LUSO INTERNATIONAL BANKING LTD v. SUMMI (GROUP) HOLDINGS LTD

HCA 1167/2020

[2021] HKCFI 906

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1167 OF 2020

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D E C I S I O N

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1.  This is the defendant’s application to stay the proceedings herein in favour of the Basic Court of the Macau Special Administrative Region, or some appropriate forum in Macau.

A.    THE RELEVANT FACTUAL BACKGROUND

2.  The plaintiff is a company incorporated in Macau carrying on the business of personal banking, trade financing and consumer and corporate banking services in Macau.

3.  The defendant is a company incorporated in the Cayman Islands and is listed on the Main Board of the Stock Exchange of Hong Kong.   According to the defendant’s evidence, the defendant and its subsidiaries are principally engaged in the production and sale of frozen concentrated orange juice and other related products.

4.  By a loan agreement entered into on 28 September 2017 (“the Loan Agreement”), the plaintiff agreed to renew and consolidate the then existing working capital loan (in the sum of HK$15,741,695.53 as at 12 September 2017) and to grant a new working capital loan of HK$25,000,000 (collectively as “the Loans”) to the defendant. 

5.  There is a jurisdiction clause in the Loan Agreement which reads “本文件適用澳門法律及接受澳門法院之管轄”.  The parties agree that this clause (“the Jurisdiction Clause”) should be translated as “This document is governed by the law of Macau and accepts the jurisdiction of the Macau courts”. 

6.  The Loan Agreement was executed by Mr Sin Ke (“Mr Sin”) on behalf of the defendant.  Mr Sin was the former chairman of the board of directors and the Chief Executive Officer of the defendant.  Further, the Loans were guaranteed by Mr Sin in favour of the plaintiff pursuant to a written guarantee dated 28 September 2017 (“the Guarantee”).

7.  According to the plaintiff, (1) the defendant has failed to fully repay the monthly instalments for the Loans since late 2018, and (2) since January 2019, the plaintiff repeatedly requested and demanded the defendant orally and in writing to repay all outstanding amounts under the Loan Agreement. 

8.  By a letter dated 15 April 2019, the plaintiff gave notice to the defendant that all outstanding principal and interest for the Loans, overdue interest, default interest, and other fees totalling HK$19,155.018.59 under the Loan Agreement became due and payable immediately.

9.  On 17 September 2019, the defendant repaid to the plaintiff a sum of HK$70,000 to partially settle the outstanding amount for the Loans.

10.  As at 30 June 2020, the outstanding indebtedness owed by the defendant to the plaintiff was HK$20,644,112.79.  By a letter dated 3 July 2020, the plaintiff through its solicitors demanded the defendant for payment of all outstanding indebtedness in the sum of HK$20,644,112.79 within 5 days of the letter.

11.  On 14 July 2020, the plaintiff filed and served its Writ of Summons and Statement of Claim on the defendant and the defendant’s solicitors.

12.  On 14 October 2020, the defendant issued its summons for a stay of the present proceedings.

B.    THE PARTIES’ RESPECTIVE CASES AND THE ISSUES

13.  The defendant’s primary case is that the Jurisdiction Clause confers exclusive jurisdiction on the Macau courts.  Its fallback position is that if the Jurisdiction Clause is only a non-exclusive one, Macau is the more appropriate forum and the proceedings should be stayed under the forum non conveniens principles.   The defendant further relies on certain procedural steps taken by the plaintiff in Macau to contend that such steps have precluded the present action from continuing in Hong Kong.

14.  On the other hand, the plaintiff submits that the Jurisdiction Clause only confers non-exclusive jurisdiction on the Macau courts.  It contends that the defendant is unable to show that Macau is clearly and distinctly the more appropriate forum and that it will suffer a serious disadvantage if the present proceedings were stayed.

15.  It seems to me that there are two broad issues in the present application:

(1)  Whether the Jurisdiction Clause confers exclusive or non-exclusive jurisdiction on the Macau courts.

(2)  Whether the proceedings herein should be stayed under the forum non conveniens principles.

C.    THE JURISDICTION CLAUSE

C1.   Expert Evidence on Macau Law

16.  It is common ground that the Loan Agreement is governed by law of Macau and its proper interpretation (including that of the Jurisdiction Clause) is also a matter of Macau law.  Both parties have filed expert evidence for the purpose of construing the Jurisdiction Clause under Macau law.  Dr Ai Linzhi (“Dr Ai”) of Ai & Wong Lawyers has prepared two written Opinions for the defendant and Mr Nuno Sardinha da Mata (“Mr Nuno”) of C&C Lawyers has prepared a written Opinion for the plaintiff.

17.  In short, Dr Ai considers that the Jurisdiction Clause “should be recognized as a clause attributing exclusive jurisdiction”. On the other hand, Mr Nuno opines that the Jurisdiction Clause “should be understood as conferring alternative (i.e. non-exclusive) jurisdiction on the Macau Courts”.

18.  There does not appear to be any dispute between the parties on the proper approach in evaluating expert evidence on foreign law. 

(1)  “If the evidence on the expert witness as to the effect of the sources quoted by him is uncontradicted, ‘it has been repeatedly said that the court should be reluctant to reject it,’ and it has been held that where each party’s expert witness agrees on the meaning and effect of the foreign law, the court is not entitled to reject such agreed evidence, at least on the basis of its own research into foreign law.  But while the court will normally accept such evidence it will not do so if it is ‘obviously false,’ ‘obscure,’ ‘extravagant,’ or ‘patently absurd,’ or if ‘he 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’; or if the relevant foreign court would not employ the reasoning of the expert even if it agreed with the conclusion.  In such cases the court may reject the evidence and examine the foreign sources to form its own conclusion as to their effect.  Similarly, the court may reject an expert’s opinion as to the meaning of a foreign statute if it is inconsistent with the text or the English translation and is not justified by reference to any special rule of construction of the foreign law.  It should, however, be noted in this connection that quite simple words may well be terms of art in a foreign statute.”  See Dicey, Morris & Collins: The Conflict of Laws (15th ed, 2012) §9-016; Traffic Stream Infrastructure Co Ltd v Full Wisdom Holdings (2004) 7 HKCFAR 442 at §21 (Ribeiro PJ).  

(2)  Issues of foreign law are treated as facts of a peculiar kind.  In the resolution of conflicts in the expert evidence on foreign law, a judge is entitled, and indeed obliged, to use his legal training insofar as it may have a bearing on the resolution of dispute.  See Shenzhen Development Bank Co Ltd v New Century Int’l (Holdings) Ltd (unreported, HCA 2976/2001; 31 July 2002), §25 (DHCJ J Lam).

19.  It is apparent from their written opinions that both Dr Ai and Mr Nuno consider that Article 228 of the Civil Code of Macau (“CCM”) and Article 29(2) of the Macau Civil Procedure Code (“MCPC”) are relevant for the construction of the Jurisdiction Clause.

C2.    Article 228 of the Civil Code of Macau

20.  Article 228 of the CCM provides:

“一、法律行為意思表示之含義， 以一般受意人處於真正受意人位置時，能從表意人之有關行為推知之含義為準， 但該含義未能為表意人所預料係屬合理者除外。

二、如受意人明知表意人之真正意思，則表意人所作之意思表示應以該真正意思為準。”

21.  Both experts agree that the effect of Article 228 is that a declaration of the parties to a legal transaction should be interpreted based on its meaning as understood by a normal declaration recipient.

22.  Specifically, in the context of considering the declaration for the purpose of Article 228, Mr Nuno opines that (1) the language of the declaration should be interpreted objectively as to what a normal declaration recipient would understand from the language of the declaration, and (2) the Macau courts would look at the context and all relevant circumstances surrounding the declaration, including (but not limited to) the background of the declarant and the declaration recipient, the genesis of the transaction, the commercial purpose of the transaction, the jurisdictions in which the parties are operating, and the intention of the declarant and the declaration recipient.   Such an approach does not appear to be disputed by Dr Ai.

23.  The context and the relevant circumstances surrounding the Loan Agreement which Mr Nuno considers relevant are: (1) the parties to the Loan Agreement involve a bank and a company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange, (2) the parties are based in different jurisdictions and are sophisticated and experienced parties and (3) the commercial purpose of the Loan Agreement is for the plaintiff bank to extend a loan to the defendant.  In these circumstances, Mr Nuno opines that the Jurisdiction Clause would not be so restrictive as to prevent the plaintiff from enforcing the Loan Agreement elsewhere other than Macau in order to recover assets from the defendant.

24.  Dr Ai describes the parties to the Loan Agreement as being in a “multi-localized legal relationship”.  He points to various “connecting factors” such as the places where the parties to the Loan Agreement were incorporated, the place where the defendant is listed, the fact that the Loan Agreement is written in Chinese and was concluded and is to be carried out in Macau, and the fact the Loan Agreement is governed by the law of Macau and there is a jurisdiction clause mentioning Macau.  Dr Ai then concludes by saying that “precisely because both parties deliberately stipulated a choice of the forum clause and agreed to grant jurisdiction to a Macao Court expressly, this behaviour shows that both parties want to grant exclusive jurisdiction to a Macao Court”.  He further says that “because the parties in the present circumstances have adopted an express choice of forum clause, the connecting factors should be interpreted in a manner which should be consistent with the granting of exclusive jurisdiction to the Court as designated by the parties”.

25.  It is apparent that both experts have considered the language of the Jurisdiction Clause, as well as what lawyers in the common law jurisdictions refer to as the “factual matrix” to the commercial agreement.  Having considered the opinions from both experts, as well as the submissions from counsel, I do not believe the Court is presently able to ascertain from the objective circumstances of the transaction to say whether the parties clearly intended the Macau courts to have exclusive or non-exclusive jurisdiction under the Jurisdiction Clause.  It is not clear to me that the context and circumstances surrounding the Loan Agreement would necessarily be sufficient to enable the parties to point to the place(s) where assets may be recovered, as suggested by Mr Nuno.  Moreover, I confess to having some difficulty in understanding Dr Ai’s logic that just because Macau is mentioned in a jurisdiction clause, the parties intended to “grant exclusive jurisdiction to a Macao Court”.  This seems to beg the very question that one has to answer.

C3.    Article 29(2) of the Macau Civil Procedure Code

26.  Article 29(2) of the MCPC provides:

“透過協議, 得指定僅某地之法院具管轄權, 或指定其他法院與澳門法院具競合管轄權；如有疑問, 則推定屬競合指定。”

The translation of Article 29(2) agreed by the parties is “Via agreement, [the parties] may designate only courts of a certain place to have jurisdiction, or designate other courts and Macau courts to have alternative jurisdiction; if there is doubt, it is presumed to be alternative designation.”

27.  It is common ground that the language of the Jurisdiction Clause does not indicate whether the Macau courts have exclusive jurisdiction.  Indeed, as Mr Jacky Lam for the defendant accepted during the hearing, the language of the Jurisdiction Clause is entirely neutral on exclusivity of jurisdiction.

28.  As an alternative analysis to his opinion based on Article 228 of the CCM, Mr Nuno opines that in the absence of express language to the effect that the Jurisdiction Clause confers exclusive jurisdiction, it is presumed under Article 29(2) of the MCPC that the jurisdiction attributed is non-exclusive jurisdiction on the basis that the parties’ intention on the attribution of jurisdiction is in doubt.

29.  Dr Ai accepts that the effect of Article 29(2) of the MCPC on a jurisdiction clause is that in cases of uncertainty, such a clause would only confer non-exclusive jurisdiction.  However, in the context of discussing the application of Article 29(2), Dr Ai opines that “as there are many connecting factors which indicate the applicability of Macau Law, and the fact that parties have chosen only the Macao Court as the competent court, it leaves no doubt that the jurisdiction attributed by the parties is exclusive”. In other words, Dr Ai considers that the presumption in Article 29(2) of the MCPC has no application because there is no doubt about the parties’ intention on jurisdiction by virtue of the “connecting factors” (mentioned in paragraph 24 above) and the fact that Macau courts are mentioned in the Jurisdiction Clause.

30.  As mentioned earlier, I do not believe it is clear to ascertain whether the parties intended the Macau courts to have exclusive or non-exclusive jurisdiction simply by reference to the context and circumstances surrounding the Loan Agreement, or the “connecting factors” as highlighted by Dr Ai.  Further, it does not follow that the mere reference to one jurisdiction in a jurisdiction clause necessarily means that the parties intend to confer exclusive jurisdiction in the courts of that single jurisdiction.  I therefore have some difficulty accepting the logic of Dr Ai’s reasoning in saying that Article 29(2) of the MCPC has no application in the context of the Jurisdiction Clause. 

31.  For the sake of completeness, it is right to mention that Dr Ai has also relied on a statement made by Dr Viriato Manuel Pinheiro de Lima (a former judge in the Court of Final Appeal of Macau) in a publication in 2008 that “when parties stipulate a jurisdiction clause, what they intend to do is that they would like to give exclusive jurisdiction to the court designated by them”.  Mr Lam on behalf of the defendant accepts that such a statement is not binding on the Macau courts.  Mr Nuno takes issue with Dr Ai’s quotation on the basis that it is incomplete, and considers that the full effect of Article 29(2) of the MCPC has not been given full effect by Dr de Lima when he made his statement extra-judicially. Given that it is common ground that extra-judicial statements and previous authorities are not binding on the Macau courts, I would prefer to focus on the application of statutory provisions in trying to determine the present issue.

32.  In my view, given that the language of the Jurisdiction Clause is neutral on the exclusivity of jurisdiction, I would prefer Mr Nuno’s alternative analysis of relying on Article 29(2) of the MCPC to suggest that the Jurisdiction Clause should be understood as conferring alternative (ie non-exclusive) jurisdiction on the Macau Courts.

C4.    Conclusion on the Jurisdiction Clause

33.  For the reasons given above, it seems to me that the Jurisdiction Clause confers non-exclusive jurisdiction on the Macau courts.

D.    WHETHER PROCEEDINGS SHOULD BE STAYED

34.  Where a defendant disputes the jurisdiction of the Hong Kong courts and seeks to stay the Hong Kong proceedings under RHC Order 12 rule 8 in circumstances where the relevant jurisdiction clause confers non-exclusive jurisdiction on a particular jurisdiction outside of Hong Kong, it is common ground that the forum non conveniens principles are relevant for the court’s exercise of discretion in deciding whether or not a stay should be granted.  

35.  The following principles on forum non conveniens as restated by the Court of Final Appeal in SPH v SA (2014) 17 HKCFAR 364 at §51 are relevant.

(1)  The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action, ie in which the action may be tried more suitably for the interests of all the parties and the ends of justice?

(2)  In order to answer this question, the applicant for the stay has to establish that (a) Hong Kong is not the natural or appropriate forum (“appropriate” in this context means the forum has the most real and substantial connection with the action) and (b) there is another available forum which is clearly or distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.

(3)  If the applicant is able to establish both of these two matters, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.

(4)  If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer.  Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.

D1.    Whether there is Some Other Forum which is the Appropriate Forum for the Trial of the Action

36.  In order for the “single question” to be answered, the defendant bears the burden to establish that (1) Hong Kong is not the natural or appropriate forum (ie Hong Kong does not have the most real and substantial connection with the action) and (2) Macau is clearly or distinctly a more appropriate forum than Hong Kong.

37.  The defendant submits that the present dispute has limited connections with Hong Kong.  To support this submission, the defendant relies on these matters: (1) the fact that the Loan Agreement is governed by Macau law and was apparently concluded in Macau, (2) a key potential witness (namely Mr Sin Ke) has been known to be based in Mainland China and (3) the defendant’s presence in Hong Kong is limited.

38.  On the other hand, the plaintiff relies on a number of factors to contend that the dispute has substantial connections with Hong Kong. 

(1)  The defendant is listed and has its head office and principal place of business in Hong Kong.  It has a number of subsidiaries and assets in Hong Kong.  It has employees in Hong Kong and a number of directors appear to be based in Hong Kong.  Its audit was conducted by a Hong Kong CPA firm.

(2)  The Loans under the Loan Agreement were granted to the defendant for use as working capital and are denominated in Hong Kong dollars.  Repayments of the Loans were also made in Hong Kong dollars.

(3)  Mr Lee Kwok Lun, another person who executed the Loan Agreement for the defendant, and the defendant’s Deputy Chief Executive Officer (Ms Hu Mingyue), are located in Hong Kong.

39.  The plaintiff has also made submissions to the effect that the defendant has failed to advance any credible defence to the plaintiff’s claim, and that the lack of a credible defence would hinder any meaningful inquiry under the forum non conveniens principles and would militate against the grant of a stay.  In Hong Kong Civil Procedure 2021, the learned editors at paragraph 11/4/63 refer to a number of authorities and state that “[if] there is no bona fide defence, then a challenge based on forum non conveniens grounds may well fail because of the focus on where the trial should take place”. 

40.  I do not believe that the defendant has sufficiently dealt with the matters set out in paragraph 38 above in its submissions.  Accordingly, it is unnecessary for the Court to go further to consider the credibility of the defendant’s defence.

41.  In these circumstances, I find that the defendant has failed discharged its burden to establish that (1) Hong Kong is not the natural or appropriate forum and (2) Macau is clearly and distinctly the more appropriate forum.  This is fatal in its application for stay of proceedings.

D2.    Other Considerations

42.  In the light of the fact that the defendant has failed to demonstrate the two matters mentioned in the previous section, it is strictly unnecessary for this Court to proceed to (1) consider whether the plaintiff will be deprived of a legitimate personal or juridical advantage if the action is tried in Macau, and (2) balance the advantages of Macau being the alternative forum against the disadvantages that the plaintiff may suffer if the matter is tried in Macau.

43.  Even assuming that I were to find that the defendant has satisfied the Court to establish that Hong Kong is not the natural or appropriate forum and that Macau is clearly and distinctly the more appropriate forum, I would have held that the plaintiff is likely to be deprived of a legitimate juridical advantage if the presenting proceedings in Hong Kong were stayed. 

(1)  The plaintiff has filed affidavit evidence to say that civil proceedings in Macau consist of “declaratory actions” (宣告之訴), whereby the parties’ rights and liabilities will be determined, and “execution actions” (執行之訴), which relates to rights recognised by the Macau Court to be immediately enforceable without any further adjudication.  It does not appear that this is disputed by the defendant.

(2)  As the Loan Agreement is considered by the plaintiff to be immediately enforceable without any further adjudication under Macau law, the plaintiff initiated an execution action against the defendant and Mr Sin in the Basic Judicial Court in Macau. In the action, the aggregate value of the assets frozen by the Macau Court amounted to MOP 347,964.63 (equivalent to approximately HK$339,701.26), which is only a small fraction of the outstanding amounts of over HK$20 million owed by the defendant under the Loan Agreement. 

(3)  According to the plaintiff, no further substantive steps could be taken in the execution action if no more assets could be found.  Further, according to its evidence, the plaintiff cannot commence a declaratory action in Macau because the Loan Agreement itself is considered to constitute rights that are immediately enforceable without the need for further adjudication. 

(4)  Such evidence from the plaintiff does not appear to be disputed by the defendant.  Rather, the defendant’s position is that (a) the plaintiff’s execution action in Macau is still ongoing, (b) the plaintiff should apply to enforce the judgment in the execution action in Hong Kong in due course and (c) it is premature to commence enforcement proceedings in Hong Kong.

(5)  If the plaintiff’s proceedings herein were stayed in favour of Macau, it does not appear from the available evidence that the plaintiff can commence a declaratory action in Macau or to take any further substantive steps in the execution action in Macau.  This demonstrates that the plaintiff is likely to suffer a juridical disadvantage of not having its claim to be determined on the merits, which can be avoided if the current proceedings in Hong Kong are not stayed.  I do not believe that such a disadvantage can be adequately answered by the submissions advanced by the defendant. Specifically, the defendant has not satisfied the Court that a “judgment” will be issued by the Macau Court in an execution action to adjudicate or declare the defendant’s liabilities to the plaintiff which can be enforceable as a foreign judgment in Hong Kong.

D3.    Conclusion on Stay of Proceedings

44.  For the above reasons, I dismiss the defendant’s application to stay the present proceedings.

E.    DISPOSITION

45.  The defendant’s stay application is dismissed. I make an order nisi that the costs of and occasioned by the defendant’s stay application are to be paid by the defendant to the plaintiff, to be taxed if not agreed.