AMED HOLDING (HONG KONG) LTD v. WONG SY KEE AND OTHERS

HCA 1879/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1879 OF 2012

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D E C I S I O N

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1.  This is an application taken out by the 1^st, 2^nd, 4^th, 5^th, 7^th and 8^th defendants by counterclaim (collectively referred to as “the Applicants”) for an order that the counterclaim be stayed or dismissed in favour of the courts of Sandakan, State of Sabah, Malaysia (“the Malaysian Court”) on the grounds of forum non conveniens.

BACKGROUND

2.  The present case concerns the disputes surrounding a Malaysian family which consists of the following members:

(a) Wong Su Yong (“Father”) who is the 1^st defendant by counterclaim;

(b) Sim Siew Ching (“Mother”), the 2^nd defendant by counterclaim;

(c) Wong Sy Chyun (“Anthony”), the 3^rd defendant by counterclaim;

(d) Wong Sye May (“May”), the 4^th defendant by counterclaim;

(e) Wong Sy Vui (“Edward”), the 5^th defendant by counterclaim;

(f) Wong Sy Kee (“Donald”), the 1^st defendant in the Main Action and the plaintiff by counterclaim;

(g) Donald is married to Ng Ka Wa, the 2^nd defendant in the Main Action.

3.  Father migrated to Malaysia in 1952. There Father met and married Mother, a local Malaysian. They raised their family there. Father became a successful businessman, founding and owning sizable oil palm plantation business which is held through two Malaysian companies, being the 7^th and 8^th defendants by counterclaim. They will be referred to individually as “AMED Malaysia” and “Ninja Malaysia” respectively, and collectively as “the Malaysian Companies”.

4.  Father, Mother and May reside permanently in Sabah tending to the oil palm plantation business.

5.  Anthony and Edward has moved to and reside in Singapore where they have their own respective businesses.

6.  Donald moved to Hong Kong and practices here as a general medical practitioner.

7.  Anthony, Edward and Donald would visit their parents in Sabah from time to time.

8.  Father would also invest in the property market, inter alia, in Hong Kong. For that purpose the plaintiff in the Main Action being also the 6^th defendant by counterclaim (“AMED HK”) was set up as a vehicle to hold such property. In 2009, Father entrusted Donald to purchase a shop premises in Yuen Long (“the Yuen Long Shop”) and which was held by AMED HK.

9.  The shareholders of AMED HK were Anthony (25%), May (25%), Edward (25%) and Donald (25%).

10.  Initially Donald and May were at all material times the directors of AMED HK. May’s directorship ceased as of 24 February 2009 when at the same time Donald’s wife became a director. The directorship of both Donald and his wife in AMED HK ceased as of 6 October 2011 when May was re-appointed to be a director of AMED HK.

11.  It should be noted that it is the contention of Father that the shares in the Malaysian Companies as well as in AMED HK were put into the names of his children but only to be held by them on trust for him during his lifetime and that it was only upon his death that his children would become the full owners of the shares in their respective names. Donald takes issue with that contention of Father. Donald alleges that the shares his name in AMED HK were absolute gifts to him by Father.

12.  All concerned were agreeable to Donald using the Yuen Long Shop as his clinic.

13.  Towards the end of 2010 or early 2011, the entire Wong family gathered in Sabah to celebrate the parent’s 50^th anniversary.

14.  At around that time, allegations were made that Donald had been using the Yuen Long Shop without paying any rent to AMED HK and that both Donald and his wife had wrongfully misappropriated funds from the bank account of AMED HK.

15.  Donald then proposed to exchange the shares registered in his name in the Malaysian Companies for the shares of his other siblings in AMED HK.

16.  Anthony drafted a home made written memo evidencing such oral agreement. Because the first copy of the memo contained a mistake as to the address of the Yuen Long Shop, a second corrected copy was made (“the Written Memo”)

17.  In June or July 2011, Donald signed the Written Memo in Sabah together with certain forms for the transfer of his shares in the Malaysian Companies, and the director’s resignation form in respect of AMED Malaysia (“the Transfer Documents”).  All these documents signed by Donald were witnessed by May and she was told by Father to keep those documents safely.

18.  The following day after signing on the documents above, Donald demanded the return of the executed documents. Donald wrote to the company secretary of the Malaysian Companies alleging that he was under the influence of drug and alcohol when he executed those documents in Sabah.

19.  Donald also lodged criminal complaints with the Royal Malaysian Police in Sabah against May and Edward alleging that the documents were stolen from him and that his signature on the share transfer documents had been forged.

20.  In August and September 2011 some efforts were made in an attempt to settle the dispute between the family members but ultimately these negotiations failed.

THE MAIN ACTION

21.  On 10 October 2012, AMED HK issued the Main Action against Donald and his wife.

22.  As against Donald and his wife, it is the case of AMED HK that when Donald and his wife were directors of AMED HK, Donald and/or his wife had withdrawn moneys (particularized in the Statement of Claim) from the bank account of AMED HK with the Hongkong and Shanghai Banking Corporation and as directors they were under a duty to account to AMED HK in respect of such withdrawals and that such withdrawals were in breach of the fiduciary duties owed by Donald and his wife as directors to AMED HK. It is also the case of AMED HK that such withdrawals had been put into accounts in the name of Donald and as such are held on trust by Donald for AMED HK and it follows that Donald is under a further duty to account to AMED HK as a trustee.

23.  AMED HK therefore claims against Donald and his wife for:

(a) An account of such withdrawals;

(b) Damages for breach of fiduciary duties and/or account of profits;

(c) An order for payment of what is found due to AMED HK upon the accounts;

(d) Interest and costs.

24.  As against Donald alone, the case of AMED HK is that AMED HK is and has been the registered owner of the Yuen Long Shop at all material times but that the title deeds to the Yuen Long Shop are still in the possession of Donald who, despite repeated demands, have refused to return them to AMED HK.

25.  It is also the case of AMED HK that Donald has since July 2009 been occupying the Yuen Long Shop without paying any rent to AMED HK. AMED HK has, by solicitor’s letter dated 18 November 2011 demanded vacant property of the Yuen Long Shop from Donald but who has refused to deliver vacant possession of same to AMED HK. In the premises AMED HK has been deprived of the use and enjoyment and/or rental income therefrom and has suffered loss and damage as well as mesne profit for the occupation by Donald.

26.  AMED HK therefore claims against Donald for:-

(a) An account and inquiry of the sums held on trust by Donald;

(b) An order for payment of such amount found due to AMED HK upon taking of the account;

(c) An order for delivery up and return of all the title deeds of the Yuen Long Shop;

(d) Delivery up of vacant possession of the Yuen Long Shop;

(e) Damages and/or mesne profits for breach of fiduciary duties and the occupation of the Yuen Long Shop;

(f) Interest and costs.

DEFENCE AND COUNTERCLAIM

(A) Defence

27.  A number of defences were raised by Donald and his wife for misappropriation of funds and breach of trust to the claim by AMED HK.

28.  Firstly, they admitted having withdrawn monies from the bank account of AMED HK but pleaded that the funds of AMED HK were either advanced by Donald or Father. Such withdrawals were not misappropriation but repayment to Donald or Father and that the other directors of AMED HK, in particular May, were aware of the withdrawals at the time of the withdrawals and no objection were raised by them. May also knew full well what the withdrawals were used for by Donald.

29.  It was also pleaded by way of defence that AMED HK suffered no loss by reason of the misappropriation because it had no business operation.

30.  Thirdly, it was pleaded that Donald’s wife was not a director of AMED HK when most of the withdrawals were made and therefore had no duty to account.

31.  As for the claim for vacant possession of the Yuen Long Shop, the return of the title deeds and the claim for mesne profits, Donald says that he was ready willing and able to give vacant possession of the Yuen Long Shop and had indeed in November 2012 travelled to Singapore in an attempt to hand over the keys of the Yuen Long Shop to Anthony, but Anthony declined to accept the keys from Donald  asking Donald to deal with the matter through the parties’ lawyers.

(B) Counterclaim

32.  Donald’s counterclaim as pleaded in the Re-re-amended Defence and Counterclaim can be summarized as follows.

33.  The counterclaim was initially brought against all the other family members, AMED HK and the Malaysian Companies.

34.  At the time of this hearing, Donald has withdrawn his claim against the Malaysian Companies.

35.  Furthermore, Anthony, likely because of the counterclaim by Donald, has transferred Anthony’s 25% shares in AMED HK to Donald and has not seen fit to take part in these proceedings.

36.  Donald’s counterclaim against his family members is based on contract. It is Donald’s contention that the Written Memo is a binding and enforceable contract between the family members. By and large the counterclaim seeks enforcement of that contract evidenced by the Written Memo, alternatively, damages for breach of same.

37.  The reliefs sought by Donald in his Re-Re-Amended Counterclaim are as follows:

(a) A mandatory injunction for May and Edward to cause and procure AMED HK to assign the Yuen Long Shop to Donald or his nominee, alternatively for May and Edward to transfer the Yuen Long Shop to Donald or his nominee by transferring all their shares in AMED HK to Donald or his nominee;

(b) Damages for breach of the Written Memo by the other members of the Wong family except Anthony;

(c) Alternatively to (a) and (b) above, if the Written Memo is not binding and enforceable, a declaration that the transfer of Donald’s shares in the Malaysian Companies to the other members of the Wong family is invalid and void with damages for the wrongful acts by the other members of the Wong family;

(d) As against AMED HK, an order that AMED HK transfer, assign and convey all the legal and equitable title and interests in the Yuen Long Shop to Donald and/or his nominees.

38.  The Applicants have not as yet pleaded by way of defence to the counterclaim, but their stance can be gathered from the affidavit evidence filed herein.

39.  The Applicant’s case is that even if the Written Memo was a valid and binding contract, it had been terminated by Donald’s breach by his attempt to keep the Ninja Malaysia shares after execution of the Written Memo and the Transfer Documents, as well as alleging that May stole the documents from him in order to interrupt the performance of the Written Memo.

The Legal Principles re forum non conveniens

40.  The legal principles governing an application for forum non conveniens was expounded in the case of Spiliada Maritime Corp v Cansulux Ltd. [1987] AC 460.

41.  Those principles were formulated into a 3-stage approach and re-stated by the Hong Kong Court of Appeal in The Lanka Muditha [1991] 1 HKLR 741 at 744 as follows:

(a) 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 or distinctly more appropriate than Hong Kong;

(b) If the answer to (1) is yes, will a trial at the other forum deprive the plaintiff of any legitimate personal or juridical advantage. The evidential burden lies on the plaintiff;

(c) If the answer to (2) is yes, a court has to balance the advantages of (1) against the disadvantages of (2). 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 forum. Proof of this rests upon the applicant.

Contention of the Applicants

42.  It is the contention of the Applicants that the counterclaim by Donald, the issues of which are distinctly separate and therefore severable from the Main Action, should be tried in the Malaysian court as being a clearly or distinctly more appropriate forum than the Hong Kong court.

43.  In support of their application and in so far as natural forum goes, the Applicants submit as follows.

44.  Firstly, the Written Memo forms the basis of Donald’s counterclaim. The Written Memo was negotiated and executed in Sandakan, Sabah.

45.  Secondly, that contract, as evidenced by and contained in the Written Memo was breached by Donald in Sandakan when Donald went back on his own words and demanded to keep the shares in AMED Malaysia.

46.  Thirdly, had that contract not been breached by Donald, it would have been performed in Sandakan, Sabah.

47.  Fourthly, even on Donald’s own case, the alleged breach of the Written Memo caused by the wrongful acts of May and or the other members of the Wong family must have taken place in Sandakan, Sabah.

48.  Fifthly, given the above matters, since there is no governing law clause in the Written Memo, the fact that the Written Memo expressly describes the parties thereto as entering the agreement in their capacity as shareholders of the Malaysian Companies and the fact that three of the parties to the Written Memo reside in Sabah, the general rule of law would dictate that the Written Memo is governed by Malaysian law.

49.  Sixthly, in so far as witnesses in the counterclaim are concerned, the key witnesses are Father, Mother, May, Edward, Anthony, Donald and the company secretary of the Malaysian Companies.

50.  Father, Mother, May and the company secretary all reside in Sabah. Father is aged 86, suffers from hypertension and glaucoma and needs regular medical check-up. Moreover, Father has to use a wheelchair. It is therefore more convenient for them to testify in a Malaysian court.

51.  Edward and Anthony, although settled in Singapore, travel to Sabah frequently to visit their parents. Whether the trial is in Hong Kong or Malaysia, they will still have to travel there from Singapore.

52.  Donald, although a Hong Kong resident, was born and raised in Sabah and is a Malaysian citizen holding a Malaysian passport. It cannot be disputed that he has a close connection with Malaysia.

53.  In response to Donald’s suggestion that evidence can be given by video-link, the Applicants say that video-link is the exception rather than the rule and in a case such as the present which is highly fact-sensitive and credibility of the witnesses are of crucial importance to the court’s findings of fact, video-link would not be an appropriate alternative to live evidence from the witnesses.

54.  Seventhly, most of the documents to be adduced as evidence in the counterclaim are located in Malaysia. They include correspondences between the parties, statements made in the criminal investigation lodged by Donald, documents kept by the Companies Commission of Malaysia and documents filed in the defamation action in the Malaysian court. Moreover, the Written Memo is located in Malaysia, being the subject of criminal investigation by the Malaysian police.

55.  Finally, it was submitted that since related criminal investigation and defamation proceedings concerning the signing of the Written Memo is on-going in the Malaysian court, and albeit that the causes of action are different in the defamation action, nevertheless, the underlying facts in dispute in the defamation action duplicate or overlap with the present counterclaim by Donald. There is therefore a real risk of contradictory findings of facts being made by the Hong Kong and Malaysian courts if the counterclaim is tried in Hong Kong.

56.  Furthermore, Father and Mother are contemplating a further action in Malaysia to recover from Donald loans made by them to Donald for some MYR438,565 over the years to enable Donald to purchase a condo in Sabah which loans Donald have failed to repay.

57.  Given the above, it was submitted by the Applicants that it would be more appropriate for all the relevant disputes between the members of this Malaysian family to be heard and resolved in the Malaysian Court to avoid multiplicity of proceedings, and that the Malaysian Court is clearly and distinctly the more appropriate forum to try the counterclaim of Donald.

Donald’s opposition to the Application

58.  It is Donald’s contention that the facts relied on by him in his counterclaim show a substantial connection to Hong Kong rather than Malaysia. The factual matrix relied on by Donald are as follows.

59.  Father was diagnosed with colon cancer in 2002 and wanted one of the sons to return to Sabah to help run the family plantation business. Of the three sons, Donald was the only one who was prepared to do so, but the other two sons did not support the idea of Donald making such a sacrifice.

60.  As a result, Donald remained in Hong Kong to carry on his medical practice. Father then offered to purchase a premises for Donald from which to operate his clinic. At first it was intended to purchase a shop premises in Sheung Wan owned by his fourth uncle and AMED HK was set up for that purpose. However, that intended purchase fell through. Donald then rented premises in Yuen Long and Jordan to operate his clinic.

61.  A second attempt was made to purchase a shop premises in Tai Kok Tsui to be used as a clinic. Father transferred HK$2 million into Donald’s account for that purchase. Donald then transferred HK$2.4 million into AMED HK’s bank account (of which HK$1.9 was money from Father) to take out a mortgage loan granted by the Bank of America. The Tai Kok Tsui shop was purchased in mid-2005 and registered in the name of AMED HK. The monthly mortgage loan repayment was paid by Donald from his own money.

62.  After the Tai Kok Tsui shop had been acquired, all the other siblings were agreeable to the proposal by Donald that their respective shareholdings in AMED HK be transferred over to Donald and each of them duly signed the necessary Instrument of Transfer and Bought and Sold Notes in or about September 2005 to effect such shares transfer in favour of Donald. However, the Tai Kok Tsui shop was sold in March 2006 and the transfer of the shares in AMED HK to Donald did not go through.

63.  In July 2008 Father offered to purchase a shop in Yuen Long for Donald to use as his clinic which suggestion was accepted by Donald. Money was transferred to Donald by Father in July 2008 and as a result the Yuen Long Shop was purchased on 26 February 2009 for HK$5.5 million.

64.  In early 2009 due to health reasons of Father and Mother, Donald agreed to return to Sabah upon certain conditions relating to Donald’s children being met.

65.  At a family meeting held on 1 January 2011, Father informed the other family members that Donald would be returning to Sabah in 2015/2016 to manage the family oil palm business. By the time of that family meeting, many of the conditions relating to Donald’s children had been met.

66.  However, Donald’s plan to assist in managing the family palm oil business was not supported by the other siblings, in particular Anthony and Edward. In mid-January 2011 Donald had the impression that Edward felt his position threatened by Donald’s plan to return to Sabah.

67.  Edward then adopted a different attitude towards Donald by demanding payment of rental from Donald for his use of the Yuen Long Shop despite Father’s earlier promise to allow Donald to have the rent-free use of the Yuen Long Shop.

68.  Not wanting to further inflame matters and to avoid further conflict, Donald did not assert his rights and interests over the Yuen Long Shop nor rely on Father’s earlier promise to him to use it rent-free or even the fact that the other siblings had duly signed documents for the transfer of their respective shares in AMED HK to Donald.

69.  Instead, Donald decided to stay in Hong Kong to continue his medical practice.

70.  To avoid further hard feelings with his other siblings due to Father’s generosity in offering Donald the rent free use of the Yuen Long Shop, Donald proposed to Anthony, Edward and May in about February 2011:

(a) Subject to the valuation of Donald’s shareholding in the Malaysian Companies, Donald was prepared to transfer his shares in AMED Malaysia and possibly with part of his shareholding in Ninja Malaysia in exchange for the ownership of the Yuen Long Shop;

(b) Since all concerned knew that the Yuen Long Shop was held by AMED HK, that transfer/exchange could be effected by Anthony, Edward and May transferring their shareholdings in AMED HK to Donald.

71.  Initially such proposal was not accepted by Anthony and Edward in February 2011, but after further consideration, Anthony, Edward, May, Father and Mother accepted such proposal around the end of March 2011.

72.  As a result, arrangements were made by May with the company secretary of AMED Malaysia around the end of April 2011 to prepare the necessary documentation for execution by Donald to resign from his directorship in AMED Malaysia.

73.  Further arrangements were also made by Donald in Hong Kong at the end of April 2011 with the company secretary of AMED HK to prepare the necessary documents  for transferring the shareholding of Anthony, Edward and May in AMED HK into the names of either Donald or his wife.

74.  In early July 2011 Donald and his family went to Sabah for a visit arriving in Sandakan on 3 July 2011and finding only May at home. Father and Mother had gone to Singapore.

75.  The following day, May presented Donald with documents for his signature which included documents for the transfer or Donald’s 50,000 shares in AMED Malaysia and 200,000 shares in Ninja Malaysia. Amongst the documents, Donald noticed two memoranda in English purporting to be a record of the agreement reached between Donald and the rest of the Wong family. However, in one of the memorandum, an incorrect address was given to the Yuen Long Shop, but which was corrected in the other memorandum. This was the Written Memo. All the other members of the Wong family had already signed all the documents presented to Donald by May.

76.  Donald refused to sign the documents presented to him due to the fact that there were discrepancies between the documents so presented and the oral understanding reached between them since the oral understanding included firstly, obtaining a valuation of Donald’s shareholdings in the Malaysian Companies as well as a valuation of the Yuen Long Shop, and secondly, a further detailed agreement had to be made.

77.  However, at that time, Father phoned from Singapore and on the phone asked Donald to sign on the relevant documents first. In order to comply with Father’s request, Donald signed the documents but kept the documents himself without returning them to May with the intention that they would not take legal effect until the valuation had been done on Donald’s shareholdings in the Malaysian Companies and on the Yuen Long Shop after which Donald would then deliver those signed documents to Father and Mother and for them to take legal effect upon such delivery (‘the Conditions Precedent”).

78.  However, on the night of 4 July 2011, Donald discovered that all the documents except the Written Memo had been taken away from his bag and was missing.

79.  The following day, when asked by Donald, May admitted that she had taken the signed documents and had already sent them to Edward in Singapore by courier.

80.  Donald’s request for the return of the documents were ignored by May and Donald was concerned that he would be divested of his shareholdings in the Malaysian Companies before the Conditions Precedent could be met.

81.  On 11 July 2011 May and Edward had attempted to transfer Donald’s shareholding in the Malaysian Companies by submitting the stolen documents to the company secretary of the Malaysian Companies but were unsuccessful due to Donald’s prior request of “no transfer” made to the company secretary.

82.  Subsequently, Donald discovered that May and Edward had succeeded in getting Donald’s shareholding in the Malaysian Companies wrongfully transferred to the other members of the Wong family resulting in Father, Mother, Anthony, May and Edward unilaterally taking the benefits under the Written Memo before the Condition Precedents were met. Donald was entitled to and did elect to waive the breach of the Conditions Precedent.

83.  On an unknown date, Father and Mother transferred all of their shareholdings of 60,000 shares each in AMED Malaysia to Anthony, May and Edward equally, thus increasing the shareholdings of each of Anthony, May and Edward by 40,000 shares respectively. Since then, Anthony, May and Edward became the only shareholders of AMED Malaysia.

84.  On 1 April 2013, Anthony, pursuant to the February 2011 proposal, transferred his 2,500 shares in AMED HK to Donald and which was approved by Edward and May as directors of AMED HK on 25 June 2013. Since then, Donald became a 50% shareholder of AMED HK.

85.  Based on the above factual matrix, Donald submits that his counterclaim has a substantial connection to Hong Kong in that :

(a) The background leading to the Written Memo, which include Father’s attempts to purchase the Sheung Wan Shop, the Tai Kok Tsui Shop for Donald, culminating in the purchase of the Yuen Long Shop for Donald’s exclusive and rent free use as his clinic occurred in Hong Kong;

(b) Although the signing of the Written Memo took place in Sabah, much of the negotiations and preparations of documents for it took place in Hong Kong;

(c) The Written Memo was breached not by Donald, but by May and Edward when they transferred and registered Donald’s shares in the Malaysian Companies to the other members of the Wong family but failed to effect the transfer of the Yuen Long Shop to Donald either directly or by the transfer of their shares in AMED HK.

(d) If the defendants in the counterclaim had abided by the Written Memo, the transfer of the Yuen Long Shop (or the transfer of their shares in AMED HK) would have taken place in Hong Kong.

86.  It was also submitted by Donald that the reliefs and remedies claimed by Donald in his counterclaim can only be granted and properly enforced by the Hong Kong courts on the basis that if the Written Memo was valid and enforceable, Donald was primarily entitled to have the Yuen Long Shop transferred to him or his nominee either directly or by menas of the transfer of all the shares held in AMED HK by Edward and May to Donald or his nominee, alternatively the damages and loss suffered by Donald due to the failure or refusal to transfer the Yuen Long Shop or the shares of Edward and May to Donald or his nominees.

87.  On the other hand, if the Written Memo was not valid, binding or enforceable agreement, then the transfer of Donald’s shares in the Malaysian Companies should be set aside and restitution of same back to Donald, alternatively damages for loss suffered by Donald.

88.  In so far as the reliefs and remedy claimed by Donald is concerned, the Yuen Long Shop is a landed property in Hong Kong and the shares in AMED HK relates to a company incorporated in Hong Kong.

89.  Questions of title to land and land use rights are usually determined according to the law of the place where the land is situated. That is another reason why Donald’s counterclaim should be heard by the Hong Kong courts.

90.  Moreover, it was submitted that the Malaysian courts may not even have jurisdiction to order the transfer of shares in a Hong Kong company, but even if they do, such an order will still have to be enforced in Hong Kong. Therefore yet another reason why it is more convenient for the counterclaim to be heard in Hong Kong.

91.  As for the law governing the Written Memo, it was submitted by counsel for Donald that the subject matter of the Written Memo was primarily the Yuen Long Shop and that the shares of AMED HK being only secondary. That is so since Donald’s shares relating to the Malaysian Companies have already been transferred to his other siblings, those shares in the Malaysian Companies no longer figure as subject matter. In the circumstances, the only subject matter of the Written Memo, whether primary or secondary, are both so connected to Hong Kong that the governing law ought to be Hong Kong law, thus making it convenient for the Hong Kong courts to hear the matter.

92.  In relation to the criminal investigation ongoing in Malaysia and the defemation case brought by Edward and May in Malaysia, it was submitted that both those matters, though inter-related, the issues in both are totally irrelevant to Donald’s counterclaim.

93.  As yet, the Malaysian courts have not even granted leave for service out of jurisdiction of the defemation action against Donald and Donald has therefore not been served with any such claim.

94.  Where witnesses are concerned, the only real concern relates to Father and Mother due to their ages. It was submitted that both Father and Mother went on a cruise trip with Edward and his family to Singapore in November 2013 and there could be no good reason why they cannot come to Hong Kong for trial. Alternatively, if they do encounter physical difficulty, there is always video link technology to take their evidence. Apart from Father and Mother, the other witnesses should have no difficulty travelling to Hong Kong for trial.

95.  As for the documents which the Applicants say are mostly in Malaysia, firstly, it is submitted that those documents are not even identified by the Applicants. Secondly, it is said that most of the communication between the family members were done by email exchanges, text messages and direct telephone communications such that those documents should also be readily available in Hong Kong given the state of modern technology.

96.  In any event little weight should be given to mere location of documents. Moreover, there does not seem to be any challenges to the authenticity of documents in this case.

97.  It was further submitted by Donald that the Main Action by AMED HK against Donald and his wife is intrinsically connected with Donald’s counterclaim since it had to be deteremined first and foremost who is/are the real owner of the shares in AMED HK. That is a contention that is part of Donald’s defence to the Main Action as well as being an issue in the counterclaim.

98.  To split the counterclaim from the Main Action by staying the counterclaim to be tried in the Malaysian Courts will effectively mean a juridical disadvantage to Donald to properly defend himself against the Main Action for an account and enquiry because the counterclaim was formulated on the basis that all the shares in AMED HK beneficially belonged to Donald, such that no account from Donald is necessary in the first place.

99.  Moreover, splitting the Main Action and the counterclaim will be inefficient and costs wasting when both can and ought to be dealt with in one trial in Hong Kong.

100.  If the counterclaim is tried in Hong Kong, that would also obviate the necessity and difficulty of having to enforce an order of the Malaysian Court in Hong Kong by obtaining a reciprocal order under the Foreign Judgments (Reciprocal Enforcement) Ordinance Cap 319.

101.  It is therefore submitted on behalf of Donald that the advantages of the Hong Kong courts is to determine a dispute involving a property situated in Hong Kong, and/or the transfer of shares in a Hong Kong company and whose judgment can be enforced in Hong Kong without difficulty or inconvenience. There will be no multiplicity of proceedings and Donald and his wife are already residents here.

102.  As against those advantages, the disadvantage is but minimal and which entail firstly, Father and Mother having to come to Hong Kong or give evidence via video link, and secondly, some of the documents including the documents of transfer and bought and sold notes relating to the Malaysian Companies are kept in Malaysia.

DECISION

103.  In coming to a ruling in this matter, the first thing to note is that the application for a stay of the counterclaim is brought by the Applicants which do not include AMED HK, being the plaintiff in the Main Action.

104.  Indeed, AMED HK, separately represented, did not even see fit to appear at the hearing on this application for a stay of the counterclaim by the Applicants on the basis that it was neutral to that application and was prepared to abide by any order which the court makes on the application for stay.

105.  There is no dispute between the Applicants and Donald as to the legal principles governing forum nonconveniens stated above. What is in dispute between them is the application of those legal principles to the present case.

106.  The first main contention between the Applicants and Donald in relation to this application relates to the applicable law.

107.  It was the contention by counsel for Donald that the applicable law in so far as the counterclaim goes is the lex situs, on the basis that subject matter in dispute where the Written Memo is concerned in primarily the Yuen Long Shop being a landed property in Hong Kong, which Donald says was at all times intended to be given to him (Donald) by Father. It was also submitted that the performance of the Written Memo, when properly understood, would involve primarily the transfer of the Yuen Long Shop to Donald, the transfer of the shares in AMED HK (to achieve the same effect) being only secondary. That contention was based on the wording employed in the Written Memo in which it was stated:

“In March 2011, [Donald] proposed to the five other Shareholders to have sole ownership of [the Yuen Long Shop] for himself. In return, Donald will transfer his existing share holdings in AMED Enterprise Sdn Bhd and Ninja Enterprise Sdn Bhd to the five other Shareholders named above. The five other Shareholders – [Father], [Mother], [Anthony], [May], [Edward] agreed to [Donald]’s above proposal.”

108.  I am unable to accept that contention by counsel for Donald that the Yuen Long Shop is the primary subject matter of the Written Memo for the simple reason that AMED HK was not a party to the Written Memo.

109.  Donald cannot run away from the fact that the registered owner of the Yuen Long Shop is AMED HK. Therefore if AMED HK was not a party to the Written Memo (that much being conceded by Donald’s counsel), even given the fact that the wording in the Written Memo being what it is, still could not have entailed any agreement for the transfer of the Yuen Long Shop to Donald. At best, the other parties to the Written Memo could only have agreed to transfer each of their respective shareholdings in AMED HK to Donald, but they had no locus standii to agree to the transfer of the Yuen Long Shop without AMED HK being a party to the Written Memo.

110.  Counsel for Donald sought reliance on the decision in Tsang Tat Investment v Hong Kong Tsang Tat Investment Co. Ltd. unrep., (HCA 889 of 2011) by Deputy High Court Judge Au Yeung, as she then was. In that case, the court had to decide land rights of a piece of land situated in Hong Kong and it was held that questions of title and injunction against infringement of land use rights are best determined where the land is situated.

111.  The case of Tsang Tat Investment is distinguishable on facts from the present case, since, for the reasons given above, the Yuen Long Shop cannot be the subject matter of the Written Memo, neither is the court called upon to decide land use rights of the Yuen Long Shop in Donald’s counterclaim.

112.  Counsel for Donald also seeks to rely on paragraph 6.090 of  Johnston’s The Conflict of Laws in Hong Kong, (2^nd Edition) where it is stated:

“6.090 Where the entire subject matter of the litigation concerns tangible property which is entirely in Hong Kong, then in practice it is suggested that Hong Kong will be regarded as the forum conveniens absent truly exceptional circumstances. Other matters must be judged on a case-by-case basis as usual. In particular, it is suggested that the technical point that the situs of intangible property is in Hong Kong is unlikely, it is suggested, to be of real significance if the substantial links of the case lie elsewhere.”

113.  In the same way, that citation above cannot assist Donald since the Yuen Long Shop cannot be the subject matter of the Written Memo and therefore of Donald’s counterclaim.

114.  Once that premise is reached, the contention by the Applicants that the counterclaim, being a dispute within a Malaysian family, relating to the performance of the Written Memo executed by the respective parties in Malaysia appears to take on an attractive complexion.

115.  However, that contention by the Applicants is predicated upon splitting the Main Action from Donald’s counterclaim, with the Main Action to be heard and determined by the Hong Kong courts while staying the counterclaim for it to be heard and determined by the Malaysian Court.

116.  It is this splitting of the counterclaim from the Main Action which caused me the greatest difficulty in deciding this application.

117.  As a general rule, a claim and a counterclaim should be tried together.

118.  The lynch pin of this application by the Applicants is that the issues of Donald’s counterclaim are wholly distinct and separate from the issues in the Main Action and therefore severable from it.

119.  When one looks only at the main issues involved, as they were summarized by counsel for the Applicants, it may appear that the issues in the counterclaim are wholly separate and distinct from the issues in the Main Action.

120.  However, it cannot be denied that there are underlying background to both the Main Action and the counterclaim which is firstly, the allegation by Donald that at all times, the intention of Father was that Father wanted to give a property to Donald for use as a clinic which ultimately was the Yuen Long Shop. This is not admitted by the Applicants and therefore in issue. It would also appear that this is one of the defence of Donald in the Main Action.

121.  Secondly, it is also alleged by the Applicants that the shares of AMED HK were all held in trust for Father and would not be distributed to the children until Father’s death. This is not admitted by Donald who says that those shares had been given outright to each of Anthony, May, Edward and Donald and that was the reason why Anthony has transferred his shares in AMED HK to Donald since Anthony did not wish to be involved in this dispute.

122.  Given that these matters have been put in issue, when the Main Action goes to trial in the Hong Kong courts, it is quite inconceivable that the plaintiff in the Main Action will not call Father as a witness, since Father alone is the only person who can rebut Donald’s allegation that the Yuen Long Shop was intended by Father to be a gift to him.

123.  Should that be the case, it would water down that part of the submission by the Applicants that the counterclaim, if heard by the Malaysian Court, it would convenience Father to give evidence in the Malaysian Court and not have to come before the Hong Kong court.

124.  Moreover, once it is recognized that there is an underlying background which is common to both the Main Action and the counterclaim, it does not make sense for evidence relating to that underlying background to be given twice over, once in the courts in Hong Kong on the Main Action, and again in the Malaysian Court on the counterclaim. Indeed, that underlying background being a significant nexus between the Main Action and the counterclaim, that would be a very strong reason for the court refusing to sever the Main Action from the counterclaim and to have each of them tried in different jurisdiction.

125.  One other matter I take into consideration is that on the pleadings as they now stand, the shares in the Malaysian Companies are no longer subject matter of dispute in this litigation, and Donald no longer pursue any claim for them in the counterclaim. However, the shares in AMED HK are still the subject of dispute, both in the Main Action as well as in the counterclaim.

126.  There is no and can be no dispute that the Main Action is to be heard by the Hong Kong court since the subject matter of the Main Action is the Yuen Long Shop, a landed property situate within the jurisdiction of the Hong Kong court.

127.  It would therefore make sense for the Hong Kong court to try both the Main Action and the counterclaim together since any order made by the courts in Hong Kong in relation to the shares of AMED HK can simply be enforced in Hong Kong.  On the other hand, an order of the Malaysian Court relating to the shares of AMED HK would need to be enforced in Hong Kong under the Foreign Judgments (Reciprocal Enforcement) Ordinance Cap 319.

128.  Lastly, the fact that some documents are located in Sabah, Malaysia is not, per se, a matter for which great weight can be attached in coming to a decision on this application. Given modern technology, those documents or copies of them can be made available even if the trial is to take place in the Hong Kong court.

129.  For the above reasons, I come to the conclusion that it would not be appropriate or just for the counterclaim to be severed from the Main Action and tried separately and that Applicants have failed to show that the Hong Kong court is not the natural and appropriate forum for trial but that the Malaysian Court is clearly and distinctly more appropriate than the Hong Kong courts. 

130.  Accordingly, the application by the Applicants is dismissed.

Costs

131.  There will be a cost order nisi that the cost of and occasioned by this application be paid by the Applicants to Donald to be taxed if not agreed and to be paid forthwith.