PATRICK JAMES JOSEPH O’MARA v. CHIN SHAU TONG

HCA 1253/2019

[2022] HKCFI 768

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1253 OF 2019

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JUDGMENT

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Introduction

1.  There is before this court the Defendant’s application by summons dated 16 November 2020 (“Summons”) for a stay of the present proceedings on forum non conveniens grounds and that the proceedings “should be conducted in another court”.  While no other court has been identified in the Summons, according to the 1st affirmation of the Defendant (“Chin 1”), he seeks to stay this Action in favour of “the Swiss Court or the English Court”.  In his 2nd affirmation (“Chin 2”), the Defendant has exhibited a legal opinion (i) from a Swiss law firm to the effect that the Courts of First Instance in all the cantons in Switzerland have jurisdiction over the Plaintiff’s claim arising from the Loan Agreement referred to below, although the Courts in the cantons of Geneva and Zurich would probably be the most appropriate, and (ii) from an English law firm to the effect that the High Court of Justice, Queen’s Bench Division, will have jurisdiction over the Plaintiff’s claim.

Background

2.  The Writ of Summons in this Action was issued on 12 July 2019.  While the Defendant was in Hong Kong, on 23 May 2020, the Writ was sent by registered post to him at his residence ie Garden House no. 75, Headland Drive, Headland Village, Discovery Bay, Hong Kong (“Discovery Bay Property”) and accepted by a domestic helper who later passed it to the Defendant.  The Discovery Bay Property has since March 2009 been registered in the name of Forever Fund Limited, a company incorporated in Hong Kong, whose sole director and shareholder is the Defendant’s current wife, Madam Yvonne Yeung (“Yeung”).  The Discovery Bay Property is where Yeung and the Defendant’s son live.  While the Defendant claims to live in Cambridge, England, he admits that whenever he is in Hong Kong, he stays at the Discovery Bay Property. 

3.  There is no dispute that the Defendant was served as of right within the jurisdiction.

4.  The Plaintiff’s claim against the Defendant is for the repayment of a US$15 million loan (“Loan”) pursuant to a Loan Agreement dated 15 July 2009 between the Plaintiff as lender and the Defendant as borrower (“Loan Agreement”).  The Loan was advanced by inter-bank transfer effected on 17 July 2009.  Under clause 4 of the Loan Agreement, it was repayable on or before 6 July 2010.  By clause 8 thereof, the Loan Agreement is governed by the laws of Switzerland and that the Courts of Switzerland shall have non-exclusive jurisdiction for any dispute arising out of or in connection with it.  The Plaintiff accepts that according to Swiss Law, its claim under the Loan Agreement is subject to a limitation period of 10 years.

5.  The Defendant’s case, according to Chin 1, is that the Loan Agreement was executed in connection with a joint venture agreement dated 15 July 2009 (“JV Agreement”) whereby the Plaintiff and the Defendant agreed to participate as shareholders of Dublin PTE Limited (“Dublin PTE”), a Singaporean company, whose primary object was to carry on the business of a gold and copper mining project in Malaysia ie Sabah Tailings Project Malaysia (“Project”) through Borneo Resources, a local Malaysian company to be owned by Dublin PTE.  In both the Loan Agreement and the JV Agreement, the Plaintiff gave an address in Singapore while the Defendant gave an address in Cambridge, England.  The Plaintiff and the Defendant were investors of the Project and Dublin PTE was their corporate vehicle.  Both agreements were apparently prepared by an English law firm viz Cathcarts solicitors (“Cathcarts”).

6.  The Project allegedly required substantial financing and various governmental approval and permits.  To facilitate the process of obtaining such financing and permits, investors in the Project had to pay allegedly “lobbyist fees” in order to meet with high-ranking individuals in the Malaysian banking and political sectors.  US$15 million had been set aside as such “lobbyist fees”.

7.  The Defendant alleges that such alleged “lobbyist fees” were to be paid by the Plaintiff with his funds originated in Kazakhstan.  In order for such “lobbyist fees” to be readily accepted, it was agreed that the Plaintiff’s funds would be routed through the Defendant’s HSBC bank account in England, recognised as a reputable country.  In order to ensure that the Defendant would not be subject to English tax liability, the Plaintiff and the Defendant agreed to instruct Cathcarts to prepare a simple loan agreement so as to explain the nature of the US$15 million transferred into the Defendant’s HSBC bank account.  In the circumstances, the US$15 million were not a loan.  They were “lobbyist fees” to be used for the benefit of the Project.  Hence, the Defendant alleges that he is under no obligation to repay the Plaintiff. 

8.  It follows from the Defendant’s narrative above that the Loan Agreement is a sham.  The Defendant’s allegations are strenuously disputed by the Plaintiff.

Deliberation

9.  The principles governing applications for a stay on forum non conveniens grounds are not in dispute and have been restated by the Court of Final Appeal in SPH v SA (2014) 17 HKCFAR 364 at [51] as follows:

“ 51. We adopt the re-statement of the principles … in DGC v SLC (née C) [2005] 3 HKC 293, 297-298, applying Spiliada Maritime Corporation v. Cansulex Limited [1987] 1 AC 460, 477 and Louvet v. Louvet [1990] 1 HKLR 670, 674-675:

‘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 i.e. 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 first, 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 second, 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.’”

10.  The words “clearly or distinctly” suggest that the onus is not to be lightly discharged.  The burden of proof on the defendant in a stay application has been described as “a very high burden”: China International Fund Ltd v West China Cement Ltd unrep, HCA 1889 of 2019, 4 December 2020, DHCJ Burns SC at [27]-[28].

11.  Where a plaintiff commenced proceedings in Hong Kong as of right, but a relevant non-exclusive jurisdiction clause exists naming another jurisdiction as an available forum, the forum non conveniens principles continue to apply - the existence of a non-exclusive jurisdiction clause is simply one factor to be placed into the discretionary mix: T & K Electronics Ltd v Tai Ping Insurance Co Ltd [1998] 1 HKLRD 172, 177G-H. 

12.  In cases where no particular forum can be described as the natural forum for the trial of the action eg in commercial disputes where there can be a number of pointers to different jurisdictions, there is no reason why the Court should not refuse to grant a stay in such a case where jurisdiction has been founded as of right:Spiliada Maritime Corporation v Cansulex Limited [1987] AC 460, 477C-D.

13.  Mere convenience is not enough nor is it enough simply to point to factors which connect a case or the parties to any particular jurisdiction.  The approach in forum non conveniens applications is not just an exercise in loading up with factors which point to any particular jurisdiction.  The court is required to focus on appropriateness of a forum from the point of view of the trial of action: Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250, 255B-C per Recorder Geoffrey Ma SC (as he then was).

14.  Mr Chen, for the Defendant, submits that Hong Kong is not the natural or appropriate forum for the trial of this Action for the following reasons. 

(1)  The Loan Agreement is governed by Swiss law and contains a non-exclusive jurisdiction clause in favour of the Swiss Courts.

(2)  The Loan Agreement was prepared by Mr Peter Cathcart, a partner of Cathcarts, and signed by the Plaintiff in Michigan, USA and by the Defendant in England.

(3)  The US$15 million were paid into the Defendant’s HSBC bank account in England.

(4)  The Plaintiff has no meaningful connection with Hong Kong.  He regards USA and Canada, where his family is based, to be his true home.

(5)  The Defendant is a Malaysian holding only a Malaysian passport and has since 1994 been a resident of the UK, living in a property in Cambridge, England which he has co-owned with his ex-wife Kaw-Yin Chin since 1991.  He is entitled to residency in England by virtue of his Residence Permit and has established ties and connections with England including inter alia by owning a property in Cambridge, by being a registered voter and by being registered with the UK’s National Health Services.  The Defendant does not have a Hong Kong ID card and relies on visitor permits when he visits Hong Kong. 

15.  Mr Chen further submits, for reasons set out in paragraphs 8 to 9 of his skeleton submissions, either the Swiss Courts or the English Courts are clearly and distinctly more appropriate than the Hong Kong Courts for the trial of the Action.  What his submissions boil down to are these:

(1)  Swiss Courts.  The Loan Agreement is governed by Swiss Law and the Swiss Courts, particularly given the commercial nature of the dispute, the civil Courts of First Instance of Zurich and Geneva, are plainly better-placed to apply Swiss law to adjudicate the dispute over its enforceability.  There is also a non-exclusive jurisdiction in favour of Swiss Courts.  Lastly, the Defendant, Mr Cathcart and Mr Philip Hirschler are all potential witnesses.  They are based in England and it is more convenient for them to travel from England to Switzerland. 

(2)  English Courts.  The Defendant and his 2 alleged potential witnesses, Mr Cathcart and Mr Philip Hirschler, are based in England and it would be most convenient for them if the trial of the Action were to take place in London.  Further, there are only 3 Swiss lawyers registered as qualified foreign lawyers with the Hong Kong Law Society.  Given the geographic proximity between England and Switzerland, it is likely that the number of Swiss qualified lawyers practicing in London greatly exceeds three.

16.  With respect, this court does not agree that Hong Kong is not the natural or appropriate forum or that the Swiss Courts and the English Courts are clearly and distinctly more appropriate than the Hong Kong Courts. 

17.  Judging from Chin 1, it is clear to this court that the primary issue for determination is whether the Loan Agreement is a sham in the way described by the Defendant.  On this issue, there is little doubt that the parties themselves are the most important witnesses who will be required to testify at the trial, either in person or, as is becoming common these days with the pandemic, by way of VCF.

18.  As far as the Plaintiff is concerned, while he regards USA and Canada to be his home, he also describes himself a “citizen of the world” and used to do a fair amount of travelling before the pandemic.  Obviously, the Plaintiff does not consider it inconvenient to travel to Hong Kong to testify in person as and when required to do so.

19.  As far as the Defendant is concerned, he has been present in Hong Kong living with his family for quite some time now[1]. This court agrees with Ms So that the evidence does suggest he has a much stronger connection with Hong Kong then he is prepared to admit on oath.  Whether or not the Defendant is resident in Cambridge, England, the evidence is such that he also lives, and has lived, in the Discovery Bay Property as his residence in Hong Kong. 

20.  First, despite what the Defendant claims in Chin 1 at paragraph 4 to be a UK resident and had spent only 2 to 3 months per year in Hong Kong with his family for the past few years, in fact, he had spent at least 5 to 6 months in Hong Kong a year.  This is accepted by Mr Chen at the hearing and is confirmed by his statement of travel records issued by the Immigration Department.  The Defendant is a retired businessman and it is purely his personal choice how much time he spends retiring in England or in Hong Kong.  According to his statement of travel records, between 5 January 2019 and 8 March 2020, he had entered Hong Kong by air dozens of times. 

21.  Second, the  Defendant  and  his  wife  Yeung are   shareholders and directors of the following 4 Hong Kong companies[2] viz:

(1)  China Eastern Oil & Gas Company Limited;

(2)  China Northern Oil & Gas Company Limited;

(3)  China Western Oil & Gas Company Limited; and

(4)  Petrotrans Company Limited (“Petrotrans”).

22.  The first 3 companies were all incorporated in Hong Kong on 5 August 2011 while the last one was incorporated in Hong Kong on 10 December 2003.  In the 4 companies’ annual returns before this court, the Discovery Bay Property was stated as the address of the Defendant and Yeung.  While in Chin 2, the Defendant says he is in the process to deregister the first 3 companies, he does not deny the Plaintiff’s allegation in his 2nd affidavit (“P2”) that Hong Kong was where their business relationship was based, that they both held positions in Petrotrans and that the Defendant’s Petrotrans’ business card showed his position as chairman with an office address in Wing On Centre, Sheung Wan. 

23.  On the other hand, as far as Swiss Courts are concerned, it seems to this court hopeless for the Defendant to suggest they are clearly and distinctly more appropriate than the Hong Kong Courts for the trial of this Action.  There is no suggestion that the Defendant has a factual witness to call who resides in Switzerland.  In so far as the Defendant relies on the non-exclusive jurisdiction clause in the Loan Agreement, this court agrees with Ms So that this is but one factor to be weighed in the balance: T & K Electronics Ltd v Tai Ping Insurance Co Ltd supra.

24.  What is slightly more relevant for the present purpose is that the Loan Agreement is governed by Swiss law.  However, the Defendant has failed to identify any legal issues, let alone “substantial and difficult” issues, which would be hotly contested and would require a decision by the Court trying the Action.  In Rambas Marketing Co LLC at 266F-I, Recorder Geoffrey Ma SC (as he then was) observed that:

“In cases where substantial and difficult issues of foreign law are involved, the court may well be compelled to stay the proceedings where there is an appreciable risk that justice will not be done. This risk may in certain circumstances be attributable to factors such as expense, but in the usual case would arise where the court was somehow concerned with the possibility that it might reach a wrong conclusion on an important aspect of foreign law. … The courts in Hong Kong (particularly the Commercial Court and the Admiralty Court), given the international identity and nature of the type of commercial litigation and litigants here, are often accustomed to dealing with aspects of foreign law. It does not therefore follow at all that once it is shown that issues of foreign law arise, that this will necessarily be a powerful, much less a decisive, factor in favour of a stay.” (emphasis added)

25.  In the absence of identification of any difficult issues under Swiss law, there is really no serious connection between this Action and Switzerland.  The Defendant’s suggestion that it is more convenient for the Defendant and his 2 potential witnesses Mr Cathcart and Mr Philip Hirschler to travel from England to Switzerland than to Hong Kong is an indication of how desperate the Defendant’s case is as far as Swiss Courts are concerned.  In this day and age, the difference between flying from England to Switzerland and to Hong Kong is only a matter of hours. 

26.  As far as the English Courts are concerned, Mr Chen only has 2 points to make.  The 1st point about there being more Swiss qualified lawyers practicing in London than in Hong Kong is quite irrelevant unless the Defendant is able to identify any complicated and difficult issues of Swiss law which would fall for determination by the Court trying the Action.  The Defendant is not able to and has identified none.

27.  The only other point left about England’s connection with this case is that the Defendant is a UK resident and his 2 potential witnesses are based in England. 

28.  As far as the Defendant himself is concerned, this court has already pointed out that that he had been living in the Discovery Bay Property as his residence in Hong Kong for around 50% of the time. This court has also pointed out that, according to his statement of travel records, between 5 January 2019 and 8 March 2020, he had entered Hong Kong by air dozens of times.  On the evidence, there is nothing to suggest that when the Defendant is able to go back to England once the travel restrictions are eased, there is any impediment for him to return to Hong Kong, whether to attend to his family here or for any other business. In so far as the Defendant considers it necessary to testify at the trial of this Action, he cannot seriously claim that the “inconvenience” of flying back to Hong Kong is such a hardship as to render the English Courts clearly and distinctly more appropriate than the Hong Kong Courts.  In so far as the Defendant deliberately refuses to leave England to attend trial of this Action in Hong Kong, such “inconvenience” is entirely self-induced and carries no weight.  

29.  The Defendant then suggests that Mr Cathcart and Mr Philip Hirschler are his potential witnesses and it is most convenient for them to testify in London.  But if one considers carefully what he says in Chin 1 and Chin 2, it is not at all clear that they are going to testify or are even likely to testify at the trial of this Action. 

30.  In Chin 1 at paragraph 26, the Defendant says this:

“… If the case were to proceed to trial, I might have to call Mr Cathcart and Philip as witnesses to depose to the circumstances in which the Loan Agreement was executed and the fact that the US$15 million was not a loan advanced by the Plaintiff to me …” (emphasis added)

31.  In Chin 2 at paragraph 17, the Defendant sounds just as hesitant.  

“Philip would be a candidate to give evidence in trial because he has knowledge of the true nature of the Loan Agreement as described in paragraphs 7 to 15 of my 1^st Affirmation.” (emphasis added)

32.  The first point to note is that the Defendant has been careful not to affirm positively that Mr Cathcart and Mr Philip Hirschler will back up his case that the Loan Agreement is a sham.  There is nothing from Mr Cathcart and Mr Philip Hirschler, whether in the form of an affidavit, a letter or even an email which even remotely confirms the Defendant’s case.  The second point to note is that the Defendant is not able to affirm positively that the 2 gentlemen have consented to be his witnesses at the trial of the Action. 

33.  Hence, on the evidence, this court is only left with the Defendant’s own wish to call Mr Cathcart and Mr Philip Hirschler as his witnesses at the trial and the mere possibility that they might actually do so.  But a lot depends on what they are prepared to testify, if at all, as to which the evidence is completely silent.  If so, their convenience as witnesses, even if it is to be taken into account at all, will be accorded very little weight for the present purpose. 

34.  In any event, mere convenience of witnesses is not enough - the court is required to focus on appropriateness of a forum from the point of view of the trial of action:  Rambas Marketing Co LLC v Chow Kam Fai David supra.

35.  To conclude, given that jurisdiction of the Hong Kong Courts has been founded as of right, and the Defendant has failed to discharge the burden of satisfying this court that Hong Kong is not the natural or appropriate forum or that the Swiss Courts and the English Courts are clearly and distinctly more appropriate than the Hong Kong Courts, such failure is fatal.  There is no need to consider the other issues set out in SPH v SA at [51] quoted above. 

36.  The stay application must be dismissed. 

Disposition and costs

37.  Paragraphs 1 and 2 of the Summons are dismissed.

38.  Both parties having agreed that costs should follow the event, there shall be an Order that costs of and occasioned by the stay application be to the Plaintiff, to be taxed if not agreed, and paid by the Defendant forthwith, certificate for counsel.