ANZ COMMODITY TRADING PTY LTD v. EXCELLENCE RAISE OVERSEAS LTD AND OTHERS

HCCL 4/2017

[2019] HKCFI 1409

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 4 OF 2017

____________

____________

_________________________

REASONS FOR DECISION

_________________________

Background

1.  This is the application made by the 2^nd to 4^th Defendants, and the 5^th and 6^th Defendants, for stay of this action against them.  The application for stay was originally made in December 2018 and (for the 6^th Defendant) in January 2019, under Order 12 rule 8 RHC, on the basis that the Court has no jurisdiction over them in respect of the subject matter or the relief; there are agreements to which the Plaintiff is a party which excludes the jurisdiction of the Court; and that the proceedings should be stayed pending the determination of the court of another jurisdiction.  In January 2019, these defendants applied for leave to amend their summonses for stay, to include the ground that the proceedings should be conducted in another court in consideration of the best interests and convenience of the parties and the witnesses; and on the ground of forum non conveniens.

2.  The 2^nd to 4^th and the 6^th Defendants seek leave to make the stay application out of time.  The 1^st, 5^th, 6^th, 9^th and 10^th Defendants also apply to adjourn a case management summons until the stay applications are finally determined.

3.  The claims made by the Plaintiff arise out of underlying transactions entered into by the parties, in respect of which the Plaintiff seeks payment of significant sums, of US$4.4 million, US$117 million, US$167 million, US$3.6 million and CNY 19 million, US $6.7 million and CNY 43 million against the different Defendants, for deceit, conspiracy, and proprietary tracing on the basis of unjust enrichment and constructive trust as a result of the Plaintiff’s funds being remitted and paid into the bank accounts of the 2^nd and 3^rd Defendants.

Whether there should be a stay

4.  As amended, the applications for stay are made under Order 12 rule 8 (2) and the inherent jurisdiction of the Court.  Considered in the round, the applications are made on the following grounds.

5.  First, it is alleged that considering the best interests and convenience of the parties and the witnesses, these proceedings should not be conducted in Hong Kong.  The Defendants rely on the fact that the relevant payments were made by the Plaintiff, first to the bank account of the Plaintiff’s contract counterparty MCM (an English company and a dealing member of the London Metal Exchange (“LME”)), before the money was remitted by MCM to the bank accounts of the 2^nd and 3^rd Defendants in Hong Kong.  The warehouse receipts which are claimed in these proceedings to have been forged, and in reliance on which the Plaintiff had been induced to make payments to MCM, were received by MCM in the United Kingdom, and then forwarded to the Plaintiff.  The Defendants argue that in these circumstances, any damage sustained by the Plaintiff was sustained in the United Kingdom, as a result of a tortious act committed within the United Kingdom, such that the United Kingdom is the natural forum for the determination of the dispute. 

6.  Second, the Defendants rely on the fact that there are ongoing and related proceedings in the United Kingdom (“UK Proceedings”), which are based on substantially the same facts, the same or similar causes of action, and the same loss and damage.  They accept that only the 2^nd Defendant and the 3^rd Defendant are the parties which are common to both the UK Proceedings and these Hong Kong proceedings, but the Defendants claim that the 4^th, 5^th and 6^th Defendants have been joined in the Hong Kong proceedings only because they worked for the 2^nd and 3^rd Defendants, and because of their acts and dealings as employees and for and on behalf of the 2^nd/3^rd Defendants.  The Defendants claim that there are common factual issues to be determined in both the UK Proceedings and the Hong Kong proceedings, as to whether the 2^nd and 3^rd Defendants had knowledge that the warehouse receipts were forged, and whether the 2^nd and 3^rd Defendants conspired to injure MCM and the parties to which MCM had sold the goods represented by the warehouse certificates.

7.  Finally, the Defendants claim that there is an agreement between MCM and the 2^nd and 3^rd Defendants, providing for English law to be the governing law and whereby the parties submitted to the jurisdiction of the English courts for disputes or claims arising under the agreement.

8.  The other grounds alluded to in the affirmations filed in support of the Defendants’ applications for stay, that the subject matter of the proceedings are not in Hong Kong, that payments were made to MCM’s bank accounts in the United Kingdom, and that the Defendants’ decision-making was not in Hong Kong, have not been pursued by counsel.

9.  None of the Defendants applying for stay have identified in their summonses the court which they claim is the natural and appropriate forum for the trial.  This is not sufficient (Greenwood Ltd v Pearl River Container Transportation Ltd unreported, CACV 27/1994, 25 May 1994, Rambas Marketing Co Ltd v Chow Kam Fai [2011] 3 HKC 250).  It was only in the evidence that it was claimed that the proceedings should be stayed pending the determination of the UK Proceedings, ie by the English Court.  Dealing with the application for stay on that basis (of the English Court being the alleged natural and appropriate forum), and also on the basis that the Defendants should be given leave to amend their Summonses to include the additional grounds relied upon, and to make the application out of time, I do not consider that the stay should be granted on any of the grounds, whether on the forum non conveniens ground or as a matter of case management on the ground that a stay is just and appropriate.

10.  The principles for granting a stay on forum non conveniens grounds are well settled, and are not in dispute.  The burden is on the defendant as applicant for stay to show not only that Hong Kong is not the natural and appropriate forum for the trial of this action, but that some other court is clearly or distinctly more appropriate than Hong Kong as the forum (Spiliada Maritime Corp v Cansulex Ltd [1987] AC 416).  The objective of the Court is to determine the forum in which the case can be tried more suitably for the interests of all parties and for the ends of justice.  The Court is to consider the forum with which the action has the most real and substantial connection, taking into consideration factors of convenience or expense, the law governing the relevant transaction, as well as the places where the parties respectively reside or carry on business.  The Court has emphasized (in New Link Consultants Ltd v Air China [2005] 2 HKC 260) that the approach is not just an exercise in loading up factors which point to any particular jurisdiction in the abstract.  The focus should be the appropriateness of a forum from the point of view of the trial of the action.

11.  As Counsel for the Plaintiff highlighted, these proceedings have been served on all the Defendants seeking the stay as of right, in Hong Kong, where they are incorporated/resident, carry on their business and work.  In such cases, the jurisdiction of the Hong Kong Court should not be interfered with on case management/lis pendens grounds in the absence of “very good reasons to the contrary” (Linfield Ltd v Taoho Design Architects Ltd [2002] 2 HKC 2004).

12.  If the 2^nd to 6^th Defendants have to be served in the UK Proceedings, the Plaintiff will have to apply for leave from the English court to serve the claim form out of the jurisdiction.

13.  The 2^nd to 6^th Defendants are Hong Kong companies/residents. They have no problem with giving evidence in Hong Kong, in Cantonese and without the need for interpretation.

14.  The main witness of the Plaintiff is in Singapore.  It is more convenient for the witness to travel from Singapore to Hong Kong for the trial.

15.  The fact that the forged warehouse receipts are not in Hong Kong, and the fact that they were issued by Singapore entities, are not material.  The warehouse receipts are the instruments of the fraud, and part of the documentary evidence.  They were endorsed by the 5^th Defendant, the staff of the 2^nd and 3^rd Defendants, in Hong Kong, and sent from Hong Kong to MCM, which forwarded the same to the Plaintiff.  If any of the documents are in the United Kingdom or outside Hong Kong (and there is no claim by the Defendants that there are), in this modern age, there should be no difficulty in having these documents sent to Hong Kong for the trial.

16.  The Defendants referred to the fact that the warehouse receipts relate to metals registered with and subject to the rules of LME, to specifications of the LME for futures contracts, and to the warehouse receipts representing nickel physically stored in LME approved warehouses in Asia.  I cannot see the relevance of any of these to the trial of the proceedings between the Plaintiff and the Defendants.  According to the Defences filed by the relevant Defendants seeking the stay, they only put the Plaintiff to proof of their claims of deceit, knowing receipt, constructive trust, etc.   

17.  As Counsel for the Plaintiff have highlighted, the subject matter of the Plaintiff’s claims in these proceedings are not the forged warehouse receipts (as the Defendants suggest) but the defrauded funds upon which the Plaintiff asserts a proprietary claim and interest.  These funds were paid by the Plaintiff, first to its client MCM, which then paid the funds to the bank accounts of the 1^st and 2^nd Defendants in Hong Kong, under the belief that the forged warehouse receipts were genuine.  The funds in Hong Kong were then dissipated via the Hong Kong bank accounts of the 2^nd and 3^rd Defendants to different entities including the 1^st Defendant, and the 7^th to 10^th Defendants, against which the Plaintiff asserts its proprietary claim.

18.  The fact that English law applies to the contracts made between the 2^nd and 3^rd Defendants and MCM, and/or to the contract made between MCM and the Plaintiff, is not of significance.  There is no pleading in the Defences filed, of any principle of English law which is said to be relevant to any issue which may be raised at trial, nor is there evidence that any principle of English law as may be relevant is in any way materially different to Hong Kong law. 

19.  Even if English law is applicable or relevant, the courts in Hong Kong are accustomed to dealing with aspects of English law.  The Plaintiff has highlighted however that the constructive trust/unjust enrichment claim is arguably governed by the law of the place of enrichment, which is Hong Kong where the 2^nd and 3^rd Defendants are incorporated and received the funds.  As for the claims of conspiracy and fraudulent misrepresentation, the pleaded overt acts of conspiracy include the endorsement of the forged warehouse receipts by the 2^nd and 3^rd Defendants and their staff, their procuring the PMA Letters (pleaded in paragraph 8A of the Amended Statement of Claim) addressed to the Plaintiff, and dispatching the letters and forged receipts to MCM from Hong Kong, with the intention that they would be relied upon by any subsequent endorsee/buyer including the Plaintiff. These took place in Hong Kong.

20.  In any event, the dealings and transactions in this case involved multiple jurisdictions (Hong Kong, Macau, the Mainland, England and Singapore) and as Lord Mance JSC held in VTB Capital plc v Nutritek International [2013] 2 AC at 51:

“The place of commission is a relevant starting point when considering the appropriate forum for a tort claim. …But, especially in the context of an international transaction like the present, it is likely to be over-simplistic to view the place of commission in isolation or by itself, when considering where the appropriate forum for the resolution of any dispute is. The significance attaching to the place of commission may be dwarfed by other countervailing factors.”

21.  The Defendants’ references to agreements which they say contain jurisdiction clauses excluding the jurisdiction of the Hong Kong Court can be disposed of shortly.  The Plaintiff did not contract with the Defendants in any of the agreements on which the 2^nd to 6^th Defendants rely. The relevant agreement was made between the Plaintiff and MCM (and not any of the Defendants).  All the other agreements to which the Defendants have referred, in purported reliance on the jurisdiction clauses therein contained, were made by the Defendants with third parties, and not with the Plaintiff. 

22.  Considering all the facts and circumstances of the claims made in this case and bearing in mind the issues raised in the Defence for trial, Hong Kong has real and substantial connections with these proceedings.  I am not satisfied that the Defendants have discharged their burden of showing that Hong Kong is not the natural or appropriate forum, and that the English court is clearly and distinctly more appropriate than Hong Kong. 

23.  As for the Defendants’ reliance on the existence of the alleged parallel proceedings in the United Kingdom, it is important to bear in mind that the UK Proceedings were brought not by the Plaintiff, but by MCM, against the 2^nd and 3^rd Defendants, and other parties not in this action. 

24.  The Defendants rely on the fact that MCM brought its claims against the UK defendants on identical or similar causes of action, of fraudulent misrepresentation, deceit, conspiracy to injure and constructive trust, for recovery of damages sustained by MCM.  The 4^th to 6^th Defendants in this action claim that MCM’s claims made against the 2^nd and 3^rd Defendants rely upon acts of the 4^th to 6^th Defendants as the director, employees or agents of the 2^nd and 3^rd Defendants. The common factual issues to be determined in both the UK Proceedings and these Hong Kong proceedings include whether the 2^nd to 6^th Defendants had knowledge that the warehouse receipts were forged, and whether the 2^nd and 3^rd Defendants had conspired to injure MCM and the parties to which MCM had sold or transferred the forged warehouse receipts.

25.  The Plaintiff in these proceedings is not a party to the UK Proceedings brought by MCM against its direct counterparties, namely the 2^nd and 3^rd Defendants.  Any judgment that may be made in the UK proceedings is not binding as between the Plaintiff and the 2^nd and 3^rd Defendants, nor against the 4^th to 6^th Defendants.  The judgment and factual findings of the UK court in the UK Proceedings is inadmissible, unless the party against whom the finding is sought to be deployed is bound by reason of estoppel (Capital Century Textile Co Ltd v Li Dianxiao [2018] HKCFI 729).

26.  The Court held in Linfield Ltd v Taoho Design Architects Ltd [2002] 2 HKC 204 that an application for stay on the basis of multiplicity of concurrent proceedings dealing with the same or similar subject matter should be approximated roughly to a lis alibi pendens application.  At paragraph 12 of the judgment, Ma J (as the Chief Justice then was) stated:

“I say “approximates roughly” because there is an important distinction between the present application and an application for a stay based on lis alibi pendens. In lis alibi pendens cases there is not only identity of subject matter but also identity of parties. Even when both these features exist, a stay is not automatically ordered if it can be shown that there is a legitimate purpose in proceeding with 2 sets of proceedings: see The Abidin Daver [1984] AC 398 at 411G-412A.

In the present case, a stay is sought where there exist multiple proceedings but not involving the same parties.  What then are the applicable principles in such type of applications?

One starts with the basic principle: what would serve the ends of justice between the parties to the litigation as far as the administration of justice is concerned?”

27.  His Lordship then proceeded in Linfield to consider the guiding principles, that the stay must not cause injustice to the claimant, and the applicant for stay must satisfy the court that the continuance of the proceedings would be oppressive or vexatious to him or an abuse of the process of the court, such that it would unjust.  His Lordship added that where a plaintiff institutes proceedings as of right, he is not to be deprived of carrying on those proceedings unless very good reasons exist to the contrary.

28.  In the present case, the Plaintiff has sustainable and legitimate causes of action against the 2^nd to 6^th Defendants, which are separate to and distinct from the causes of action of MCM against the 2^nd and 3^rd Defendants under their agreements.  The Plaintiff and MCM are separate and independent legal entities, with separate causes of action, each of which has the right to pursue its claims independently of the other.  Each of MCM and the Plaintiff has confirmed that it will give credit for any recoveries that may be made from the 2^nd and 3^rd Defendants.  The Defendants are located in and served in Hong Kong, where proceedings have been instituted by the Plaintiff as of right.

29.  The Plaintiff has obtained Mareva and/or proprietary injunctions against the 1^st, 9^th and 10^th Defendants.  Further delay in the trial is not just to the Plaintiff, nor is it fair to the other Defendants.  All parties are exposed to the risk of increasing potential liability under the injunctions and cross-undertakings as to damages.  The UK Proceedings are at the preliminary pleadings stage, and there is no evidence to suggest that a trial or determination is expected in the near future. 

30.  In all the circumstances, including the matters referred to in paragraphs 12 to 21 above, I am not satisfied that it is just, or appropriate, to grant a stay of these proceedings on case management or other discretionary grounds.

Orders

31.  For all the above reasons, the applications for stay made by the Defendants’ proposed amended summonses were dismissed at the conclusion of the hearing on 28 May 2019, with costs to the Plaintiff, to be summarily assessed.

32.  The application to adjourn the case management summons until the disposal of the stay application was dismissed, since the stay application was disposed of, with costs to the Plaintiff, also to be summarily assessed.