HOTEL PANORAMA CO LTD v. CHAN WAH CHIU ANTHONY

HCA 496/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 496 OF 2013

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J U D G M E N T

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The Application

1.  This is the hearing of the defendant’s application pursuant to Order 12 rule 8(2) RHC for: -

(a)   a declaration that in the circumstances of this case the court should not exercise any jurisdiction it may have, or

(b)   an order staying this proceedings, or

(c)   such other relief as may be appropriate

on the ground that considering the best interests and convenience of the parties to this proceedings and the witnesses in this proceedings, this proceedings should be conducted in the court in London.

Background

2.  Plaintiff is a company incorporated in Hong Kong which engages in business of hotel operation and management.  It belongs to the Rhombus International Hotels Group (“Rhombus Group”).  Plaintiff is also the operator of Panorama Hotel in Hong Kong.

3.  By an employment contract dated 4 April 2011, defendant became the employee of the plaintiff, initially as an internal auditor and later promoted to the position of executive assistant manager in finance on or about 1 June 2011 (“the Employment Contract”).

4.  In or about December 2011, Calvin Mak of the plaintiff nominated defendant to work in Hotel Verta in London to assist Fabiano Hotels Limited, amongst other things, in setting up accounting system after the latter’s takeover of Hotel Verta.  Prior to the takeover, Hotel Verta was managed by Rhombus Group and therefore Fabiano Hotels Limited requested Rhombus Group to assist in setting up the internal control system of Hotel Verta.

5.  During the period when defendant was working in Hotel Verta, there was discrepancy in the accounts and a loss of funds in the amount of GPB76,197.57 was discovered.

6.  According to the plaintiff, as a result, on 11 March 2013, they had paid and made up this loss to Hotel Verta.

7.  They had issued the present proceedings against the defendant on 21 March 2013.

8.  Plaintiff’s present claim against the defendant is premised upon alleged negligence on the part of the defendant and alleged breach of the Employment Contract between the parties.

9.  Plaintiff claims against the defendant, for inter alia, the loss of GBP76,197.57 as aforesaid, cost of investigation of the complaint and damages to the goodwill and reputation of the plaintiff.

Applicable legal principles

10.  Mr A Leung and Mr Y K Leung, respectively counsel for the plaintiff and the defendant referred this court to the House of Lords case of The Spiliada [1981] AC 460 and adopted in Hong Kong in the case of The Owners of Carge lately laden on board the ship on Vessel “Adhiguna Meranti” and The Owners of the Ships or Vessels “Adhiguna Harapan” and Others [1987] HKLR 904 where it is set out that

(a)   the fundamental principle applicable to stay of English proceedings on the ground that some other forum is the appropriate forum is that the court will choose that forum in which the case can be tried more suitability for the interests of all parties and for the ends of justice.

(b)   upon an application for a stay of English proceedings the burden or proof lies on the defendant to show that the court should exercise its discretion to grant a stay.  Moreover the defendant is required to show not merely that England is not the natural or appropriate forum for the trial but that there is another available forum which is clearly or distinctly more appropriate than the English Forum.  In considering whether there is another forum which is more appropriate the court will look for that forum with which the action has the most real and substantial connection, eg in terms of convenience or expense, availability of witnesses, the law governing the relevant transaction and the places where the parties reside or carry on business. If the court concludes that there is no other available forum which is more appropriate than the English court, it will normally refuse a stay.  If, however, the court concludes that there is another forum which is prima facie more appropriate, the court will normally grant a stay unless there are circumstances militating against a stay, eg if the plaintiff will not obtain justice in the foreign jurisdiction.

(c)   the fact that the grant of a stay of English proceedings may deprive the plaintiff of a legitimate or juridical advantage available to him under the English jurisdiction will not as a general rule, deter the court from granting a stay if the court is satisfied that substantial justice will be done to the parties in the appropriate forum.

11.  In the Hong Kong Court of Appeal case of The Adhiguna Harapan (owners of ships), a three stage process is set out when dealing with such application: -

“ (I) Is it shown that Hong Kong is not only not the natural and appropriate forum for the trial, but that there is another available forum which is clearly and distinctly more appropriate than Hong Kong …

(II) If the answer to (I) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantages. The evidential burden here lies on the plaintiff.

  (III)   If the answer to (II) is yes, a court has to balance the advantages of (I) against the disadvantages of (II) … Deprivation of one or more personal or juridical advantages will not necessarily be fatal to the applicant provided that the court is satisfied that notwithstanding such loss substantial justice will be done in the available appropriate forum … Proof of this … rests upon the applicant for the stay.”

12.  According to the commentary at Hong Kong Civil Procedure 2014 §§11/1/10C, when considering whether a certain place is “clearly and distinctly” the appropriate forum, it is sufficient to show that the court, is on balance and in the final analysis, the most appropriate forum, whether by a law or a mile does not matter, Siemens A G v Holdrich Investments Ltd [2010] SGCA 23.

13.  It is said in the commentary §§11/1/10D that the appropriateness of Hong Kong or the alternative forum for trial depends on considering the connecting factors and going through the Spiliada analysis.  The court must focus on the appropriateness of the competing forums in light of the factors from the point of view of the matters actually likely to arise in the trial of the action: New Link Consultants Ltd v Air China [2005] 2 HKC 260 and Xinjiang Xingmei Oil-Pipeline Co Ltd v China Petroleum and Chemical Corp (unrep, HCCL 6 of 2004) [2005] HKEC 283 at paragraph 18 and Sawyer v Atari Interactive Inc [2005] EWHC 2351 (Ch), at paragraph 68 Lawrence Collins J and Hargreaves v Tai-an Insurance Co Ltd and Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454 (CA) at page 58.  In Pei Zheng Middle School (廣州市培正中學) & others v China Pui Ching Education Foundation Ltd (unrep, CACV 262/2005 [2006] HKEC 316) followed in Wynn Resorts (Macau) SA v Mong Henry (unrep, HCA 192/2009 [2009] HKEC 1048).

14.  The Court of Appeal analysed question (I) into two distinct stages, stating that the applicant for a stay must first show that Hong Kong is not the natural or appropriate forum and second that there is another forum that is clearly or distinctly more appropriate than Hong Kong.  Natural or appropriate forum means the forum that has the most real and substantial connection with the action.

15.  In the commentary at Hong Kong Civil Procedure §§11/1/10E, it is said thata failure to show that the courts of the foreign jurisdiction are clearly and distinctly more appropriate than the Hong Kong courts is ordinarily decisive in favour of the court refusing a stay, United Phosphorus Ltd v China Merchants Shipping & Enterprises show that the alternative forum is the natural forum, there is no need to go on to the juridical advantage stage (to consider whether there is such an advantage in the alternative forum of which the defendant should be allowed to take).

16.  In truth, the court is looking for the appropriate forum for the dispute, that is the one where it can be tried suitably for the interests of all the parties and for the ends of justice, not the forum with which the dispute may appear most naturally connected.

17.  In paragraph 11/1/10S of the commentary, it is said that despite the name, forum non conveniens is not a matter of mere “convenience”; it is a matter of the suitability and appropriateness of a particular forum for trial in the interests of justice.  That said, convenience is a factor and the court may take into account whether the witnesses and documents that will be required for trial are in Hong Kong or elsewhere, in which case they would need to be brought to Hong Kong, Man Roland (Chiana) Ltd v PICC Property and Casualty Co Ltd [2006] 3 HKLRD 638 citing Rambas Marketing Co LLC v David Chow [2001] 3 HKC at 255B-C.  Similarily, the court may take into account the location of any real evidence or site that may call for a view.

18.  It is said also that nowadays, with very few forensic contests over the authenticity of copy documents, instantaneous replication and long-distance transmission of documents and the ease of air travel, the location of witnesses and especially “location” of documents seem to carry little weight, unless perhaps it is necessary to compel production documents held abroad and not yet available to the parties or the witnesses are only compellable in the foreign jurisdiction, Man Roland (China) Ltd, above.

Discussion

19.  It is not in dispute that

(a)   the plaintiff is a company incorporated in Hong Kong and carries on business in Hong Kong.

(b)   the defendant is a Hong Kong resident, having his residence in Hong Kong and for substantial part of his working life worked in Hong Kong.

(c)   Service on defendant of the writ in the present action was effected in Hong Kong.

(d)   plaintiff did pay Hotel Verta the said sum of GPB76,197.57.

Issues at trial

20.  There is a dispute between the parties as to whether the defendant was, only seconded by the plaintiff to work in Hotel Verta at the material times, as alleged by the plaintiff or as the defendant alleged, the Employment Contract was terminated at the material time and the defendant was then employed by Fabiano Hotels Limited.

21.  This question is, in my view, one of the most important questions that need be addressed during trial.

22.  If the Employment Contract was still subsisting, then the court will need to decide, amongst others: -

(a)   if there was negligence on the part of the defendant;

(b)   if defendant was in breach of the Employment Contract between the parties at the material time;

(c)   whether the goodwill and reputation of the plaintiff was damaged as a result of the negligence/breach of Employment Contract and if so, the amount of damages.

Was the Employment Contract subsisting at the material time?

23.  Defendant contends in his affirmation that the Employment Contract ended on 31 December 2011 and that since then he was employed by Fabiano Hotels Limited at the material times instead.

24.  In support of this assertion defendant produced copy of an employment contract with Fabiano Hotels Limited.  Under this contract, his employment was said to commence from 10 February 2012.

25.  Nevertheless, defendant did not dispute that a letter was issued by Fabiano Hotels on 23 May 2012 to the British Embassy which read as follows: -

“This is to certify that Rhombus Group … is engaged by us to operate our hotel located in London … we wish to invite their employee – Mr. Chan Wah Chiu Anthony [the Defendant] appointed staff to assist our Hotel Manager in implement group policy and procedure and internal control for Fabiano Hotels Limited, t/a Hotel Verta, by Rhombus.

Mr. Chan [the Defendant] will return to Hong Kong after the completion of the assignment.  During his visit, all his expenditure will be financially supported by the Rhombus International Group.”

26.  In fact, there was no dispute that in support of the application for defendant’s work visa in London, another letter dated 23 May 2012 from Rhombus Group was presented to the British Embassy on his behalf which stated that the defendant was employed by Rhombus Group and that he would be assigned to assist the Hotel Manager of Fabiano Hotels Limited trading as Hotel Verta by Rhombus in London and that during the visit to London, the defendant’s accommodation and living expenses would be supported by Rhombus, salary of the defendant would also be paid in Hong Kong by the plaintiff and after the completion of the assignment, defendant will return to Hong Kong.

27.  Mr Y K Leung for the defendant did not dispute the correctness of the contents of those letters to the British Embassy.  In court, his counsel confirms the absence of “fraud” in the letters.

28.  It is also interesting to note that in the emails exchanged between the defendant and Chan Lam Jenny and/or the other staff of Rhombus Group between the period from 29 March 2012 to 6 June 2012, the email address of the defendant remains “anthony_chan@rhombus international.com”.

29.  In the email from the defendant to Jenny Lam Chan dated 29 March 2012, the defendant had described himself as “Anthony Chan, EAM-Finance, Rhombus”.

30.  Likewise, he had used the same description when he sent an email to Herbert Ng of Rhombus Group on 28 May 2012 at 11:04 am.

31.  In another email dated 30 May 2012 from the defendant to a staff called Anna of Rhombus Group, he had described himself as “Anthony Chan, Director of Business Development (China) using the same email address as before and the same set of contact details as before, i.e. same direct line, mobile phone number and facsimile number.

32.  In the Employer’s Tax Return for the year ended 31 March 2012 filed with the Inland Revenue Department in Hong Kong, the plaintiff claimed they were the employer of the defendant from “6 April 2011 to 31 March 2012”.

33.  Plaintiff maintained that the Employment Contract with the plaintiff was subsisting at the relevant times.  They said under the Employment Contract, notice in writing/payment in lieu has to be given to terminate the Employment Contract.

34.  Clause 21 of the Employment Contract reads: -

“Termination of Employment. The Employee’s employment may be terminated by the Employer for any of the following reasons: -

a) …

b) Without cause, upon giving the notice referred to in the Employment Ordinance of Hong Kong;

c) …

d) Employees with three written warnings will be terminated without notice or payment in lieu of notice.

35.  Clause 22 of the Employment Contract reads: -

Notice.  Should the Employee choose to resign their position, the Employee must provide the Employer with a minimum notice period of one (1) month, unless otherwise agreed by the parties.”

36.  Plaintiff alleged that there was no written notice issued or payment in lieu made by either party.

37.  It is true that the defendant did not adduce any evidence of written notice issued to terminate the Employment Contract nor evidence of payment made in lieu of notice.

38.  Clause 16 of the Employment Contract reads: -

“The Employee agrees not to engage or be interested, directly or indirectly, in any other business or employment during the term of this employment, except with the specific permission from Employer, given in writing”

39.  Plaintiff contended further that specific permission in writing need be given for the defendant to engage in other employment during the subsistence of the Employment Contract and that there was no such permission given.

40.  Again there is no evidence adduced by the defendant in this respect.

41.  Clause 20 of the Employment Contract reads: -

“Covenants of the Employee.

The Employee covenants both during and after employment with the Employer as follows:

a) That he/she shall not at any time be guilty of any act or conduct causing or calculated to cause damage or discredit to the reputation or business of the Employer; …

b) …

c) That as soon as notice of termination of employment has been given by either party … he/she shall deliver up to the Employer all books, records, printouts, lists, notes and other documents or copies thereof relating to the business of the Employer which may be in his/her possession …”

42.  Plaintiff submitted that even if the Employment Contract was terminated, the convenant under clause 20 survives.

43.  According to the plaintiff, during the relevant period, defendant’s salary was paid by the Rhombus Group in Hong Kong.

44.  They said that the initial arrangement was that whilst the defendant was working in London, the salary of the defendant was paid by the Rhombus Group into his bank account in Hong Kong which would subsequently be reimbursed by Fabiano Hotels Limited.

45.  Plaintiff further said that at one time when the parties focused on the take over, to simplify the matter, Fabiano Hotels did pay salary to the defendant’s bank account in Hong Kong direct from January 2012 to May 2012 the same was reimbursed to the plaintiff afterwards.  Since June 2012, plaintiff said the Rhombus Group resumed paying the defendant via Hotel de Edge Limited, a member of the Rhombus Group.

46.  In support of this contention, plaintiff exhibited bank transfer documents.

47.  As for the employment contract between defendant and Fabiano Hotels Limited exhibited by the defendant, Chan Lam Jenny of Rhombus Group in her affidavit explained that the employment contract was only executed by her on behalf of Fabiano Hotels Limited due to administrative error on the part of the plaintiff.

48.  Defendant denied this was the case.

49.  Chan Lam Jenny said further that according to the management agreement between the Rhombus Group and Fabiano Hotels, clause 3.3 expressly provides that the Rhombus Group has sole and exclusive right to hire staff of their own management team, these staff, though the staff of the Rhombus Group, their salaries will be billed to Fabiano Hotels for payment.  She said defendant is one such staff on the management team.

50.  On this note, one wonders why the plaintiff would reimburse Hotel Verta for the loss they suffered had the defendant not been the employee of the plaintiff but that of Fabiano Hotels Limited at the time.  It does not make sense.

51.  In my view, on what is before the court, the plaintiff’s contention that at the material times the Employment Contract was alive and the defendant whilst as the employee of the plaintiff was seconded to work in Hotel Verta appears more probable.

52.  Coming to the Employment Contract: -

(a)   The same was entered between the parties in Hong Kong.

(b)   Parties to the Employment Contract are respectively Hong Kong Company doing business in Hong Kong and Hong Kong resident with his residence in Hong Kong.

(c)   Under Clause 10 of the same, the defendant is entitled to the statutory holidays and annual paid leave in accordance with the provisions of the Employment Ordinance (Cap 57) of Hong Kong.

(d)   Under Clause 13, the defendant is required to join the plaintiff’s Mandatory Provident Fund Scheme under the Government regulations.

(d)   Under Clause 21, the employment can be terminated by the plaintiff without cause, upon giving the notice referred to in the Employment Ordinance of Hong Kong (Cap 57).

53.  It is clear that parties had intended the applicable law for the Employment Contract to be the Laws of Hong Kong.

Any breach of Employment Contract?

54.  As to the disputed issue whether the defendant is liable to the plaintiff for the loss suffered by Hotel Verta, which was reimbursed by the plaintiff, the court will need to determine whether the defendant did breach the Employment Contract between the parties, the applicable law of which is the Laws of Hong Kong and/or whether the defendant fail in his duty towards the plaintiff which result in the loss.

Location of wrongdoing

55.  It is true that any negligence of the defendant or breach of the Employment Contract took place in London.

56.  Defendant submits that as the alleged tort/breach was committed in London, London is prima facie the appropriate forum for the resolution of the dispute.  Cordoba Shipping Co Ltd v National State Bank, Elizabeth, New Jersey [1984] 2 Lloyd’s Rep 91.

57.  Plaintiff claims that in determining the most appropriate forum for trial, one has to consider the forum where the action could most suitably be tried for the interests of all the parties and for the ends of justice.  The court is not simply to load up factors which point to any particular jurisdiction but we need to focus “from the point of view of the trial of the action”: Rambas Marketing Co LLC v Chow Kam Fai, David [2001] 3 HKC 250 at p 255, per Recorder Ma SC (as Ma CJ then was); the same was later applied by Cheung JA in Dynasty Line Ltd v Sukant Sia [2009] 4 HKLRD 454 (CA)at §§58-59.

58.  Plaintiff tried to persuade the court that any wrongdoing/breach by the defendant which occurred in the course of an employment relationship entered in Hong Kong between a Hong Kong limited company and a permanent resident of Hong Kong, the location of the alleged wrongdoing has little bearing when determining the forum which has the closest and substantial connection with the action.

59.  Plaintiff maintains Hong Kong is the proper forum.

60.  Plaintiff further submits that any damage to the reputation and goodwill of the plaintiff is a wrongdoing by the defendant which took place in Hong Kong and in the circumstances, there is no reason for the London Court to seize jurisdiction.

Location of witnesses

61.  Plaintiff says that they have sent staff from Hong Kong to London to investigate the problem and their witnesses are all in Hong Kong.

62.  Defendant says that most witnesses he intend to call are in London.  He named

(a)   Edger Muran (Accountant), who was directly in charge the cash transaction;

(b)   Assistant Front Office Manager and 3 Duty Managers, who were monitoring the drop safe procedure;

(c)   Night Manager;

(d)   Anna Asimakopoulou (Ex-Hotel Manager), the person who overseeing Hotel Verta from 9December 2011 to 8 February 2013;

(e)   Fadi Gemayel, director of Fabiano Hotels Limited who signed the letter dated 23 May 2012 which is contradictory to the Employment Contract between Fabiano Hotels Limited and me; and

(f)    Loomis Limited, a Money Transportation Company in UK.

as some of the witnesses for his case.  He did not however describe the evidence that they intend to give, whether they are relevant to the issue in dispute nor did he state if he had difficulty in securing them testifying in Hong Kong, whether these witnesses have difficulty coming to Hong Kong or whether they are unwilling to come.  Undeniably, defendant himself is the main witness in the defence case.

63.  It is advanced by the plaintiff that: -

“ ‘in these modern age of communication, instantaneous long distance transmission of documents and the ease of air travel’, the location of witnesses ‘carry little weight’: see HKCP 2014 p. 137 §11/1/10S; see further Yantai Wanhua Polyurethanes Co Ltd v Pur Products Ltd [2013 1 HKLRD 590 at §§9, per To J.”

Location of documents

64.  Further the plaintiff says that all the accounting records, books and documents that they relied on are in Hong Kong.

65.  Defendant did not adduce evidence in this respect save that they said that the original documents belonged to Fabiano Hotels Limited and that they are in London.

66.  Court notes that authenticity of the documents does not appear to be an issue in this case.

67.  In all, plaintiff says the defendant here has not satisfied the Spiliada test stage 1 by showing that Hong Kong is not only not the natural or appropriate forum but London is clearly or distinctly more appropriate forum than Hong Kong.

68.  Plaintiff also submitted that if the trial took place in London, substantial extra costs would have to be incurred as the witnesses for the plaintiff are all in Hong Kong as well as all the records and documents are in Hong Kong.

Conclusion

69.  This is an action brought by the plaintiff against the defendant for his breach and/or negligence during subsistence of the Employment Contract.

70.  As said, I find it more probable that the Employment Contract subsisted at the relevant times.

71.  I agree with the submission of the plaintiff that the applicable laws of the Employment Contract is Hong Kong laws and that the Employment Contract does have real and substantial connection to Hong Kong.

72.  The witnesses for the plaintiff, according to the plaintiff are all in Hong Kong.  Although those witnesses for the defence, apart from the defendant, are said to be in London, the defendant did not say he has difficulty in securing their attendance to testify in Hong Kong.  In the circumstances, on this point alone, one cannot say therefore that London is the more appropriate forum.

73.  In considering if there was a breach of the Employment Contract, the court will need to examine the terms of the Employment Contract reference to Hong Kong laws.  The performance of defendant although in London would have to be considered in the light of the Employment Contract.

74.  Even considering the alleged tort was committed in London, in this case, this factor in my view is not of such weight as to make London the more appropriate forum.

75.  As for the issue on loss and damages to the reputation and goodwill of the plaintiff, I agree that with counsel for the plaintiff that as the plaintiff is a Hong Kong company carrying on business here in Hong Kong, the quantum attributable to the loss and damages to their loss of reputation should be assessed by Hong Kong courts having reference to the law on damages here.

76.  Furthermore the claim of the plaintiff under this head was premised on clause 20 of the Employment Contract, the governing laws of which is Hong Kong laws.

77.  In the circumstances, I find Hong Kong courts the natural and appropriate forum to conduct the trial.

78.  In Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454, Cheung JA said at §58-59:

“ 58. The ‘appropriate’ or ‘natural’ forum is one ‘with which the action had the most real and substantial connection’. This includes not only factors affecting convenience and expense (such as availability of witness) but also other factors such as the law governing the relevant transaction and the place where the parties respectively reside and carried on business, Spiliada Maritime Corp v Cansulex Ltd at p. 478.

  59.     …… Ultimately one has to consider the forum where the action could most suitably be tried for the interests of all the parties and for the ends of justice.  Comments of a similar nature although differently put have been made by the courts in the past: the court is not simply to load up factors which point to any particular jurisdiction but to focus on the appropriateness of a forum from the point of view of the trial of the action, see: Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250 per Recorder Ma SC (now Ma CJHC) at p. 255.”

79.  The defendant here has clearly failed to establish that London is clearly and distinctly the more appropriate forum.  They had therefore failed the stage 1 test in the Spiliada case.  It is not necessary therefore to proceed to stage 2 test.

80.  It is said by the defendant that the court need to consider the employment contract between the defendant and Fabiano Hotel.  I do not think so. The claim presently before the court is not brought by Fabiano Hotel but by the plaintiff.  It is founded on the Employment Contract.  It is immaterial if there was in fact also another employment contract subsisting because the plaintiff was not a party to that agreement.  The issue remains whether the Employment Contract was still subsisting at the material times and if so, whether there was a breach.

81.  It is also submitted by the plaintiff that as the defendant is unable to identify an arguable defence with sufficient particularity; in the circumstances, the court should not consider the stay application further but should dismiss it, relying on Bayer Polymers Co Ltd v Industrial and Commercial Bank of China [2000] 1 HKC 805 (Stone J); applied in Chow Fu Hsien v K Vision International Investment Limited, HCA 2884/2004 (unrep, 13 November 2006) at §18, per DHCJ Carlson.  I do not agree to the submission that the defence as pleaded lacked particularity to that extent.

82.  In summary, it will be in the best interests and convenience of the parties and the witnesses in this proceedings to have the trial conducted in Hong Kong Courts and so I dismiss the application of the defendant.

Costs

83.  I also make an order nisi that defendant shall pay costs of the application, the same to be taxed if not agreed, with certificate for counsel.

84.  I thank counsels for their assistance.