XCHRX NAFTOMAR SHIPPING AND TRADING CO. LTD INC. v. GUANGDONG DEVELOPMENT BANK

HCCL207/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.207 OF 1999

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J U D G M E N T

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The application

1. There is before the court one of the many stay applications with which this court is regularly seized. It is taken out by the defendant, the Guangdong Development Bank, by summons dated 22 December 1999, and it prays that all further proceedings in this action be stayed on the ground that Hong Kong is not the forum conveniens for the subject matter of the claim, relief or remedy sought by the plaintiff against the defendant in this action, and that the appropriate forum for the trial of the action in interest of the parties and for the ends of justice is the People's Court of Chaozhou, PRC. Taken at face value, the summons begs a number of factual questions, and it may be appropriate at the outset briefly to provide some of the background facts of this case.

The factual background

2. The plaintiff, Naftomar, is a Panamanian corporation. It apparently carries on business in Greece and trades in liquified petroleum gas product ("LPG"). The defendant is an overseas company registered under Part XI of the Companies Ordinance, Cap.32. In order to be subject to the registration obligations imposed upon overseas companies by Part XI, it seems clear that the defendant must have established a place of business in Hong Kong (irrespective of how busy that place of business may or may not be) and, therefore, it is incontrovertible that in this case the bank has been served as of right.

3. What appears to have happened is this. On 31 March 1999, the plaintiff entered into a contract with a Mainland Chinese entity, one Chaozhou Hua Feng Group Co. of Chaozhou City PRC, to sell a quantity of LPG mixture. Payment was to be made by irrevocable letter of credit. On 1 April 1999, the defendant bank opened an irrevocable letter of credit in favour of the plaintiff. It is this letter of credit which is at the centre of this case. Although the plaintiff is based in Greece, the letter of credit was advised via UBS AG, the Swiss bank, in Geneva. On its face, the letter of credit was expressed to be negotiable by any bank in Switzerland, and Switzerland was expressly the place of expiry of the credit. All the documents called for under the letter of credit were required to be in English. It is common ground that the expiry date in the letter of credit was extended on 20 April 1999 (the original expiry date), and that such extension was advised via UBS AG in Geneva.

4. On 20 April 1999, the plaintiff forwarded documents to UBS AG and asked UBS to send them to the opening bank for payment at maturity, despite the fact that it was recognised by both the plaintiff and by UBS AG that these documents were in some respects discrepant. UBS AG forwarded the documents to the defendant on or about 22 April 1999.

5. No monies have been paid under the letter of credit, and in this suit the plaintiff seeks recovery of the sum alleged to be due from the defendant, namely, US$368,939.97 in breach of the contract contained in the letter of credit.

The relevant principles

6. In so far as may be necessary in such applications which are frequently before the commercial court, this court formally reminds itself of the relevant principles; in particular reference has been made to The "Adhiguna Meranti" [1987] HKLR 904, a decision of the Hong Kong Court of Appeal, and also, of course, to Spiliada Maritime Corporation v. Cansulex Ltd [1987] 1 AC 460.

7. It is abundantly clear that the question the court has to bear firmly in mind is whether there is some other available forum having competent jurisdiction which is the appropriate forum for the trial of the action, that is, in which the case may be tried more suitably for the interests of all the parties and for the ends of justice. In The "Adhiguna Meranti" the Court of Appeal laid down a three stage process, the first stage being whether it had been shown not only that Hong Kong was not the appropriate forum but also that the available forum sought was "clearly or distinctly more appropriate" on the particular facts.

The argument

8. Mr Mak, who appears today on behalf of the applicant/defendant, has no quarrel with the basic legal principles, which indeed are common ground between counsel. He submits that on these particular facts, the forum of the People's Court of Chaozhou in the PRC is the natural and appropriate forum for trial, and it is clearly or distinctly more appropriate than the Hong Kong forum. He attempts to make that good primarily by reference as to what may, or may not, have transpired between the defendant and its client, the applicant for the credit, in particular in the context of waiver. He further submits that the plaintiff is unable to show that there exist special circumstances by reason of which justice requires that the trial of the present subject matter should nevertheless take place in Hong Kong. He developed his argument in an excellent skeleton which was submitted for the perusal of the court prior to this hearing.

9. For his part, Mr Charles Sussex, on behalf of the plaintiff, contends that in fact this case involves two short points :-

First, whether there has been rejection of the discrepant documents by the defendant bank in time pursuant to the provisions of the UCP; and

Second, whether the bank is or can be bound by what appears to be the applicant's waiver in terms of a document dated 5 May 1999 from Chaozhou Hua Feng Group Co. to the China Development Bank.

10. His bald point is that this is a prime example of a commercial case in which no particular forum sticks out like a 'sore thumb' as being clearly or distinctly more appropriate for the trial of the action. In other words, that there is on the present facts no overwhelming connection with another jurisdiction. He points out that when deciding whether there is or is not a natural forum, whilst the court must look for connecting factors, the question at issue is not one of "mere practical convenience". He asserts that in the context of a commercial dispute where there are pointers to a number of different jurisdictions, the court is perfectly entitled to conclude that no particular forum can be described as the natural forum and, therefore, to refuse a stay. He used a particular example the decision of Robert Goff J (as he then was) in European Asian Bank A.G. v. Punjab and Sind Bank [1981] 2 Lloyd's Rep.651, wherein the learned judge, after evaluating a complex set of facts, was not convinced that either India or Singapore was more appropriate, as opposed to London with which there was no immediate connection in terms of the facts of that case. Similarly, says Mr Sussex in this instance, the defendant has failed to discharge the burden of satisfying the court that the People's Court of Chaozhou is "clearly and distinctly" more appropriate for the trial. As Lord Goff put it in Spiliada, op.cit., at 477B :-

"Furthermore, there are cases where no particular forum can be described as the natural forum for the trial of the action. Such cases are particularly likely to occur in commercial disputes, where there can be pointers to a number of different jurisdictions (see, e.g., European Asian Bank A.G. v. Punjab and Sind Bank [1982] 2 Lloyd's Rep.356), or in Admiralty, in the case of collisions on the high seas. I can see no reason why the English court should not refuse to grant a stay in such a case, where jurisdiction has been founded as of right. It is significant that, in all the leading English cases where a stay has been granted, there has been another clearly more appropriate forum - in The Atlantic Star [1974] A.C. 436 (Belgium); in MacShannon's case [1978] A.C. 795 (Scotland); in Trendtex [1982] A.C. 679 (Switzerland); and in the The Abidin Daver [1984] A.C. 398 (Turkey). In my opinion, the burden resting on the defendant is not just to show that England is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the English forum. In this way, proper regard is paid to the fact that jurisdiction has been founded in England as of right (see MacShannon's case [1978] A.C. 795, per Lord Salmon); and there is the further advantage that, on a subject where comity is of importance, it appears that there will be a broad consensus among major common law jurisdictions. I may add that if, in any case, the connection of the defendant with the English forum is a fragile one (for example, if he is served with proceedings during a short visit to this country), it should be all the easier for him to prove that there is another clearly more appropriate forum for the trial overseas. ..." (emphasis added)

Decision

11. On balance, I am inclined to agree with Mr Sussex. In my judgment, there is no forum in this case which strikes one overwhelmingly as the natural forum. That is the short point and, in light of that conclusion, there is no need further to consider other matters such as juridical disadvantage. The substantive points in this case are themselves short, nor do I accept that a large amount of witness evidence is or may become necessary. Moreover, the subject matter of these proceedings is squarely within this court's everyday jurisdiction and experience, and the defendant has been served here as of right. It may also be the case, if the point be taken on the pleadings, that the proper law of the letter of credit is not PRC law as the defendant alleges, but in fact Swiss law, although in practice such matters, whilst earnestly debated at the interlocutory stage, tend to be forgotten at trial, the cases thereafter generally proceeding along well defined principles of Hong Kong law. Be that as it may. For all his efforts, Mr Mak has not succeeded in convincing this court that this case now should go to Chaozhou. To the contrary, it would seem that the case could appropriately be dealt with in this court, and very quickly at that.

12. It follows from the foregoing, therefore, that the defendant's summons dated 22 December 1999 is dismissed. It must also follow, I think, that costs must follow the event, unless either counsel has anything to say to the contrary.

[No costs submission]

13. I thank both counsel for their assistance.