In Beijing Songxianghu Architectural Decoration Engineering Co., Ltd v Kitty Kam (桂藝芙) also known as Wang Yuzhi (王妤之) [2024] HKCFI 1657, the court refused to grant a confidentiality order preventing public disclosure of information relating to an HKIAC arbitration in parallel court proceedings brought against a party related to the respondent in the arbitration. The court found that section 18(2)(a)(i) of the Arbitration Ordinance (AO) which provides the exception that a party may disclose such information “to protect or pursue a legal right or interest of the party” applied and the court was not satisfied that there were cogent reasons in this particular case to justify a departure from open justice.
Background
In this action, the Plaintiff claimed against the Defendant (Kam) to recover HK$253 million for fraud, dishonest assistance and conspiracy to injure by unlawful means. Shortly after the action was commenced, arbitration proceedings were commenced by the Plaintiff against an entity related to Kam. There were many common issues between the arbitration and the action and much overlap between the action and the arbitration.
Sections 16 and 18 of the Arbitration Ordinance
In the court action, there was to be a contested hearing of Kam’s summons to strike out the Statement of Claim and discharge of the Mareva Injunction granted against Kam. Kam sought a confidentiality order, that (a) the hearing of his summons be closed to the public; (b) the decision to be given on the summons not be searched, inspected or published without the court’s leave; (c) documents in the court file containing information relating to the arbitration be sealed and not available for public inspection, or alternatively (d) such part of the hearing, during which “information relating to the arbitration” would be disclosed, be closed to the public, and (e) in the striking-out decision, the parties and a number of persons/entities be anonymized and all references to “information relating to the arbitration” be redacted and the parties’ comments on the redaction be obtained before the striking-out decision would be released to the public.
Kam argued that confidentiality is protected in the arbitration under sections 16 and 18 of AO. S.16 provides that arbitration proceedings are to be heard otherwise than in open court, although the court may order arbitral proceedings to be in open court on the application of any party or, if in any particular case, the court is satisfied that the proceedings ought to be heard in open court. S.18 provides that, unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to the arbitral proceedings or arbitral award. Exceptions to this prohibition in s.18, where such publication, disclosure or communication of information is permitted, include, amongst others, where it is (i) to protect or pursue a legal right or interest of the party; or (ii) to enforce or challenge the award in legal proceedings before the court or other judicial authority.
Kam’s stance was that confidentiality was undermined by the gap created by the Plaintiff’s decision to commence the parallel proceedings against Kam, which effectively left open a loophole that allowed the Plaintiff to breach its confidentiality obligations through the backdoor.
Court’s Decision
The court said that the first important thing was to identify with some precision what “information relating to the arbitration” means and encompasses. The starting point, the court said, must be that open administration of justice is a fundamental principle of great importance and any departure from this in any given case must be justified by reference to the principles and circumstances of the case in question. A central consideration is whether the due administration of justice requires the principle of open administration of justice to be compromised.
Kam emphasized that she was entitled to arbitral confidentiality as it is protected by s.18 of the AO. However, the court said that s.18(2)(a)(i) provides the exception that a party may disclose such information “to protect or pursue a legal right or interest of the party”. Similarly, Article 45.3 of the 2018 HKIAC Administered Arbitration Rules (which governed the arbitration) provides that a party is not prevented from disclosure of such information to protect or pursue a legal right or interest of the party.
It was not disputed that the Plaintiff was entitled to bring the action against Kam as of right. The Plaintiff’s allegations, evidence and documents it proffered in the action were therefore disclosed to pursue a legal right or interest of the Plaintiff within the meaning of s.18(2)(a)(i) and Article 45.3 of the HKIAC Rules.
Kam prayed in aid the English Court of Appeal decision in CDE v NOP [2021] EWCA Civ 1908, where in a similar case to the present one, the Defendants were accused of fraud and those same allegations were the subject of an arbitration against companies said to be connected with the defendant. The arbitrators produced an award finding the claimant’s allegations well-founded and the claimants asserted that the award was binding on the defendants, as they were privy to it, and sought to make the award public and admit it as evidence in the action. The question of whether the award was binding (privity application) was to be determined in a coming hearing at which the claimant would apply for summary judgment. The broad issue argued in that appeal concerned the extent to which proceedings in that action, particularly the privity application, which involved reference to the contents of the award should be heard in public. The Court of Appeal in CDE held that the judge in the court below had been right to hold a case management conference in private and also upheld the judge’s order, effectively making no decision whether the privity application should be heard in public and placing the burden on the claimant to seek a determination from the judge hearing the privity application to decide whether the hearing should be held in public or private. However, the Court of Appeal made it clear that the starting point is that the hearing of the privity application should be in public and any derogation from that position needed to be justified.
The court in the present case referred to the Court of Appeal’s comments in CDE that it was necessary to make clear that the considerations leading to the conclusion that it was necessary to have the case management conference heard in private did not have the same force if applied in the context of a hearing where the merits of the dispute would be considered and decided. The court said that this was pertinent in the present case, as Kam’s striking out application could potentially affect the Plaintiff’s substantive right. Further, the Court of Appeal in CDE had mentioned twice that should the hearing of the privity application be decided under procedural rules to be heard in public, there would be no breach of confidentiality as such disclosure was in order to protect or pursue a legal right of the claimant. The court said that with CDE so properly understood, it did not assist Kam. Rather, the judgment in that case reinforced that disclosure to protect or pursue a legal right of the party, as provided by s.18(2)(a)(i) of the AO, does not amount to a breach of the arbitral confidentiality.
The court said that arbitral confidentiality being so excepted by s.18(2)(a)(i) of the AO, it fell on Kam to satisfy the court that there were otherwise cogent reasons in this particular case (save arbitral confidentiality) to justify a departure from open justice, or that due administration of justice required the principle of open administration of justice to be compromised. Other than arbitral confidentiality, Kam did not put forward any such other reasons or justification. Therefore, Kam’s application was refused.
Comments
It is not uncommon for parties to be engaged in litigation and at the same time in arbitration concerning related disputes. This judgment clarifies when the exception to the duty of confidentiality under s.18(2)(a)(i) of the AO applies.
For further information, please contact:
Joseph Chung, Partner, Deacons
joseph.chung@deacons.com
