DEF FOUNDATION INC. & OTHERS v. CHANG YIN CHING & 0THERS

HCA48/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.48 OF 2001

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R E A S O N S   F O R    D E C I S I O N

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1. This is an application by the 3rd defendant pursuant to Order 12, rule 8 Rules of the High Court for a stay of these proceedings or alternatively for an order setting aside the Order of the Master granting leave to serve the Writ on him outside jurisdiction. The application is based on the ground of forum non conveniens. After hearing the submissions, I dismissed the application and gave oral reasons for so doing. I now reduce my reasons into writing.

BACKGROUND

2. The 3rd defendant and the 3rd and 4th plaintiffs are respectively the sons and daughter of Mr Chang Yin Ching ("Father") and Madam Tsui Yuen Ying also known as Tsui San Mui ("Mother"). The 5th plaintiff is the 3rd plaintiff's wife. The 3rd defendant is a resident of Canada. The 3rd and 5th plaintiffs are resident in Hong Kong. The 4th plaintiff used to reside in Toronto, Canada. She has since January 2001 worked and resided in Hainan province of Mainland China.

3. The 1st and 2nd plaintiffs are BVI companies incorporated in about 1993 and 1995 respectively. The shares in the 1st plaintiff are currently held under the names of Father, Mother, the 3rd and the 5th plaintiffs, who holds it on trust for the 4th plaintiff. As for the 2nd plaintiff, Father, Mother, the 3rd defendant, the 3rd and the 5th plaintiffs each holds one share in it. The one share held by the 5th plaintiff is also held on trust for the 4th plaintiff. The 3rd to 5th plaintiffs are currently the directors of the 1st and 2nd plaintiffs.

4. Father died on 3 February 1999 in Toronto, Canada. Mother also died several months later in Canada on 8 September 1999. The plaintiffs contend that Father died intestate. The 3rd defendant, on the other hand, says that Father had made three Chinese wills. The estates of Father and Mother have yet to be administered.

CANADIAN PROCEEDINGS

5. On 22 October 1999, the 3rd defendant commenced proceedings in the Ottawa Superior Court against the 1st to 4th plaintiffs for injunctive, declarative and accounting reliefs in respect of the funds in the corporate bank accounts held by the 1st and 2nd plaintiffs. The 3rd defendant contends that the funds are held by the 1st and 2nd plaintiffs on trust for charitable purposes and for certain designated beneficiaries or, alternatively, on trust for the estate of Father. On 28 March 2000, the 3rd and 4th plaintiffs applied to stay the Canadian proceedings. The motion to stay is to be heard in early 2002. In the meantime, the Ottawa Court had ordered that the 3rd and 4th plaintiffs be cross-examined in Hong Kong. Letter of Request had also been issued.

6. On 26 September 2001, the 3rd defendant further took out probate proceedings in Ottawa Court in relation to the estates of both Father and Mother.

HONG KONG PROCEEDINGS

7. The plaintiffs commenced these proceedings on 4 January 2001. On 13 March 2001, the Master granted leave for the service of the Writ on the 3rd defendant outside jurisdiction. Prior to that, the plaintiffs had on 22 January 2001 instituted probate actions in respect of the estates of Father and Mother under HCAP 3 of 2001 and HCAP 4 of 2001.

8. On 16 June 2001, the defendant took out a summons applying for a stay of these proceedings on the ground of forum non conveniens. The summons was listed for argument on 18 October 2001. One day before the hearing, the 3rd defendant took out another summons to amend the previous summons by adding an alternative application to set aside the Master's Order granting leave to serve the Writ outside jurisdiction. With no objection from the plaintiffs, both the original application and the additional application were heard together.

THE APPLICABLE PRINCIPLES

9. It is common ground that questions of leave to serve proceedings outside jurisdiction and of stay of proceedings involve the exercise of the Court's discretion. As far as the issue of forum non conveniens is concerned, the principles applicable to an application for stay of proceedings are applicable to an application for leave to serve proceedings out of jurisdiction. The burden of proof, however, is different. In an application for stay, the applicant must show that it is right to deprive the plaintiff of the right to sue in Hong Kong while under an Order 11 application, the plaintiff must prove that Hong Kong Court is the forum conveniens : The Spiliada [1986] AC 460.

10. The relevant principles as discussed by the Court of Appeal in The Adhiguna Meranti [1987] HKLR 904 at 907 can be summarized as a three-stage process as follows :

(1) Is it shown that Hong Kong is not only not the natural or appropriate forum for the trial, but there is another available forum which is clearly or distinctly more appropriate than Hong Kong?

(2) If the answer to (1) is yes, will a trial in the other forum deprive the plaintiff of any legitimate personal or juridical advantages? The evidential burden here is on the plaintiff.

(3) If the answer to (2) is yes, the court has to balance the advantages of (1) against the disadvantages of (2). Proof of this rests upon the party applying for a stay.

See The Lanka Muditha [1991] 1 HKLR 741, 744 and The Kapitan Shvestsor [1997] 1 HKC 485 at 493A-D.

THE 1st STAGE

11. The 3rd defendant does not dispute that Hong Kong Court is a court of competent jurisdiction. As a matter of fact, there can be no doubt that Hong Kong Court has jurisdiction over the action. A substantial part of the subject matter of the present claim is the funds held in the corporate bank accounts of the 1st and 2nd plaintiffs with banks and financial institutions in Hong Kong. The subject matter of the dispute is therefore located within Hong Kong.

12. It is also the plaintiff's case that the funds were paid to and received by the 1st and 2nd plaintiffs in Hong Kong. The 3rd defendant does not challenge this in his affidavits, although his case is that all the funds originated from Father.

13. It will appear from the material now before the Court that the disputes are essential factual. The plaintiffs have asserted that the relevant records and documentary evidence and the material witnesses are located in Hong Kong. Insofar as the records and documents relating to the receipt of the funds by the 1st and 2nd plaintiffs are concerned, it will follow from the fact that the funds were received in Hong Kong that these documentary evidence are kept by the relevant banks and financial institutions in Hong Kong. The question of the sources or origins of these funds is a crucial one having regard to the different assertions of the parties. The question will shed light on whether the funds in the corporate bank accounts are held on trust and whether the 3rd and 4th plaintiffs hold the shares in the 1st and 2nd plaintiffs on trust.

14. As regards witnesses, the 3rd and 5th plaintiffs are in Hong Kong whereas the 3rd defendant is in Canada. The plaintiff's case is that most of the material witnesses are residing in Hong Kong. These include the staff of the banks and financial institutions who had dealt with the transfers and deposits of the funds, Mr Ho Kam Fai, who is one of the alleged witnesses to the Father's Chinese wills, Mr Patrick Yuen, the accountant who, according to the 3rd defendant, was responsible for keeping the corporate records of Father and was also involved in some of the relevant events and matters.

15. Other material witnesses, including Mr Luk Hok Ling and Miss Chan Kwan Yee, who were allegedly witnesses to Father's Chinese wills, are said to be travelling between Hong Kong and Canada or the United States on a frequent basis. The 4th plaintiff who is now in Hainan is also said to be prepared to come to Hong Kong to testify.

16. The 3rd defendant does not dispute the positions of the relevant witnesses as stated by the plaintiff. The 3rd defendant however says that it is not necessary for the staff of banks and financial institutions to give oral testimony.

17. In my view, it is clear from the above matters that Hong Kong is the natural and appropriate forum. While Mr Cheung for the 3rd defendant has argued that Canada is also a court of competent jurisdiction and an appropriate forum, he has advanced no submission to demonstrate that Hong Kong is not the natural forum. Neither has he sought to argue that Hong Kong is not the appropriate forum.

18. In his affidavit filed in the Canadian proceedings on 30 November 2000, the 3rd defendant has suggested that given the purpose of the charitable trust is to promote democracy in China, the dispute as to the beneficial ownership of the funds should not be resolved in Hong Kong Court because it would be highly controversial and very uncomfortable for any Hong Kong judge to uphold such a charitable trust. Mr Cheung, in my view quite rightly, does not seek to rely on it for the purpose of these applications.

19. The position taken by Mr Cheung is that in terms of location of evidence and witnesses, the factors in favour of Hong Kong and Ottawa Courts are fairly balanced. That is insufficient. It is insufficient to show that there is another forum conveniens. The 3rd defendant has to show that Ottawa Court is clearly or distinctly more appropriate than Hong Kong Court. The evidence adduced plainly falls short of demonstrating this.

THE 2nd AND 3rd STAGE

20. Given that the plaintiffs have shown that Hong Kong Court is the natural and appropriate forum, and that the 3rd defendant has failed to show that there is available another more appropriate forum, it would not have been necessary to go on to the second and third stage. However, since there are several matters that have been canvassed by counsel in this context, I will briefly state my views on them.

(1) Power to cross-examine overseas witnesses

21. For the 3rd defendant, it is argued that the domicile of Father is an important issue, being relevant to the administration of the estate and the determination of the proper forum. Since parties have filed substantial affidavits on the matter, it is necessary for the parties to be cross-examined. Mr Cheung submits that the Ottawa Court has the advantage of being able to direct for cross-examination of witnesses abroad.

22. While I can see the significance of the issue of domicile in the probate actions and/or the Canadian proceedings, I am unable to agree that it is of relevance to the action before this Court. The dispute here, put in a nutshell, turns on the beneficial ownership of the funds and assets of the 1st and 2nd plaintiffs. The domicile of Father is irrelevant. Secondly, it is not correct to say that the Ottawa Court enjoys wider power in being able to direct for cross-examination of witness abroad. Order 39, rules 2 and 3 Rules of the High Court confer a similar power on the Hong Kong Court.

(2) Qualification of judges

23. The plaintiffs, on the other hand, point out that the purported wills of Father are all in Chinese. It is submitted that a bilingual judge of the Hong Kong Court will be better equipped to handle the construction and effect of these documents as well as the disputes on the handwriting. It is further said that a Hong Kong judge is in a better position to assess and appreciate the thinking and intention of Father, being a Chinese person who had spent a great part of his life in Hong Kong.

24. Mr Mok has drawn my attention to some features of the three Chinese documents and some of the contents of their English translations prepared by the 3rd defendant and filed in the Ottawa Court. I can see that there will be considerable disputes as to the accuracy of the translations as well as the construction to be placed on the documents. I accept, too, the practical difficulties that a non-Chinese-speaking judge will encounter in sorting out these issues, as identified by Mr Mok. In my view, however, these are not necessarily insurmountable and do not automatically prevent a non-Chinese and/or monolingual judge from dealing with the case. While it may be desirable for the present action to be tried by a Chinese and bilingual judge, I will not go so far as saying that this confers a juridical or procedural advantage if the action is litigated in Hong Kong.

25. For the plaintiffs, it is further argued that Canadian judges are less experienced than Hong Kong judges in dealing with homemade testamentary and other Chinese documents. In my view, little or no purpose is served by attempting to compare or comment on the experience of judges. It may well be that there are more litigations in Hong Kong concerning the validity or authenticity of homemade Chinese wills and Chinese documents, but this is not a matter of personal or juridical advantage or disadvantage.

NEGATIVE DECLARATIONS

26. The point that Mr Cheung for the 3rd defendant relies heavily on for these applications turns on the nature of the relief sought herein. It is argued that the present action is a "mirror action" of the Canadian proceedings and that a number of negative declarations are sought for the purpose of neutralizing or countering the effects of the outcome of the Canadian proceedings. Relying on the case of The Volvox Hollandia [1988] 2 Lloyd's Rep. 361, Mr Cheung submits that the court ought to look at a claim for negative declaration with great caution in situations involving possible conflicts of jurisdiction.

27. The relevant part of Kerr LJ's judgment The Volvox Hollandia reads as follows (at p 371) :

" R.S.C., O. 15. r. 16 confers wide powers on our Courts to grant declarations. But these are discretionary and exercised with caution. The refusal to grant negative declarations which might be premature or hypothetical or might unfairly prejudice a defendant, is an important illustration of the proper limits of the rule.

Where a person is faced with a claim that he is bound to do something imminently, which he denies, he may properly apply for a declaration that he is under no obligation to do what is demand of him ...... But an anticipatory claim for a negative declaration as to the rights or obligations of another person is clearly different ......

In addition, there is an important wider perspective. Claims for declarations, and in particular negative declarations, must be viewed with great caution in all situations involving possible conflicts of jurisdictions, since they obviously lend themselves to improper attempts at forum shopping."

28. It is evident that not all negative declarations are open to suspicions. It is only those negative declarations that are anticipatory and sought with a view to foreshadow or counteract foreign proceedings properly commenced that the court ought to refuse.

29. In the present case, the pleaded case of the plaintiffs is that the 3rd defendant had made adverse claims in Hong Kong resulting in the assets and funds of the 1st and 2nd plaintiffs being frozen. The 3rd defendant does not dispute this. The declarations sought by the plaintiff are therefore not anticipatory.

30. In addition, the Canadian proceedings only concern the beneficial ownership of the funds in the corporate bank accounts of the 1st and 2nd plaintiffs. The present action however goes further than that and touches upon other assets of the 1st and 2nd plaintiffs and also the shares in the 1st and 2nd plaintiffs. The court cannot readily infer that the commencement of the present action is an improper attempt at forum shopping. I am of the view that this is not a case where the court ought to exercise its discretion to exclude the claim from the Hong Kong court.

CONCLUSION

31. For the reasons above, the 3rd defendant's summons as amended is dismissed with costs to the plaintiffs against the 3rd defendant, to be taxed if not agreed. The costs of the summons to amend is to be paid by the 3rd defendant to the plaintiffs in any event.