CL MEDICAL INVESTMENTS LTD v. LAVONNE LEE (ALSO KNOWN AS LEE RAYER LAVONNE)

HCA 786/2022

[2023] HKCFI 3078

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 786 OF 2022

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REASONS FOR DECISION

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1.  By summons issued on 12 October 2022, as amended on 7 November 2022, the Defendant in this action (“D”)  applied for an order that the action be stayed.

2.  In this action, the Plaintiff (“P”)  sues D as guarantor of the indebtedness of a company of which D is and was at all material times director and shareholder (“the Company”). The Company’s indebtedness allegedly arises pursuant to (a)  a Loan facility agreement (“the Loan Facility Agreement”), made between P (as lender), the Company (as borrower)  and D as guarantor, by which P made available to the Company a loan facility in the aggregate amount of US$8,000,000, and (b) a supplemental agreement, by which P advanced a loan of RMB 200,000 to the Company (“the Supplemental Agreement”).

3.  The ground upon which D’s application was made was that the Loan Facility Agreement contains an arbitration clause requiring that any dispute under the agreement should be referred to and finally settled by arbitration at the Hong Kong International Arbitration Centre.

4.  At the conclusion of the hearing of D’s summons I dismissed the application made thereby and made an order that D should pay P’s costs of the application which I summarily assessed in the amount of HK$220,000, such costs to be paid forthwith.  I also gave a direction that D should file a defence within 28 days from the date of my order.

5.  I now give brief reasons for the decision to dismiss D’s application.

DISCUSSION

6.  Notwithstanding that the Loan Facility Agreement itself contained an undertaking by D to guarantee the Company’s performance thereunder and that D was expressly made jointly and severally liable with the Company in respect of the Company’s obligations thereunder, it expressly required D to execute and deliver to P separate a separate Deed of Guarantee (“the Deed of Guarantee”).

7.  By the Deed of Guarantee, D guaranteed the performance of the obligations of the Company under both the Loan Facility Agreement and any supplemental or amended loan facility agreements as might from time to time be made between P and the Company.

8.  The Deed of Guarantee provided, inter alia, that the parties thereto irrevocably submitted to the non-exclusive jurisdiction of the courts of Hong Kong.

9.  The first point taken by D in the stay application was that only a breach of the Loan Facility Agreement and the Supplemental Agreement was expressly pleaded in the body of the Statement of Claim and that, rather than pleading any breach, only the existence of the Deed of Guarantee and some of its clauses were expressly pleaded.  However, at the hearing, counsel for D accepted that, as pleaded, P’s case sounded in debt and not in damages and there was therefore no need to plead its breach. This point was not therefore pursued.

10.  It was common ground that where, as here, there are multiple related commercial agreements, each dealing with different aspects of the parties’ relationship and dealings and each containing its own provision for expressed choice of jurisdiction, the proper test in ascertaining the parties’ intention as to how any dispute should be dealt with is to identify the nature of the claim and the agreement which has the closest connection with such dispute and claim (the agreement “at the centre of gravity of the dispute” or “at the commercial centre” of the transaction in question): see Houtai Investment Holdings Limited v Leung Yat Tung & others [2021] HKCFI 1504.

11.  I am satisfied that, this being a claim against D as guarantor, the agreement at the commercial centre of the transactions in question, and at the centre of gravity of the claim and of any dispute concerning it, is the Deed of Guarantee. In this respect it is noteworthy that the Deed of Guarantee and no other agreement which gives rise to the cause of action in respect of the claimed indebtedness which arises under the Supplemental Agreement.

12.  In view of my conclusion in the preceding paragraph, I consider that the claims in this action and any dispute concerning them falls to be considered according to the clause in the Deed of Guarantee whereby the parties agreed to submit to the non-exclusive jurisdiction of the Hong Kong Court. Hence my decision to dismiss D’s stay application.