XCHRX ROYAL GARDEN RESORT PUBLIC CO. LTD. v. THE MITSUBISHI TRUST AND BANKING CORPORATION AND OTHERS

HCA 6541/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6541 OF 1999

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D E C I S I O N

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1. This is D1's (originally the only defendant herein) appeal against the order of Master Cheung dated 26 October 1999 dismissing D1's application for stay of this action on the ground of forum non conveniens.

2. Subsequently, on 22 November 1999, leave was given to the plaintiff to amend the Writ herein to add 2 other defendants, i.e. D2 and D3.

3. There is no dispute that:-

(a) the plaintiff is one of the subsidiaries of a Thai Group. The plaintiff itself was incorporated in Thailand and is listed on the Stock Exchange there.

(b) D1 was incorporated in Japan and is a licensed bank there. D1 has:-

(1) a Hong Kong branch office and is also a licensed bank here but the Hong Kong branch played no part in the matters with which this action is concerned.

(2) a Bangkok representation office but that representation office played no part in the said matters either.

(c) D2 and D3 are HK private companies and are 2 subsidiaries of a EIE International Corporation ("EIE").

(d) D2 and D3 respectively held 17.777% and 14.555% shares of a Rajadamri Hotel Public Co. Ltd ("RHC") in Thailand but they held these shares for EIE.

(e) The RHC shares held by D2 and D3 were pledged to D1 as security for various banking and credit facilities made available by D1 to EIE.

4. The plaintiff's claim against D1 is that an oral agreement was reached between them in Bangkok on 16 March 1999 whereby D1:-

(a) either as the unpaid pledgee of the said shares in RHC (or otherwise entitled to sell them);

(b) or as agent for D2 and D3,

agreed to sell the said shares in RHC to the plaintiff. The plaintiff alleges that D1 breached the said oral agreement by:-

(1) failing to sell them to the plaintiff;

(2) selling them to a 3rd party.

D1 denied that an agreement was concluded and further alleged in its affidavits that the discussion for the sale of the shares was made expressly subject to the approval of EIE, the ultimate owner.

5. Further to the claim against D1, the plaintiff's claim against D2 and D3 is that:-

(a) they (as D1's principals) have breached the said oral agreement of 16 March 1999;

(b) they have tortiously interfered with D1's performance of the said oral agreement.

6. Mr Reyes for D1 argued that the following factors point to Bangkok as a more appropriate forum than Hong Kong:-

(a) the alleged oral agreement was for the sale of shares of RHC, a Thai listed company;

(b) the alleged oral agreement was said to have been concluded in Bangkok;

(c) such an agreement was to be governed by Thai law;

(d) 3 of the people present at the meeting on 16 March 1999 were residing in Thailand;

(e) the currency involved in the alleged oral agreement was Thai baht;

(f) D1 has a presence in Bangkok (through its representation office) for the purpose of service of court documents.

7. Mr Reyes' alternative position is that Tokyo is a more appropriate forum than Hong Kong because:-

(a) D1 is a Japanese bank;

(b) D1's representatives present at the 16 March 1999 meeting are based in Tokyo, Japan. One of them is a Japanese. Besides, there is another potential witness for D1 who is also a Japanese;

(c) EIE, the ultimate owner of the said shares, is based in Japan.

8. He argued that, on the other hand, the factors alleged by the plaintiff to provide connection with Hong Kong are insignificant because:-

(a) D1's Hong Kong office has had no involvement in the matters litigated;

(b) D2 and D3 are only shelf companies acting as EIE's nominees;

(c) a document called "Confidential Agreement" which was made between the plaintiff's parent company and D1's Tokyo's office is irrelevant to the matters litigated;

(d) the alleged evidence of witnesses residing in Hong Kong is of doubtful or no relevance to the issues herein;

(e) none of the people present at the 16 March 1999 meeting has any significant connection with Hong Kong.

9. Mr Reyes further argued that plaintiff had not been able to show that it would suffer any significant juridical disadvantage by litigating in Bangkok or Tokyo.

10. Counsel for the respective parties also differed as to what the relevant legal test is in an application for stay on the ground of forum non conveniens. Mr Reyes informed me (and Mr Kat did not dispute it) that it was the plaintiff's case that the test applicable in Hong Kong regarding such an application is different from that applicable in England under Spiliada Maritime v Cansulex [1987] 1 AC 460, relying on the Hong Kong Courts' observations in the "Kapitan Shvetsov" [1998] 1 Ll Rep 199 and the "Magnum" [1989] 1 Ll Rep 47.

11. It is the plaintiff's contention that the burden for the applicant (D1) is heavier in Hong Kong than in England. Mr Kat relied upon the following passages in 2 decisions:-

(a) in the "Kapitan Shvetsov" [1998] 1 Ll Rep 199 Mr Justice Litton (as he then was) said:-

"... the court hesitates to disturb the plaintiff's choice of forum and will not do so unless the balance of factors is strongly in favour of the defendant" (at pp 215-16 of the report);

(a) in the "Magnum" [1989] 1 Ll Rep 47, the Court of Appeal of England said:-

"In my view it would be unjust to the plaintiff to prevent him from proceeding in Courts where the result of his bargain would be to produce success and to force him to proceed in Courts where the result would or might be that the defendants escaped from their bargain."

Having reviewed the authorities, I agreed with Mr Reyes that the Hong Kong Court of Appeal was only applying the test laid down in the Spiliada case and did not intend to lay down a more stringent test than that laid down in Spiliada.

12. Mr Kat accepted that by reason of the facts of this case, Thailand is the natural forum: see para 3 of the plaintiff's Amended Skeleton Argument. He argued, however, that even so, this is not by itself a sufficient reason for staying the action. D1 still has to establish that there is another available forum which is clearly or distinctly more appropriate than the one chosen by the plaintiff ("stage 1" of the test in the Spiliada case). This is because the plaintiff has served the writ herein within jurisdiction and jurisdiction is therefore founded as of right. The decisions in both Hong Kong and England show that the Court will not lightly disturb jurisdiction so established "unless the balance of factors is strongly in favour of the defendant" (underline supplied): see the "Kapitan Shvetsov" at pp. 215-16 and the Spiliada case at p 476 G.

13. I agree that in cases where the plaintiff has founded jurisdiction as of right (as in the present case), the applicant for stay will still have to establish that there is another forum which is clearly or distinctly more appropriate than Hong Kong. However, taking into account the matters relied upon by Mr Reyes as showing that either Thailand or Japan (as opposed to Hong Kong) is the more "convenient" forum (as that word is understood in Spiliada and the "Kapitan Shvetsov"), I consider that D1 has satisfied me on "stage 1" of the test.

14. Mr Kat for the plaintiff also put forward a number of arguments in answer relating to "stage 2" of the test in the Spiliada case. First, he argued that plaintiff could proceed against D2 and D3 (as primary tortfeasors) as of right in Hong Kong but the plaintiff could not do so against them in Thailand or Tokyo.

15. Secondly, Mr Kat argued that the plaintiff will suffer the following juridical disadvantage in Thailand. According to the legal opinion of the Thai lawyer engaged by the plaintiff, D1 has no presence in Thailand except its representation office. However, since this representation office has taken no active part (or no part at all) in the matter litigated, it cannot be said to be D1's agent for the purpose of service of court documents and under Thai law the representation office is entitled to refuse to accept service of process. Mr Kat asked me to note that D1 has not undertaken to accept service in Thailand. The plaintiff's foreign law experts also referred to other juridical disadvantages but they were all disputed by D1's foreign law experts.

16. Mr Kat argued that if the matter is tried in Thailand, "it is likely or probable that the Courts of the other forum will decide a matter repugnant to the understanding of commercial men on the basis of [Hong Kong] law", or "there is risk of such a stay would be to place the matter in the hands of a court which on its domestic law would be compelled to decide the matter in favour of the defendant" or "subject only to part performance, [the plaintiff] may lose against [D1] if this matter is heard in Bangkok": see para 5, 6 and 12 of the plaintiff's Amended Skeleton Argument.

17. This part of Mr Kat's submissions relates to Section 456 of the Thai Civil Commercial Code which provides that:-

"Section 456. A sale of immovable property is void unless it is made in writing and registered by competent official. The same rule applies to ships or vessels of six tons and over ...

An agreement to sell or buy the aforesaid property, or a promise of sale of such property is not enforceable by action unless there by [sic] some written evidence signed by the party liable or unless earnest is given, or there is part performance.

The provisions of the foregoing paragraph shall apply to a contract of sale of movable property where the agreed price is five hundred baht or upwards."

There is common ground that the present action involved a transaction where the price was more than 500 baht.

18. With respect to Mr Kat, I do not accept this part of his argument. As stated earlier, it is accepted by the plaintiff that Thai law applied to the alleged agreement: see para 14 of the affidavit of William Heinecke. Even if this action be tried in Hong Kong, the Hong Kong Court will still have to apply Thai law, including Section 456 of the Thai Civil Commercial Code. There is therefore no advantage, juridical or otherwise, which the plaintiff may obtain wherever this action is tried. Having said that, the plaintiff herein also relies on "part performance" in its pleadings, which is a doctrine recognised under Thai law. There is no evidence that the doctrine of "part performance" under Thai law is different from that under Hong Kong law and they may well be the same.

19. As stated earlier, Mr Kat also argued that there is a juridical disadvantage to the plaintiff if this action is tried in Thailand because D1 only has a representation office in Bangkok. He submitted D1 may be able to escape Thai proceedings entirely by refusing or challenging service: see para 14a of the plaintiff's Amended Skeleton Argument. In relation to this argument, Mr Reyes for D1 has given the following undertaking at the appeal hearing:-

"D1 undertakes to submit to Thai jurisdiction".

In view of this undertaking, I consider that the juridical disadvantage contended for no longer exists. Mr Kat also asked for D1's undertaking to satisfy any judgment given by the Thai Court but this was refused by Mr Reyes. I do not see why D1 should give such an undertaking. Further, there is no evidence before the Court as to the assets (or the lack thereof) of D1 in Thailand or in Hong Kong.

20. The fact that the plaintiff has now also sued D2 and D3 (which are Hong Kong companies) is a matter which is relevant to both "stage 1" and "stage 2" of the test relating to an application for stay. Counsel for the parties have advanced their respective arguments regarding the merits (or demerits) of this part of the plaintiff's claim. I do not consider it necessary to go into the details of those arguments save to set out the following. There are 2 grounds on which the claim against D2 and D3 is based:-

(a) their liability as D1's principal under the alleged agreement: para 20 of the Amended Statement of Claim;

(b) their liability as tortfeasors for interfering with the alleged agreement between D1 and the plaintiff: para 21 of the Amended Statement of Claim.

In relation to (a) above, D2 and D3's liability would also depend on the enforceability of the alleged agreement under Thai law. In relation to (b) above, I agree with Mr Reye's argument as to the "double actionability" test in private international law: see Rule 203 in Dicey & Morris on the Conflict of Laws (1993) 12th ed, pp 1487-1515, that is, if the alleged agreement is unenforceable under Thai law, the tort relied upon may not be actionable in Thailand. Hence, the "double actionability" test is not satisfied. For these reasons, I consider that this fact does not prevent me from concluding that a stay should be granted in D1's favour in relation to "stage 1" of the test.

21. Further, although there may be some duplication of effort if the plaintiff has to sue D1 in Thailand and D2-3 in Hong Kong, I do not consider this a good reason for refusing stay under "stage 2". Insofar as there is an overlap of issues between a Thai action against D1 and a Hong Kong action against D2 and D3, the plaintiff may rely on issue estoppel: see also the "Kapitan Shvetsov" at p 218. Save as aforesaid, the liability of D2 and D3 under (a) and (b) above involves different considerations even if the plaintiff succeeds in establishing a claim against D1. The plaintiff still has to prove that D2 and D3 were D1's principals (under (a) above), or to prove they were the tortfeasors (under (b) above).

22. There is also dispute between the parties as to whether the plaintiff will suffer from other juridical disadvantages regarding:-

(a) reciprocity of enforcement of judgments;

(b) the language to be used in litigation;

(c) discovery of documents;

(d) witness statements;

(e) costs and interest recoverable.

23. Having taken into account these matters (and whether the opinions given by the plaintiff's foreign law experts is correct), I do not consider that the plaintiff has demonstrated that substantial justice will not be done if a stay of proceedings is given ("stage 3" of the test in the Spiliada case): see the Spiliada at p 482 D-G and 483B, the "Meranti" at pp 907I-908B and the "Kapitan Shvetsov" at pp 211-12.

24. For the above reasons, I consider that the Master's order should be set aside and the appeal should be allowed. The proceedings in this action against D1 should therefore be stayed.

25. I also make a costs order nisi that costs of this appeal and the application before the learned Master are to be paid by the plaintiff to D1 in any event with certificate for counsel for the hearing on 26 October 1999 before the learned Master.