust.

The Recovery Action was brought by Dingway and has been underway in Hong Kong since early 2022. The Alleged Trust is the principal backbone of CCCDHK’s defence and is also relied upon by other defendants, who were the recipients of the sale proceeds. The Alleged Trust has also been the subject of two Hong Kong proceedings commenced by CCCDHK against CCCI to enforce the Alleged Trust. Both of those proceedings were subsequently discontinued by CCCDHK; the most recent discontinuance coming after CCCDHK’s application for the Alleged Trust issue to be tried as a preliminary issue in the Recovery Action was rejected by the Hong Kong court.

Shortly after that decision (but unknown to CCCI and Dingway until some months later) CCCDHK commenced an action in Beijing (“Beijing Action”) against CCCI to enforce the Alleged Trust.

General Legal Principles for granting ASI

The learned Judge emphasised that an ASI (1) does not deny or pre-empt any jurisdiction of the foreign court; (2) is not an order directed at the foreign court; and (3) is binding only on the individual or company who has commenced proceedings in the foreign (here, Beijing) court and who is subject to the in personam jurisdiction of the domestic (here, Hong Kong) court.

The domestic court has power, and would exercise its discretion, to grant an ASI if the applicant has a legitimate interest in making the application, and it is clearly necessary to protect that legitimate interest in proceedings where the domestic court is the natural forum, and where the conduct of commencing the foreign proceedings was vexatious and oppressive, such that it would be unconscionable for the individual or company to pursue the foreign proceedings and the ends of justice require the domestic court to grant an ASI.?

The possibility of interference with the normal process of the foreign court should be weighed in the light of the particular factors of the case, such as the time and circumstances in which those foreign proceedings were begun, the scope of the issue(s) before it, and the stage those proceedings have reached (if any).

Key Issues addressed in this Judgment

(1) Does the applicant for an ASI need to be a party (in the domestic proceedings)?

• The court held that this is not an essential element, Her Ladyship stating that an applicant who can show that it would be bound by proceedings in the domestic court would have a legitimate interest to protect against unconscionable conduct of the entity pursuing foreign proceedings, and that a legitimate interest does not necessarily mean that the applicant must itself be a party to the domestic proceedings.

• In the present case, despite not being a party to the Recovery Action, CCCI has given an undertaking to the court to be bound by the determination of the Alleged Trust issue in that action. In such circumstances, the court considered that to insist that CCCI needs to be a party as a pre-requisite to the granting of ASI would be to elevate form over substance.

(2) The existence of a non-exclusive jurisdiction clause

• The relevant jurisdiction clause relied upon by CCCDHK provides that “either party may bring proceedings in the Xicheng District of Beijing or a Hong Kong Court with jurisdiction” (emphasis added).

• Her Ladyship did not accept the Plaintiffs’ submission that once proceedings had been brought in one jurisdiction pursuant to such a clause, and a party had submitted to that jurisdiction, such party is precluded from resorting to the other jurisdiction as a matter of election. The court considered that it is unlikely to have been the intention of the parties that the party who was first to act in a dispute may in effect turn the jurisdiction it chose into an exclusive jurisdiction once the other party submitted to it. ?

• The court added that prosecution of parallel proceedings is not necessarily vexatious oppressive. Only foreign proceedings which were vexatious and oppressive for some reason independent of the mere presence of the non-exclusive jurisdiction clause should be restrained.

(3) Must the applicant first apply to the Beijing Court?

• The parties accept that there is no absolute rule in law that an application to the foreign court must be made before applying to the domestic court for an ASI. However, the Defendants argued strongly that this should ordinarily be the case.

• Her Ladyship rejected the Defendant’s argument that it would be an “affront” to the foreign court if no application for stay is made to it first, reciting, inter alia, the well-known statement in The Angelic Grace [1995] 1 Lloyd’s Rep 87, 95 that there is “nothing more patronising” than the domestic court considering whether it should intervene and restrain the foreign proceedings only after the foreign court has assumed jurisdiction and refused to stay the proceedings before it.

• In sum, Her Ladyship held that this is a matter that should be weighed in the balance of the various factors, but concluded that in the present case (1) Hong Kong is the natural forum; (2) by the Beijing Action CCCDHK seeks to carve out only one of the multiple issues in the Recovery Action; (3) CCCDHK’s commencement (and subsequent discontinuance) of and participation in a number of Hong Kong proceedings over a long period of time shows that its conduct in now commencing the Beijing Action is plainly vexatious or oppressive; and (4) it is unconscionable for CCCDHK to pursue the Beijing Action and, after giving due regard to comity, the ends of justice require the Hong Kong court to grant an ASI without the applicants having to first apply to the Beijing court. The court also took into account a number of other factors that pointed to the conduct of CCCDHK in commencing the Beijing Action as being vexatious.

Robin Darton (Partner), Veronica Chan (Partner), Jeeby Au (Associate) and Tiffany Chan (Trainee) of Tanner De Witt acted for the Liquidators of CCCI and Dingway. We were assisted by Derek JY Chan of Parkside Chambers in this matter.

Robin Darton and Jeeby Au

If you would like to discuss any of the matters raised in this article, please contact:

Robin Darton

The above is not intended to be relied on as legal advice and specific legal advice should be sought at all times in relation to the above.

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