JOVIAL PARADISE LTD v. EVER HARMONY ENTERPRISES LTD AND OTHERS

HCA 1937/2023

[2024] HKCFI 3500

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

HIGH COURT ACTION NO 1937 OF 2023

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BETWEEN

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D E C I S I O N

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Introduction

1.  The Plaintiff (“P”) claims against the Defendants (“Ds”) (D1 and D2 as borrowers and D3 to D5 as guarantors) for overdue loans and interest amounting to over US$192 million pursuant to an “Amended Facility Agreement” dated 28 September 2018. The Statement of Claim was filed on 29 November 2023.

2.  On 4 March 2024, Master Lai made an unless order that Ds do file and serve their Defence by 4pm on 2 April 2024, failing which Ds be debarred from doing so and P be at liberty to apply for judgment against Ds.

3.  By a summons dated 28 March 2024, Ds seek a declaration that the Hong Kong court has no jurisdiction over D3 to D5 in respect of the subject matter of the claims and an order that all further proceedings in this court be stayed in favour of the Nanjing Intermediate People’s Court on the ground of forum non conveniens. (“Jurisdiction Summons”)

4.  Ds did not file any Defence by the deadline and default judgment (“Default Judgment”) was subsequently entered against Ds on 3 July 2024 upon the ex parte application by P.

5.  By a summons dated 12 July 2024, Ds seek that the default judgment be set aside and the deadline for Ds to file and serve their Defence and Counterclaim (if any) be dispensed with or pending the determination of the Jurisdiction Summons (“Setting-aside Summons”).

6.  The two summonses are now before me for determination.

The Plaintiff’s case

7.  The Plaintiff’s case is set out in the written skeleton filed by P under the heading “Factual Background”, which is adopted herein as representing the Plaintiff’s case.

8.  On 22 August 2018, P and Ds entered into an agreement (“Facility Agreement”) whereby P agreed to lend US88,000,000 to the borrowers (D1 and D2) (“Loan”). The Facility Agreement was defined in clause 1.1 as one of the “Finance Documents”.

9.  Under clause 14.1 of the Facility Agreement, each of the guarantors (D3 to D5) agree to guarantee the borrowers’ obligations to repay the Loan on time (“Guarantee”). There is a similar indemnity obligation in clause 23.2 of the Facility Agreement.

10.  Regarding governing law and jurisdiction, clauses 33 and 34 of the Facility Agreement provided that:

“33. Governing Law

This Agreement is governed by Hong Kong law.

34.1 Jurisdiction

(a) Unless specifically provided in another Finance Document in relation to that Finance Document, the Hong Kong courts have exclusive jurisdiction to settle any dispute arising out of or in connection with any Finance Document (including a dispute relating to the existence validity, or termination of any Finance Document (a “Dispute”)

(b) The Parties agree that the Hong Kong courts are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.”

(Clauses 34.1(a) and (b) are referred to as the “Jurisdiction Clause”.)

11.  Between 25 June 2018 and 5 July 2018, the parties executed various documents related to the Facility Agreement.

12.  On 28 September 2018, P and Ds entered into the Amendment and Restatement Agreement (“Amendment Agreement”) to amend the terms of the Facility Agreement. Clause 2 provided that the amendments took effect once the condition precedents in Schedule 2 were satisfied. Condition 1 of Schedule 2 provides for the execution of a personal guarantee governed by PRC law by each of D3 to D5, guaranteeing the D1 and D2’s obligations under the Finance Documents (“PRC Personal Guarantee”).

13.  The PRC Personal Guarantee was executed by D3 to D5 on 28 September 2018. Clause 3.16 reconfirms each of D3 to D5’s submissions to the jurisdiction named in the various Finance Documents (which included the Facility Agreement):

“3.16 Jurisdiction

(a) Each individual Guarantor’s:

(i) irrevocable submission under the Finance Documents to the jurisdiction of the courts therein;

(ii) agreement that each Finance Document is governed by the governing law stated therein …

are legal, valid and binding under the law of his or her Relevant Jurisdiction.”

14.  The Amended Facility Agreement was exhibited to the Amendment Agreement. The Guarantee is retained in clause 14 in identical terms. The Hong Kong governing law clause and the Jurisdiction Clause in the Facility Agreement are also retained[1].

15.  P’s pleaded case is that, in default of the Facility Agreement as amended and restated by the Amended Facility Agreement, D1 and D2 failed to pay interest on the Loan within the stipulated time[2] and were liable to repay the entire outstanding part of the Loan. P therefore seeks to recover the Loan (principal and interest) from D1 and D2 and enforce the Guarantee against D3 to D5 under the Facility Agreement and/or Amended Facility Agreement.

16.  One important point to note is that the PRC Personal Guarantee is not mentioned at all in the Statement of Claim and P is not relying on it to sue any of Ds.

Jurisdiction Summons

17.  It is expressly stated in the Jurisdiction Summons that Ds are applying under the ground of forum non conveniens. Ds’ view is that the proper forum for determination of P’s claims is the Nanjing Intermediate People’s Court as opposed to the Hong Kong Court.

18.  In her 31 pages skeleton submissions, Ms Chantel Lin, counsel for Ds, set out in detail a number of related transactions entered into by the parties during the relevant time and cited various terms under the corresponding legal documents signed by the parties. However, the relevance of those transactions and terms are not very apparent.

19.  Ms Lin submitted that the proper forum in enforcing the PRC Personal Guarantee should be the PRC court as it is provided in the PRC Personal Guarantee that PRC law is the governing law. Moreover, the guarantors (Ds) entered into the PRC Personal Guarantee in their capacity of PRC nationals.

20.  It is Ms Lin’s submission that the provisions in the PRC Personal Guarantee are applicable regarding P’s claim. Her argument is basically that, the PRC Personal Guarantee is a “Finance Document” specifically included in Schedule 2 of the Amended Facility Agreement, which is one of the documents the receipt of which by P being made a condition precedent for the essential terms of the Amended Facility Agreement to come into effect.

21.  As such, Ms Lin submitted that, it is not open for P to contend that its claim against D3 to D5 is pursuant to clause 14.1 of the Facility Agreement and independent to the PRC Personal Guarantee.

22.  With respect, I find it difficult to accept Ms Lin’s arguments.

23.  As described by Ms Lin in her own submission, the PRC Personal Guarantee was specifically included in the Amended Facility Agreement as a further security agreement. It is a separate obligation committed to by D3 to D5 in favour of Ps on top of the guarantees provided under the Facility Agreement and the Amended Facility Agreement. The fact that the execution of it being made a condition precedent for the Amended Facility Agreement to be effective does not render the terms of it forming part of or superseding the terms of the Amended Facility Agreement.

24.  Mr Jonathan Chang SC[3], counsel for Ps, submitted that where proceedings were instituted in the very forum to which the parties have agreed to submit under a jurisdiction clause, strong or overwhelming reasons or exceptional circumstances must be shown by the parties sued in the agreed forum (Ds) for the court to depart from it[4].

25.  In my judgment, it is crystal clear from the Jurisdiction Clause that parties agreed the Hong Kong courts are the most appropriate and convenient courts to settle any disputes relevant to the Facility Agreement and Amended Facility Agreement. Even if it is provided otherwise in a Finance Document, the exception will only be related to that particular document[5].

26.  I agree with Mr Chang that, as Ds fail to demonstrate any reasons or exceptional circumstances why the court should depart from it, the Jurisdiction Clause must stand.

27.  There is no place for the doctrine of forum non conveniens to come into play. Ds’ applications under the Jurisdiction Summons must fail.

Setting-aside Summons

28.  The Default Judgment was regularly entered. To set aside a regular judgment, it is incumbent on Ds to show a manifestly arguable defence on merits apparent from the papers already before the court[6].

29.  Ds did not put forward any substantive defence against P’s claims. Instead, Ds only raised some peripheral attacks on P’s claims, namely that Ps failed to submit any proof of claims to two mainland companies[7] which went into liquidation.

30.  As submitted by Mr Chang, this is not a valid point. The two mainland companies are not borrowers in the Facility Agreement or Amended Facility Agreement but coporate guarantors. It is provided in the Facility Agreement that P does not have to proceed against any other person before going after Ds and Ds’ liability would not be affected by any release of any other obligor or any insolvency or similar proceedings[8].

31.  Ds have disclosed no valid defence in the evidence.

32.  Ms Lin relied on Lau Chi Wang v Ip Fook Chuen[9] and complained that P should have applied for judgment by way of an inter parte summons. However, as submitted by Mr Chang, unlike the situation in Lau Chi Wang, there is no room for argument on whether Ds were in default in the present case and therefore an inter parte hearing for argument is unnecessary. Once an unless order is made, a jurisdictional challenge does not stay the deadline for filing a defence and as Ds did not file their defence before the deadline, P is entitled to apply for a default judgment.

Disposition

33.  For the above reasons, I am of the view that the Jurisdiction Summons and the Setting Aside Summons shall be dismissed.

34.  Costs of Ps in both summonses be borne by Ds. Ps’ costs are to be assessed summarily if not agreed. This is a costs order nisi and will become absolute unless any party applies to vary within 14 days.