WHITE DYNASTY GLOBAL HOLDINGS LTD v. NEWAY ENTERPRISES LTD AND ANOTHER

HCA 1939/2021

[2022] HKCFI 2933

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1939 OF 2021

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D E C I S I O N

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INTRODUCTION

1.  Before me are (1) the Plaintiff’s Summons filed on 26 April 2022 for summary judgment for HK$175,323,331.26 plus interest; and (2) the 1^st and 2^nd Defendants’ Summons filed on 25 May 2022 for an order of a stay of the present action on the ground of forum non conveniens or alternatively a case-management stay of the present action pending the determination of High Court Winding-up Proceedings No 484 of 2021 (“HCCW 484/2021”).

BACKGROUND

2.  The Plaintiff is the bondholder of the bond (the “Bond”) issued by Tian Shan Development (Holding) Limited (the “Issuer”) for an aggregate sum of HK$200,000,000 with an interest rate of 13% under a bond certificate dated 29 March 2019 (the “Bond Certificate”) executed among the Issuer and the Defendants. The maturity date of the Bond under the Bond Certificate was 28 March 2021, subsequently extended to 28 September 2021 by a supplemental bond certificate dated 29 March 2019, with an increase interest rate of 15% and default interest rate of 15%.

3.  Correspondingly, on 29 March 2019 and 29 March 2021 respectively, the Defendants, in favour of the Plaintiff, executes a guarantee (the “Guarantee”) and a supplemental guarantee.

4.  Clause 2.3 of the Bond Certificate provided that:-

“新威及吳先生按共同及個別基準，無條件及不可撤回地擔保依時支付票據下表明發行人應付之全數款項，以及履行交易文件下發行人之全部責任。就此而言新威及吳先生各自之責任載於擔保內。彼等於擔保下之責任乃構成彼等之直接及無條件責任，須受下文之條款及適用法律之必守條文所規限，至少在付款優先次序上享有與彼等各自之其他現有或未來直接、無條件、非後償及有抵押責任相同之地位。” (emphasis added)

5.  Clause 2.1 of the Guarantee provided that:-

“擔保。鑒於獲擔保方訂立交易文件，各擔保人無條件及不可撒銷地共同及個別及其他擔保人擔保，作為以獲擔保方為受益人的持續義務： (i) 適當及準時支付擔保人及/或公司根據交易文件現時或隨時應付予獲擔保方（或彼等各自之聯屬人士）之全部或任何金頷（不論本金、利息、費用或其他）; 及(ii)擔保人及公司各自週當及準時履行和遵守彼等根據交易文件各自對獲擔保方（或其聯屬人士）之義務（統稱「擔保義務」）。” (emphasis added)

6.  Clause 2.2 of the Guarantee provided that:-

“主要義務人。倘任何擔保人或公司因任何理由未能履行任何擔保義務，則擔保人應立即按要求無條件地共同及個別按交易文件指定之方式履行 (或促使履行) 及達成 (或促使達成) 該違約相關之義務或責任，使獲擔保方獲賦予倘該主要義務或責任已獲擔保人及/或公司 (視乎情況而定) 適當履行及達成而彼原應獲得的相同利益。”

7.  Clause 2.3 of the Guarantee provided that:-

要求。在上述第 2.2 款之規限下，獲擔保方可於任何擔保人及/或公司違反或未能支付任何金額或履行、遵守或達成任何擔保義務後，不時根據本契據向任何擔保人提出要求，該等要求應針對擔保人予以執行，而不論有否或會否針對擔保人及/或合司或任何其他人士採取任何步驟或程序，以追討根據本契據或任何其他交易文件申索之債務。

8.  Clause 2.5 of the Guarantee provided that:-

“擔保人（「彌償方」) 共同及個別就因或有關以下各項而產生或由於以下各項直接造成的任何及全部損失，按要求立即向獲擔保方及其聯屬人士、高級職員、僱員、代理及董事（「獲彌償方」) 提供彌償並使彼等免受損害（惟受償方由於欺詐或故意違約產生的損失則除外)， (i) 擔保人及/或公司違反或未能支付任何金額或履行、遵守、達成或解除其根據交易文件欠付或須履行之任何擔保義務……”

9.  Each of the Bond and the Guarantee contained a non-exclusive jurisdiction clause in favour of the Hong Kong Courts.

10.  28 September 2021 has passed. The Issuer has made no repayment. On 5 October 2021, the Plaintiff’s solicitors issued statutory demands to the Issuer and the Defendants. On 28 December 2021, the Plaintiff presented a winding-up petition in HCCW 484/2021 against the Issuer. On 29 December 2021, the Plaintiff commenced the present action.

FORUM NON CONVENIENS

11.  For an application for a stay on forum non conveniens when there is a non-exclusive jurisdiction clause in favour of the Hong Kong Courts, “strong reasons must be shown” why the jurisdiction clause should be departed from: see Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631 at §§35 and 37 per Ma CJHC (as he then was).

12.  Further, it is trite that for a defendant to convince the Court to grant a stay on forum non conveniens, the defendant must identify his defence to the plaintiff’s claim first. “Without such information, the court will not be able to know whether there are any real issues to be tried between the parties or to assess the appropriateness of the forum from the point of view of the trial of the action”: see High Hope Zhongding Corp v 廈門墩峰進出口有限公司, HCA 2485/2015, 16 January 2017 at §30 per David Lok J. Failure to identify such a defence is fatal to an application to stay on forum non conveniens: see High Hope Zhongding Corp v 廈門墩峰進出口有限公司, supra at §§31-35.

13.  The Defendants have not filed their defence yet. Ms Ivy Ho, counsel for the Defendants, confirms to me that the only defence the Defendants mount is the jurisdictional defence, and there is no substantive defence.

14.  Ms Ho has list out various factors of foreign connection, for example, the Issuer is a limited company incorporated in the Cayman Islands, the 1^st Defendant is a limited company incorporated in the BVI, the 2^nd Defendant is a limited company incorporated in the PRC, and the register of holders of the bond certificates is kept in the Cayman Islands, and so on. However, as there is no substantive defence mounted, I see no reason why these connections would have any impact on the appropriateness, in particular the cost-effectiveness, of the forum and constitute any strong reasons for departing from the jurisdiction clauses.

15.  In the circumstances, I see no strong reasons for departing from the parites’ agreement to the jurisdiction clause, and refuse the stay application on forum non conveniens.

CASE-MANAGEMENT STAY

16.  In an application for a case-management stay, the Court is to consider the balance of convenience and fairness as between the parties, and should exercise its discretion in such a manner as to ensure that its procedures are used in a logical, fair and cost-efficient manner. Whether or not to grant such a stay is a question of case management, but not a question of depriving the right of a litigant to proceed altogether: see Lok Man Sin v Lam Chi Wing [2019] HKCFI 56 at §§18-20 per Recorder Mr Eugene Fung SC.

17.  One significant factor to consider is of course the degree of any overlap of issues. Another factor is the identity of parties. As Ma J (as he then was) said in Linfield Ltd v Taoho Design Architects Ltd [2002] 2 HKC 204 at §16:-

“Even if there are multiple sets of proceedings involving similar or even the same issues, if there is no identity of parties, I fail to see how it is desirable or even possible for one or more of such proceedings involving different parties to be stayed pending the resolution of any other set or sets of proceedings. The determination of any issues in proceedings between different parties would not be binding on any other party in another set of proceedings.” (emphasis added)

18.  In HCCW 484/2021, the Issuer’s opposition to the winding-up petition is a pure jurisdictional challenge on the ground that the Issuer is a non-Hong Kong company. There was no substantive defence raised there. So, there is no overlap of issues at all, and in any event, the jurisdictional challenge to the winding-up petition involves consideration of factors not the same as the jurisdictional challenge mounted by the Defendants here. Also, the Defendants are not parties in HCCW 484/2021. Thus, I do not see how a case-management stay would be a “logical, fair and cost-efficient” course to take.

19.  The petition was heard before Linda Chan J on 3 May, 8 August and 22 August 2022, and was adjourned to 3 October 2022. Her Ladyship expressly indicated that if the parties are unable to form a concrete settlement agreement by 3 October 2022, the Court would likely make a winding up order against the Issuer. Ms Ho submits that because the parties in HCCW 484/2021 are negotiating for a settlement, a case-management stay would facilitate the settlement, even possibly with the Defendants herein.

20.  However, there is no evidence before me to explain how close, if at all, the parties in HCCW 484/2021 and the Defendants are here to reach a settlement. There is no evidence of whether or not the settlement terms (if any) would have any effect on the liability of the Defendants as guarantors, while the liability of the Defendants as guarantors under the Guarantee is primary and independent. Ms Ho on her feet offered an undertaking on behalf of her instructing solicitors that an affirmation would be filed by next Monday to explain the progress of the settlement negotiation. I refused to accede to such an approach. I decide upon the evidence filed before me. I do not know whether the evidence proposed to be filed would be of any assistance at all. If such evidence were relevant, it should have been filed earlier.

21.  In the circumstances, the attempt by the parites in HCCW 484/2021 to reach a settlement agreement gives no support to the Defendants’ application for a case-management stay.

22.  Ms Ho also seems to suggest that the present action should be stayed because otherwise, any judgment entered against the Defendants here would be inequitable in that the whole debt would be imposed unfairly upon the Defendants, and the Plaintiff would be spared from its obligation to go after the solvent principal first. She refers me to Rowlatt on Principal and Surety (6^th ed., 2011) §7-03:-

“it is still arguable that a surety has an equity […] to stay a creditor attempting unfairly to place the whole burden of the debt upon the surety, at least in special circumstances, e.g. where there is a solvent principal debtor […] who could easily be but are not joined in the action or where there is a security which could easily be realised to pay the whole debt.”

23.  As pointed out by Mr Michael Lok, counsel for the Plaintiff, this “arguable” approach was squarely rejected by Kwan J (as she then was) in Re Yohan Chandra, ex p United Overseas Bank Ltd [2001] 1 HKLRD 860, affirmed by the Court of Appeal in [2002] 1 HKLRD 404.

24.  On the contrary, it is well-established that the remedies available to a creditor could be exercised at any time or times simultaneously or contemporaneously or successively or not at all: see China and South Sea Bank v Tan Soon Gin [1990] 1 AC 536 at 545C-D per Lord Templeman. Corollary to that is the proposition that a creditor “has a completely unfettered choice as to how, and against whom, he should proceed to recover the debt or damages to which he is entitled. The creditor may simultaneously bring winding-up proceedings against the principal and sue on the guarantee in separate proceedings”: see Standard Chartered Bank (Hong Kong) Limited v Pak Kwan Ho, HCA 1269/2015, 26 August 2016) at §§13, 17, per DHCJ Wilson Chan (as he then was), cited with approval by the Court of Appeal in Re Lau Yu [2019] 2 HKC 18 at §35 per Kwan JA (as she then was).

25.  “[A] fortiori where the guarantee provides expressly that the guarantor waived any right he may have to require the creditor to first proceed against the principal borrower. Such a clause is a perfectly normal provision in a guarantee and there is no obligation on the bank to proceed against the principal borrower before proceeding against the guarantors”: see Standard Chartered Bank (Hong Kong) Limited v Pak Kwan Ho, supra at §§14 and 17.

26.  In the present case, by Clauses 2.2 and 2.3 of the Guarantee, the Defendants agreed to be primary obligor and to be liable irrespective of whether actions have been taken against the Issuer. I do not see any reason or equity why the Court should not hold the Defendants to their bargain but should re-write the parties’ contractual agreement, a course the Court always loathes.

27.  Therefore, I also refuse to grant a case-management stay.

ORDER 14 APPLICATION

28.  That leaves the Plaintiff’s Order 14 application. The Plaintiff has established a prima facie case for its claim. The burden lies upon the Defendants to raise arguable defence and/or triable issues.

29.  Ms Ho confirms to me that the Defendants’ only defence is the jurisdictional defence. It is not a substantive defence to the Plaintiff’s claim at all. In any event, this jurisdictional defence, if it is a defence to the claim at all, has been rejected when I dealt with the stay summons above.

30.  Therefore, the Defendants have raised no arguable defence and triable issues. I should grant summary judgment.

ORDER

31.  In the circumstances, I order that:-

(1)  The Defendants’ Summons filed on 25 May 2022 be dismissed.

(2)  The 1^st and 2^nd Defendants do jointly and severally pay the Plaintiff HK$175,323,331.26, with interest accruing thereon from 17 February 2022 at the contractual interest rate of 30% per annum until today;

(3)  There be judgment interest on the sum in paragraph (2) above at judgment rate.

(4)  Costs of the Defendant’s Summons, the Plaintiff’s Summons and the action be to the Plaintiff to be summarily assessed, with certificate for counsel.