ING BANK N.V. v. INDUSTRIAL AND COMMERCIAL BANK OF CHINA LTD

CAMP 239/2024, [2025] HKCA 824

On Appeal from [2024] HKCFI 2220

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 239 OF 2024

(ON AN INTENDED APPEAL FROM HCCL No. 2 OF 2023)

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

1.  This is a renewed application by the defendant (“ICBC”)  for leave to appeal against the decision of Anthony Chan J on 23 August 2024 (“Decision”),[1] by which the judge dismissed ICBC’s summons for stay of proceedings on the ground of forum non conveniens.

Background

2.  The action arose out of the financing arrangements for certain sale of goods transactions.  The sales took place between the Hong Kong seller company called “Triway” and the Mainland buyer company called “Maike”.  The goods sold were copper cathodes worth a total of about USD 170.99 million (“Goods”).  Triway is actually a wholly-owned subsidiary of Maike.  Between June and August 2022, the plaintiff bank (“ING”), by way of trade facilities for its customer Triway, discounted a total of 30 sets of original export documents (“Documents”)  including the bills of lading in respect of 61 shipments of goods, and, acting as Triway’s remitting bank, sent and gave collection instructions (“Collection Instructions”)  to ICBC’s High Tech Industries Sub-Branch at Xi’an, Shaanxi Province (“HTI-SB”)  as collecting bank, for collection from Maike on a DP (Documents against Payment)  basis.[2]  ING says that the bills of lading and the Goods were pledged by Triway to it as security for the facilities.  On 9 September 2022, ING also obtained an assignment from Triway of its rights to the price payable by Maike for the Goods.

3.  It is common ground that ICBC or HTI-SB released the Documents to Maike shortly after receiving each set from ING, without collecting from Maike or remitting to ING any payment, and that Maike had thereby obtained the Goods.  ING says that in so doing, ICBC acted wrongfully and, in particular, contrary to the terms of the Collection Instructions acknowledged by ICBC which included the ICC Uniform Rules for Collections 522 (“URC”).  In particular, reliance is placed on Art. 4 which provides:

Art 4(a)(i):

“ All documents sent for collection must be accompanied by a collection instruction indicating that the collection is subject to URC 522 and giving complete and precise instructions. Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with these Rules.”

Art 4(a)(iii):

“ Unless otherwise authorised in the collection instruction, banks will disregard any instructions from any party/bank other than the party/bank from whom they received the collection.”

4.  As a result, ING claims that ICBC is liable for breach of contract, breach of its duty of care in tort, breach of its duties as ING’s agent or as bailee of the Documents and the Goods, and for conversion.  ING claims the sum of USD 170.99 million from ICBC, alternatively damages for the loss ING suffered by losing its security over the Goods and Documents for recovery of the amounts due from Triway totalling about USD 147.46 million.

5.  ING issued a writ in the High Court on 10 November 2022, which was served on ICBC in Hong Kong.  A statement of claim was filed on 8 December 2022.  By summons issued on 9 March 2023 and amended on 9 November 2023,[3] ICBC sought an order for stay of proceedings on the ground of forum non conveniens in favour of the Xi’an Intermediate People’s Court, Shaanxi Province (“Xi’an court”).

6.  From the affirmations filed for the stay application, it appears at this stage there are going to be five defences raised by ICBC, on which the parties’ contentions are broadly as follows:

(1)  ICBC says that under Mainland law, HTI-SB has the legal standing and is the proper party to be sued, instead of ICBC.  ING retorts that Hong Kong law governs the issue of the proper party to be sued, and that under Hong Kong law, ICBC should be sued, HTI-SB not being a legal entity separate and distinct from ICBC.

(2)  ICBC says that ING as the remitting bank does not have any standing or legal basis to bring the action.  It is not entirely clear what ING’s response is.  Presumably it disputes this and will in any event rely on the assignment from Triway.

(3)  ICBC says that HTI-SB was entitled to release the Documents to Maike free of payment pursuant to the instructions given by Qi Xiaodi and Miao Xiaomei (who were directors of Triway up to 17 June 2022 and 21 November 2022 respectively)  as well as He Jinbi (who was the legal representative and ultimate controller of Maike)  on behalf of Triway and confirmed in a notice dated 26 August 2022 issued by Triway as the “principal”[4] within the meaning of Art. 3 of the URC.  ING does not accept the notice was an authentic document issued on that date, and in any event says that under the URC, the principal does not have any authority to give instructions regarding collection.

(4)  ICBC says that there had been a common practice since around 2010 among Triway, Maike, ING and HTI-SB, of releasing export documents to Maike free of payment, and that of the approximately 1,900 bills of lading received from ING between 2019 and 2022, 94% were released to Maike free of payment pursuant to that practice.  In response ING says that those were cases in which Triway had directly paid ING in relation to the relevant shipments and ING had accordingly instructed ICBC that it could release the export documents to Maike free of payment.  ICBC says such release instructions were retrospectively issued by ING after the documents had been released, but ING says they were not retrospective as far as it was concerned as it did not know the documents had already been released by ICBC.  ING also says that the alleged common practice was in direct conflict with the terms of the Collection Instructions and the URC.

(5)  ICBC says it was not aware of the trade facilities and security arrangements between ING and Triway, and that ING’s alleged loss was not reasonably foreseeable and did not arise as a result of ICBC’s acts.  ING says the losses were not too remote since ICBC knew or ought to have known or reasonably foreseen ING’s provision of export financing to Triway.

7.  In his Decision:

(1)  In terms of connections with Hong Kong, the judge noted that the transactions were initiated from Hong Kong and concluded between an international bank doing business in Hong Kong (ING)  and a Xi’an branch of ICBC, which is listed on the Stock Exchange of Hong Kong and also doing business here.  The relationship between Triway and ING is governed by Hong Kong law.  The money to be collected by ICBC was to be paid to ING in Hong Kong, albeit through its USD account in New York.  ICBC would have to inform ING and return the documents to ING in Hong Kong if no payment was received. See [45], [47]-[49].

(2)  As to the governing law as between ING and ICBC, the judge proceeded on the basis that he did not need to make a final decision but only a decision based on a good arguable case, which may be revisited at trial.  He held that there is at least a good arguable case that Hong Kong law applies as the system of law with which the transactions in question have their closest and most real connection or alternatively based on an inferred common intention of ING and ICBC.  See [55]-[65].

(3)  Furthermore, the judge considered that Hong Kong law, as the lex fori, governs whether ICBC can be sued in Hong Kong, as the Mainland law suggesting HTI-SB should be sued is procedural in nature.  See [67].

(4)  The judge considered that even if Mainland law applies, the issues are less complex than ICBC suggested, and with the aid of a single joint expert, any complexity can be trimmed down, possibly significantly.  The Hong Kong court would have no difficulty in dealing with the factual disputes and Mainland law on estoppel and the concept of good faith in relation to the defence of common practice and any Mainland law issues in relation to the defence based on Triway’s instruction.  Nor do the defences as to whether ICBC or HTI-SB is the proper party and as to whether ING’s loss was reasonably foreseeable raise any issue which the Hong Kong court will have serious difficulty in resolving.  See [68]-[71].

(5)  As to the location of witnesses and documentation, the judge considered it likely that the trial will be predominantly based on documents.  There will be no difficulty in making the documents available in Hong Kong.  ING’s witnesses are based in Hong Kong.  ICBC’s factual witnesses are apparently in Xi’an but there is no suggestion that they will be unable to attend a trial in Hong Kong.  As to Mr He Jinbi, the judge said there is no evidence that he will be unable to attend trial in Hong Kong but able or compellable to attend trial in the Mainland.  See [73]-[76].

(6)  As a result, the judge was not satisfied that Hong Kong is not the appropriate forum with the most real and substantial connection with the action, or that the Xi’an court is clearly or distinctly the more appropriate forum: [77].

Application for leave to appeal

8.  On 27 November 2024, the judge refused to give leave to appeal (“Leave Decision”).[5] By summons dated 11 December 2024, the defendant renews its application for leave to appeal in this court, with a draft Notice of Appeal listing 10 grounds of appeal.  The defendant has also filed an affirmation setting out certain new evidence it proposes to adduce in the intended appeal.

9.  Having considered the papers, we think it appropriate to determine this application without an oral hearing pursuant to Order 59 rule 2A(5)  of the Rules of the High Court (Cap 4A).

10.  As provided by section 14AA(4)  of the High Court Ordinance (Cap 4), leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

The scope of appeal against a decision on forum non conveniens

11.  There is no dispute that the scope for challenging a decision on an application for stay on forum non conveniens grounds is limited.  The relevant principles have been set out in Bright Shipping Ltd v Changhong Group (HK)  Ltd (No 2) [2019] 5 HKLRD 30 at [4]-[11].  Essentially, whether characterised as an exercise of discretion or an “evaluative, or a balancing, exercise”, such a decision is one with which an appellate court “should be slow to interfere”.  The readiness of an appellate court to interfere will depend on all the circumstances of the case; the greater the number of factors to be taken into account, the more reluctant an appellate court should be to interfere.  The Court of Appeal may only interfere in three situations: (1)  where the judge has misdirected himself with regard to the principles in accordance with which his discretion had to be exercised; (2)  where the judge, in exercising his discretion, has taken into account matters which he ought not to have done or failed to take into account matters which he ought to have done; or (3)  where his decision is plainly wrong.  This is a field in which different conclusions can be reached by different tribunals without either being susceptible to legal challenge.  The appellate court cannot interfere merely because it would have reached a different conclusion had it been hearing the application at first instance, or would have given more weight to one of the many factors to be taken into account.

12.  It needs also to be borne in mind that where jurisdiction is founded in the Hong Kong court as of right, as in the present case where the writ was served on ICBC in Hong Kong, the defendant who seeks a stay has to establish that there is another forum which is clearly or distinctly more appropriate than Hong Kong: SPH v SA (2014)  17 HKCFAR 364 at [52].

13.  With the above in mind, we discuss in so far as necessary ICBC’s principal grounds of appeal in turn below, which, as in the application for leave before the judge, fall into five main points.

The approach to good arguable case

14.  Grounds 1-2: The first point is in essence that in coming to a view on what is the governing law of the Collection Instructions, the judge should simply have asked on a stand-alone basis whether ICBC had shown a “good arguable case” that Mainland law applies, without using a “relative” approach that compares the strength of the parties’ rival contentions as to the proper law.  The relative approach, that is to say, asking who has the better of the argument, is the approach enunciated in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547, 555G (affirmed in [2002] 1 AC 1, 13H).  It is submitted that the line of cases applying the relative approach concern whether an Order 11 gateway is applicable (e.g. whether a defendant is domiciled in the jurisdiction), and should not be applied in the forum non conveniens context since the court should not disregard even the weaker contention in assessing which is the more appropriate forum.

15.  It appears from [11] of the Leave Decision that this is a new point not taken by ICBC in the substantive hearing before the judge.  In any event, as pointed out on behalf of ING, although the judge considered Hong Kong law to be the governing law, he did proceed (at [68]-[71] & [73] of the Decision)  to consider the matter on the alternative basis that Mainland law is the governing law, and in effect concluded that even on that basis he would refuse a stay; see also Leave Decision, [14].  This point is therefore largely rendered academic and as such does not give rise to any reasonable prospect of success of the appeal.

16.  Whilst strictly unnecessary, we would add the following observations in light of ICBC’s submission that the judge’s approach was contrary to binding authorities.  First, in China Reliance Finance Co Ltd v China Three-Gorge Economic Development Corp (HCCL 9/2004, 15 September 2004), at [35]-[37], it appears that Stone J was not referred to the Canada Trust line of cases.  Nevertheless, although his Lordship did not expressly refer to the “better of the argument” test, he said he had “reflected upon the arguments on both sides” and concluded the defendant had succeeded in establishing a good arguable case that the proper law was PRC law (see [43]).  This seems to us to show that Stone J also took into account the plaintiff’s rival argument on the proper law.  On appeal (CACV 296/2004, 25 May 2005), Rogers VP said at [6] that the requirement of a good arguable case meant that the defendant there “had to establish [that the governing law was PRC law] with some degree of assurance at least on a provisional basis”.  We do not consider the approach taken in China Reliance Finance Co Ltd to be inconsistent with the approach of the judge in the present case. 

17.  As for Wo Fung Paper Making Factory Ltd v Sappi Kraft (Pty)  Ltd [1988] 2 HKLR 346, Hunter JA said at p 357G-H that “the showing of a good arguable case does not postulate an Order 14 case, and is not negatived by the fact that good arguable defences may exist”.  But read in context, what his Lordship was dealing with was clearly the question of the substantive merits of the plaintiff’s claim especially where there were disputed facts (a matter that is now governed by the “serious issue to be tried” threshold rather than “good arguable case”[6]).  We do not regard this case to be of assistance to ICBC’s argument. 

18.  Whatever may be the precise content of the good arguable case test, it does not seem to us right to confine the court’s examination to the system of law propounded by the defendant as the governing law and to disregard completely the competing contention of the plaintiff. After all, the ultimate question of whether one forum is clearly or distinctly the more appropriate forum than the other involves a comparison.  At the early stage of an action when a stay application is being considered, depending on the circumstances of the particular case, the level of the judge’s conviction on what the governing law is may vary.  In one case the judge may be able to feel certain what the governing law is; in another case the rival contentions may be so finely balanced that the judge is unable to say with much confidence who has the better of the argument.  The court will take this into account in the weighing exercise in determining the stay application.  We do not think there is any significant material error in the judge’s approach in this connection.

The place of performance

19.  Ground 3:  Relying on First Laser Ltd v Fujian Enterprises (Holdings)  Co Ltd (2012)  15 HKCFAR 569 at [54]-[56] and Chatenay v The Brazilian Submarine Telegraph Co Ltd [1891]1 QB 79 at 82-83, this ground contends that in ascertaining the governing law, the judge should have attached “great weight” to the place of performance, and that the judge should not have diluted it by other factors.  It is contended that the judge should have held the place of collection was the place of performance.

20.  First, as mentioned above, the judge went on to consider the stay application on the basis that Mainland law is the law governing the relationship between ING and ICBC.  It seems to us that ICBC has not demonstrated that Ground 3 is material to the outcome of the intended appeal.

21.  Further, we do not read First Laser as laying down an absolute rule that the place of performance will “trump” all other factors in all circumstances in determining the governing law of a contract. As recognised in Chatenay, something may appear to the contrary.  In any event, in arriving at his provisional view on the governing law, the judge did recognise the importance of the place of performance: see Decision, [58] & [60].  In assessing the place of performance, it was open to the judge to take into account the fact that the performance of the Collection Instructions included not only presenting the Documents to Maike against payment (which, one assumes, was to take place in Xi’an)  but also either making payment to ING or returning the Documents to ING which is in Hong Kong.  The letter of credit cases relied upon by ICBC (Bank of Credit & Commerce Hong Kong Ltd (in liquidation)  v Sonali Bank [1995] 1 Ll. R. 227 and European Asian Bank AG v Punjab and Sind Bank [1982] 2 Ll. R. 356)  concern different roles and obligations undertaken by the correspondent banks including the negotiation of the letters of credit, and are in our view of little assistance to ICBC on the facts of this case. 

22.  What the judge arrived at was a provisional view of the proper law based on an evaluative exercise on the materials and arguments at this stage.  We do not think that there is the requisite prospect of success for ICBC to overcome the high hurdle for impugning such a conclusion.  Having said that, we emphasise that this in no way prevents the trial judge from coming to a different view at trial.

The possibility of distorted interpretation of URC by Mainland courts

23.  Grounds 5.5(c), 6.3 & 6.4: These paragraphs in the draft notice of appeal allege that in determining the governing law, the judge erred in taking the view that the Mainland courts may arrive at a “distorted interpretation” of the URC (Decision, at [13(1)], [59]-[60], [62], [65]; Leave Decision, at [19]). 

24.  We do not think this point has any prospects of success.  The judge did not actually find that there was a real possibility that the Mainland courts would adopt a “distorted interpretation” of the URC.  On the contrary, the judge expressly accepted that the Xi’an court would be “perfectly capable to deal with international transactions of the present type and to apply the URC”.[7]  The judge did not believe that the performance of the Collection Instructions would be inconsistent with Mainland laws.[8]  He preferred the evidence of ING’s expert that the URC would be followed under Mainland laws.[9]  On this basis, the judge concluded that the fact that part of the performance of the Collection Instructions took place in the Mainland would not be conclusive.[10]

25.  The judge only referred to the possibility of a “distorted interpretation” of the URC when reciting ING’s arguments.[11]  He observed that “if the performance of the Collection Instructions was contrary to Mainland laws” (underlining in the original), it would lend weight to ING’s submission based on the validation principle supporting an inferred choice of Hong Kong law.[12]  Given his primary reason, however, this hypothetical observation was of little significance to the Decision.

The complexity of Mainland law

26.  Ground 7 contends that the judge was wrong to hold that whether ICBC or its branch HTI-SB is the proper defendant is a procedural question governed by Hong Kong law as the lex fori.  Ground 8 contends that the judge was wrong to think that if Mainland law applies, the issues are “less complex than suggested” and that the Hong Kong courts are capable of dealing with them without undue difficulty. 

27.  As to the proper party issue, the judge held that if Hong Kong law applies as the lex causae, ICBC rather than HTI-SB is the proper defendant.[13] It is true that the judge held that even if Mainland law is the lex causae, the issue would be governed in the Hong Kong action by Hong Kong law as the lex fori.[14]  But the judge went on to hold that even if Mainland law applies, the issues are less complex than suggested, thus finding that this factor does not make the Xi’an court clearly or distinctly the more appropriate forum.[15]  It follows that Ground 7 is not material to the outcome. 

28.  In any event, the relevant Mainland law relied upon by ICBC is primarily the Civil Procedure Law,[16] and there is no dispute that it is ICBC itself, and not its branches, that has actual legal personality in Mainland law, and that under Mainland law even though the branch may be sued, the liability is not limited to the assets of the branch.  In these circumstances we are not at this stage satisfied that the judge was plainly wrong in taking the view that the relevant Mainland law is procedural in nature having regard to the approach to classification set out in Dicey, Morris & Collins, The Conflict of Laws,Vol 1, §4-020.[17]

29.  As to the attack under Ground 8 on the judge’s assessment of the complexities of Mainland law issues, this is a qualitative assessment having regard to the competing evidence on the proper party issue and the so-called sub-agency point (which contended that ICBC was entitled to act directly on the instructions of Triway).  The judge had considered the points arising and the expert evidence adduced, and concluded that these are matters of Mainland law that the Hong Kong court would be able to deal with without undue difficulty.  There is no real basis to impugn the judge’s assessment of the capacity of the Hong Kong Commercial List court to deal with those Mainland law issues.

30.  As to the defendant’s argument that the judge failed to ask the correct question of whether there is a real risk that the Hong Kong courts may reach a wrong decision on Mainland law issues, we agree with ING that there is no merit in the criticism.  The judge’s observations that the Hong Kong courts are “capable of dealing with” the Mainland law issues, which are less complex than suggested, with no “undue difficulty” or “serious difficulty”[18] show that the judge had directed his mind to the Hong Kong court’s capacity of resolving such issues correctly. The judge was entitled to take this into account in assessing the application for stay on the alternative assumption that Mainland law governs the issues in question.

The new evidence relating to Mr He Jinbi

31.  Ground 9: If leave to appeal is granted, the defendant intends to adduce new evidence relating to the availability of Mr He Jinbi as a witness, which was a factor considered by the judge in the Decision at [76], where the judge said there was no evidence to show that Mr He would not be able to attend trial in Hong Kong (either in person or by video-conferencing facilities)  but would be able or compellable to attend trial in the Mainland.  What the court needs to consider at this stage may be divided into two inter-linked questions: first, assuming there is an appeal, whether it is reasonably arguable that the court would grant leave by reference to the criteria in Ladd v Marshall[19] for the new evidence to be adduced; secondly, in the light of such evidence assuming it is admitted, whether there is a reasonable prospect of success in the appeal such that leave to appeal should be granted.

32.  The gist of the defendant’s affirmation in support of the application to adduce new evidence is that (i)  Mr He has been detained by the police in Shaanxi Province since 10 May 2024; (ii)  on 19 August 2024 (3 days before the adjourned hearing before the judge on 22 August 2024)  the Shaanxi branch of ICBC made a request to the police in Xi’an to ascertain the status of Mr He, and on the same date the police authorities informed ICBC of Mr He’s detention but stipulated that such information could not be publicly disclosed (even to the Hong Kong court and ING); and (iii)  after the Decision, the Shaanxi branch of ICBC requested for and was granted permission on 2 September 2024 to disclose the information.  ICBC seeks to adduce the letter issued by the Xi’an police on 2 September 2024 and a Mainland legal opinion dated 6 September 2024 that seeks to explain that if the trial of the action takes place in the Mainland, steps can be taken to ensure Mr He’s availability as a witness in the Mainland courts.

33.  ING objects to ICBC’s application on the ground that ICBC could with reasonable diligence have adduced such evidence before the judge.  It is also submitted that the relevance and significance of Mr He’s evidence is limited.

34.  As pointed out by ING, the availability of Mr He to give evidence at trial was a live issue in ICBC’s application for stay of the proceedings in Hong Kong.  There were news articles already published in October and November 2023, prior to the first hearing before the judge, suggesting that Mr He had been arrested and detained by the police in Shaanxi.  Yet there is no explanation as to why the defendant had not made enquiries with the Mainland authorities earlier and requested for permission to disclose any reply earlier.  We are not satisfied that there is reasonable prospect that the proposed new evidence could meet the first Ladd v Marshall condition. 

Disposition and costs

35.  For the reasons given above, we take the view that the threshold requirement for granting leave to appeal is not met.  We are further of the view that there is no other reason in the interests of justice why the appeal should be heard.  Accordingly, the application for leave to appeal is dismissed.  We make an order pursuant to Order 59 rule 2A(8)  that no party may request this determination to be considered at an oral hearing inter partes.

36.  There will be an order nisi that the defendant do pay the plaintiff the costs of this application, summarily assessed in the amount of HK$300,000.