DUAN QI GUI v. UPPER LIKE INVESTMENTS LTD AND OTHERS

HCA 1004/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1004 OF 2005

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J U D G M E N T

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Background

1.  This is an appeal from an order made by Master Au-Yeung (as Madam Registrar Au-Yeung then was) on 17 April 2007, dismissing an application by the 1^st, 4^th and 5^th defendants to stay all further proceedings in this action on the ground of forum non conveniens.

2.  It is only necessary to state the facts and disputes in a simplified way.  The plaintiff, initially through a Mainland company known as Shanghai Tai Qi Real Estate Company Limited (STQ) and subsequently also through the 5^th defendant, a Hong Kong company, controlled a real estate project in Shanghai.  On the other hand, the 1^st defendant, a Hong Kong company, through its then directors and shareholders, the 2^nd and 3^rd defendants, and another Hong Kong company known as Eagle Fair International Limited (Eagle Fair), controlled two real estate projects in Qingdao on the Mainland.

3.  By an agreement made on 8 August 1997, the plaintiff acting on behalf of STQ agreed with the 1^st defendant (represented by the 2^nd defendant) to assign STQ’s interest in the Shanghai project to the 1^st defendant in exchange for the 1^st defendant’s assignment to the 5^th defendant of its majority interests in the two Qingdao projects.

4.  Based on agreed valuations of the respective projects, equalisation money was payable by the 1^st defendant to the plaintiff’s side.

5.  On 11 December 1997, the 5^th defendant represented by the plaintiff entered into a supplemental agreement with the 1^st defendant (represented by the 2^nd defendant) to clarify, so the plaintiff maintains, that the 5^th defendant was to replace STQ as the party effecting the project exchange with the 1^st defendant.  The supplemental agreement also confirmed and agreed that the equalisation money due to the plaintiff’s side was RMB136,857,000, payable by instalments.

6.  It is the plaintiff’s case that pursuant to the agreement and the supplemental agreement, she transferred a total of 10,000 shares beneficially owned by her in the 5^th defendant, comprising the entire authorised and issued share capital of the 5^th defendant, to the 2^nd defendant (9,999 shares) and the 3^rd defendant (one share) on 15 December 1997.  (The 3^rd defendant has since transferred the one share to the 4^th defendant.)  She also relinquished her control in STQ.  It is the plaintiff’s case that she has therefore discharged her contractual obligations under the project exchange agreement and the supplement agreement.

7.  Her case is that the 1^st defendant has only partially performed its obligations under the two agreements by making certain payments to her.  The more significant obligation of transferring to her the majority interests in the two Qingdao projects was not performed.

8.  In fact, according to the plaintiff’s case, the defendants could not perform the obligation because the 1^st and 2^nd defendants did not at any material time have the agreement of a third shareholder of Eagle Fair (Luk Pei Lun) to enter into the two agreements, and the 1^st defendant did not hold a majority interest in one of the two Qingdao projects.  Misrepresentations were made by the 1^st and 2^nd defendants to her during the negotiations, she maintains.

9.  It is therefore the plaintiff’s case that by reason of those misrepresentations and the failure to transfer the agreed majority interests in the Qingdao projects to her, she is entitled to seek the return of the shares in the 5^th defendant to her.  She thus sues for an order that the transfer of the shares by her to the 2^nd and 3^rd defendants be set aside and cancelled and an order for the re-transfer of the shares to her.  She also seeks accounts, inquires and directions, or alternatively damages. 

10.  The 2^nd and 3^rd defendants have not entered an appearance to defend the present action.  Indeed, according to the documents filed, the 2^nd and 4^th defendants appear to have transferred the subject shares to BVI companies.  In any event, it is the case of the 1^st, 4^th and 5^th defendants that in fact there were hidden debts and liabilities in STQ which the plaintiff failed to disclose to the 1^st and 2^nd defendants.  As a result of the transfer of the shares by the plaintiff to the 2^nd and 3^rd defendants and the assumption of control of STQ by the 1^st and 2^nd defendants, coupled with the subsequent criminal prosecution against the plaintiff (on a separate matter) which resulted at one stage in her being sentenced to capital punishment on the Mainland, the defendants had no choice but to meet these indebtedness and liabilities on behalf of STQ.  They claim that the money they have so expended on STQ far exceeds the amount that was payable under the agreement and supplemental agreement to the plaintiff’s side by way of equalisation money.  In those circumstances, they deny that the plaintiff has any outstanding claim against them for the equalisation money.  Furthermore, they claim that the undisclosed indebtedness and their discharging of the same under forced circumstances have caused them loss, for which the plaintiff is liable.

11.  But more importantly, it is the defendants’ case that the total amount they have incurred in discharging the hidden liabilities and indebtedness not only exceeds the outstanding equalisation money payable to the plaintiff’s side, but also covers the entire value of the Qingdao projects that ought to be transferred to the plaintiff.  Moreover, the plaintiff has signed documents in Chinese pledging her interests in the Qingdao projects in favour of the defendants as security for repayment of the moneys thus advanced in her favour.  The defendants are therefore not liable to transfer the Qingdao projects to the plaintiff.

12.  The 1^st, 4^th and 5^th defendants accept that there was at one stage a memorandum in Chinese signed by the 2^nd defendant in favour of the plaintiff.  The document seems to suggest that the plaintiff had already performed all her obligations under the two agreements and it was the defendants’ side which was unable to perform their obligations.  But the defendants maintain that the memorandum did not correctly and fully reflect the true position.

13.  The plaintiff does not accept that there were undisclosed indebtedness and liabilities.  She maintains that they had been disclosed in the financial statement of STQ for 1997 and were discoverable by the defendants during their financial advisers’ due diligence at the negotiation stage.  Furthermore, she claims that some of the alleged liabilities on the Mainland were simply fabricated or double-counted.

Application for stay

14.  In the application for stay, the 1^st, 4^th and 5^th defendants maintain that either the People’s Court in Shanghai or that in Qingdao on the Mainland is clearly and distinctly a more appropriate forum than the Hong Kong court to try the case.  The plaintiff, the defendants contend, has no sustainable case on juridical advantage.  But if the Court should hold that the plaintiff would suffer from a juridical disadvantage in terms of limitation period, such disadvantage is answered by an appropriate undertaking of waiver.  The defendants further contend that there ought to be a mutual waiver by the defendants and the plaintiff in respect of, respectively, the plaintiff’s claim and the defendants’ set off and counterclaim relating to the allegedly undisclosed indebtedness and liabilities.  But as a fall-back position, the defendants are content to provide a unilateral waiver.

15.  Master Au-Yeung dismissed the application for stay essentially on one ground, namely the juridical disadvantage in terms of limitation period which cannot be satisfactorily covered by a unilateral waiver – she having ruled that there was no question of forcing upon the plaintiff a mutual waiver.

16.  The applicable legal test is not in dispute.  It is common ground that the three-stage test propounded by the House of Lords in Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460 represents the correct test to apply. 

17.  In Pei Zheng Middle School v China Pui Ching Education Foundation Ltd CACV 262/2005, 21 February 2006, Cheung JA explained the law as follows:

“	1.	The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action i.e. in which the action may be tried more suitably for the interests of all the parties and the ends of justice?
	2.	In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action) and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong.  Failure by the applicant to establish these two matters at this stage is fatal.
	3.	If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceeding has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.
	4.	If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer.  Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.”

 See also other local cases such as The Adhiguna Meranti [1987] HKLR 904; The Kapitan Shvetsov [1997] 1 HKC 485; Yu Lap Man v Good First Investment Ltd [1998] 1 HKC 726; Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250; Newlink Consultants Ltd v Air China [2005] 2 HKC 260 and Xinjiang Xingmei Oil-Pipeline Co Ltd v China Petrolium & Chemical Corp [2005] 2 HKC 292

18.  With the applicable legal principles explained in these cases in mind, I approach the present case with a view to applying the three-stage test.

Stage one: Is Hong Kong not the natural or appropriate forum and the Shanghai or Qingdao court clearly and distinctly more appropriate than Hong Kong?

19.  First, it is the contention of the 1^st, 4^th and 5^th defendants that Hong Kong is not the natural or appropriate forum and that either the People’s Court in Shanghai or that in Qingdao is clearly or distinctly a more appropriate forum than the court in Hong Kong to try the present dispute, those two places on the Mainland being the places where the projects are located respectively.

20.  In this regard, the Court’s task is to focus on the appropriateness of a forum from the point of view of the trial of the action and to identify a forum which has the most real and substantial connection.

21.  In the present case, I have no doubt that Hong Kong is not the natural or appropriate forum and that both the Shanghai and Qingdao courts are clearly or distinctly more appropriate as a forum for trying the present case than the Hong Kong court.  The agreements and memorandum in question were all made on the Mainland.  All the individual parties are residents on the Mainland.  Although both the 1^st and 5^th defendants are Hong Kong companies, their main, if not only, business activities take or took place on the Mainland.  In fact, the 5^th defendant was specifically formed in Hong Kong as part of the arrangement to effect the exchange of projects pursuant to the original agreement between the parties. 

22.  The subject matters of the agreements under dispute are located on the Mainland.  The projects, needless to say, are Mainland projects.

23.  The alleged breaches or wrongdoing took place on the Mainland.  The alleged misrepresentations were made on the Mainland.  The alleged undisclosed indebtedness and liabilities were Mainland liabilities and indebtedness.  The alleged discharge of those indebtedness and liabilities also took place on the Mainland, and the various documents in Chinese whereby, amongst other things, the plaintiff apparently pledged her interests in the Qingdao projects in favour of the defendants as security for repayment were made on the Mainland.

24.  The witnesses, particularly those relating to the alleged indebtedness and liabilities and the discharge thereof, are Mainland witnesses.  All relevant documentation is found on the Mainland.

25.  I have not forgotten the point made on behalf of the plaintiff by her counsel, Mr Abraham Chan, that the 5^th defendant is a Hong Kong company and the transfer of shares in the 5^th defendant which the plaintiff now seeks to set aside was governed by Hong Kong law.  So will the re-transfer of shares in the 5^th defendant in favour of the plaintiff be governed by Hong Kong law, counsel submits.

26.  That may well be so.  However, on the materials before me, no real issue has thus far been raised by anybody regarding the transfer or re-transfer.  The defence of the 1^st, 4^th and 5^th defendants appears to be based on the alleged hidden indebtedness and liabilities and their discharge, as well as the Chinese documents whereby the plaintiff’s interests in the Qingdao projects have been pledged as security in favour of the defendants.

27.  In terms of importance of the issues, of much greater significance, in my view, are those that the defendants are relying on in defence of the plaintiff’s claim.  They are, as described, all matters closely connected with the Mainland rather than Hong Kong.

28.  Mr Abraham Chan also says that in the absence of pleaded issues, it is impossible to assess the relative importance of the witnesses or documents from the point of view of a trial, even though they are essentially Mainland witnesses and documents.  I do not agree.  It appears from the materials so far placed before the Court that the alleged hidden indebtedness and liabilities are going to be important matters, particularly bearing in mind the plaintiff’s allegation that at least one of the alleged loans is a fabrication and there has been double counting.

29.  I do not see the presence of two possible fora on the Mainland as an obstacle.  Mr Abraham Chan tries to gain some mileage out of the fact that under article 34 of the Civil Procedure Law on the Mainland, both the courts in Qingdao and Shanghai appear to have exclusive jurisdiction over the disputes between the parties insofar as they relate to land situated in those two places respectively.  However, article 35 would seem to provide a solution –ie the plaintiff would have the option of choosing which court to commence proceedings.  And given the plaintiff’s claim is essentially for rescission, Shanghai would seem to be the more appropriate forum as between the two.  If the plaintiff is successful, she will get back the relevant shares which will give her control over the Shanghai project.  In any event, I do not consider the possibility of the two People’s Courts competing against each other for jurisdiction to try the present dispute a very real one to be seriously taken into account. 

30.  As a general proposition, the existence of more than one appropriate foreign forum does not prevent the grant of a stay of the local action.  There is no requirement that the defendant must prove that one be more appropriate than the other: Xinjiang Xingmei Oil-Pipeline Co Ltd, supra, at pages 297 to 298, paras 27 and 28.

31.  In other words, at stage one, I am with the defendants.

Stage two: juridical advantage in terms of limitation periods

32.  Stage two of the three-stage test deals with the question of legitimate personal or juridical advantage or disadvantage.  The burden is still on the applicant/defendant, but the plaintiff has an evidential burden in relation to establishing that a trial at the other forum would deprive him of a legitimate personal or juridical advantage: The Adhiguna Meranti, supra, at page 907H; Newlink Consultants Ltd, supra, at page 277E/F.

33.  It is at this juncture that the question of limitation comes into play.  It is common ground that the Hong Kong action commenced by the plaintiff has no time bar problem.  However, it is not disputed that put at the lowest, there is a real risk that if the plaintiff were forced to commence proceedings now in the People’s Court on the Mainland, the proceedings against the defendants would be time barred, on the available expert opinions on Mainland law.  That is not disputed.

34.  Nor is it disputed that that would be a highly material juridical disadvantage.  The position has been explained by Lord Goff of Chieveley in Spiliada at pages 483E to 484E as follows:

“

Let me consider how the principle of forum non conveniens should be applied in a case in which the plaintiff has started proceedings in England where his claim was not time barred, but there is some other jurisdiction which, in the opinion of the court, is clearly more appropriate for the trial of the action, but where the plaintiff has not commenced proceedings and where his claim is now time barred.  Now, to take some extreme examples, suppose that the plaintiff allowed the limitation period to elapse in the appropriate jurisdiction, and came here simply because he wanted to take advantage of a more generous time bar applicable in this country; or suppose that it was obvious that the plaintiff should have commenced proceedings in the appropriate jurisdiction, and yet he did not trouble to issue a protective writ there; in cases such as these, I cannot see that the court should hesitate to stay the proceedings in this country, even though the effect would be that the plaintiff’s claim would inevitably be defeated by a plea of the time bar in the appropriate jurisdiction.  Indeed a strong theoretical argument can be advanced for the proposition that, if there is another clearly more appropriate forum for the trial of the action, a stay should generally be granted even though the plaintiff’s action would be time barred there.  But, in my opinion, this is a case where practical justice should be done.  And practical justice demands that, if the court considers that the plaintiff acted reasonably in commencing proceedings in this country, and that, although it appears that (putting on one side the time bar point) the appropriate forum for the trial of the action is elsewhere than England, the plaintiff did not act unreasonably in failing to commence proceedings (for example, by issuing a protective writ) in that jurisdiction within the limitation period applicable there, it would not, I think, be just to deprive the plaintiff of the benefit of having started proceedings within the limitation period applicable in this country.  This approach is consistent with that of Sheen J. in The Blue Wave [1982] 1 Lloyd’s Rep. 151.  It is not to be forgotten that, by making its jurisdiction under R.S.C., Ord. 11 – the courts of this country have provided the plaintiff with an opportunity to start proceedings here; accordingly, if justice demands, the court should not deprive the plaintiff of the benefit of having complied with the time bar in this country.  Furthermore, as the applicable principles become more clearly established and better known, it will, I suspect, become increasingly difficult for plaintiffs to prove lack of negligence in this respect.  The fact that the court has been asked to exercise its discretion under R.S.C., Ord. 11, rather than that the plaintiff has served proceedings upon the defendant in this country as of right, is, I consider, only relevant to consideration of the plaintiff’s conduct in failing to save the time bar in the other relevant alternative jurisdiction.  The appropriate order, where the application of the time bar in the foreign jurisdiction is dependent upon its invocation by the defendant, may well be to make it a condition of the grant of a stay, or the exercise of discretion against giving leave to serve out of the jurisdiction, that the defendant should waive the time bar in the foreign jurisdiction; this is apparently the practice in the United States of America.”

35.  In The Blue Wave [1982] 1 Lloyd’s Rep 151, referred to specifically by Lord Goff in the passage extracted above, Sheen J has said at page 156 as follows:

“

The approach of the Courts of this country to a time bar has significantly altered in recent years.  If it is open to a Court to extend the time limit, the Court will look to see if the defendant has been prejudiced by the delay in commencing proceedings.  Such prejudice cannot arise where a claim is brought in time, but not in the correct tribunal.  There would be an injustice to a plaintiff, who has suffered a legal wrong and has started proceedings, if he is precluded altogether from pursuing his remedy.  The fact that the plaintiff will have no remedy in the foreign Court seems to me to be a powerful factor against a stay.  To this approach I would make an exception if on the facts it was clear that the plaintiff had acted unreasonably and that his conduct showed that without good reason he deliberately and advisedly allowed the time limit to expire without instituting alternative proceedings.”

36.  In Yu Lap Man, supra, Cheung J (as he then was) dealt with an argument based on limitation period as follows (at page 734F to H):

“

The parties also argued on the expiration of the limitation period to bring proceedings in China.  There is no evidence that the plaintiff deliberately withheld from commencing proceedings in China on the agreement.  InSpiliada, Lord Goff discussed the issue of a plaintiff commencing proceedings in England which has not been time-barred, but there is some other jurisdiction which is clearly more appropriate for the trial of the action but where the plaintiff has not commenced proceedings and where his claim is time-barred.  He was of the view that if the plaintiff deliberately refrained from commencing proceedings in such a country, the court should not hesitate to stay the proceedings in England.  This is not the case here.  I am not satisfied that the defendant has discharged the burden of showing that the courts in PRC are the more appropriate forum for the determination of this action.”

37.  In the present case, on the facts and available expert evidence, I am of the view that there is a real risk of the plaintiff’s proceedings on the Mainland against the defendants, if commenced now, being defeated by reason of the shorter limitation periods applicable there.  That is a recognised juridical disadvantage.  The question boils down to whether the plaintiff has acted unreasonably in allowing time to have lapsed on the Mainland, particularly whether “without good reason” she has “deliberately and advisedly allowed the time limit to expire” without instituting proceedings there.

38.  Mr Abraham Chan, for the plaintiff and Mr Anthony Chan SC, for the 1^st, 4^th and 5^th defendants, have respectively submitted that the evidential burden is on the other side in relation to the above question.  In particular, Mr Abraham Chan has submitted that since one is now dealing with an exception to an exception, the evidential burden does not lie with the plaintiff, who has already discharged her evidential burden in proving that if a stay is ordered, she would stand to lose a juridical advantage in terms of a longer limitation period here.  In other words, he who asserts must prove.

39.  It is true that there is no direct evidence, particularly no direct evidence from the plaintiff, as to why no proceedings were commenced on the Mainland.  But on the materials available, I do not think I can conclude that it is clear that the plaintiff has failed to commence proceedings on the Mainland unreasonably and that her conduct shows that without good reason she has deliberately and advisedly allowed the time limit to expire without commencing proceedings on the Mainland.  It is true that during her imprisonment, she had access to Mainland lawyers and could have, at least in theory, given instructions to her lawyers to commence proceedings on the Mainland even though she was in prison.  However, it is her evidence, although given in relation to her criminal trial, that she had (and has) no confidence in the Mainland legal system at all.  In those circumstances, it is not wholly surprising that she did not commence any legal proceedings against the defendants on the Mainland to pursue her claim.

40.  In my view, one must not lose sight of the reality of the matter.  The plaintiff has been convicted of serious criminal offences on the Mainland and has been at one stage sentenced to death.  Although the sentence has subsequently been reduced to a period of imprisonment, she has – subjectively – lost all confidence in the Mainland legal system.  She says so in terms in her affirmations filed in these proceedings.  It is against that background that one must consider, on the existing materials, whether she has acted unreasonably in not commencing a civil claim against the defendants on the Mainland, or whether she has deliberately refrained from doing so, so as to gain an undue juridical advantage by suing in the Hong Kong court.

41.  Unlike the situation dealt with by Lord Goff in Spiliada in the passage extracted above, the present case is not a case on Order 11, rule 1.  Rather, the plaintiff has founded her action against the defendants in Hong Kong as of right.  That is by no means a conclusive factor, but nonetheless it is a factor to be taken into account, particularly in relation to “consideration of the plaintiff’s conduct in failing to save the time bar in the other relevant alternative jurisdiction” (per Lord Goff in Spiliada at page 484C/D).  In other words, as I understand it, the fact that a plaintiff can sue and has in fact sued the defendant in the local forum as of right is a relevant factor in considering whether he or she has acted unreasonably in not commencing an action in the alternative jurisdiction before the expiry of the limitation period there.

42.  On the whole, although the evidence is not entirely satisfactory, I am unable to conclude, regardless of where the evidential burden actually lies, that the plaintiff has deliberately and advisedly for no good reason allowed the time limit to expire on the Mainland, or that she has acted unreasonably in the matter.

Waiver of limitation defence

43.  As regards the question of waiver of the limitation defence, the defendants have through counsel offered an undertaking to waive such a defence on the Mainland if the present action is stayed in favour of litigation on the Mainland.  There are several difficulties.  First, it is not entirely clear from the expert evidence on Mainland law that such a waiver will be accepted by the courts on the Mainland.  It is common ground that so far as the written law is concerned, there is no provision allowing a waiver of the limitation period.  I accept that the legal opinion prepared by King & Wood, expert for the defendants, sets out in some detail what will likely be the reaction of the People’s Courts in relation to a waiver of the limitation defence.  I am prepared to assume, for present purposes, that more probable than not, such a waiver will be accepted by the People’s Courts.  But I do not think one can go so far as to say that there is no real risk of the People’s Courts insisting on the application of the limitation period.

44.  Secondly, although the present application for a stay has been taken out by the 1^st, 4^th and 5^th defendants only, they ask for a general stay of the entire action.  That covers the plaintiff’s claim against the 2^nd and 3^rd defendants.  Although the 2^nd and 3^rd defendants have not entered an appearance in the present action and the plaintiff is entitled to apply for default judgment against them, given the relief that the plaintiff is seeking, there will still be further proceedings against the 2^nd and 3^rd defendants in Hong Kong (taking of an account, assessment of damages) even if an application for default judgment is successfully made.  The present application for stay, if successful, means that the entire proceedings, including those proceedings against the 2^nd and 3^rd defendants, will be stayed in favour of proceedings to be commenced by the plaintiff against all the defendants on the Mainland.  The obvious difficulty created by this is that the 2^nd and 3^rd defendants, not having participated in the present appeal, will have given no waiver of any limitation defence open to them.  Furthermore, although they have not appeared in the present action, the possibility of their appearing in such Mainland proceedings cannot be discounted, for the simple reason that they are Mainland residents.  Indeed their not defending the action in Hong Kong, with which they have apparently little connection, is not surprising.  One simply cannot infer or assume that they will not defend a Mainland claim.

45.  Although it is debatable whether the plaintiff needs to obtain judgments against the 2^nd and 3^rd defendants in order to obtain the ultimate relief that she is seeking against the 1^st and 5^th defendants, namely the re-transfer of the shares in the 5^th defendant, the possibility of the 2^nd and 3^rd defendants appearing in the Mainland proceedings and running a limitation defence, and the possible implications of such a move on the plaintiff’s claim against the 1^st and 5^th defendants in the Mainland proceedings cannot be lightly brushed aside.

46.  In short, the suggested waiver does not seem to provide an effective or complete answer to the juridical advantage/disadvantage under consideration.

47.  Thirdly, the defendants have maintained, at least as their primary position, that there should be a mutual waiver.  In short, the defendants’ defence of set off may only be accepted by a Mainland court if it is dressed up, as it were, in the form of a counterclaim.  The difficulty with such a course is that any such counterclaim will likewise be time barred.  Thus the defendants require a corresponding waiver from the plaintiff as well not to raise the time bar in relation to their counterclaim.  Understandably that is flatly rejected by the plaintiff. 

48.  The defendants’ submission on mutual waiver does not attract me.  On the facts, it is the defendants who have failed to commence proceedings on the Mainland (in terms of the so-called counterclaim) within time so as to preserve their defence in the first place.  What is under consideration is whether there are effective and complete ways to remedy the possible loss of a juridical advantage that staying the plaintiff’s action will bring about.  As a matter of principle, I see no justification for requiring, whether directly or indirectly, the plaintiff to give any waiver in favour of the defendants.  The ball is entirely in the defendants’ court.

49.  As mentioned, this is only the defendants’ primary position.  As a fallback position, the defendants are prepared to give a unilateral waiver.

50.  However, my earlier concerns still remain, and it seems that even such a unilateral waiver will not be effective or complete enough to deal with the situation.

Conditional stay

51.  Then there is the suggestion of granting only a conditional stay of the present action.  In other words, if the plaintiff should face any limitation difficulty in the People’s Court, or if the 2^nd and 3^rd defendants should suddenly appear in the Mainland proceedings and run a limitation defence, she is at liberty to come back to the Hong Kong court to apply to lift the stay and continue with her action.

52.  I note that the option of granting only a limited or conditional stay was not even mentioned as a possibility for consideration by the Court of Appeal in The Adhiguna Meranti, supra, at page 919 G-H, where Hunter JA dealt with the time bar concerned in that case and the lack of an effective and satisfactory undertaking to overcome the time bar in the following words:

“	(1)	Time Bar
		The evidence of Indonesian law leaves it quite uncertain whether the Indonesian courts would regard themselves as bound by the defendants’ waiver and not raise limitation for themselves.  Equally uncertain in terms of comity is their attitude to an undertaking apparently “extracted” from one party in order to have the case tried in Indonesia at all.  We are not satisfied that this undertaking is effective to fulfil its intended purpose.”

53.  Understandingly, the plaintiff is not receptive to the suggestion at all.  Mr Abraham Chan submits on behalf of his client that in the eventuality of the People’s Court not accepting the waiver, or the 2^nd and 3^rd defendants entering an appearance in the Mainland proceedings and running a limitation defence, as a result of which the plaintiff needs to return to this court to ask for the uplifting of the stay, valuable resources such as costs and time will have been wasted and there could be other complications.  It should be noted here that unlike the situation of an interlocutory injunction, there is no cross undertaking as to damages.  Nor is there any basis for awarding costs against anybody in any of the described eventualities.

54.  Whether in theory or in terms of jurisdiction, I see no real obstacle to granting a stay on terms.  But on the facts of the present case, I am with Mr Abraham Chan.  I do not think granting a conditional stay offers a satisfactory solution.  I have fully borne in mind Mr Anthony Chan SC’s submission that the possibilities of the eventualities mentioned above happening are “remote”.  But put at the lowest, I cannot ignore them.

55.  In short, like the Master below, I perceive the limitation difficulty as a stumbling juridical disadvantage in the path of the defendants’ application. 

Other considerations

56.  The plaintiff has also relied on enforcement as a juridical advantage.  In other words, the plaintiff says that since her ultimate goal is to obtain the re-transfer of the shares in the 5^th defendant, which is a Hong Kong company, in terms of enforcement, it would be much easier to enforce a court order for the re-transfer if the order is a Hong Kong one.  On the other hand, I bear in mind Mr Anthony Chan SC’s submission that the defendants do have substantial businesses on the Mainland and one should not assume that they will not comply with a Mainland court order regarding the shares.  On the whole, I place little weight on this factor.

57.  Finally, the plaintiff also relies on her subjective distrust of the Mainland legal system as a juridical disadvantage.  I do not think her subjective belief or distrust, on the facts of the present case, takes her case at stage two any further. 

Stage three: balancing the advantages and disadvantages

58.  I now move on to stage three.  It is noteworthy that Mr Anthony Chan SC does not make any submission in relation to the stage three consideration.  That is understandable, given the limitation difficulty.  On the facts of the present case, having balanced the advantages and disadvantages involved, I have come to the conclusion that the Court’s discretion should be exercised against granting a stay. 

59.  In other words, I think the Master has come to the right conclusion.  The appeal is dismissed with costs. 

60.  I thank counsel for their assistance.