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HCA 194/2017
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 194 OF 2017
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BETWEEN
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MADISON COMMUNICATIONS PRIVATE LIMITED |
1st Plaintiff |
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MOMS OUTDOOR MEDIA SOLUTIONS PRIVATE LIMITED |
2nd Plaintiff |
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ENTRUST COMMUNICATIONS PRIVATE LIMITED |
3rd Plaintiff |
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and
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LE ECOSYSTEM TECHNOLOGY INDIA PRIVATE LIMITED |
1st Defendant |
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LE CORPORATION LIMITED |
2nd Defendant |
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Before: Deputy High Court Judge William Wong SC in Chambers
Date of Hearing: 25 August 2017
Date of Decision: 30 August 2017
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DECISION
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1. This is the application of Le Corporation Limited, a Hong Kong incorporated limited company (“the 2nd Defendant”) by summons dated 12 April 2017, for the following orders:
(1) A declaration that in the circumstances of the case this court should not exercise any jurisdiction it may have against the 2nd Defendant on the following grounds:
(a) All parties have agreed that any dispute (which formed the subject matter in these proceedings) shall be exclusively adjudicated by the courts of Bangalore in India, thereby ousting the jurisdiction of the Hong Kong Court.
(b) Considering the best interests and convenience of the parties to the present proceedings, the proceedings should be conducted in another court, namely the courts of Bangalore in India.
(c) In any event, this court ought to stay the present proceedings pending the outcome of the dispute between the Plaintiffs against the 1st Defendant under the Marketing Service Agreement dated 17 February 2016 (i.e. the Agreement as defined in §4 of the Statement of Claim) which, by reason of the exclusive jurisdiction clause therein, must be resolved by the courts of Bangalore in India, to avoid any inconsistent findings.
(2) Further and/or in the alterative, an order staying all further proceedings in this action against the 2nd Defendant and an interim stay of proceedings pending the determination of the present application.
BACKGROUND
2. The Plaintiffs were and are private limited companies registered in India. They carry on businesses of providing media services to corporations. Particularly, the 1st Plaintiff provides traditional advertising services, the 2nd Plaintiff provides outdoor advertising services, and the 3rd Plaintiff supports the 2nd Plaintiff’s business by arranging the printing of the 2nd Plaintiff’s outdoor advertisements. The Plaintiffs are related through a common majority shareholder.
3. The 2nd Defendant carries on a business of providing online entertainment and selling smart devices under the “Le” brand. The 2nd Defendant is and was at all material times the 99% majority shareholder of the 1st Defendant, and the Defendants share the same ultimate beneficial owner. Mr Mok Chui Tin was at all material times a director of the Defendants.
4. The 1st Defendant was formerly known as Le Ecosystem Technology Private Limited. It is a private limited company registered in India and carries on a business of marketing and selling products such as smart phones under the “Le” brand in India.
5. By a Marketing Service Agreement between the 1st Plaintiff and the 1st Defendant (signed by Mr Mok for and on its behalf) dated 17 February 2016 (“the MSA”), the 1st Defendant agreed to engage the 1st Plaintiff to provide to the 1st Defendant media services, upon the terms of the MSA. It is common ground that the 2nd Defendant is not a signatory to the MSA. The MSA provides, inter alia, that:
“ 12.6 This Agreement shall be governed by the laws of India and the courts at Bangalore shall have exclusive jurisdiction for any dispute arising out of or under this Agreement.
21.7. This Agreement can be modified, supplemented or amended only by a written agreement executed by both parties.”
6. In or around March 2016, a request was made by the 1st Defendant that its parent company, the 2nd Defendant would make payments to the 1st Plaintiff instead. By an undertaking provided by the 2nd Defendant to the 1st Plaintiff, signed by the 2nd Defendant (by Mr Mok for and on its behalf) and accepted by the Plaintiffs by conduct (the “Payment Agreement”), it was agreed that, in consideration of the 1st Plaintiff providing the media services, the 2nd Defendant would settle the bills of the 1st Plaintiff. The Payment Agreement provides:
“ This is to inform you that we are desirous of sponsoring an advertising campaign for our company in India, through our subsidiary “LE ECOSYSTEM TECHNOLOGY PRIVATE LIMITED”, a company incorporated under the provisions of Indian Companies Act, 1956 and having its registered office at 1005, SYNERGY, Corporate Road, Near Vodafone House, Prahaldnagar, Ahmedabad, Gujarat-380015, (hereinafter referred to as “INDIAN VENTURE”)
By virtue of and in furtherance of this arrangement, we wish to further inform you that:
1. SCOPE OF WORK:
Pursuant to the agreement entered into between INDIAN VENTURE and MADISON dated 17th February 2016 (“Agreement”), MADISON shall provide its services in relation to media printing, media negotiations, implementation planning, media analysis, and purchase of space and time on various media including Print, TV, Radio, Digital, Outdoor and Cinema and such other media as laid out in detail in the Agreement (collectively the “Services”)
2. In consideration of MADISON to provide the above Services, MADISON shall issue the bills which is not disputed by us and is not subject to any of our queries in relation thereto (“Bills”) for the advertisement expenditure for campaigns as may be instructed by INDIAN VENTURE directly in writing and we shall make payment to the Bills as provided for the Services completed by MADISON and duly approved by INDIAN VENTURE.
3. We shall make payments from our account, in respect of the said Bills, within 15 (fifteen) working days from the date of receipt of such Bills or at least 15 working days prior to the date on which MADISON has to release payments to the Media Vendors (as the case may be), whichever is earlier.”
7. Pursuant to and in reliance of both the MSA and the Payment Agreement, the Plaintiffs had duly provided the Services. In accordance with the Payment Agreement, the Plaintiffs submitted invoices to the Defendants. The 2nd Defendant made payments respectively on 8 February 2016 (INR103,786), 4 August 2016 (INR32,995,644), 22 August 2016 (INR42,960,637.40), 25 August 2016 (INR53,075,620.90) and 9 September 2016 (INR132,095,640.70) to the Plaintiffs.
8. The Plaintiffs’ case is that in breach of the MSA and the Payment Agreement, the Defendants have failed to pay to the Plaintiffs any of the sums requested in the invoices set out in Attachment I of the Statement of Claim (“Outstanding Invoices”). The balance of the sums due and unpaid under the Outstanding Invoices is in the total sum of INR392,471,885 (“Outstanding Balance”), exclusive of interest of 18% per annum for every delayed day of payment.
9. It is the Plaintiffs’ case that the Defendants have no credible defence to their claims and indeed the 1st Defendant has even admitted liability to pay the Outstanding Balance. This can be seen from a series of correspondence between the parties:
(1) In an email dated 20 June 2016 from Mr William Hong of the 2nd Defendant to Mr Murthy of the 1st Plaintiff entitled “Le Eco Outstanding payments — options”, it is stated that:
“ As far as the payments are concerned, we are lining up the funds so that our AP team would be taking care of outstanding bills shortly. Once we have the receipt of transfer, we would definitely let your treasury team know.”
(2) In an email dated 22 June 2016 from Mr Murthy to Mr Hong, it is stated:
“ On a separate note, we are concerned for the outstandings of INR71 million in Madison Communications Private limited, which are due for payment to Media Vendors within the next 1 week. Our cash flows will be severely impaired if the amount is not received in time. Please look into.
We have also not heard of the clearance of the Out of home outstanding of INR66 million.
Please let us have the payment details on all the above. Will it all be paid from India as mentioned earlier.”
(3) In an email dated 8 July 2016 from Mr Hong to Mr Murthy, it is stated:
“ As far as the outstanding payment, AP team is arranging it at the moment. Your team should be getting it soon.”
(4) In an email dated 23 July 2016 from Atul Jain of the 1st Defendant to Sam Balsara of the 1st Plaintiff, it is stated:
“ I really regret the delay in payments from our side. I know this would be creating lot of financial pressure for you…
The delay is due to our internal process logjam. But it is being resolved, and we hope to make payments in a short period of time. I request you to bear with us for some time please.”
(5) In an email dated 4 August 2016 from Mr Hong to Mr Murthy and Sam, it is stated:
“ Understand the 0.5M would not be fully sufficient, we are planning to make another wire transfer early next week. Due to our internal procedure deadlock here, we only manage to come up with 0.5M. Please give us some time. We are well aware of your difficulty as well.”
(6) In an email dated 22 August 2016 from Atul Jain to Sam Balsara, it is stated:
“ Regret the continued delay in overdue payments, which had been due to our internal processes.
However, this is going to be cleared soon, and we expect to make substantial part of the overdue payments by next week. Kindly bear with us for some more time.”
(7) In an email dated 8 September 2016 from Mr Hong to Mr Murthy, it is stated:
“ We are intended to make another round of payment by month end.”
(8) In an email dated 23 September 2016 from Mr Hong to Mr Murthy, it is stated:
“ We are arranging the fund transfer internally at the moment. Once we have to proof of transfer and we would definitely notify you. Please give us a few more days! We would try to keep our account current whenever possible.”
(9) In an email dated 28 September 2016 from Mr Hong to Mr Murthy, it is stated:
“ We are going thru some internal payment procedures deadlock at the moment. We would get back to you shortly on the remittance amount.”
(10) In an email dated 14 October 2016 from Mr Murthy to Mr Hong, Mr Kesavan and Mr Shrinath Saralya, it is stated:
“ Please refer to the telephonic conversation with Mr Hong a few days ago. We are still awaiting remittance of the overdues. The latest position is given below, including Overdue interest of Rs 1.14 crores. Please note it is no longer possible for us to sustain this pressure on our Cash flows. Despite assurance of clearance in the last week of September, no payment is received by us till now.”
(11) In a letter dated 15 November 2016 from Atul Jain to Mr Murthy, it is stated:
“ This refers to our team’s telecom last week on current outstanding, and our sincere efforts to reach a mutually acceptable solution.”
10. Importantly, in a minutes of meeting held on 21 November 2016 at 10:30 am at Hotel Le Meridien, Gurgaon, NCR between Advertising Agencies Association of India (AAAI) and LeEcosystem Technology Private Limited regarding outstanding payment to Madison Communication Private Limited, it is clearly stated:
“ Mr Atul Jain confirmed that he agrees that the amount of US$6.348 million is payable to Madison Communications. In this connection Mr Jain stated that delay has occurred due to ambitious expansion plan of their company which has resulted in the cash crunch, which is a temporary phenomenon and things will improve soon. Now their company is restructuring the business to ensure that their business plan is in line with financial commitments. Regarding payment plan, he stated that disbursements are made from China. He will impress upon the concerned persons in China to send the commitment letter and release the above amount as early as possible, but he did not indicate a clear date.” (Emphasis added.)
11. Mr Ng, for the Plaintiff, submitted that this is a clear admission of liability on the part of the 1st Defendant. I agree. It is clear to me that in view of the long period of time which overdue payments have remained unpaid, the Plaintiffs resorted to trade associations for resolution. There was an email dated 4 November 2016 from Gaurav Chopra, vice-president of the Internet and Mobile Association of India to Mr Manish Aggarwal which stated:
“ Your company has some outstanding payments due to your agency Madison. The IAMAI-AAAI Committee felt that you might not be aware of the payment delays and therefore decided that we should write and apprise you of this situation. Attached is a joint letter from IAMAI-AAAI and the detailed statement on the outstanding dues.”
12. On 7 November 2016, Mr Manish Aggarwal replied to say:
“ Thanks for your email, we are aware of the situation at hand and are closely working with the Madison team in settling the same on priority.”
13. In a letter dated 3 January 2017 from the 1st Defendant to Mr Vikram and Mr Sam of the 1st Plaintiff, it is stated:
“ We discussed last week with Vikram, and basis our internal expected funds situation, please consider the following schedule of payments to reach some conclusion mutually acceptable to both of us.
Le Eco will commence paying Madison on a monthly basis commencing February 2017 at 1 Musd per month, till such the entire liability is settled.
All the payments will be duly reconciled in terms of the contractual agreement and both Finance teams will agree on the dues. Interest on the dues to be waived by Madison.
We thank you for the patience you have demonstrated and the support you have extended over this period and we certainly hope to recommence business engagements once this current financial hurdle is cleared.”
14. The Defendants have indeed made substantial partial payments to the Plaintiffs from March to September 2016, in the significant sum of INR731,513,732. More than 80% of the payments received came from the 2nd Defendant. The 1st Defendant also settled some of the Plaintiffs’ outstanding bills. However, there is still an outstanding balance of INR392,471,886 and interest.
15. The Plaintiff therefore commenced this action on 25 January 2017 and the 2nd Defendant being a Hong Kong company was served as of right. While the 1st Defendant is named as a party, the writ of summons has not been served on the 1st Defendant. Mr Ng, for the Plaintiffs, informed this court that the 1st Defendant is widely rumoured to be in dire financial conditions and does not appear to be worth suing. No action has been brought against the 1st Defendant outside Hong Kong, though a letter of demand was issued by Messrs Khaitan & Co, to the 1st Defendant on 16 February 2017.
16. On 12 April 2017, the 2nd Defendant took out the present summons pursuant to Order 12, rule 8 seeking a declaration that the courts in this jurisdiction should not exercise jurisdiction in relation to the 2nd Defendant because:
(1) The 2nd Defendant can rely on the jurisdiction agreement between the Plaintiffs and the 1st Defendant which confers exclusive jurisdiction on the courts in Bangalore;
(2) The claims against the 2nd Defendant must be resolved together with the claims against the 1st Defendant. Mr Chang, for the 2nd Defendant, submitted that the Plaintiff’s claims against the 2nd Defendant is parasitic on their claims against the 1st Defendant. It is submitted that as the claims against the 1st Defendant have to be resolved in the courts of Bangalore, the claims against the 2nd Defendant should also be resolved in Bangalore. Alternatively, it is the 2nd Defendant’s case that this action ought to be stayed pending the resolution of the disputes under the MSA between the Plaintiffs and the 1st Defendant in Bangalore.
(3) The Bangalore court is the more convenient forum albeit that the 2nd Defendant, a Hong Kong limited company, was served as of right.
EXCLUSIVE JURISDICTION CLAUSE
17. There is no dispute that the exclusive jurisdiction clause is applicable to disputes between the Plaintiffs and the 1st Defendant. The crucial issue is whether the 2nd Defendant can rely on the exclusive jurisdiction clause to which it is not a signatory. Mr Chang, for the 2nd Defendant, submitted that all parties have agreed that the dispute in the present action shall be exclusively adjudicated by the courts of Bangalore in India, thereby ousting the jurisdiction of the Hong Kong court.
18. Mr Chang submitted that the parties treated the MSA and the Payment Agreement as one composite agreement and hence the 2nd Defendant is a party to the MSA and can rely on the exclusive jurisdiction clause. He referred to an email dated 30 May 2016 from Mr Murthy to Mr Hong which stated:
“ 1. We can have a revised arrangement with effect from 1st April 2016, as a modification to the existing agreement…
2. To enable us raise the bills on Le Corporation (Hong Kong), we will need to execute 2 supplemental documents as per attachments. Please let us have your comments.” (Emphasis added.)
19. The two supplemental documents are the Payment Agreement and an undertaking from the 1st Defendant (“the Undertaking”).
20. The 2nd Defendant also relied on the following two emails:
(1) In an email dated 8 July 2016 from Mr Hong to Mr Murthy, it is stated:
“ Our authorized signer has signed off these tri-patriate agreements with attached softcopy for your reference.”
(2) In an email dated 12 July 2016 from Mr Hong to Mr Murthy, it is stated:
“ Would get the company stamp to executed the tri-agreements on our side.”
21. However, both Mr Ng for the Plaintiffs and Mr Chang for the 2nd Defendant agreed that as to the issue of whether the 2nd Defendant can rely on Clause 12.6 of the MSA, it is an issue to be determined in accordance with the law governing the MSA, which is Indian law. It is, thus, not right for this court to apply Hong Kong law to determine this very issue. In Briggs, Civil Jurisdiction and Judgments 6th Ed, at §4.43, it is stated:
“ The common law took it as settled law that a choice of court clause, like any other term in a contract, was interpreted by the proper law of the contract, as it was one contractual promise among many.”
22. Mr Chang, for the 2nd Defendant, submitted that the proper law of the Payment Agreement to which the 2nd Defendant is a party is Indian law. Mr Ng, for the Plaintiffs submitted that the starting point must be that the 2nd Defendant is not a party to the MSA and the burden rests on the 2nd Defendant, on credible evidence, to persuade this court that it is, under Indian law, a party to MSA or can somehow derive benefit from the exclusive jurisdiction clause under the MSA. I agree that this is the approach this court should adopt.
23. Hence, both parties have adduced Indian law expert opinions on this particular issue. The Plaintiff’s experts, Mr DK Deshmukh, a former judge of the Bombay High Court and Mr Gaurav Joshi, Senior Advocate of the Bombay High Court are of the opinion that:
(1) The MSA was signed between the 1st Plaintiff and the 1st Defendant. The 2nd Defendant is simply not a party to the MSA, and is not entitled to rely on the jurisdiction clause.
(2) This is particularly so in view of clause 12.7 (variation to be in writing) and 12.10 (entire agreement) of the MSA.
(3) In contrast, the Payment Agreement binding on the 2nd Defendant is not governed by any jurisdiction clause.
(4) As a matter of fact, the 2nd Defendant was not in the picture at the time when the MSA was signed. In the premises, the 2nd Defendant cannot be covered by the jurisdiction clause in the MSA.
24. On the other hand, the 2nd Defendant relied on the expert opinion of Mr Promod Nair dated 30 March 2017 (“the Opinion”) where he, at paragraph 24, opined that:
“ Further, the MSA, the Payment Agreement, the Reimbursement Agreement and the Undertaking would likely constitute a ‘composite transaction’ under Indian law.” (Emphasis added.)
25. Mr Promod Nair then referred to the case of Chloro Controls India (P) Ltd v Severn Trent Water Purification Inc (2013) 1 SCC 641 in support. At paragraph 25 of the Opinion, it is stated:
“ In the above decision, even non-signatories to the arbitration agreement in the principal agreement were held to be bound by it because they were signatories to agreements which originated from the principal agreement. This reasoning could apply to a jurisdiction clause contained in a principal agreement such as the MSA. It is evident that the Payment Agreement and the Reimbursement Agreement originated from the MSA or are closely interlinked to the MSA, and therefore parties to the Payment Agreement and the Reimbursement Agreement may be considered to be bound by the jurisdiction clause in the MSA, especially when the Payment Agreement and Reimbursement do not contain any provision to the contrary. These documents would likely to be construed by an Indian court, applying Indian law, to be part of the same transaction and intrinsically connected to the MSA with the services as provided for under the MSA to be provided by Madison in consideration for payment to be made by Le Corporation.” (Emphasid added.)
26. First, I notice that Mr Promod Nair was very cautious in expressing his opinion that parties to the Payment Agreement and the Reimbursement Agreement may be considered to be bound by the jurisdiction clause in the MSA.
27. Secondly, Mr Ng is right in pointing out that the one authority that Mr Promod Nair relied on to support his opinion is a case concerning an arbitration clause rather than an exclusive jurisdiction clause. In that case, it was held that a non-signatory or third party can be subjected to arbitration without his consent, but only in exceptional circumstances. I agree that it involved the construction of a particular provision under an Indian statute, namely, section 45 of Arbitration and Conciliation Act, 1996. It was further held in that case that even non-signatory parties can pray for and be referred to arbitration provided they satisfy the prerequisites under sections 44, 45 and Schedule I. A heavy onus lies on a party to show that, in fact and in law, it is claiming through or under the signatory party as contemplated under section 45. At p 645, it is stated:
“ In Section 45, the expression “any person” clearly refers to the legislative intent of enlarging the scope of the words beyond “the parties” who are signatory to the arbitration agreement. Of course, such applicant should claim through or under the signatory party. Once this link is established, then the court shall refer them to arbitration. The use of the word “shall” would have to be given its proper meaning and cannot be equated with the word “may”, as liberally understood in its common parlance. The expression “shall” in the language of Section 45 is intended to require the court to necessarily make a reference to arbitration, if the conditions of this provision are satisfied. However, the right to reference cannot be construed strictly as an indefeasible right. One can claim the reference only upon satisfaction of the prerequisites stated under Sections 44 and 45 read with Schedule I of the 1996 Act. Thus, it is a legal right which has its own contours and is not an absolute right free of any obligations/limitations.”
28. Mr Gaurav Joshi, expert for the Plaintiffs, opined that the case of Chloro Controls India (P) Ltd v Severn Trent Water Purification Inc is clearly distinguishable and is not applicable to the present case. At p 25, he stated:
“ On a perusal of the judgment, it is clear that the same has been rendered in arbitration proceedings under Section 45 of the Arbitration and Conciliation Act, 1996, under Section 45 of the Arbitration and Conciliation Act, 1996 (relating to reference of disputes in Foreign Arbitrations), is based on the specific language of that section and in the facts and circumstances stated therein. All that it provided was that in those factual circumstances, a party which was otherwise not a party to an Arbitration could be relegated to Arbitration. The said principles were not even extended to Section 8 of the Arbitration and Conciliation Act 1996 relating to domestic arbitrations as prevailing then. In any event, the said judgment has not been extended to interpretation of other terms of a contract and more particularly clauses relating to exclusive jurisdiction clauses or ouster of jurisdiction clauses. The principles laid down in the aforesaid judgment have been distinguished by the Hon’ble Bombay High Court in the case of Housing Development and Infrastructure Limited vs. Mumbai International Airport Pvt Ltd & Ors. where it was observed in paragraph 21 that, there could be several distinct agreements required to be separately performed yet all directed towards a common objective. The same could not be legally or conceptually interpreted to constitute a situation of a mother or composite agreement, the performance of which depends on some subsidiary or ancillary agreement.
Significantly, unlike in the case of interpretation of Arbitration clauses, clauses relating to interpretation of clauses ousting jurisdiction of courts have to be strictly construed, as laid down in paragraph 23 [reported in (2011) 7 SCC 463] Thus, the principles laid down in Chloro Controls India (P) Ltd v Severn Trent Water Purification Inc cannot be extended to interpretation of clauses ousting jurisdiction of courts.”
29. In response, a further expert opinion dated 14 August 2017 was given by Mr Promod Nair (“Further Opinion”) where he stated:
“ 28. Although the decision in Chloro Controls was rendered in the context of section 45 of the Arbitration and Conciliation Act 1996, there is no reason why the principles cannot be applied more widely. The decision itself does not state or otherwise indicate that the findings therein are confined to the facts and circumstances of the case. The principles laid down by the court regarding when a transaction may be treated as a composite transaction are of general application and should be treated as laying down general principles of Indian law in this regard. The rationale for enabling joinder of disputes arising under related agreements into a single arbitration or into a single proceeding before a national court are common – they are to avoid multiplicity of proceedings and conflicting decisions. These objectives are widely followed by Indian courts.” (Emphasis added.)
30. Mr Ng, understandably, submitted that given that Mr Promod Nair opined that the principles from Chloro Controls can be applied more widely and are widely followed by Indian courts, he should be able to produce more cases in which those principles were applied outside the context of arbitration. No such cases, however, have been cited to demonstrate how the principles from Chloro Controls were applied in solving challenges to courts’ jurisdiction on the basis of an exclusive jurisdiction clause. The only other case that Mr Promod Nair cited was Olympus Superstructures Pvt v Meena Vijay Khetan which is also an arbitration case.
31. Mr Chang, for the 2nd Defendant, submitted that his primary case is that the MSA and the Payment Agreement and the Undertaking are in fact one agreement. As such, the 2nd Defendant is entitled to rely on the exclusive jurisdiction clause in the MSA.
32. While such an argument is certainly open to the 2nd Defendant, the burden of proof rests on the 2nd Defendant to adduce sufficient and credible Indian law evidence to prove that the MSA and the Payment Agreement and the Undertaking constitute one agreement.
33. In this regard, it is well settled that the court is entitled to and indeed duty bound to use its legal training to scrutinize the primary foreign sources and is entitled to reject foreign expert evidence if the relevant expert has “never applied his mind to the real point of law”, or “if the matters stated by the expert did not support his conclusion according to any stated or implied process of reasoning” (See Newmark Capital Corp Ltd v Coffee Partners Ltd [2007] 1 HKLRD 718, at §49 per Recorder Paul Shieh SC; Shenzhen Development Bank v New Century International (Holdings) Ltd HCA 2976/2001, unreported, 31 July 2002, at §§25 – 27, per Deputy High Court Judge Lam (as he then was); Dicey, Morris & Collins: The Conflict of Laws 15th Ed, 2012, at §9-017)
34. On the evidence before this court, I am of the view that the 2nd Defendant fails to discharge its burden that under Indian law, the MSA and the Payment Agreement are a composite agreement and as such the 2nd Defendant is entitled to rely on the exclusive jurisdiction clause in the MSA. I am of the view that the Plaintiffs’ experts evidence are to be preferred. The 2nd Defendant’s expert, Mr Promod Nair mainly relied on the case of Chloro Controls. I agree that Chloro Controls does not support the conclusion that, under Indian law, the MSA, the Payment Agreement, the Reimbursement Agreement and the Undertaking would constitute one ‘composite transaction’. Indeed, the 2nd Defendant’s expert, Mr Promod Nair did not go so far as to suggest that the MSA and the Payment Agreement constitute one ‘composite agreement’. As mentioned in Paragraph 25 above, he opined that “parties to the Payment Agreement and the Reimbursement Agreement may be considered to be bound by the jurisdiction clause in the MSA…”
35. Mr Ng, for the Plaintiffs, also relied on Clause 12.7 of the MSA and submitted that as the Payment Agreement was not signed by the 1st Defendant, there was no variation or amendment of the MSA. Mr Chang, for the Defendant, referred to the Undertaking which was signed by the 1st Defendant to say that the Undertaking constitutes an amendment or a modification in writing by the 1st Defendant.
36. However, in Mr Promod Nair’s Opinion, whilst at paragraph 14(ii), he opined that “However, the Payment Agreement contemplates that payment for services under the MSA be made by Le Corporation. This necessarily implies that the Payment Agreement seeks to amend a term of the MSA”, in paragraph 16, he opined that:
“ Clause 12.8 of the MSA states that the failure of either party to require performance of any provision of the MSA shall not affect such party’s right to full performance thereof at any time thereafter. It further provides that no waiver shall be effective unless in writing and duly executed by the concerned party. In view of clause 12.8, read with clause 12.7 of the MSA which requires an amendment to the MSA to be executed by both parties, the Payment Agreement may not be considered as having the effect of amending the MSA.” (Emphasis added.)
37. Mr Promod Nair did not consider whether the effect of the Undertaking coupled with the Payment Agreement would have the effect of amending the MSA. It follows that the 2nd Defendant is not entitled to rely on the exclusive jurisdiction clause in the MSA to which it is not a party. In the Payment Agreement to which it is a party, there is no exclusive jurisdiction clause. Hence, the beginning and end of the analysis is that the 2nd Defendant is not a party to an agreement which carries with it an exclusive jurisdiction clause.
38. Finally, Mr Ng, in his learned, and well-researched submission, also referred this court to the case of Re Team Y & R Holdings Hong Kong Ltd [2016] 3 HKLRD 778, Deputy High Court Judge Le Pichon at §§38, 41 – 43 and 47 said:
“ 38. The question that arises in the present case is whether on the assumption that the petitioner is bound by the jurisdiction clause vis-à-vis Cavendish, he should not be allowed to bring the petition against the remaining three respondents namely the Company, Y&R and WPP who are not parties to the SPA.
41. Teare J reviewed those authorities in Morgan Stanley & Co International Plc v China Haisheng Juice Holdings Co Ltd [2010] 2 All ER (Comm) 514 (at [17]-[19]). He concluded (at [21-23]) that the true construction of the exclusive jurisdiction clause must depend upon its own terms. The key question is whether it would reasonably be understood that the parties to the agreement had promised each other that claims arising out of the agreement would be brought in England regardless of whether the claims were against the other or a non-party to the agreement.
42. He also considered the argument that rational businessmen are likely to have intended that all disputes arising out of or connected with the relationship into which they had entered would be decided by the same court. It was an approach that Lord Hoffmann had adopted as a starting point for the construction of an arbitration clause in Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951 at [13].
43. Teare J noted the fact that such an approach would result in “considerable imbalance between a party and a non-party” in that:
(i) there would be an absence of reciprocity in as much as the party would have to sue the non-party in the designated forum but the non-party would not be obliged to do so; and
(ii) the designated forum may not have jurisdiction over the non-party since it had not submitted to the jurisdiction or waived any objections to jurisdiction.
On the facts of the case before him, Teare J concluded that the parties did not promise each other that claims against non-parties could only be brought in England.
47. When those matters are coupled with the considerations of “imbalance” between a party and a non-party discussed in the Morgan Stanley case, they support a construction that the parties to the SPA did not promise each other that claims arising out of the SPA were to be submitted to the English court regardless of whether the claims are against the other or a non-party. In my view, the jurisdiction clause is not a bar to a party brining proceedings against non-parties in a jurisdiction other than England.”
39. The learned Deputy High Court Judge Le Pichon’s decision was recently affirmed on appeal. (See Re Team Y & R Holdings Hong Kong Ltd CACV 6/2017, unreported, 21 July 2017 at §§47 – 49, per Kwan JA.) The proposition that a non-party cannot take advantage of a jurisdiction clause to which he is not a party is simply an application for the conventional rule of privity of contract. (See David Joseph QC, Jurisdiction and Arbitration Agreements and their Enforcement 3rd Ed, 2015 at §7.42)
JURISDICTION CLAUSE INVALID UNDER INDIAN LAW
40. Mr Ng, for the Plaintiff, further submitted that a jurisdiction clause cannot be enforced if it is invalid under its proper law (see Dicey, Morris & Collins: The Conflict of Laws 15th Ed, 2012, at §12-118) and in the present case, Clause 12.6 of the MSA cannot validly confer jurisdiction on the courts of Bangalore because:
(1) Insofar as the Plaintiffs and the 1st Defendant are concerned, the Plaintiffs’ experts opined that the 1st Plaintiff “has its office in Mumbai”, and that the 1st Defendant “had its office at Ahmedabad”. They pointed out that the MSA was stated to be executed in Mumbai.
(2) The Plaintiffs’ experts concluded that no part of the cause of action had arisen in Bangalore, and under Indian law, the clause cannot validly confer jurisdiction on the courts in Bangalore.
41. Paragraphs 11 and 12 of Mr Promod Nair’s Further Opinion stated:
“ 11. The Code of Civil Procedure 1908 (the “CPC”) in India sets out guidelines in identifying the appropriate court before which a civil suit should be instituted. Sections 19 and 20 of the CPC provide that a suit may be instituted where the defendant resides or carries on business. Such courts would be said to have inherent or natural jurisdiction over the dispute. Conferring exclusive jurisdiction on a court which has inherent or natural jurisdiction over the dispute is permissible under Indian law, as it also evident from the decisions relied on by the Madison Opinions. Sections 19 and 20 of the CPC are extracted below for reference:
‘19. Suits for compensation for wrongs to person or movables. — Where a suit is for compensation for wrong done to the person or to movable property, if the wrong was done within the local limits of the jurisdiction of one Court and the defendant resides, or carries on business, or personally works for gain, within the local limits of the jurisdiction of another court, the suit may be instituted at the option of the plaintiff in either of the said courts.’
‘20. Other suits to be instituted where defendants reside or cause of action arises. — Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction —
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises.’ ”
42. I agree with Mr Chang, for the 2nd Defendant, that the courts of Bangalore do have jurisdiction over the 1st Defendant because:
(1) At the time of the execution of the MSA, the 1st Defendant had an office in Bangalore;
(2) Shortly after the execution of the MSA, the 1st Defendant changed its registered office to Bangalore.
(3) The Plaintiffs had stated in the Writ of Summons that the 1st Defendant’s registered office is in Bangalore which was repeated in the Statement of Claim.
43. However, I am of the view that the courts of Bangalore do not have jurisdiction over the 2nd Defendant which is a Hong Kong company with no apparent place of business or substantive operation in Bangalore. Mr Ng submitted that the 2nd Defendant had not dealt with this point, namely, the Bangalore courts’ lack of jurisdiction over the 2nd Defendant in its written submissions, which is confined to the position of the 1st Defendant. Accordingly, it is submitted that the 2nd Defendant cannot take advantage of Clause 12.6 in any event.
44. Mr Chang, in his oral submissions, relied on Section 20(b) of the CPC to say that the 2nd Defendant can and will give its acquiescence to the Plaintiffs’ institution of proceedings in the courts of Bangalore. Section 20(b) is premised on more than one defendant. Mr Chang submitted that the Plaintiffs can sue the 1st Defendant and the 2nd Defendant in the courts of Bangalore and the 2nd Defendant would consent to it. Mr Ng submitted that the Plaintiff would not sue the 1st Defendant in Bangalore as it is not worth suing and there is at present no proceedings in India, whether in Bangalore or otherwise, against the 1st Defendant.
45. Mr Chang submitted that the test is whether the Plaintiffs can sue the 1st Defendant, not whether they will sue the 1st Defendant. Mr Ng submitted that as the Plaintiffs do not intend to sue the 1st Defendant in Bangalore, they cannot be forced to do so. On the existing evidence, given that there is no pending proceedings against the 1st Defendant in Bangalore, I am of the view that Section 20(b) of the CPC is simply not engaged. As such, I agree with Mr Ng that, on the existing evidence, the courts in Bangalore have no jurisdiction over the 2nd Defendant. The Plaintiffs’ expert, Mr DK Deshmukh, opined that “The settled law on this point is stated in the Supreme Court in its judgment in the case of State of Gujarat V/s Savitri Devi AIR 1996 SC 937 that the parties to the contract cannot confer jurisdiction on any court which does not have jurisdiction.”
46. As the 2nd Defendant also relied on forum non conveniens as a ground of stay of these proceedings, Mr Ng submitted that the burden is on the 2nd Defendant to establish the availability of the proposed alternative forum, namely, the courts in Bangalore. The 2nd Defendant’s reliance on forum non conveniens will fall away if there is a risk that the courts in Bangalore is unavailable. The Plaintiffs do not need to show on the balance of probabilities that the foreign court does not have jurisdiction, merely that there is a risk of that happening. (See Hong Kong Civil Procedure 2017 Vol 1, §11/1/10H) In BAT Industries Plc v Windward Prospects Ltd [2013] 1 Lloyd’s Rep 559 Field J at §69 stated:
“ BAT does not have to show on the balance of probabilities that the New York Court would find that it did not have jurisdiction over a claim against Windward, merely that there is a real risk of that happening; see Cecil and Others v Bayat and Others [2010] EWHC 641 [28], per Hamblen J citing Cherney v Deripaska [2009] EWCA Civ 849 [29]. In my judgment, Mr Milonas’ evidence is sufficiently cogent to support the conclusion that there is a real risk that the New York Court would find that it did not have jurisdiction over a claim brought by BAT against Windward for indemnity and I so hold.”
47. Similarly, in S Megga Telecommunications Ltd v Etowaru Co Ltd [1995] 2 HKC 761, the Court of Appeal held that when the jurisdiction of the foreign court was a “live issue” in the foreign proceedings (at 765I-766E), the reliance on forum non conveniens failed. In the present case, I also hold that the jurisdiction (or lack thereof) of the courts in Bangalore is, to say the least, also a “live issue”. This is a further reason why stay should not be ordered.
NO CREDIBLE DEFENCE
48. Even if the exclusive jurisdiction clause is applicable to the 2nd Defendant, I am of the view that no stay should be ordered because, on the evidence before this court, the 2nd Defendant has no credible defence to the Plaintiffs’ claims.
Legal Principles
49. In Re Team Y & R Holdings Hong Kong Ltd (supra), Deputy High Court Judge Le Pichon at §105 said:
“ 105. I accept that where there is a jurisdiction clause in the contract, the starting point is that the parties should be held to their bargain but the rule is not absolute, as it is for the courts to ultimately determine where the interests of justice lie. They may in exceptional cases ignore the contractual bargain but strong reasons must be demonstrated if the court is to free the parties from their contractual bargain. It is not a matter of weighing up the connecting factors as though the court were faced with a stay application based on forum non conveniens: Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631 at [27], [29], [36] and [40].”
(“Emphasis added.)
50. A lack of credible defence can amount to a “strong cause” or exceptional circumstances to override any exclusive jurisdiction clause applicable to the 2nd Defendant. In Hong Kong Civil Procedure 2017, Vol 1 at §11/1/12EB, examples of strong cause include:
“ (xi) Where the defendants have failed to outline any defence in their defence in their evidence, especially where the claim is for a small amount, so that they cannot be said genuinely to want a trial.”
51. In The Frank Pais [1986] 1 Lloyd’s Rep 529, Sheen J was faced with an application for a stay under a foreign jurisdiction clause in favour of Cuba. At p 534, Sheen J said:
“ I approach this question bearing in mind the considerations which have been authoritatively stated in the judgment of Lord Justice Brandon in The El Amria, [1981] 2 Lloyd’s Rep 119 at p 123.
The Court has a discretion whether to grant a stay or not, but that discretion should be exercised by granting a stay unless the plaintiffs show strong cause for not doing so. In exercising that discretion the Court should take into account all the circumstances of the particular case. In particular I am concerned with whether the defendants genuinely desire trial in Cuba, or are only seeking procedural advantages.
That leaves only a dispute as to $2600. As to that small sum the defendants say rhetorically “why should we have to litigate in London over that small sum?” The answer to that question is that they might not have to litigate anywhere if they were to act reasonably and disclose the survey report which will show whether they have any defence. The whole tenor of all correspondence or telex messages emanating from the defendants or their agents leaves me with a very clear picture of the defendants who do not genuinely desire trial in any country but are only seeking to delay processing of this claim. The impression to which I have just referred is strengthened by the tenor of the affidavits sworn by Mr Graham Harris. All the circumstances of this case make it clear to me that I should refuse to stay this action.”
See also PT Krakatau Steel (Persero) v Mount Kerinci LLC [2009] 1 HKLRD 264 at §§82 – 83.
52. I have to say that in view of the matters set out in paragraphs 9 to 14 above, it is clear to this court that the Defendants do not have any credible defence to the Plaintiffs’ claims. The 2nd Defendant has not particularised its defence in any of its supporting affirmations. Mr Ng for the Plaintiffs correctly pointed out that in Mr Chang’s written submissions dated 22 August 2017, the 2nd Defendant has not even referred to any substantive defence. That leaves the court with a distinct impression that the 2nd Defendant does not genuinely intend the matter to proceed to trial in any country but is only seeking to delay the proceedings by this application.
53. In the minutes as set out paragraph 10 above, the 1st Defendant clearly admitted liability. Mr Chang, for the 2nd Defendant, fairly agrees that if the Defendants have no credible defence then there should not be a stay. Any stay would be a futility if the Defendants have no credible defence at all.
54. However, in Mr Chang’s oral submission, he argued that the 1st Defendant has advanced a credible defence by way of a without prejudice email dated 27 April 2017 in reply to the Plaintiffs’ letter from Messrs Khaitan & Co dated 16 February 2017. This court was told that there was a reply letter from the Plaintiffs in May, but somehow this reply letter was not exhibited in the 2nd Affirmation of Cheung Wing Leung dated 15 August 2017.
55. Mr Chang submitted that in the said email, it was pointed out that there was “considerable difference between the rates mentioned/charged by the media partners to your Clients [i.e. the Plaintiffs] and the rates mentioned/charged by the same media partner directly to our unit “Le Mall” for the same transaction” and “This also gives us a reason to believe that your Clients with mala fide intention and with an ulterior motive of making more money cheated us by providing us with the invoices containing inflated numbers.”
56. First, these are bare allegations from the 1st Defendant without any particulars or evidence. Secondly, when this court tried to understand what would the 1st Defendant’s defence be, Mr Chang submitted that the Defendants’ defence would be breach of an implied duty of fidelity and conspiracy to defraud. However, I note that two Indian law expert opinions adduced by the 2nd Defendant did not discuss such defences under Indian law. As such there is no evidential basis for Mr Chang’s submissions. I am of the view that the 2nd Defendant has not adduced any credible evidence to show that it has a credible defence under Indian law.
57. Thirdly, it is important to note that the Outstanding Balance includes payments that the Plaintiffs have to pay to third party media vendors or owners who provided services to the 1st Defendant. Paragraphs 11 and 12 of the Statement of Claim read:
“ 11. Furthermore, as a result of the Defendants’ breach, the Plaintiffs have incurred substantial losses and damages, including facing threats of legal proceedings against the 1st Plaintiff by third party media vendor/owners seeking damages against the 1st Plaintiff for failing to make payment to those third party media vendors/owners, which resulted directly from the Defendants’ breach.
12. The Plaintiffs seeks a declaration that, in the event that such claims are being brought by the third party media vendors, the Defendants are liable to indemnify the Plaintiffs for any such claims in full together with the legal and such further recoverable costs of such third parties and the legal and other recoverable costs of the 1st Plaintiff in question.”
58. Thus, even putting the 2nd Defendant’s case to its highest, there might be a defence on quantum, but there cannot be any defence on liability. As far as the dispute on quantum is concerned, there is simply no evidence on how much, if any, of the quantum is in dispute. Given the way the 2nd Defendant dealt with the issue of credible defence in its affirmation evidence, this court cannot but form the view that the 2nd Defendant has no credible defence at all. In Shenzhen CTS International Logisitics Co Ltd and Another v Dajiang International Investment Co Limited HCA 1927/2016, unreported, 28 April 2017, Mimmie Chan J at §22 – 23 said:
“ 22. Nowhere in the Defendant’s affirmations has the Defendant raised any arguable defence, or real issue in dispute to the claims made by the Plaintiffs in this action. It only asserts that it has no obligation to provide the Shipping Information to the Plaintiffs, without further elaboration on any real or arguable basis, even after the results of the surveys conducted in Hong Kong and on the Mainland, showing the obvious inconsistencies and contradictions between the nature of the Goods as stated on the Bills and as revealed in the surveys, had been made known to the Defendant.
23. These are sufficient, in my judgment, to dispose of the application for stay.”
59. In China Construction Bank (Asia) Corp Ltd v Shanghai Pudong Development Bank Co Ltd HCA 1323/2014, unreported, 11 December 2015, Mimmie Chan J at §§14 – 15 said:
“ 14. Leading Counsel for the Defendants relies on Melvin Waxman & Anr v Li Fei Yu, unreported, HCA 1972/2012, 19 July 2013 to argue that it is sufficient if the Defendant can identify issues for trial….
15. I have no doubt the above is the correct approach. However, such approach of considering a stay application before an application for summary judgment does not mean that the defendant seeking a stay does not have to identify a defence, or issues requiring a trial…. So long as there are issues for a defence which can be identified, it may not be possible or appropriate for the Court, in every case, to consider the merits of the defence raised (Melvin Waxman & Anr v Li Fei Yu).”
60. In the present case, there is not even an identification of possible defence under Indian law in the 2nd Defendant’s expert opinions.
61. In Standard Chartered Bank v Pakistan National Shipping Corporation and Others [1995] 2 Lloyd’s Rep 365 at 378, Clarke J (as he then was) said:
“ The position here is different because the Court has a discretion whether to grant a stay. It appears to me that in a case where a defendant has no arguable defence on liability and quantum that would be a strong reason to refuse a stay because, as I said in Adria Services Y.U. case, there would be no real issues between the parties which should be trued either here or elsewhere.”
62. In David Joseph QC’s Jurisdiction and Arbitration Agreements and Their Enforcement, 3rd Ed at §10.31, the learned author stated:
“ There is a yet further line of cases, predominantly from the Court of Appeal in Singapore, which examines the question of a stay of proceedings under the “strong case” test in the context of there being no real defence to the claim. The general thrust of these cases is to suggest that in circumstances where the defendant applies for a stay but has no real defence or genuine desire for proceedings in the agreed forum then this might amount to or assist in establishing “strong cause”. In a clear-cut case regarding both liability and quantum (an established debt for example) this may be correct, but some caution needs to be expressed. First of all, it is by no means the predominant function or feature of a jurisdiction battle to assess or determine merits or proceed to summary judgment without a trial. Secondly, a party might be liable in damages but still have the right to have quantum and interest determined by the contractual forum.”
63. Mr Ng, very fairly, referred this court to the following passage from Briggs: Civil Jurisdiction and Judgments 6th Ed at §4.36:
“ There is a good reason for a court to be distinctly cautious before acting on any perception that the defendant has no defence. If the motives of the defendants are apparently disreputable, this may be a contributory factor in the argument why a stay should be withheld, but if the stay is sought on the basis of a jurisdiction clause, it is hard to see that a defendant who seeks to rely on the advantages accruing to him from a contract freely entered into can fairly be criticised for what he has done. And, indeed, it does not follow that, just because the claimant would have a clear and summary victory in England, there is no defence to the claim. Another court may apply a different choice of law rule, or may admit different evidence, or may place the burden of proof differently; or may for a variety of reasons conclude that the defendant has an arguable or a good defence. In any such case it is undesirable for an English court to conclude that its assessment of who will win at trial is the only tenable one; the question of who will win may well be affected by the decision where the case is to be fought. To conclude that, because the claimant is going to win, there is no issue as where the natural forum might be is to put the cart before the horse, which is not generally profitable.”
64. Mr Ng submitted that the learned author cited no authority in support of his opinion. But I think the key is whether there is any defence to the claim if a different choice of law rule applies. In my judgment, it is up to the party applying for a stay to adduce evidence to state what the plausible defences under a different legal system are. If the applicant chooses not to adduce any foreign law to identify a defence, or issues requiring a trial, then the court can only proceed on the basis there is none under the relevant system of law.
65. I agree with Mr Chang that in assessing whether there is a credible defence or not, the court need not adopt the test of applying for summary judgment and require the Defendants to condescend upon particulars. But there must be at least some evidence, in contrast to bare allegations, for the court to assess whether there is a credible defence. In the present case, other than the bare allegations in the without prejudice email, there is no evidence at all. This sits well with the correspondence, the admission of liability and quantum and the fact that, given the latest allegation of mala fide overcharge, from April to August 2017, the Defendants have not commenced any suit in the courts of Bangalore to claim for their loss and damages.
66. Taking all the above considerations into account, in my judgment, the 2nd Defendant has not demonstrated to this court there are any credible defences to the Plaintiffs’ claims under Indian law and this court is of the view that this application is but a delaying tactic to further delay legitimate payments due to the Plaintiffs. On these grounds, this court would refuse the 2nd Defendant’s application for a stay of these proceedings.
RELEVANCE OF THE 1ST DEFENDANT’S POSITION
67. As to the 2nd Defendant’s submission that its liability is parasitic on the 1st Defendant’s liability and therefore the claims against the 1st Defendant must be resolved together with the claims against the 2nd Defendant in the courts of Bangalore, alternatively, the present action ought to be stayed pending the resolution of the disputes under the MSA between the Plaintiffs and the 1st Defendant in the courts of Bangalore, I agree that the position of the 1st Defendant is irrelevant. No action has been brought in India against the 1st Defendant which is widely rumoured to be in dire financial conditions.
68. The 1st Defendant has not even been served with these proceedings. Since no parallel proceedings have been commenced, the position of the 1st Defendant is immaterial. In de Dampierre v de Dampierre [1988] 2 AC 92 at 108B-D, Lord Goff of Chieveley said:
“ The same principle is applicable whether or not there are other relevant proceedings already pending in the alternative forum: see The Abidin Daver [1984] A.C. 398, 411, per Lord Diplock. However, the existence of such proceedings may, depending on the circumstances, be relevant to the inquiry. Sometimes they may be of no relevance at all, for example, if one party has commenced the proceedings for the purpose of demonstrating the existence of a competing jurisdiction, or the proceedings have not passed beyond the stage of the initiating process. But if, for example, genuine proceedings have been started and have not merely been started but have developed to the stage where they have had some impact upon the dispute between the parties, especially if such impact is likely to have a continuing effect, then this may be a relevant factor to be taken into account when considering whether the foreign jurisdiction provides the appropriate forum for the resolution of the dispute between the parties.”
69. A fortiori, there is no pending proceedings against the 1st Defendant in Bangalore.
FORUM NON CONVENIENS
70. I agree that the starting point must be that the 2nd Defendant, a company incorporated in Hong Kong, is subject to the jurisdiction of the Hong Kong court. The 2nd Defendant can therefore be sued in Hong Kong “as of right”, and bears the burden to demonstrate that the court in Bangalore is clearly or distinctly more appropriate. The principles have been recently summarized by Mr Justice Lok in High Hope Zhongding Corp v 廈門墩峰進出口有限公司HCA 2485/2015, unreported, 16 January 2017, who came to the view that a plaintiff’s entitlement to commence legal proceedings against Hong Kong companies as of right should be given due weight. In paragraph 41:
“ The 4th Defendant is a Hong Kong company and the 5th Defendant is a Hong Kong resident. It cannot be disputed that the Plaintiff instituted the present proceedings against them as of right, and the writ has been properly served on them in Hong Kong. This is thus a situation in which the jurisdiction of the Hong Kong court is established as of right, at least so far as the claims against the 4th and 5th Defendants are concerned, and considerable weight and serious recognition should therefore be given to this right of the Plaintiff. The burden lies squarely on the 4th and 5th Defendants to convince the court to exercise its discretion to depart from the norm which is not an easy burden.”
No credible defence
71. As analysed above, this court is of the view that on the filed evidence there does not appear to be any credible defence. In the absence of a credible defence, the 2nd Defendant’s argument on forum non conveniens must be rejected. A defendant must identify its defence with sufficient particularity. If there is no bona fide defence, then a challenge based on forum non conveniens ground will fail. Hong Kong Civil Procedure 2017, Vol 1 at §11/4/8J.
72. As Lok J explained in High Hope Zhongding Corp v 廈門墩峰進出口有限公司, “without knowing the nature of the controversy between the parties, the court is not able to answer this particular question [i.e. the issue of forum non conveniens]. Hence, the non-exclusive jurisdiction clause in the previous contracts cannot assist the stay application.” (at §49)
73. In Bayer Polymers Co Ltd v The Industrial and Commercial Bank of China, Hong Kong Branch [2000] 1 HKC 805, Stone J at 807G said:
“ The proposition here is straightforward. The defendant, says Mr Brock, has made no real attempt to justify its actions, in reality there is no arguable defence (albeit currently there is no application for summary judgment before the court), and it follows that the issue of a stay should not seriously arise in this arise. Jurisdiction has been established in Hong Kong as of right by virtue of service upon the defendant’s branch here, and the case should follow its normal course in this jurisdiction.”
74. Likewise, in the absence of a credible defence, the 2nd Defendant’s assertion that Indian law applies to the Payment Agreement is simply irrelevant. Without a valid defence, there is simply no Indian law issue to be resolved, and the alleged application of Indian law is accordingly wholly irrelevant: Hong Kong Civil Procedure 2017, Vol 1, §§11/1/10R, 11/1/10S.
Alternative forum not available
75. For the reasons set out in paragraphs 42 – 46 above, there is a credible argument that the courts of Bangalore do not have jurisdiction over the 2nd Defendant. In the circumstances, the disputes have to be resolved in Hong Kong, instead of the court proposed by the 2nd Defendant in paragraph 1 of its summons.
Other Relevant Factors
76. In the context of forum non conveniens, this court also takes into consideration the following factors:
(1) The 2nd Defendant is a Hong Kong company, and actions can be brought against it as of right.
(2) The 1st Defendant is widely rumoured to be in dire financial conditions, and has been scaling down its operation in India and has apparently sacked at least 85% of their Indian staff. Mr Cheung on behalf of the 2nd Defendant has not denied this assertion by the Plaintiffs in his two affirmations. Any action, if commenced in Bangalore, is not likely to give the Plaintiffs any meaningful compensation.
(3) On the other hand, the 2nd Defendant has assets in Hong Kong and according to Mr Cheung of the 2nd Defendant, the 2nd Defendant is not in dire financial conditions.
(4) In the Statement of Claim, the Plaintiffs also seek a declaration of indemnity from the Defendants. I agree that it is uncertain whether such a foreign judgment can be registered in Hong Kong, given that it is not a monetary judgment: Hong Kong Civil Procedure 2017 §§E3/0.5, E3/0/10. Such a difficulty in enforcement suggests that the claim has to be heard in Hong Kong. (See Pei Zhang Middle School v China Pui Ching Education Foundation Ltd, CACV 262/2005, unreported, 21 February 2006 at §23)
DISPOSITION
77. For all the above reasons, the 2nd Defendant’s Summons is dismissed. I also make a costs order nisi that costs are to be paid by the 2nd Defendant to the Plaintiff forthwith, on a party to party basis, to be taxed if not agreed. Parties can make application to vary the costs order nisi within 14 days from the date of this decision failing which the costs order nisi will become absolute after the expiry of the 14-days period.
78. Finally, it remains for me to thanks Mr Ng and Mr Chang for their helpful assistance rendered to the court.
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(William Wong SC)
Deputy High Court Judge
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Mr Tom Ng, instructed by Robertsons, for the 1st – 3rd Plaintiffs
The 1st Defendant was not represented and did not appear
Mr Johnathan Chang, instructed by Benny Kwong & Tsai, for the 2nd Defendant
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