CHINACHEM FINANCIAL SERVICES LTD v. CENTURY VENTURE HOLDINGS LTD

HCA 410/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 410 OF 2013

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D E C I S I O N

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I. INTRODUCTION

1. The plaintiff (“P”) was/is a Hong Kong company within the Chinachem group of companies (“Group”). The defendant (a BVI company, “D”) specialised/specialises in handling of claims and debt disputes in Mainland China (“PRC”).

2. In 2001, China Small and Medium Enterprise Investment Co Ltd (“China SME”) sued P in the Beijing Municipal Higher People’s Court (“Beijing HPC”) with respect to a dispute (“MinshengDispute”) arising out of P’s alleged investment in China Minsheng Bank Corporation Limited (“Bank”) (“Minsheng Litigation”).  On 8 July and 2 August 2002, the Beijing HPC made a first instance judgment and civil order (collectively, “1^st Minsheng Judgment”).  On 15 July 2002, P appealed to the Supreme People’s Court (“SPC”) (“Minsheng Appeal”).

3. P (Party A) and D (Party B) entered into a “委托索償債權協議” dated 25 August 2009 (“Agreement”) whereby D agreed inter alia to provide services to P in relation to the Minsheng Appeal/Dispute upon inter alia terms/clauses in the Annex to this Decision.  Mr Chan SC (and Mr Suen with him), counsel for D, submitted that the Agreement was predicated on P retaining Beijing Dishi Law Firm (“Dishi”) as their PRC lawyers.  For convenience, reference to “Clause xx” in this Decision is a reference to the relevant clause in the Agreement.

4. On/about 12 January 2010, P and D entered into a supplemental agreement (“Supp Agt”), which amended inter alia Clause 10(c) to the effect that P would be entitled to terminate the Agreement if D failed to obtain the “Desired Second Instance Result” provided for in Clause 5.2 within 12 months from the date of the Agreement.

5. P claimed D was not entitled to any remuneration pursuant to the Agreement:

(a)  P was entitled to terminate the Agreement because D failed to procure the “Desired Second Instance Result” within 12 months from signing the Agreement (ie by 25 August 2010);

(b)  when the Agreement expired by effluxion of time under Clause 9 upon expiry of 18 months from signing the Agreement on 25 February 2011 (i) D had failed to ensure P prevailed in the Minsheng Appeal[1] and obtained the “Desired Second Instance Result”, (ii) the SPC had not delivered judgment in the Minsheng Appeal, (iii) the Minsheng Dispute had not been settled by mediation or otherwise and/or (iv) P had not obtained benefits more favourable than the 1^st Minsheng Judgment;

(c) at a meeting in Beijing on/about 21 June 2012 (“Beijing Meeting”), P confirmed to D the Agreement had expired or had been terminated.  

6. On 4 February 2013, Dishi and D as co‑claimants commenced legal proceedings at the Beijing HPC against P for P’s breach of the Agreement (“PRC Litigation”).  On 7 March 2013, P commenced the present action against D (“HK Action”) for negative “no liability” declarations that (a) the Agreement had expired by effluxion of time on 25 February 2011 and in any event had been terminated no later than on 21 June 2012, and (b) D was not entitled to remuneration from P pursuant to the Agreement (collectively, “P’s Claims”).  The writ of summons was served on D’s appointed agent for such purpose in Hong Kong.

II.  SUMMONS

7. On 18 June 2013, D applied by summons (“Summons”) to stay all further proceedings in the HK Action on the grounds that:

(a)  the Beijing HPC would determine P’s claims in the HK Action together with Dishi’s claim against P (governed by PRC law and intimately related to the dispute between P and D) in the PRC Litigation;

(b)  the dispute between P and D had limited (and indeed no real) connection with Hong Kong;

(c)  D’s key witnesses all resided in the PRC;

(d)  D was a BVI company with their primary place of business in the PRC;

(e)  vast documents concerning the dispute between P and D were in simplified Chinese with expressions used in the PRC;

(f)  it would be in the interests of justice for the claims between P and D and between P and Dishi to be adjudicated/resolved by the same court within the same forum in the PRC;

(g)  it would be more appropriate/convenient for the dispute between P and D to be decided in the PRC.

8. For the Summons, D would not dispute (a) the writ of summons in the HK Action was served on their authorised agent in Hong Kong as of right, (b) Clause 15 being inter alia a Hong Kong non‑exclusive jurisdiction clause (“NEJC”) was an essential feature, and (c) they had to demonstrate exceptional circumstances to support a stay.  But D argued:

(a)  There was nexus of contractual rights/obligations among P, D and Dishi under their agreements which together constituted a tripartite agreement with common/overlapping issues about the HK Action and PRC Litigation such that it would be against the interests of justice for such matters to be determined in isolation of one another in different forums given the high risk of inconsistent findings in Hong Kong and PRC proceedings in the absence of a stay.

(b)  The HK Action would not obviate the need for the PRC Litigation, especially when such litigation between P and Dishi could only be adjudicated in the PRC, and P had not issued proceedings against Dishi in Hong Kong.  So if the HK Action were not stayed, there would be duplicity of proceedings in Hong Kong and the PRC on overlapping issues.

(c)  The scope of the HK Action was fully covered by the PRC Litigation, and there would not be any remaining dispute that must be litigated in Hong Kong if a stay was granted.

9. P disagreed, and claimed Hong Kong would be the appropriate forum given (a) the parties’ intention via the NEJC to resolve disputes within the Hong Kong jurisdiction, (b) the want of identity in parties/issues, and (c) Hong Kong being a convenient jurisdiction to resolve the dispute.

10. On 18 June 2013 and 23 October 2014, D filed the 1^st and 2^nd affirmations of Mr Lam Yee Hung (D’s director and sole shareholder, “YH Lam”) in support of the Summons (“Lam 1^st and 2^nd Affs”).  On 7 August 2013, P filed the affirmation of Chan Kam Por (P’s director, “Chan”) in opposition (“Chan Aff”).  On 25 March 2014, DHCJ Ramanathan SC struck out parts of the Lam 1^st Aff.  Mr Chan SC assured this court that the pending appeal against such decision had no impact on the Summons.

11. The hearing of the Summons came before me on 28 October 2014 (“Hearing”).  Shortly before the Hearing, D sought to rely on the 3^rd affirmation of YH Lam (“Lam 3^rd Aff”) and the affirmation of D’s solicitor Mr Ma Wan Hin (“Ma Aff”) that exhibited a draft affirmation of Dishi’s Mr Jiang Xueping (“Jiang”).  Mr Ho SC (and Mr Dawes with him), P’s counsel, had no objection, but asked the court to note P had no opportunity to respond to certain observations in Jiang’s draft affirmation.  I granted leave accordingly, and on 28 October and 11 November 2014 D filed the Lam 3^rd Aff, Ma Aff and Jiang’s affirmation (“Jiang Aff”).

12. Neither Mr Chan SC nor Mr Ho SC asked me to delve into the substantive merits of P’s Claims or D’s potential defence (and counterclaim).  They are content to proceed on the basis that neither party’s case can be said to be untenable or, to put it in another way, that there is arguable claim and defence.  Therefore, there is no need for me to pass comment on the substantive merits of the HK Action.

III.  D’s AFFIRMATION EVIDENCE

(a) Minsheng Litigation

13. In/about late 1995, the Group through P advanced funds to and entrusted China SME to acquire/hold shares in the Bank (“Minsheng Shares”) for them, but China SME alleged P only advanced funds to them as loans.  The Minsheng Shares appreciated in value, so in 2001 China SME sued P to confirm the alleged loan agreement was of no effect and P counterclaimed to confirm the alleged investment trust agreement was effective (ie the Minsheng Litigation).  P successfully applied to freeze the Minsheng Shares (then held by the Shanghai branch of China Securities Depository and Clearing Co, Ltd) until the conclusion of the Minsheng Litigation. 

14. By the 1^st Minsheng Judgment, the Beijing HPC held that P (a foreign enterprise) could not invest in PRC financial institutions without prior government approval, so (a) P was in breach of financial regulatory control, (b) the investment trust agreement was of no legal effect, and (c) P could only receive the principal investment sum and compensation but could not claim for return of the Minsheng Shares. P appealed to the SPC, but after seven years (ie by 2009) the Minsheng Appeal was not yet concluded. 

(b) Group’s request for assistance

15. As a result of probate litigation following the death of the Group’s chairperson Mrs Nina Wang, the court appointed administrators pendente lite.  In September 2008, 許業榮先生 (“Hui”) was engaged as CEO of the Group.  He sought assistance from彭振聲先生 (D’s director and Hong Kong general manager, “Pang”) for the Minsheng Litigation.  Pang recommended YH Lam and his brother Lam Yee Kung (“YK Lam”), who had broad connections in the PRC, to Dr Kung Yan Sum (P’s director and chairman of the Group’s Executive Committee (“Exco”), “Kung”) and Hui.  In October/November 2008, Pang and/or YH Lam met Kung and his sisters to discuss inter alia how to progress the Minsheng Litigation. 

16. Hui recommended and Kung agreed that P should appoint appropriate persons to handle the Minsheng Litigation on a profit-sharing basis but without upfront payment.  YH Lam then became involved in the Minsheng Litigation.  In February 2009, through Dishi’s Mr Long Yifei (“Long”), YH Lam arranged for Hui and Kung to meet the person in charge of the SPC’s No 4 Court to ascertain why such litigation had not been concluded and whether the Minsheng Appeal had any prospect of success.  In April 2009, YH Lam entrusted Long to engage experts on PRC law who opined that the 1^st Minsheng Judgment was erroneous.  YH Lam suggested that P should retain Dishi’s Long/Jiang as their PRC lawyers.  In May 2009, 梁榮江先生 (P’s director and Exco member) and P’s Hong Kong solicitor met Long in Beijing to discuss the retainer.  As a result, Kung, Hui and 梁榮江先生 agreed to let YH Lam manage the Minsheng Litigation.

(c) Retainer agreements

17. YH Lam (through Pang) negotiated the terms of the retainer with P and their lawyers, and eventually agreed to 50:50 profit‑sharing ratio for benefits that exceeded the 1^st Minsheng Judgment but subject to (a) P receiving a minimum of RMB800 million and (b) YH Lam signing a guarantee to indemnify P if less than RMB800 million was recovered due to non-performance of D’s obligation(s).  At first Pang/YK Lam objected to imposing a time limit for the validity of the Agreement and for achieving the “Desired Second Instance Result”.  P explained that the Exco feared D would not progress the matter in the absence of such provision, but they assured YH Lam such clause did not mean the Minsheng Appeal had to be concluded within a specified period.  Hui told P that Kung said so long as D/Dishi could “重新啟動審判或有關的程序” P would agree to any request for time extension for carrying out their work.  YH Lam claimed he relied on such assurance, and did not expect the Group to renege on the same. 

18. In May 2009, YH Lam set up D as his corporate vehicle to help P manage the Minsheng Litigation.  On 25 August 2009, P’s梁榮江先生and D’s YH Lam signed the Agreement, YH Lam signed a “擔保契約” (“Guarantee”),[2] and P’s 梁榮江先生 signed a “法律服務委托協議” (“Dishi Agreement”).  On 27 August 2009, Long signed the Dishi Agreement on Dishi’s behalf.  The Lam 1^st Aff said of the Guarantee as follows:

“24. …… 根據[the Guarantee]，[YH Lam]須無條件擔保[D]履行在[the Agreement]下的全部義務及責任，如因[D]未有或怠於履行責任而引致[P]未能取得不少於人民幣八億元的得益及/或蒙受其他損失的情形發生，[YH Lam]需無條件予以足額補償。換言之，若[P’s] [the Minsheng Appeal]敗訴或結果不比[the 1^st Minsheng Judgment] 結果優越，又或[the Minsheng Appeal]結果比[the 1^st Minsheng Judgment]優越但[P]取得少於人民幣八億元的得益，則[YH Lam]需親自向[P]作出差額補償。毫無疑問，當中的擔保條款對[YH Lam]是相當苛刻和不利的。更甚的是，[the Guarantee]並不設立與[the Agreement]相同的期限條款，這意味著無論何時何故，只要[P’s] [the Minsheng Appeal]敗訴或未能取得不少於人民幣八億元的得益，[YH Lam]均須向[P]作出補償。這亦導致日後[P]輕易放棄和解、脅迫[D]接受調低分配比例等情形發生時，[D]喪失議價能力，任由宰割；[P]則可以輸打贏要，一方面借故拖延簽訂補充協議，另一方面却又繼續委托[D]和[Dishi]為其辦事，直待[the Minsheng Appeal]結果出台，才視乎結果的好壞就[D]和[Dishi]的去留作最終定奪。這亦正說明，為何[the Minsheng Appeal]判决一日未有結果，[P]一日都未有解除與[D]和[Dishi]的委托關係。”

(d) D’s work and progress of the Minsheng Litigation

19. After signing the Agreement, D (mostly by YH and YK Lam) carried out works for P in respect of the Minsheng Litigation, which were mainly done in the PRC since such litigation took place in the PRC and China SME was a PRC company:

(a)  helping P draft letters to the People’s Congress, State Council, Political and Legal Committee, SPC and other departments in relation to the Minsheng Litigation, and arranging suitable method/channel for serving such letters;

(b)  ascertaining progress of the Minsheng Litigation on timely basis, devising implementation proposals, and reporting to P before carrying out such proposals;

(c)  working jointly with Dishi on case analysis and formulation of litigation strategy and direction;

(d)  assisting Dishi in drafting documents for submission to the SPC;

(e)  representing P in court-ordered mediation and in negotiations with China SME;

(f)  persuading (by lawful channels/methods) relevant departments not to impose administrative penalties on P by reflecting the true background/circumstances of the Minsheng Litigation.[3]

Pang as D’s Hong Kong general manager was responsible for liaising with the Exco, and YH and YK Lam would also periodically report to the Exco.

20. YH Lam claimed that in the first few months D caused the Minsheng Litigation to make significant progress, eg the SPC directed mediation between P and China SME three times on terms that were better than the 1^st Minsheng Judgment.  D drafted letters for P to issue to important persons to draw their attention to the Minsheng Litigation, and D also provided advice and mediation negotiation strategy.  From time to time, YH Lam, Pang and YK Lam would make special report to the Exco on progress of the Minsheng Litigation.

(e) Supplemental agreements

21. In early 2010, D requested for extension of the six‑month deadline under Clause 10.  On 14 January 2010, D emailed to P a signed copy of the Supp Agt and a discussion draft of 《補充協議(二)》.  YH Lam claimed both parties regarded the Supp Agt to be a mere formality, and the Exco had no objection to the time extension.  On 27 January 2010, P and D signed the Supp Agt to extend the period under Clause 10 to 12 months. Thereafter, D continued to carry out various works in respect of the Minsheng Litigation.[4]

22. On 19 July 2010, as a result of D’s/Dishi’s efforts, during mediation China SME offered to settle the Minsheng Litigation by equal division of the Minsheng Shares between Chian SME and D on 50:50 basis, which meant (a) P would have received benefits equivalent to at least RMB2 billion, (b) there would have been compliance with the principles for mediation in Clause 2.1 such that D “按時完成了[the Agreement]項下的責任和義務”, and (c) D would have been entitled to share profits of at least RMB900 million pursuant to the Agreement. 

23. But P insisted China SME should only be entitled to 30% of the Minsheng Shares, and on 20 July 2010 notified D they would abandon mediation and proceed with the Minsheng Appeal.  D had no alternative but to abide by P’s decision even though “[D]在接受委托時已告知[P]，法院審理程式進度難以確定，[P]必須給予[D]足夠的工作時間以獲取對[P]有利的二審判決”.  So in August 2010 and February 2011, D sent to P draft 《補充協議(二)》 (“2^nd Supp Agt”) and 《補充協議(三)》(“3^rd Supp Agt”) with a view to extend the period under Clause 10 to 18 months and 24 months respectively.  Hui orally assured YH Lam and Pang that the Exco agreed to extend time and to sign the 2^nd and 3^rd Supp Agts, and P and D should continue to perform the Agreement, so YH Lam and D assumed P had signed the 2^nd and 3^rd Supp Agts and did not ask for signed copies.  It was only in November 2011 when an issue arose as to whether the Agreement amounted to champerty that D realised for the first time P had not signed the 2^nd and 3^rd Supp Agts.  D claimed that since P had orally and by conduct agreed to the time extension and D had continued to perform under the Agreement in reliance of P’s representation/assurance to their detriment, P was estopped from denying the continuing validity of the Agreement.  YH Lam claimed D was legally advised that “由於雙方同意延長委托期限至二十四個月，則[Clause 9]已被取締；[P]已不可能根據[Clause 9]指[the Agreement]已於十八個月後失效。換言之，除非[P]行使[Clause 10]賦予的權力，以書面通知[D]終止[the Agreement]，否則[the Agreement]始終有效”.

24. YH Lam claimed that by the 2^nd and 3^rd Supp Agts, the deadline in Clause 10 was extended to 25 August 2011.  So on 8 August 2011, D sent another draft 《補充協議(四)》 (“4^th Supp Agt”)to P for time extension under Clause 10 to 30 months.  But P did not give any positive response, and when Pang contacted Kung he merely said “現階段只是等待判決，不用多開會議”, which YH Lam understood to mean “無需跟過往那樣，專門召開[the Exco]會議，討論決定[D]續期事宜”, so D continued to follow up on the Minsheng Litigation as before.

25. In/about November 2011, the Exco’s membership increased to eight members.  To D’s surprise, an Exco member raised query as to whether the Agreement amounted to champerty.  As a result, the Exco sought legal advice.  On 9 November 2011, D sent an open letter to the Exco to clarify inter alia that the Agreement did not breach Hong Kong or PRC law.  The Lam 1^st Aff went on to state:

“42. …… [D]在公開信中再次強調，由於[D]促成[China SME]被迫提出均分標的物的和解方案已滿足了[the Agreement]約定的八億元保底條款要求，[D]業已完成合約主要義務，因此[the Agreement]下所有的期限不應當續存。再者，既然[P]決定放棄調解，將[the Minsheng Litigation]付諸裁判，增加了[D]的工作難度和風險，給予[D]足夠的工作時間是最基本的條件之一。要推翻[the 1^st Minsheng Judgment]，必須遊說[the SPC]審判委員會接受並支持[P]方的答辯觀點。簽訂補充協議只是形式上的做法。”

26. In the meantime, on 9 November 2011, D sent P a further draft 《補充協議(五)》 (“5^th Supp Agt”) which sought to extend the period in both Clauses 9 and 10 to 36 months.  Even though P did not sign the 2^nd to 5^th Supp Agts, they continued to retain D/Dishi as their claims recovery agent/lawyers in the Minsheng Litigation, and did not terminate the retainer agreements or otherwise demand them to cease work.  As before, P continued to work with D/Dishi and to urge them to perform their obligations under the Agreement and Dishi Agreement.[5]

27. P and D had two meetings on 3 November 2011 and 16 March 2012 to further negotiate the terms of the supplemental agreements with P proposing and D disagreeing to reduce D’s profit‑sharing ratio under the Agreement:

“47. [Pang]指出[D]執行合約沒有任何錯誤，且[China SME]提出均分標的物的調解方案已符合[the Agreement]所列的和解原則，[D]早已完成合約義務。[P]自行決定放棄調解，把案件提交法庭判決，在被告知[the SPC]審判委員會評議的裁判結果為五五分成之後，卻以續期為由要求降低10%分配比例，沒有任何道理並有失誠信。最後，[Hui]提出，既然[the SPC]的判決書即將頒出，可待拿到[P]勝訴的判決書再進行洽商。當時，大家的共同理解是，簽署補充協議本身不是一個問題，判決結果才是最重要的。”

28. On 22 March 2012, P invited Dishi’s Long for a meeting to enquire Dishi’s stance if P’s solicitors were to take over the management of the Minsheng Litigation from D, but Long made clear D was crucial to achieving the then beneficial state of affairs.  At that time, they were then waiting for the SPC to hand down the second instance (ie Minsheng Appeal) decision, so D’s work “基本上圍繞著協調並說服中國銀監會對[P]違規行為不予處罰，關注判決主文能否有助於案件順利執行。另一項重要的工作為申請續凍股權(即申請把[the Minsheng Shares]及其孳息繼續凍結)”.  In April 2012, Pang informed YH Lam that Hui told him P had obtained legal advice to the effect that champerty was no longer an issue.

(f) Beijing Meeting

29. On 19 June 2012, D emailed the Exco to reiterate the history/progress of the Minsheng Litigation, the nature/course of D’s retainer, and D’s work and efforts.  On 21 June 2012, P’s and D’s representatives and P’s lawyers attended the Beijing Meeting when P’s lawyers suggested the Agreement had expired and was no longer effective, and the parties should sign a new agreement.  D disputed this and explained “[China SME]於調解時所提出的均分標的物的和解方案已符合[the Agreement]約定的和解原則，[D]因此已完成[the Agreement]項下的主要義務。既然[P]不接受[China SME]的和解方案，決定放棄調解，把案件付諸裁判，就必須給[D]足夠的工作時間。[D]的立場是必需首先保證[the Agreement]所約定的利益分配比例等重大原則不能被改變的前提下，一些未完善的條款則可以補充協議的方式進一步明確”.  Upon further negotiations, the parties reached the following understanding before the conclusion of the Beijing Meeting: “由[P’s lawyers]在充分尊重原協議之大原則及分成比例不變的大前提下負責起草[the Agreement]的補充協議、[D]負責繼續敦促裁判文書盡快簽發、[Dishi]負責查核標的物詳情以及[P]與[Dishi]亦應遵從[the Agreement]的大原則簽訂補充協議等基本共識”.

30. But on 17 August 2012, P’s solicitors sent D draft《法律與索償服務契據》(to be signed by P and D) and draft 《法律服務協議》(to be signed by P and Dishi) that unilaterally altered the profit-sharing ratio to 70 (P) : 30 (D) and contained harsh terms against D.  D protested to Hui who tried to reassure them by suggesting further negotiations could be made after the SPC handed down its second instance (ie the Minsheng Appeal) decision, but there was no further discussion on these draft agreements.

(g) SPC’s second instance (ie Minsheng Appeal) decision

31. On 29 October 2012, the SPC handed down its second instance (ie the Minsheng Appeal) decision (“2^nd Minsheng Judgment”), and P was entitled to benefits exceeding RMB2 billion thereunder.  On 6 November 2012, Kung told Pang that he was satisfied with the 2^nd Minsheng Judgment, and that it confirmed the Exco had been right to retain D.  Thereafter, D/Dishi continued to liaise with P to assist in the enforcement of the 2^nd Minsheng Judgment. 

(h) P’s termination of retainer of D/Dishi

32. Thereafter, D became concerned over some media report that Hui’s four-year contract with the Group was about to expire and would not be renewed.  To D’s surprise, they suddenly received a letter from P’s solicitors by email on 23 November 2012 stating the Agreement had lapsed since 25 February 2011 and therefore D/Dishi were not entitled to act for P in respect of the Minsheng Litigation since that day.  Even though such letter made no mention of the issue over the profit-sharing ratio, YH Lam claimed P “顯然是以[the Agreement]過期失效為藉口，而拒不支付[D]任何報酬。需要特別指出的是，在此之前，[P]從沒有聲稱或書面通知，撤銷[D]及[Dishi]代表[P]處理[the Minsheng Litigation]之授權”.  By another letter dated 6 December 2012 by P’s solicitors, P also terminated and revoked the appointment of Dishi as their lawyers in the PRC.

33. Dispute arose between P and D/Dishi as to (a) the validity of the Agreement and Dishi Agreement and (b) D’s/Dishi’s claims for remuneration from P as explained in the Lam 1^st Aff:

“69. …… 現在看來，起碼部份[P]的負責人早已為此埋下伏線，早已有包藏禍心立心不良的決定，存心詐騙[D]努力的成果。

……

74. [P]一直以來給予[D]的明確表述是，[the Agreement]的限期只是一個形式上的規範，只要[D]盡心執行合同規定為[P]取得應有的權益，簽署補充協議不是一個問題。[D]也是基於對[P]這樣表述的信賴一直繼續為[P]提供[the Minsheng Litigation]的服務，直至為[P]取得了理想的二審結果，實現了[the Agreement]合同目的。

75.  在取得二審判決後不足一個月，且[China SME]明確表示願意主動履行生效判決之後，[P]竟然改口，表示[the Agreement]差不多兩年之前已經失效，[P]因此不會向[D]分配任何利益。……”

(i) PRC Litigation and HK Action

34. D engaged Hong Kong solicitors to liaise with P’s solicitors, but since December 2012 D took preparatory steps for commencing legal proceedings in the PRC against P, including obtaining documents as to D’s status as a BVI company as verified by China attesting officer and notarised through consular service.

35. On 4 February 2013, Dishi and D as the 1^st and 2^nd co‑claimants formally commenced proceedings against P at the Beijing HPC, and filed 《民事訴狀》, 《財產保全申請書》, 《立案訴訟材料》and 《關於第2項訴訟請求的說明》, and the PRC court acknowledged receipt as evidenced by the 《收取立案訴訟材料清單》 signed by a judge of the Beijing HPC.  YH Lam explained that according to “《中華人民共和國民事訴訟法》和有關法院的執行細則，人民法院立案庭設立的案件受理窗口收到原告的訴狀之後，立案庭經辦法官應進行 …… 審查” including “管轄權：明確該法院是否具有管轄權”.[6] Further, “內地法院處理涉外的案件，由於通常會牽涉國家與國家之間的條約及/或其他司法管轄區的法律，所以一般會較其他案件更為嚴謹慎重地處理。有關案件除必須由指定的市中級人民法院或以上的人民法院審理外，亦須由特定的資深法官負責，在某些情況下更會由法院領導召集審判委員會討論，所以立案程式需時較長。”[7]

36. On 21 March 2013, the Beijing HPC “批准正式立案審理，簽發(2013)高民初字1476號《受理案件通知書》”.  On 25 March 2013, the Beijing HPC issued a 《民事傳票》 which was transmitted to the SPC for service on P via the High Court of Hong Kong.  Dishi and D were unable to provide sufficient security, so the Beijing HPC did not approve their 《財產保全申請書》.  On 7 April 2013, the Beijing HPC issued a 《更正訴訟須知》to rectify a clerical error in the 《民事傳票》. 

37. In the meantime, about a month after D/Dishi commenced the PRC Litigation, ie on 7 March 2013, P commenced the HK Action against D for declaratory reliefs.  The statement of claim was filed about a month later on 2 April 2013.  P never commenced any legal proceedings against Dishi in Hong Kong.

38. Subsequently, P made submissions to the Beijing HPC that the dispute between P and D should be dealt with by the Hong Kong courts and also applied for de-consolidation of Dishi’s and D’s claims against them.  On 3 March 2014, the Beijing HPC rejected P’s application (“1^st Stay Judgment”).  P appealed to the SPC.  On 21 October 2014, D was notified of the decision of the SPC dated 29 September 2014 (“2^nd Stay Judgment”). 

IV.  2^ND STAY JUDGMENT

39. In the 2^nd Stay Judgment, P was the appellant, and Dishi and D were the respondents.  P claimed (a) Dishi and D should not jointly sue them in the same action, (b) Dishi’s claim was below the monetary jurisdictional threshold for proceedings in the Beijing HPC such that the SPC ought to remit such claim to the Beijing Intermediate People’s Court (“Beijing IPC”), and (c) the Beijing HPC ought to decline jurisdiction over D’s claim, including on the basis of forum non conveniens.  “[D]與[P]簽訂的[the Agreement]約定爭議由香港法院管轄，依據香港法律，該協議管轄條款有效。可見，合並起訴的目的在於規避協議管轄。目前並無證據證明[the Agreement]的履行地在北京，[the Beijing HPC]認定[the Agreement]的履行地在北京從而具有管轄權的理由是錯誤的。即使[the Beijing HPC]對[D]提起的訴訟享有管轄權，也應當適用“不方便法院原則”拒絕行使管轄權。…… [The Beijing HPC]對[P]主張適用“不方便法院原則”的請求，未予審查認定，程序不當”.

40. On issue (a) above (ie “關於[the PRC Litigation]是否屬於共同訴訟並應予合並審理的問題”), the SPC held that even though there were some connections between the Agreement and Dishi Agreement, “但簽約主體和委托事項均不相同，分別構成訴訟代理合同法律關係和委托合同法律關係兩個相互獨立的訴訟標的，三方當事人之間沒有不可分的共同權利義務關係，故不構成必要共同訴訟的情形，而屬於普通共同訴訟。由於[P]明確提出管轄權異議且不同意合並審理；而[Dishi]在起訴中還對原告之一[D]提出了訴訟請求，[the PRC Litigation]亦不宜合並審理，因此本案不符合《中華人民共和國民事訴訟法》第五十二條第一款規定的普通共同訴訟之合並審理條件”.  In short, the SPC held that Dishi’s and D’s claims against P should be the subject of separate proceedings because (a) they failed to meet PRC statutory requirements for claims that must be litigated together, and (b) even though there were some connections between the Agreement and Dishi Agreement, P did not consent for both matters to be heard together so they would be dealt with in different actions.

41. On issue (b) above (ie “關於[the Beijing HPC]對[Dishi]提起的訴訟代理合同糾紛案是否具有管轄權的問題”), the SPC held inter alia that “[Dishi]提起的訴訟標的額為6700萬元及自2012 年11 月23 日起的逾期利息，不符合[the Beijing HPC]管轄第一審涉港民商事案件的標准，依法應由北京市的有關中級人民法院管轄。[P]關於級別管轄異議的上訴理由成立，本院予以支持”.  In short, the amount of Dishi’s claim did not exceed RMB100 million, so the SPC remitted it to be dealt with by the Beijing IPC. 

42. On issue (c) above (ie “關於[the Beijing HPC]對[D]提起的委托合同糾紛訴訟案是否具有管轄權，如其具有管轄權，是否可以不予行使管轄權的問題”), the SPC held that the PRC courts, which had jurisdiction, should not decline jurisdiction over D’s claim including on forum non conveniens grounds:

(a)  The Agreement provided for the non-exclusive jurisdiction of Hong Kong courts, “此屬於當事人明確約定的[NEJC]，不具有排除其他有管轄權的法院行使管轄權的效力。[P]以[the Agreement]管轄條款主張排除內地法院管轄權的理由不能成立，本院不予支持”.

(b)  The subject matter of the Agreement was “[D]為[P]對[China SME]的權益提供索償清收債權服務，而債務人[China SME]的住所地位於北京，因此[the Agreement]的主要義務履行地為北京。根據《中華人民共和國民事訴訟法》第二百六十五條的規定，以及結合[D]訴請的標的額，[the Beijing HPC]作為合同履行地法院對該案享有管轄權”.

(c)  On the question whether the Beijing HPC should decline jurisdiction, the SPC noted P and D commenced proceedings in Hong Kong and the PRC respectively which resulted in parallel litigation in both jurisdictions, but whether Hong Kong being an independent legal jurisdiction “是否已經受理案件或作出判決，不影響內地法院依法享有的管轄權，但內地法院是否受理，根據案件具體情況裁量決定，其中包括考慮案件是否存在不方便管轄的因素”.  The SPC held that “因訟爭[the Agreement]的委托事項為索償清收在內地的權益，合同履行地和爭議事實發生地均位於內地，[P]可供扣押的財產亦位於內地，而內地與香港對當事人約定非排他性協議管轄的民商事案件尚未建立解決管轄權沖突和相互認可與執行法院裁決的司法互助關係，因此無論從案件審理還是判決執行便利的角度考慮，內地法院行使管轄權均更加有利於實現及時審理案件、保障當事人合法權益的民事訴訟目的。該案訟爭議約定適用香港法、部分文件語言為英語、部分證人可能位於香港等情況，並不足以構成內地法院重大、明顯的不方便管轄因素。故[P]以平行訴訟和不方便管轄為由主張[the Beijing HPC]不應行使管轄權的上訴理由不能成立，本院不予支持”.

43. YH Lam claimed that since the PRC courts would not stay or strike out D’s claim against P in the PRC Litigation notwithstanding the HK Action, which would lead to parallel litigation and risk of contradictory or conflicting decisions between the PRC and Hong Kong courts, the PRC courts would be the appropriate forum and the HK Action should be stayed.  Further, Jiang Aff stated that:

“4. 至於有關分案審查的裁決，雖然[Dishi]訴[P]的案件現被移送至北京市第一中級人民法院管轄，[Dishi]一方仍然有權向[the Beijing HPC]申請把[Dishi]訴[P]的案件轉由[the Beijing HPC]審理。屆時，該案與[D]訴[P]的案件可能會同在[Beijing HPC]審理。

5.  [D]訴[P]的案件屬涉外案件，而中國內地的民事訴訟並沒有對涉外案件的審理時間有特定規限。但根據以往的經驗，[the Beijing HPC]可能會安排雙方於未來的一至兩個月內完成交換證據的程序。交換證據程序結束後，法院一般會於15至30天內正式開庭審理案件。”

V.  SOLICITORS’ COMMUNICATIONS

44. P’s solicitors wrote to D on 23 November 2012 to state that the Agreement had expired by effluxion of time on 25 February 2011 and had been terminated.  On 4 December 2012, D’s solicitors wrote to P’s solicitors to inter alia (a) deny the Agreement had expired in view of the amendments by the various supplemental agreements and the time extension by the conduct of the parties, (b) accept P’s repudiation of the Agreement, and (c) inform P that unless P admitted liability pursuant to Clauses 1.5 and 4 they would take legal action against P to recover the sum payable under the Agreement with damages, interest and costs (“4/12/12 Letter”).  Chan suggested that such immediate threat (through D’s Hong Kong solicitors) to commence proceedings against P indicated D’s intention to sue P in Hong Kong because (i) D was “well aware of the existence and effect of Clause 15” and (ii) D did not suggest any dispute between P and D that might arise from the Agreement should be dealt with by the PRC courts.  YH Lam disagreed and said the fact D instructed their Hong Kong solicitors to liaise with P did not mean they must sue P in the Hong Kong courts.

45. More than four months later and after P issued the writ of summons and statement of claim in the HK Action, D’s solicitors wrote to P’s solicitors on 29 April 2013 for a 21-day time extension to file the defence (and any counterclaim) in the HK Action, but did not express any intention to challenge the jurisdiction of the Hong Kong courts.  Chan claimed D should/could have raised (but did not raise) objection at the outset, so the Summons was a delay tactic.  But Mr Chan SC submitted there was no conflict between D’s request for time extension to file defence and D’s present application by the Summons. 

VI.  D’s ALLEGED THREATS

46. D by their solicitors’ letters dated 4 December 2012, 22 January 2013 and 7 February 2013 suggested that (a) P had committed a criminal offence in the PRC by treating the Agreement as having expired by effluxion of time, (b) they had received advice from PRC legal experts (which opinion they declined to disclose to P) to such effect, and (c) P’s officers/directors would act at own peril if they ignored D’s warning.  Although P reserved their position in this regard, Chan argued it was illogical/unconscionable for D to contend that the dispute in question should be dealt with by the PRC courts when they made threats and attempted to intimidate P’s directors/officers from travelling to the PRC to take part in any legal proceedings that might be entertained by the PRC courts. But YH Lam claimed the “threats” were nothing more than D pointing out to P the seriousness of their behaviour, and reflecting that D had sought PRC legal advice on the matter from the beginning.

VII.  P’s AFFIRMATION EVIDENCE

47. Chan claimed that the Group’s chairperson Mrs Nina Wang passed away in 2007, and when the Agreement was signed in 2009, P’s was managed by the board of Chime Corporation Limited and P’s directors.  On/about January 2010 the board’s powers were delegated to the Exco, and later court-appointed joint administrators (formerly administrators pendente lite) and their representatives were appointed to the Exco.  Chan became an Exco member since about January 2010.

48. Chan claimed that when D drafted/prepared the Supp Agt, there was no change to Clause 15 which demonstrated that D endorsed/confirmed their approval of such provision.  The Supp Agt also did not alter/amend Clause 9 which provided that the Agreement would expire in 18 months, ie on 25 February 2011.  P did not sign the 2^nd, 3^rd, 4^th and 5^th Supp Agts, and D did not propose to amend/modify/supersede Clause 15 even though they (a) drafted such supplemental agreements and (b) all along knew the work envisaged to be done under the Agreement was closely connected to the Minsheng Dispute in the PRC.  Chan claimed that if D intended any dispute that might arise from the Agreement should be resolved by the PRC courts, D could have proposed to amend Clause 15. 

49. Chan disputed the factual accuracy of much of the Lam 1^st Aff, but he only addressed those matters that were relevant to the Summons.  Hence, it is perhaps more useful for me to canvass the parties’ affirmation evidence under various factors.

VIII.  AFFIRMATION EVIDENCE: PARTIES TO THE HK ACTION

50. Chan noted neither P (a Hong Kong company being part of the Hong Kong-based Group) nor D (a BVI company) was a PRC entity.  P’s directors were in Hong Kong, and the majority of the Group’s employees/officers who managed P were Hong Kong residents.  All Exco members (including the joint administrators appointed by and answerable to the Hong Kong courts) were based/living in Hong Kong, and the Exco conducted the Group’s business by regular meetings in Hong Kong.  Further, YH Lam (D’s sole shareholder) was a Hong Kong resident and holder of a Hong Kong identity card, and Pang (D’s director and Hong Kong general manager) was also a Hong Kong resident.  It was therefore entirely appropriate/intentional that the parties agreed that the Agreement be governed by Hong Kong law and that they submit to the jurisdiction of the Hong Kong courts with respect to any disputes/differences that might arise. 

51. But YH Lam explained D merely borrowed the office address of “德眾投資有限公司” as their contact address for the Agreement, and their main office address was that of “上海揚博網路科技有限公司 …… 的子公司北京樂動神州資訊技術有限公司” in Beijing.  YH Lam was a director of Suny Multimedia International Limited which held controlling shares in “上海揚博網路科技有限公司”. 

IX.  AFFIRMATION EVIDENCE: PARTIES’ INTENTION

52. Chan said the negotiation/genesis of the Agreement took place in Hong Kong with input from P’s Hong Kong lawyers.  By Clauses 13 and 14, D provided a Hong Kong address for receipt of notices and a Hong Kong service agent for service of inter alia legal proceedings, so D must have understood/agreed that disputes that might arise under the Agreement would be resolved in Hong Kong.  Further, by Clause 15, the parties agreed to submit to the jurisdiction of the Hong Kong courts, which provision was important to P because (a) P was a Hong Kong company based in Hong Kong, (b) P would not wish to have the PRC courts where they encountered delays/problems in obtaining resolution of the Minsheng Dispute/Appeal resolve disputes arising under the Agreement, and (c) D was recommended to the Group/P on the basis of their wide reaching network in the PRC.  Indeed, the Lam 1^st Aff did not say D was unaware of the existence/implication of Clause 15.

53. Even though the Agreement was drafted in relation to services to be performed by D in relation to the Minsheng Dispute/Litigation in the PRC, the parties selected the Hong Kong courts as the venue for dispute resolution and Hong Kong law as the governing law.  Further, the Agreement was signed in Macau for tax/foreign currency purposes, and made no reference to PRC law or PRC court jurisdiction.  Indeed, Clause 10 of the Guarantee also provided “本契約在各方面均受香港法律管轄及解釋, 本契約各方面不可撤銷地同意接受香港法庭的非專屬性司法權限”, which was consistent with Clause 15.  Chan claimed that Hong Kong had always been the parties’ preferred, agreed and logical forum for resolving disputes which might arise from the Agreement, and that the parties intended to avoid the PRC jurisdiction from the beginning.

54. On the other hand, YH Lam reminded that even though the Agreement and Guarantee were drafted/revised by P’s lawyers, Clause 15 only specified the Hong Kong courts had non-exclusive jurisdiction and did not provide for a Hong Kong exclusive jurisdiction clause (“EJC”) or for express exclusion of the jurisdiction of the PRC courts.  So YH Lam claimed P must have anticipated some disputes that might arise under the Agreement might be resolved by courts of other jurisdictions.  Further, Chan’s reliance on Clauses 13 and 14 was misplaced since they were only applicable if litigation took place in Hong Kong, but it did not mean D agreed to have any dispute that might arise under the Agreement to be litigated in Hong Kong.

X. AFFIRMATION EVIDENCE: PERFORMANCE OF THE AGREE-MENT

55. YH Lam claimed that since Clause 15 was only a NEJC and PRC law “允許當事人自行約定選擇適用法律”, it would be more convenient for the PRC courts (and inconvenient for the Hong Kong courts) to deal with the present dispute given its close connection with the PRC.  The HK Action concerned P’s engagement of D/Dishi for services to be performed largely in the PRC in relation to the Minsheng Appeal to the SPC, and the disputed issues were (a) whether the Agreement had expired and was no longer of effect, (b) if it was still of effect, whether P and D had performed their obligations thereunder, (c) if it was of no effect, whether P was still obliged to pay remuneration for D’s services, and (d) if so, what should be the amount of D’s remuneration.

56. YH Lam said for (a)-(b) above, the court (in addition to matters of law) would have to consider P’s and D’s conduct/intention after the alleged expiry date of the Agreement[8] in deciding whether (i) the Agreement was still effective, (ii) the parties had complied with their obligations under the Agreement and/or (iii) the time limit in the Agreement had been superseded or changed, and in doing so the court would have to take into account the Minsheng Litigation and relevant PRC legal procedure.  For (c)-(d) above，the court would have to consider all the services rendered by D/Dishi on P’s behalf for the Minsheng Appeal.  Since the the Minsheng Litigation were PRC legal proceedings, the court would have to understand/consider special features of the PRC legal system and civil procedure,[9] so “内地法院是最適合判斷[D]和[Dishi]在爭取有利和解方案而提供服務的重要性和其價值的審訊機關”. 

57. On the other hand, Chan suggested that a substantial portion of the tasks performed by D took place in Hong Kong, eg the entire reporting function to P (eg meetings/reports) was done in Hong Kong as P/Exco were located in Hong Kong,[10] and D had to engage Pang as their Hong Kong general manager at the outset of the Agreement.  Further, the Minsheng Litigation had a Hong Kong element given the substantial investment by P on behalf of the Hong Kong-based Group and Mrs Nina Wang.[11] Chan claimed it was always the parties’ intention as reflected in the Agreement for the Hong Kong courts to resolve disputes relating to the Agreement even though the parties knew from the beginning that part of D’s envisaged tasks would be carried out in the PRC, and the Hong Kong courts should have no difficulty in considering D’s alleged works if necessary with the aid of PRC expert evidence to assess the issues relevant to the dispute.

58. YH Lam reiterated that the purpose of the Agreement was D’s retainer to handle to the Minsheng Litigation so the essential work could only be done in the PRC.[12] The only work D did in Hong Kong was to make special report to the Exco from time to time at P’s request, and it was YK Lam and not Pang who made such report.  Further, D did not deliberately employ Pang as their Hong Kong general manager for the purpose of the Agreement; rather, D arranged for Pang as the main point of liaison mainly because (a) Pang already knew the Group’s senior management and (b) it was through Pang’s recommendation that P engaged D to handle the Minsheng Litigation.  In fact, D mostly reported to P by email, so D’s reporting function as not their main work.  YH Lam also disagreed that the Minsheng Litigation had a Hong Kong element because it involved investment by the Group and Mrs Nina Wang.  He said it was such investment by entrusting China SME to purchase the Minsheng Shares that led to the Minsheng Litigation/Appeal, but the HK Action concerned the validity of the Agreement (for services D rendered in respect of the Minsheng Litigation) and not the source/use of funds in the Minsheng Litigation.

XI.  AFFIRMATION EVIDENCE: DISHI

59. YH Lam claimed the factual background to D’s and Dishi’s claims against P was the same or substantially overlapped, and it would be unfair to Dishi (who would be deprived of an opportunity to take part in legal proceedings in which their financial interest was at stake) if the HK Action was dealt with by the Hong Kong courts because (a) Dishi/D had worked closely over the Minsheng Dispute such that Dishi’s claim against P necessarily involved D’s works and D’s claim against P necessarily involved Dishi’s works, (b) Dishi would only be fully paid if D recovered their remuneration from P pursuant to the Agreement, and (c) there was no dispute that Dishi as a PRC law firm should pursue P in the PRC to recover their legal fees.  It would be more convenient/ appropriate to have Dishi’s and D’s claims against P to be heard by the PRC court at the same time rather than in two different jurisdictions with doubling of legal costs and witnesses having to give evidence twice over.

60. YH Lam said the Agreement, Dishi Agreement and Guarantee were interrelated with the Agreement being the main agreement that envisaged conclusion of the Minsheng Litigation either by judgment or settlement.  Under the settlement plan, D was to be in charge (and Dishi would assist); but under the judgment plan, Dishi was to be in charge (and D would only “行使敦促之責”).  The provisions in the Agreement and Dishi Agreement also reflected the connection between Dishi’s and D’s claims against P.[13] YH Lam claimed the Dishi Agreement was different from an ordinary lawyer retainer agreement because the calculation and mode of payment of legal fees were based on the Agreement and P and D were both responsible for payment of the legal fees.  So if the Agreement were held to be ineffective, it might also invalidate some terms of the Dishi Agreement and query would arise as to whether Dishi could recover their full legal fees.  Further, Clause 3 provided that “[Dishi]應得的律師費必須在[P]勝訴的前提之下，由[P]支付一半，另一半由[D]支付，而問題是[P]拒不支付[D]所得利益，[D]也就暫時不能履行支付[Dishi]另一半律師費的義務。簡單說，只有[P]履行[the Agreement]，[Dishi]方能足額獲取律師費。顯然，在香港訴訟無形中把[Dishi]排除在外，對本案相關人[Dishi]絕對不公平”.  Since any judgment in litigation between P and D would directly affect Dishi’s claim against P for legal fees, “更不應該因[P]主張在香港法院審理而剝奪[Dishi]的合法申索權利”, and Dishi’s/D’s claims against P could (and should) not be tried separately.

61. On the other hand, Chan claimed that the position of Dishi (who was not a party to the HK Action) was irrelevant as to whether Hong Kong courts should exercise jurisdiction over the dispute between P and D under the Agreement, and any issue relating to Dishi and/or the Dishi Agreement would be outside the ambit of the HK Action for declaratory reliefs in respect of the Agreement made between P and D.  Dishi’s entitlement to legal fees depended on the construction/ interpretation of the Dishi Agreement which should be governed by PRC law,[14] and Clause 8 of the Dishi Agreement provided that any dispute between P and Dishi shall be resolved by way of mediation conducted at the All China Lawyers Association and if negotiation or mediation fails, by way of arbitration in the PRC, of which the result shall be deemed final, which provision was different from Clause 15.  Had the parties intended disputes between P and D and those between P and Dishi should be heard together by the same court, the Agreement and Dishi Agreement would have contained consistent provisions on governing law and/or court jurisdiction (which was not the case).  In any event, it would not be unfair/prejudicial to Dishi for the Hong Kong courts to handle the dispute between P and D  because Dishi had commenced proceedings in

the PRC against the P to recover any legal fees which they thought were due and payable by P.  There was no direct evidence from Dishi contending of any unfairness, and YH Lam not being a member or representative of Dishi had no standing to make such submissions on Dishi’s behalf. 

XII.  AFFIRMATION EVIDENCE: PRACTICAL CONVENIENCE

62. Chan claimed there were practical reasons why the dispute between P and D would be more conveniently dealt with by the Hong Kong courts rather than the PRC courts.

(a) Witnesses and documents

63. YH Lam claimed that D’s key witnesses would be YH Lam, YK Lam, Pang, Dishi’s lawyers and some persons who helped D handle the Minsheng Litigation and/or who attended the Beijing Meeting, and only Pang resided in Hong Kong. YH and YK Lam resided in the PRC and spoke putonghua (with limited punti language capability), and Dishi’s Long/Jiang lived in Beijing and only spoke putonghua.  YH Lam had a Hong Kong identity card, but he had lived in Fuzhou for almost 20 years.  Further, most documents were written in simplified Chinese with “内地習慣用語”.  It would be more appropriate for PRC courts/judges to try the dispute between P and D.

64. Chan said that of the 11 key persons referred to in the Lam 1^st Aff (and hence potential witnesses in the HK Action), two were Dishi’s lawyers (but Dishi’s involvement/claim (if any) was independent of D’s claim and so it was unlikely they would be witnesses).  Further, since China SME was in direct conflict with P in the Minsheng Dispute, and neither China SME nor their 強宏偉先生 had any financial interest in the outcome of the HK Action, it was doubtful he would be a necessary/willing witness.  Of the remaining eight persons (three from D and five from the Group), six resided in Hong Kong.  YH Lam had a Hong Kong permanent identity card (and was a permanent resident of Hong Kong), and appeared to travel to Hong Kong regularly (eg to affirm the Lam 1^st Aff).  Pang was located in Hong Kong, and held a Hong Kong identity card.  The Group’s five personnel were all located in Hong Kong.  In any event, it would be easy for PRC witnesses to travel between the PRC and Hong Kong for giving testimony at trial in Hong Kong, and to communicate by telephone, email and video link over a shared time zone for attending conferences with lawyers and preparing statements etc.  Hong Kong had ready availability of bilingual judges/counsel and also putonghua translators for the trial, and Hong Kong courts had experience in dealing with disputes with PRC elements and documents in Chinese (in simplified/traditional forum).  It would also save rounds of cumbersome notarisation and legalisation necessary for serving/filing of documents and evidence in the PRC courts.

(b) Agreement governed by Hong Kong law 

65. Chan claimed an important matter that weighed in favour of the Hong Kong forum was Clause 15 which provided that the Agreement was governed by Hong Kong law.  If the PRC courts were to hear the HK Action, they would need to be assisted by experts (and their opinion) on the application of Hong Kong law.  It would be more convenient to have the present dispute heard by Hong Kong judges who would be competent to resolve the dispute in accordance with Hong Kong law, and who would be able to dispose of the legal issues more easily than their PRC counterparts.  On the other hand, Mr Chan SC submitted there was no suggestion that the present dispute involved any complex or sophisticated points of Hong Kong law or that the PRC courts were in any way handicapped in adjudicating the dispute by having to make reference to Hong Kong law.

(c) Enforcement

66. YH Lam claimed that if P wanted to enforce the 2^nd Minsheng Judgment against the Minsheng Shares (presently legally frozen by the Beijing HPC and the SPC), they would have to apply to the PRC courts and carry out enforcement procedures in the PRC.  P would not have any difficulty in enforcing any judgment in their favour in respect of the P’s Claims whether they were litigated in Hong Kong or the PRC since P merely sought declaratory reliefs. But for the real dispute being D’s claim against P for monetary payment and damages under the Agreement being the subject matter of the PRC Litigation between P and D, it was unclear whether P, a $2 company, had any assets apart from the fruits of the Minsheng Litigation.  Mr Chan SC complained that the Chan Aff had been coy about P’s assets, and winding up P without any known assets in Hong Kong would not answer.  YH Lam further claimed that even though the Group had substantial assets, matters concerning the estate of the late Mrs Nina Wang had not been fully resolved, and such estate (including the assets of the Group) could become part of the Chinachem Charitable Foundation.  If the HK Action were to be tried in Hong Kong，D “要執行判決將會無端產生諸多變數”.  YH Lam said that all this meant D would have to enforce any judgment obtained in Hong Kong in their favour in the PRC (possibly after P’s enforcement of the 2^nd Minsheng Judgment), which would have to be by way of legal action in the PRC courts in the absence of applicable procedure for reciprocal enforcement of judgment in the PRC.[15]

67. On the other hand, Chan claimed that “if the case is to be heard by the Hong Kong Court, any judgment that might be obtained by [D] against [P] may be enforced by [D] in the PRC.  Furthermore, a Hong Kong judgment can of course be enforced against [P’s] assets in Hong Kong.  It would also be open for [D] to wind up [P] (a Hong Kong company) in the event of non-payment of any judgment debt.  ……”

XIII.  SYNOPSIS OF D’s ARGUMENTS

68. Mr Chan SC submitted it was unnecessary to go further than the 2^nd Stay Judgment which decided against P’s assertion that the dispute between P and D over the Agreement should not be litigated in the PRC.  The 2^nd Stay Judgment conclusively decided the twin issues of (a) whether the dispute between P and D over the Agreement should be litigated in Hong Kong or in the PRC and (b) whether forum non conveniens considerations favoured the PRC or Hong Kong jurisdiction.  It was not a trivial decision, and the SPC had taken into account the NEJC and the forum coveniens connecting factors.  Relying on First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd,[16] Mr Chan SC submitted that the doctrine of issue estoppel and/or res judicata was applicable, and since it was not open for P to challenge the decision in the 2^nd Stay Judgment on the above two issues, it would be unnecessary for this court to revisit them in granting the reliefs sought in the Summons. 

69. Alternatively, Mr Chan SC argued that the 2^nd Stay Judgment had weighed up the connecting factors and the NEJC (which concerned forum conveniens rather than contractual agreement) and had made final decision on the issue of forum non conveniens by favouring the PRC courts, so it must be implicit in such decision that the Hong Kong courts were less convenient.  On such basis, it was said that at the very least the 2^nd Stay Judgment raised issue estoppel on such issue.  Mr Chan SC submitted that although Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd,[17] the locus classicus on the status and legal effect of NEJCs, suggested one should not approach such clauses simply on a forum non conveniens balancing exercise and strong cause had to be shown to unseat the named/chosen jurisdiction, the Court of Appeal did not specify what would be “strong grounds”. Mr Chan SC said common sense indicated that the forum conveniens connectingfactors would form the backbone of such “strong grounds”, but as a result of issue estoppel based on the 2^nd Stay Judgment, it would be unnecessary to rake over the nexus factors in coming to a conclusion in D’s favour over the Summons.

70. Still alternatively, even if there were no issue estoppel, Mr Chan SC argued that upon considering and balancing all the factors canvassed in the affirmation evidence and counsel’s submissions, this court should conclude it would be appropriate to stay the HK Action in favour of the PRC courts. 

XIV.  ISSUE ESTOPPEL OR RES JUDICATA

(a) Legal principles

71. In First Laser Ltd, there was a dispute over the governing law of the relevant agreement.  The plaintiff submitted to the jurisdiction of the SPC and defended the PRC proceedings. The Court of Final Appeal held that (a) a decision on the merits was one which established certain facts as proved or not in dispute, stated what were the relevant principles of law applicable to such facts, and expressed a conclusion with regard to the effect of applying those principles to the factual situation concerned, (b) a judgment of the SPC was a final judgment of a court of competent jurisdiction, and (c) a judgment of a foreign court of competent jurisdiction which was final and conclusive and on the merits would be conclusive in Hong Kong proceedings if the parties were the same and the issues were identical.  In that case, the two issues decided by the SPC (ie the governing law and the validity of the relevant agreement) were clear and the action before the SPC was not trivial, so the decision by the SPC was therefore on the merits and final.[18]

(b) Discussion

72. Clause 15 was both a governing law clause and a NEJC.  As a prerequisite for issue estoppel or res judicata to apply, the issue before the local and foreign courts must be identical.  By the ruling in the 2^nd Stay Judgment on issue (c) set out in paragraph 42 above, the SPC made clear that what was determined was (i) whether or not the Beijing HPC had jurisdiction to deal with the PRC Litigation between P and D, and (ii) if so, whether the Beijing HPC should exercise or decline jurisdiction.

73. For the first sub-ruling on issue (c) in paragraph 42(a) above, the SPC held that the non-exclusive nature of Clause 15 did not exclude courts of other jurisdictions from exercising competent jurisdiction, so plainly the SPC was considering the scope of jurisdiction exercisable by the PRC courts (which were not courts of the named/chosen jurisdiction under Clause 15) over the PRC Litigation between P and D, and not the scope of jurisdiction of the Hong Kong courts (which were courts of the named/chosen jurisdiction under Clause 15) over the HK Action commenced as of right in Hong Kong.  In my view, in dealing with the latter issue under the Summons to stay the HK Action, this court is seized of a different point in respect of the jurisdiction issue and the NEJC.

74. For the 2^nd sub-ruling on issue (c) in paragraph 42(b) above, the SPC held that pursuant to PRC law[19] and the quantum of D’s claim, the Beijing HPC had concurrent jurisdiction over the PRC Litigation between P and D.  But such PRC statutory provision had no application in Hong Kong for determining whether the Hong Kong courts (in contra‑distinction to the PRC courts) had jurisdiction over the HK Action.  In fact, there is no dispute that the HK Action was issued as of right, and the Hong Kong courts had jurisdiction.

75. For the 3^rd sub-ruling on issue (c) in paragraph 42(c) above, the SPC noted the existence of parallel proceedings, ie the HK Action and the PRC Litigation between P and D, but clearly held that whether Hong Kong “是否已經受理案件或作出判決，不影響內地法院依法享有的管轄權，但內地法院是否受理，根據案件具體情況裁量決定，其中包括考慮案件是否存在不方便管轄的因素”.  Thus, the SPC was particularly concerned with the issue as to whether the PRC courts should exercise/decline jurisdiction (which was quite irrespective of whether the Hong Kong courts “是否已經受理案件或作出判決”) and not whether the Hong Kong courts should exercise or decline jurisdiction.  Careful scrutiny of the 2^nd Stay Judgment shows it merely decided that the PRC courts would not decline jurisdiction over the PRC Litigation between P and D, but there was no ruling that the HK Action (which were commenced as of right in Hong Kong) should not proceed in Hong Kong or that the Hong Kong courts were an inappropriate forum despite the guidance in Noble Power Investments Ltd.

76. In my view, the 2^nd Stay Judgment was not a final and conclusive judgment on the merits on the questions as to whether the HK Action (in contra-distinction to the PRC Litigation between P and D) should be litigated in Hong Kong.  In light of the SPC’s careful qualification of the scope of their ruling as being irrespective of whether the Hong Kong courts “是否已經受理案件或作出判決”, the stay application under the Summons for displacing Hong Kong being the named/chosen jurisdiction under Clause 15 is removed from the circumstances of First Laser Ltd.  I am of the view that the 2^nd Stay Judgment does not give rise to issue estoppel or res judicata as to whether the dispute between P and D raised in the HK Action should be litigated in the PRC or Hong Kong for the purpose of the Summons.

77. In respect of Mr Chan SC’s alternative argument that at least there was issue estoppel as to whether the Hong Kong courts were an inconvenient forum for the HK Action issued as of right in Hong Kong, he was careful to say this was only implicit from the 2^nd Stay Judgment (which confirmed the PRC courts should exercise jurisdiction in respect of the PRC Litigation between P and D on forum conveniens grounds).  But as explained above, the SPC did not canvass the forum conveniens connecting factors from the perspective of an attempt to unseat the named/chosen jurisdiction under a NEJC in respect of which the proper approach is set out in Noble Power Investments Ltdas explained below.  Indeed, the existence of parallel proceedings is not unusual in jurisdictional disputes,[20] but this factor will not be sufficient to stay the Hong Kong proceedings if Hong Kong is in fact the appropriate forum.[21] Although foreign proceedings may be relevant under some circumstances as explained in de Dampierre v de Dampierre,[22] the possible co-existence of parallel litigation plainly demonstrates the decision in the 2^nd Stay Judgment that the Beijing HPC should not decline jurisdiction over the dispute between P and D on forum non conveniens grounds does not necessarily imply the Hong Kong courts are therefore ipso facto an inappropriate forum without further investigation.  The matter of parallel proceedings is discussed in greater detail in Part XVI(c) below.

78. However, even if I were wrong and issue estoppel or res judicata applies to any question of forum non conveniens by virtue of the 2^nd Stay Judgment, in view of Clause 15 this court is still bound to adopt the approach in Noble Power Investments Ltd which is different from a standard Spiliada balancing exercise, and for reasons discussed below I find D has failed to discharge the heavy burden that falls on them to unseat the Hong Kong courts as the named/chosen forum under Clause 15. 

XV.  DISCUSSION 

79. The starting point is that Hong Kong is the named/chosen forum specified under Clause 15, and P served process on D in Hong Kong as of right under Clauses 13 and 14.  Both Mr Ho SC and Mr Chan SC accepted that Clause 15 being a NEJC is significant in that the parties have contracted to submit to the non-exclusive jurisdiction of the Hong Kong courts.  Indeed, there is no evidence of any proposal to amend or change Clause 15.  Hence, the Summons is an attempt to unseat the named/chosen albeit non-exclusive jurisdiction.

(a) NEJC - legal principles

80. In Noble Power Investments Ltd, the plaintiffs and the defendant were foreign companies and the principal obligations were to take place overseas, but the agreement in English was negotiated/signed in Hong Kong and contained a Hong Kong governing law clause and a Hong Kong NEJC.  In the context of whether or not to grant leave to serve out of jurisdiction, the plaintiffs sought to argue Hong Kong clearly was the appropriate forum by reason of the NEJC. 

81. Ma CJHC (as he then was) explained that where a plaintiff institutes proceedings in Hong Kong as of right, the defendant may challenge the jurisdiction of the Hong Kong courts to hear the claim in the sense that there is an alternative forum which ought, in preference to Hong Kong, to deal with the claim, and this usually arises where the defendant relies on, say, the principle of forum non conveniens in an application to stay the action in Hong Kong based on Order 12 rule 8 of the Rules of the High Court where the interests of justice so dictate, and the burden is on the defendant to demonstrate a stay should be granted.[23]

82. As regards NEJCs, Ma CJHC (as he then was) observed that generally the following characteristics will be present in such clauses:

(a)  The NEJC will identify a specific forum (usually the courts of a given place) to which the parties to a contract will be obliged to submit for the resolution of a dispute between them.  The element of submission to a jurisdiction in the event a party will be sued in the named forum is a key component.

(b)  The named forum will not be an exclusive one to hear the dispute in that it will be clear that the parties may also be at liberty to institute proceedings in other jurisdictions (which may be unidentified).[24]

The basic premise is that the courts will generally hold parties to their contractual bargain.[25] Mercury Communications Ltd & anor v Communication Telesystems International[26]held that  a NEJC “has generally been regarded as a powerful factor in favour of allowing proceedings brought in this country to continue” for two reasons: (i) such clause involves a contract by each party to submit to the jurisdiction of the chosen forum if the other chooses to bring proceedings in such jurisdiction, and (ii) each party must be taken to have recognised that the chosen forum is an appropriate forum for the trial of the action.[27]

83. Mr Chan SC reminded that although the parties by agreeing to a NEJC have accepted the named/chosen forum is an appropriate forum, they have not agreed that it will be the most appropriate forum.  I accept that if there are strong or exceptional grounds, a party can apply to stay proceedings issued in the named/chosen jurisdiction under the NEJC in favour of another forum,[28] but otherwise, as Stone J said in Noble Power Investments Ltd, the named/chosen forum is “obviously …… appropriate for the resolution of this dispute” and “clearly a convenient forum”.[29]

84. Ma CJHC (as he then was) saw no difference in principle between a NEJC and an EJC since in both cases the parties have contractually agreed to submit to a named forum, except that in the latter case they have also agreed that such forum is the only avenue for resolving their disputes, but under a NEJC, neither party is bound to bring an action in the chosen forum although each party agrees to submit to the jurisdiction if an action is brought against him in such forum. 

85. Where proceedings are commenced in the named/chosen forum to which the parties have agreed to submit, Ma CJHC (as he then was) held that the party who seeks a stay has “a very heavy burden to discharge” or has to show “strong reasons”[30] since that party is seeking to avoid a forum which he has agreed contractually to submit:

“33. Some simple illustrations to summarize the foregoing propositions might assist:

(1) A sues B in Hong Kong. Hong Kong is named as a non-exclusive jurisdiction to which the parties have agreed to submit in the event of their being sued. The burden on B, if he contests the appropriateness of the Hong Kong courts, is a heavy one.

……

36. The extent of the burden can be put in several ways but the following provides a ready guide: strong or overwhelming reasons or exceptional circumstances must be shown, such as the existence of factors not contemplated by the parties at the time the relevant agreement was made. It perhaps matters not exactly which term is preferred, but the main point to bear in mind is that strong reasons must be demonstrated to the court before it allows the parties to be freed from their contractual bargain. ……” (my emphasis)[31]

86. Stone J in Noble Power Investments Ltd also agreed, and cited the following English authorities:[32]

“…… In such a case that party must show some good reason or special cause why it should not be held to its agreement to submit to the agreed jurisdiction …… In the present case, however, there is no reliance … on anything unforeseen, no suggestion of any strong or special cause, no identification of some matter which lies beyond considerations of convenience and goes to a matter of justice. On the contrary, what this court has been pressed with … are the usual and straightforward factors of an argument on convenience – the nature of the issues, the relevancy of English as against Texan or New York law, the whereabouts and nationality of witnesses of fact or expertise, cost and delay, and such like …” (my emphasis) (Ace Insurance SA-NV v Zurich Insurance Co [2001] EWCA Civ 173 at para 62)

“It would not be useful to speculate on what exceptional circumstances would justify the court in not accepting jurisdiction where the parties had conferred non-exclusive jurisdiction on the English Court, but I accept that one feature which may be highly relevant is whether there are already proceedings in a foreign country which involve overlapping issues, especially if they have been commenced by the party which subsequently seeks to sue in England.” (my emphasis) (Bas Capital Funding Corp & ors v Medfinco Ltd & ors [2004] 1 Lloyd’s Rep 652, 678 at para 193)

“…… the general rule is that the parties will be held to their contractual choice of English jurisdiction unless there are overwhelming, or at least very strong, reasons for departing from this rule …… Such overwhelming or very strong reasons do not include factors of convenience that were foreseeable at the time that the contract was entered into (save in exceptional circumstances involving the interests of justice); and it is not appropriate to embark upon a standard Spiliada balancing exercise. The defendant has to point to some factor which it could not have foreseen at the time the contract was concluded. Even if there is an unforeseeable factor or a party can point to some other reason which, in the interests of justice, points to another forum, this does not automatically lead to the conclusion that the court should exercise its jurisdiction to release a party from its contractual bargain; …… In particular, the fact that the defendant has, or is about, to institute proceedings in another jurisdiction, not contemplated by the [NEJC], is not a strong or compelling reason to relieve a party from his bargain, notwithstanding the undesirability of parallel proceedings. Otherwise a party to a [NEJC] could avoid its agreement at will by commencing proceedings in another jurisdiction ……” (my emphasis) (Antec International Ltd v Biosafety USA Inc [2006] EWHC 47 (Comm) para 7(ii)-(iii)))

87. Thus analysed, the effect of a NEJC in terms of challenge to the appropriateness of a forum is in practice the same as an EJC, and the plaintiff can show the named forum is the appropriate one by simply referring to the NEJC.  As Stone J put it, “absent exceptional reasons to be advanced by the defendant/applicant, the contractual nomination of Hong Kong as the non-exclusive jurisdiction serves effectively to preclude argument that Hong Kong is not a clearly convenient forum”.[33]

88. Mr Chan SC submitted Gloster J overput it when she said in Antec International Ltd that to overcome a NEJC the defendant has to point to some factor which he could not have foreseen or anticipated at the time the contract was concluded.  Mr Chan SC argued this could only be one of the instances that would amount to strong reasons or exceptional circumstances to ignore the contractual bargain between the parties and to displace the chosen forum. In dealing with questions of jurisdiction and forum, as a matter of public policy, it is ultimately for the courts to determine where the interests of justice lie.[34] So although the starting point is the parties’ contractual bargain, such contractual regime would have to give way if and insofar as the interests of justice warrant it.

89. On the other hand, Mr Ho SC suggested that strong causes, overwhelming reasons and/or exceptional circumstances must not have been reasonably contemplated or foreseen at the time when the parties agreed to submit to the particular jurisdiction.  He said it lies ill in the mouth of a party to a NEJC to later claim that conducting litigation in the named/chosen jurisdiction is inconvenient; rather it would be in the interests of justice to hold the parties to their bargain.

90. In my view, there is no absolute requirement for a defendant to point to some factor that he could not have foreseen or anticipated at the time of agreeing to the NEJC.  Neither Ma CJHC (as he then was) nor Stone J in Noble Power Investments Ltd said this is an exclusive factor.  Indeed, Ma CJHC (as he then was) said the defendant must show strong causes, overwhelming reasons and/or exceptional circumstances “such as” the existence of factors not contemplated by the parties at the time the relevant agreement was made.[35] This is also evident from Gloster J’s observations in Antec International Ltd [36] cited by Stone J in Noble Power Investments Ltd,[37] ie “[such] overwhelming or very strong reasons do not include factors of convenience that were foreseeable at the time that the contract was entered into (save in exceptional circumstances involving the interests of justice) …… Even if there is an unforeseeable factor or a party can point to some other reason which, in the interests of justice, points to another forum, this does not automatically lead to the conclusion that the court should exercise its jurisdiction to release a party from its contractual bargain……” (my emphasis). Quite clearly, even Gloster J recognised there may be circumstances that were foreseeable, but may still amount to strong causes, overwhelming reasons and/or exceptional circumstances to displace the named/chosen forum. 

91. I agree with Mr Chan SC that the court’s hands should not be unduly fettered in considering what are matters of public policy and what the interests of justice require.  But that said, cases where the defendant can discharge the heavy burden on him by relying on factors that were foreseen or could have been foreseen at the time of the relevant agreement will be quite rare, otherwise (as Gloster J explained) “a party to a [NEJC] could avoid its agreement at will by commencing proceedings in another jurisdiction ……” Indeed, Ma CJHC (as he then was) stressed “that it is only in exceptional cases that a court should not give effect to contractual terms”.[38]

92. Here, the writ of summons was issued/served in Hong Kong as of right, and there was no need (as in Noble Power Investments Ltd) to seek leave to serve out of jurisdiction.  Mr Chan SC referred to Gloster J’s observations in Antec International Ltd[39] cited by Stone J in Noble Power Investments Ltd[40] on the interplay between commencement of proceedings as of right and the effect of a NEJC:

“The fact that the parties have freely negotiated a contract providing for the non-exclusive jurisdiction of the English courts and English law, creates a strong prima facie case that the English jurisdiction is the correct one. In such circumstances, it is appropriate to approach the matter as though the Claimant had founded jurisdiction here as of right, even though the clause is non-exclusive …….”,

and submitted that such observations plainly showed the NEJC merely elevates the claimant’s case as though he has issued proceedings in the named/chosen jurisdiction as of right, so it would be wrong to treat a NEJC and the issuance of proceedings as of right as two separate and distinct factors to be aggregated and weighed in favour of the named/chosen forum. 

93. Whilst I agree one should not approach matters of jurisdiction and forum merely by totting up factors without having an eye to the overall picture, one should not lose sight of the significant status and legal effect of a NEJC as explained by Noble Power Investments Ltd.  In the absence of a NEJC, the question of whether to stay proceedings commenced as of right in Hong Kong will be considered on the principle of forum conveniens,[41] but where there exists a NEJC and proceedings were issued as of right in the very forum to which the parties have agreed to submit,[42] the plaintiff can simply point to the NEJC to show that the named/chosen forum is prima facie the appropriate one, and the burden falls on the defendant to show “strong grounds” why the parties’ agreement should not be enforced. 

94. Mr Chan SC submitted that in determining whether there were “strong grounds”, it was unclear if the forum conveniens connecting factors (or lack of them) were simply irrelevant in all cases for Ma CJHC (as he then was) said that “[generally], the existence or non-existence of connecting factors will be quite irrelevant, certainly much less powerful, unless it can somehow be shown that these may constitute strong reasons as to why the [NEJC] should not be enforced” (my emphasis).[43] Mr Chan SC argued that such connecting factors should still be considered and taken into account insofar as they constitute strong reasons as to why the NEJC should not be enforced.

95. However, Noble Power Investments Ltd clearly held that where the proceedings are commenced as of right in the named/chosen jurisdiction under a NEJC, it is not a matter simply of weighing up the various connecting factors (or lack of them) to arrive at a view on the appropriate forum,[44] and it is not appropriate to embark upon a Spiliada balancing exercise for the “strong grounds” must go to the interests of justice:

“40. …… Generally, the existence or non-existence of connecting factors will be quite irrelevant, certainly much less powerful, unless it can somehow be shown that these may constitute strong reasons as to why the [NEJC] should not be enforced. As the authorities make clear, one is really talking about factors that were not in the reasonable contemplation of the parties at the time of the agreement was made. As Rix J observed in Ace Insurance SA-NV v Zurich Insurance Co & Another at p.820a:

If a party agrees to submit to the jurisdiction of the courts of a state, it does not easily lie in its mouth to complain that it is inconvenient to conduct its litigation there (ie assert that the agreed forum is a forum non conveniens).”[45]

96. Both Mr Chan SC and Mr Ho SC referred to the principles on forum non conveniens.  They are authoritatively stated by Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd:[46]

“(a) The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice. ……

(e) If the court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the action, it will ordinarily refuse a stay ……

(f) If however the court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the action, it will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should nevertheless not be granted.  ……”

97. In Hong Kong, these principles are set out in The Adhiguna Meranti[47] inter alia as follows:[48]

(a)  The essential question is “in which court may the matter most appropriately be tried in the interests of all parties and for the ends of justice”.  Where Hong Kong jurisdiction over the defendant is established as of right, the onus lies upon the defendant to demonstrate that some other named forum is more appropriate rather than more “convenient”, and the court will look first to see what connecting factors there are which indicate it is with the foreign forum that the action has its “most real and substantial connection”. 

(b)  If the answer to (a) is yes, the court may still refuse a stay if persuaded by the plaintiff that justice requires so, and the evidential burden lies on the plaintiff to show that trial at the other forum would deprive him of “legitimate personal or juridical advantages”.

(c)  If the plaintiff discharges such burden, the court then has to balance the considerations in (a) against those in (b).

98. In determining whether a forum is one with which the action has “the most real and substantial connection”,[49] To J in Yantai Wanhua Polyurethanes Co Ltd v Pur Products Ltd said as follows:[50]

“9. …… The court must focus on the appropriateness of the competing forum in light of the factors from the point of view of the matters actually likely to arise in the trial of the action …… The question is not one of mere convenience, though it may be a factor and the court may take into account whether witnesses and documents that will be required for trial are in the local forum or elsewhere. But in this modern age of communication, instantaneous long distance transmission of documents and ease of air travel, these factors may carry little weight. Other relevant factors include the governing law of the agreement and the place where the parties respectively reside and carry on business: ……”

99. In my view, the reference to the principles on forum non conveniens must be subject to the necessary qualification in Noble Power Investments Ltd since the HK Action was commenced as of right in Hong Kong being the named/chosen jurisdiction in the NEJC under Clause 15.  The existence of connecting factors or the lack of them are plainly “much less powerful” because the court should not undertake a Spiliada balancing exercise.  It is only when such connecting factors can “somehow” be shown to be so strong, exceptional and/or overwhelming that they go to a matter of justice that the NEJC will not be enforced. 

(b) Choice of law clause – legal principles

100. Mr Chan SC submitted that the weight given to this factor depends on the circumstances, and in the absence of a jurisdiction clause the choice of law is only a relevant factor to be taken into account by the court.  But Clause 15 is not merely a choice of law clause; it is also a NEJC that named the Hong Kong courts as the chosen forum. Thus, the question of jurisdiction and forum cannot be approached on a Spiliada balancing exercise by weighing up the connecting factors.

(c) Related proceedings abroad – legal principles

101. Mr Chan SC submitted that the existence of related proceedings abroad is a factor which may justify a stay or be taken into account in the exercise of the court’s discretion on the question of forum.[51] He referred to Lord Diplock’s speech in The Abidin Daver:[52]

“Where a suit about a particular subject matter between a plaintiff and a defendant is already pending in a foreign court which is a natural and appropriate forum for the resolution of the dispute between them, and the defendant in the foreign suit seeks to institute as plaintiff an action in England about the same matter to which the person who is plaintiff in the foreign suit is made defendant, then the additional inconvenience and expense which must result from allowing two sets of legal proceedings to be pursued concurrently in two different countries where the same facts will be in issue and the testimony of the same witnesses required, can only be justified if the would-be plaintiff can establish objectively by cogent evidence that there is some personal or juridical advantage that would be available to him in the English action that is of such importance that it would cause injustice to him to deprive him of it.”[53]

102. Two matters are of note.  First, as regards the identification of a foreign court as “a natural and appropriate forum”, the fact that proceedings have already been commenced in a foreign court is not a factor in determining whether the foreign court is in fact a natural and appropriate forum.  The issue is it not which party first started proceedings in which jurisdiction but whether the foreign proceedings were issued in a court which, at the time of issue, was a natural and appropriate forum.

103. Secondly, Lord Brandon in The Abidin Daver considered parallel proceedings in the foreign jurisdiction, and the difficulties which may ensue, is only a factor to be taken into account (even though on the facts of that case the co-existence of the foreign action was a decisive factor).[54] This approach is consistent with the overarching idea underlying the doctrine of forum non conveniens,[55] and is also echoed in Johnston,The Conflict of Laws in Hong Kong which stated as follows:[56]

“Unlike some other jurisdictional systems, Hong Kong law does not …… have a technical notion of lis alibi pendens: the existence of parallel litigation in other jurisdictions is simply a factor to be taken into account in the forum non conveniens discretion. …… Where the Hong Kong and foreign proceedings are brought by the same party, however, the position is different: the court will put him to his election unless he can show a good reason for pursuing both sets of proceedings.”

Thus, in the exercise of the forum non conveniens discretion to determine which is the appropriate forum (in contra-distinction to where there is a choice of jurisdiction clause) and in the absence of any separate principle of lis alibi pendens, parallel litigation is but a connecting factor to be weighed in the Spiliada balancing exercise.[57]

104. In de Dampierre, the wife petitioned for divorce in England after the husband had already commenced divorce proceedings in France.  She hoped to gain a better financial settlement in England than in France.  The husband applied to stay the wife’s petition under the Domicile and Domestic Proceedings Act 1973.  The House of Lords adopted the same approach as in the common law in cases of forum non conveniens where there was a lis alibi pendens, and said:

“…… accordingly, the court should not as a general rule, be deterred from granting a stay of proceedings merely because the plaintiff in this country would be deprived of a legitimate personal or juridical advantage, provided that the court was satisfied that substantial justice would be done in the appropriate forum overseas; that in the circumstances, it was impossible to conclude that, objectively considered, justice would not be done if the wife was compelled to pursue her remedy for financial provision in France, which provided, most plainly, the natural forum for the resolution of the present material dispute”.[58]

105. Lord Goff explained as follows:

“Under the principle of forum non conveniens ……, the court may exercise its discretion under its inherent jurisdiction to grant a stay where “it is satisfied that there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interests of the parties and for the ends of justice” …… The effect is that the court in this country looks first to see what factors there are which connect the case with another forum. If, on the basis of that inquiry, the court concludes that there is another available forum which, prima facie, is more appropriate for the trial of the action, it will ordinarily grant a stay, unless there are circumstances by reason of which justice requires that a stay should nevertheless not be granted: see the Spiliada case [1987] A.C. 460, 475-478. The same principle is applicable whether or not there are other relevant proceedings already pending in the alternative forum: see The Abidin Daver [1984] A.C. 398, 411, per Lord Diplock. ……”[59]

106. Lord Goff went on to say as follows:

“…… the existence of [foreign] proceedings may, depending on circumstances, be relevant to the [form conveniens] inquiry. Sometimes they may be of no relevance at all, for example, if one party has commenced the proceedings for the purpose of demonstrating the existence of a competent jurisdiction, or the proceedings have not passed beyond the stage of the initiating process. But if, for example, genuine proceedings have been started and have not merely been started but have developed to the stage where they have had some impact upon the dispute between the parties, especially if such impact is likely to have a continuing effect, then this may be a relevant factor to be taken into account when considering whether the foreign jurisdiction provides the appropriate forum for the resolution of the dispute between the parties.”[60]

Thus, the precise characteristics of the particular foreign litigation (including the parties and subject matter) will have to be weighed, but only material parallel proceedings that have gone beyond the initial stage will be pertinent.  Indeed, it is perfectly possible for the Hong Kong courts to allow concurrent proceedings in Hong Kong and foreign jurisdictions to continue, refusing to stay the Hong Kong action and also refusing an anti-suit injunction.[61]

107. In Hing Fat Plastic Manufacturing Co Ltd v Advanced Technology Products (HK) Ltd,[62] the plaintiff commenced PRC proceedings against the defendant for the price of goods sold and delivered, and a month later commenced identical Hong Kong proceedings.  The defendant applied for a stay of the Hong Kong proceedings or an injunction to restrain the plaintiff from continuing the PRC proceedings.  Keith J said as follows:[63]

“ I have no doubt that it is highly undesirable to have concurrent actions in Hong Kong and the PRC between the same parties where the claims in each action are identical. The defendant has to expend double the time and double the expense in defending both sets of proceedings. Moreover, there is the possibility that at the end of it all conflicting decisions will be pronounced. To avoid that, the parties may be tempted to engage in an unseemly race to obtain judgment on one jurisdiction so as to utilize that judgment and plead either res judicata or issue estoppel in the other. As Mr Wong rightly submits, all that puts pressure on the defendant to settle the plaintiff’s claims on less favourable terms than it might otherwise have done if the claim was proceeding in one jurisdiction only.

  However, the undesirability of concurrent actions in different jurisdictions does not automatically justify an order whose effect is to prevent both actions continuing at the same time.  The proper test was discussed by the House of Lords in The Abidin Daver [1984] AC 398.  At pp.411G-412A, Lord Diplock took the view that a plaintiff should be allowed to proceed with both actions only if there was a personal or juridical advantage which the plaintiff would derive from proceeding with both actions, and which is of such a fundamental nature that to deny the plaintiff that advantage would amount to a positive injustice.  However, at p.419G‑H, Lord Brandon applied a more flexible approach.  He regarded the exercise of the court’s discretion as involving the balancing of all the relevant factors on either side, those favouring allowing the plaintiff to proceed simultaneously in different jurisdictions, and those militating against it.”

108. Mr Chan SC submitted that Hing Fat Plastic Manufacturing Co Ltd indicated that the modern approach is a flexible one.  But as Mr Ho SC reminded, this case (and indeed the whole discussion under this Part XVI(c)) concerned the forum non conveniens discretion and must be read subject to (a) the guidance in Noble Power Investments Ltd on the status and effect of NEJCs, (b) the non-applicability of the principle of lis alibi pendens, and (c) Gloster J’s warning in Antec International Ltd against stealing a march over the contractual bargain.

109. Concerning the situation where there is an additional party in the parallel action, the court in Intel Corp v Via Technologies Inc & anor[64]applied principles similar to lis alibi pendens, but even then the application to stay the Hong Kong proceedings in favour of ongoing proceedings in England, which had progressed further (ie trial dates had been set), was dismissed.  Although there would be duplication of work if the Hong Kong proceedings were allowed to continue, there were important differences between the two actions.  In particular, the proceedings in England involved an additional defendant (which meant there was no identity of parties), and the Hong Kong proceedings fell to be determined by local legislation which had different wording.  Mr Chan SC submitted that each case must be decided on its own facts, and Intel Corp did not illustrate Mr Ho SC’s point that there should be no stay of the HK Action even if the PRC Litigation between P and D was quite advanced.

(d) Discussion

110. In a nutshell, Mr Ho SC argued that P abided by the NEJC in commencing the HK Action, and the Lam 1^st, 2^nd and 3^rd Affs did not refer to any circumstance unforeseen at the time of making the Agreement, so there was no or no sufficient basis to displace Hong Kong as the named/chosen jurisdiction for dealing with the HK Action.  But even if there were any unforeseeable factor (which P disagreed), this would not automatically lead to the conclusion that the court should exercise its discretion to release D from their contractual bargain, and the fact there were concurrent proceedings in the PRC was not compelling.

111. Unforeseen circumstance?  Mr Chan SC submitted that after 4/12/12 Letter, D took steps to prepare for and to commence the PRC Litigation in the PRC, but service of process was delayed since it had to be routed through the court system.  In the meantime, P commenced the HK Action to seek negative “no liability” declarations, which Mr Chan SC said was a significant unforeseen circumstance.  He submitted no one would be so idle in ordinary litigation, and he doubted P’s motive in being so keen to have the Hong Kong courts give them a clean bill of health when D had not even sued them.  Mr Chan SC characterised the HK Action as an idle/useless exercise that P deliberately engineered in anticipation of litigation that would ensue in the PRC jurisdiction which they did not quite like and in the knowledge that P’s Claims could have been elicited and made clear in the substantive defence to any litigation to be issued by D against them as such litigation progressed.  Mr Chan SC argued that the HK Action was contrived in the sense that no substantive relief was asked for, and such transparent attempt to preempt the PRC courts in a more suitable and indeed right jurisdiction[65] to assume jurisdiction must be something wholly outside the parties’ contemplation when they agreed to Clause 15 that allowed them to commence proceedings in whatever jurisdiction would be convenient even though they had agreed to submit to the Hong Kong jurisdiction.  There was also little point in having parallel proceedings covering the same issues.

112. But Mr Chan SC accepted P’s claim in the HK Action was not liable to be struck out as an abuse of process, and he fairly drew my attention to To J’s observations in Yantai Wanhua Polyurethanes Co Ltd as follows:[66]

“17. In the Hong Kong proceedings, the only substantive relief sought by the plaintiff is a declaration that the Agreement was lawfully terminated as at 31 December 2010. Such a claim is sufficient to affect the Agreement for the purpose of O.11 r.1(d)(iii): see BP Exploration Co (Libya) Ltd v Hunt [1976] 1 WLR 788 per Kerr J (as he then was). On the basis of the facts outlined above, it cannot be said that there is no reasonable cause of action …… There is, therefore, a serious question to be tried. Mr Stock, counsel for the defendant, does not argue otherwise.”

He nevertheless submitted that this court in dealing with the stay application under the Summons could take the matter further because in reality D’s defence to P’s claim in the HK Action would be D’s claim against P in the PRC Litigation between P and D, and even if the HK Action were not stayed, it would be for D as the true plaintiff with a genuine/substantive claim for monetary relief to eventually open their case at trial.  Thus, the HK Action was idle and unnecessary, and therefore should be stayed.

113. Mr Chan SC prayed in aid Lord Goff’s observations in de Dampierre that sometimes “the existence of proceedings” may be of no relevance at all, eg “if one party has commenced the proceedings for the purpose of demonstrating the existence of a competent jurisdiction”.  But I do not think these observations assist because Lord Goff was referring to the possible irrelevance of “foreign” proceedings issued “for the purpose of demonstrating the existence of a competent jurisdiction”, and here Mr Chan SC tried to argue the obverse by suggesting the HK Action commenced as of right (in contra-distinction to the foreign action) was idle and irrelevant.

114. On the other hand, Mr Ho SC disagreed that the negative “no liability” declarations P sought in the HK Action were somehow less significant than monetary claims.  As the HK Action progressed, the court would adjudicate on the merits of P’s Claims and on the parties’ contractual rights/obligations under the Agreement in deciding whether to grant the declarations sought, so it made no sense to say the HK Action was an idle claim, hence D’s core complaint was essentially about P not waiting for D to sue them.  However, by the 4/12/12 Letter D denied the Agreement had expired, accepted P’s repudiation of the Agreement, and threatened legal action against P,[67] and P’s stance was that D was not entitled to sue for recovery of the sum payable under the Agreement with damages, interest and costs.  Mr Ho SC said there was nothing wrong for P to commence the HK Action in Hong Kong as of right for confirmation that they were relieved of such obligation on the basis that the Agreement had to come to an end, and P was not even aware of the PRC Litigation (issued in February 2013 but not served until April 2013) when they commenced the HK Action as of right on 7 March 2013.  Mr Ho SC likened the HK Action to a vendor and purchaser summons whereby the court is asked to determine whether or not a party is bound to sell/purchase real property irrespective of any monetary claim.  He said such “negative” declaratory relief is useful in clarifying whether or not the vendor is free to sell elsewhere without fear of recourse.

115. But Mr Chan SC argued that the 4/12/12 Letter did not justify P in commencing the HK Action since the warning therein that D might take legal action must mean D would only do so in the appropriate jurisdiction (which was the PRC), and given that D had warned of litigation to come, there was all the more reason to wait for it to happen.  Further, P’s complaint in their solicitors’ letter dated 7 February 2013 against D’s unwillingness to provide copy of the PRC legal opinion P obtained also did not justify the commencement of the HK Action. Still further, a vendor and purchaser summons was different because parties to such proceedings require adjudication on proper disposal of the deposit, but P’s Claims did not require decision on entitlement to any sum of money.

116. In my view, the usual complaint against “negative” declarations in situations involving possible conflict of jurisdictions involves the argument that they may lend themselves to improper attempts at forum shopping:

(a)  in the normal order of events the claimant for substantive reliefs (party A) will be the plaintiff;

(b)  a claim for a negative declaration by the other contractual party (party B) is a reversal of the normal order;

(c)  this should be weighed in the Spiliada balancing exercise against party B if with knowledge that he is likely to be sued elsewhere he institutes proceedings in Hong Kong to found an objection to the foreign jurisdiction in the dispute. 

Accordingly, in exercising the forum non conveniens discretion, the Hong Kong courts will stay Hong Kong proceedings claiming for negative declarations against a defendant who is subject to the Hong Kong jurisdiction where a foreign court is the forum conveniens, or to put it in another way, the Hong Kong courts will not be disposed to allow the Hong Kong claim for negative declarations to proceed unless Hong Kong is the appropriate forum.

117. But one must also recognise there are cases with a legitimate role for bona fide claims for negative declarations.  A party may have a commercial need for early determination of his liability (if any) to another who may seek to claim against him.  Irrespective of the matter of disposal of the deposit, a vendor may need to know whether he is obliged to sell his real property to the purchaser or whether he is free to sell to a third party.  A supplier may need to know whether he is obliged to continue to supply a purchaser or may, instead, deal elsewhere.  Thus, even in the context of the forum non conveniens discretion (in contra‑distinction to the approach in Noble Power Investments Ltd) in a stay application, the court will have to consider whether there is justification for the negative declarations sought and whether Hong Kong is the appropriate forum. 

118. In my view, it cannot be said the HK Action was premature in the sense that P has no reasonable apprehension of being sued by the D.  The 4/12/12 Letter made it abundantly clear that D insisted the Agreement was still valid and effective and they treated P’s Claims to be repudiatory, and that they even (a) threatened legal action unless P admitted liability and (b) alleged P’s Claims amounted to criminal conduct in the PRC.[68] P clearly had reasonable apprehension of being sued by D even though they were not actually aware of the existence of the PRC Litigation when they issued the writ of summons in the HK Action.  Against such background, I am not persuaded that the HK Action in seeking negative declarations is an idle claim with no justification.  Since late 2012 and early 2013 D by their solicitors’ letters already alleged that P’s Claims amounted to a criminal offence in the PRC,[69] so D could hardly have expected P to seek vindication of their stance via legal action in the PRC or by waiting to be sued in the PRC.  Further, D’s threat of substantial monetary claim against P creates uncertainty in P’s operations, not least of which is their use and disposal of their assets, including perhaps the proceeds of the 2^nd Minsheng Judgment and the Minsheng Shares.  In my view, D is justified in seeking judicial determination of the status of the Agreement and confirmation as to whether P is relieved from having to pay remuneration to D under the Agreement.  One also has to bear in mind that P is no ordinary commercial entity, but one that is managed by the Exco which membership includes court-appointed joint administrators (formerly administrators pendente lite) and/or their representatives, and such joint administrators are answerable to the Hong Kong courts.

119. Even more importantly, Clause 15 is a NEJC, and P issued the HK Action against D as of right in Hong Kong as the named/chosen forum. According to the proper approach as explained in Noble Power Investments Ltd, the starting point is the NEJC and not a Spiliada balancing exercise.  P can point to the NEJC to show that prima facie Hong Kong is the appropriate forum for seeking the negative declarations against D.  I am not convinced that P was abusing the process of the court or the NJEC in commencing and pursuing the HK Action in Hong Kong, or that the HK Action is a deliberately engineered idle claim not foreseeable when the parties agreed to Clause 15, or that the HK Action was commenced merely to demonstrate jurisdiction. 

120. Mr Chan SC did not refer to any other alleged unforeseeable circumstance, and I agree with Mr Ho SC there is none.  But still I have to go on to consider whether D has been able to raise “strong grounds” that go to the interests of justice in order to unseat Hong Kong as the named/chosen jurisdiction in Clause 15 for the HK Action.

121. PRC Litigation between P and D  Although the existence of parallel litigation per se is by no means a determinative factor in unseating the named/chosen jurisdiction under a NEJC, Mr Chan SC argued it did not mean parallel proceedings were completely useless.  He referred to the following observations in Bas Capital Funding Corporation & Ors v Medfinco Ltd & Ors:[70]

“It would not be useful to speculate on what exceptional circumstances would justify the court in not accepting jurisdiction where the parties had conferred non-exclusive jurisdiction on the English Court, but I accept that one feature which may be highly relevant is whether there are already proceedings in a foreign country which involve overlapping issues, especially if they have been commenced by the party which subsequently seeks to sue in England.” (my emphasis)

122. Here, the HK Action and the PRC Litigation between P and D were not issued by the same party, but Mr Chan SC submitted there were common overlapping issues/evidence in the parallel proceedings[71] in that (a) the PRC Litigation between P and D was for enforcement of obligations under the very same Agreement that was the subject matter of P’s Claims, and (b) it was expected P would raise P’s Claims by way of defence to D’s claim in the PRC Litigation, so even if the HK Action were stayed, the scope of the HK Action would be fully covered by the PRC Litigation between P and D.  There would not be any need for litigation to be conducted in Hong Kong at all, so quite aside from any issue estoppel or res judicata discussed above, it would be against the interests of justice that the rights/obligations between P and D be litigated/adjudicated in two different jurisdictions.  Mr Chan SC referred to Dicey, Morris & Collins on The Conflict of Laws[72] in the context of EJCs (which he said equally applies to NEJCs) which demonstrated the undesirability of concurrent legal actions (and not a mere matter of inconvenience:

“The general principle is that a court, whilst it will give great weight to a jurisdiction clause, will not allow the parties to a contract to insist on the strict enforcement of their contractual agreement at the cost of damage being done to the orderly and efficient resolution of complex disputes or of the resolution of the controversy by a “single tribunal which is best fitted to make a reliable, comprehensive judgment on all matters in issue”, especially where this would risk exposing non-parties to serious prejudice.” (my emphasis)

123. Mr Chan SC referred to the Jiang Aff which stated that from past experience the Beijing HPC “可能會安排雙方於未來的一至兩個月內完成交換證據程序。交換證據程序結束後，法院一般會於15至30 天內正式開庭審理案件”, but Jiang did not give any particulars of his past experience, and he frankly admitted the PRC Litigation between P and D “屬涉外案件，而中國內地的民事訴訟法並沒有對涉外案件的審理時間有特定規限”.  Despite Jiang’s optimistic assertion, the experience in relation to the Minsheng Litigation canvassed in the Lam 1^st, 2^nd and 3^rd Affs does not bode well for speedy disposition of PRC Litigation between P and D by the Beijing HPC.  Further, although P very fairly did not object to D’s reliance on the Jiang Aff, this court does not lose sight of the fact that D put forward such affirmation just shortly before the Hearing leaving little/no time for P to prepare/submit any response.  All in all, I am not persuaded I can safely rely on Jiang’s robust estimation.

124. Mr Chan SC submitted that in the absence of a stay there would be a high risk of inconsistent findings being reached in the proceedings between P and D both in Hong Kong and in the PRC as well as in the proceedings between P and Dishi in the PRC (although as explained in paragraphs 135-142 below the risk of contradictory findings being reached in the proceedings between P and Dishi would remain even if the HK Action were stayed in favour of the PRC courts because the 2^nd Stay Judgment held that the PRC Litigation between D and P and between Dishi and P should be tried by different tribunals in the PRC). 

125. On the other hand, Mr Ho SC submitted that D’s arguments missed the point that Clause 15 was highly significant and de Dampierre was merely concerned with the forum non conveniens discretion, so even if the PRC Litigation was a relevant factor to be taken into account for such discretion, it carried little weight when P commenced the HK Action as of right in the named/chosen jurisdiction under Clause 15 in view of the principles in Noble Power Investments Ltd.  But even if one were to follow de Dampierre and Hing Fat Plastic Manufacturing Co Ltd, parallel litigation was just one of the factors to be considered in granting a stay application, and in particular Lord Goff in de Dampierre considered foreign proceedings that “have not passed beyond the stage of the initiating process” would not be relevant factor even in the Spiliada balancing exercise.  Mr Ho SC argued that the PRC Litigation between P and D had merely just begun because ever since the commencement of the PRC Litigation in 2013, P/Dishi/D were all along engaged in disputes over jurisdiction and forum, which disputes were only resolved recently by the 2^nd Stay Judgment.  Hence, at this stage, the PRC Litigation had not gone beyond the initiating stage – at least P had yet to divulge their substantive defence.  There was no substantial development, and D could not rely on the PRC Litigation to contest the named/chosen jurisdiction.

126. Mr Chan SC responded by saying the PRC Litigation had finally resolved the challenge to jurisdiction, so it had gone further than the HK Action which was still embroiled in such dispute.  Mr Chan SC urged this court to take an overall view of the Hong Kong and PRC proceedings and to note D would prosecute the PRC Litigation seriously, which must be contrasted with the situation of a party commencing foreign proceedings merely to demonstrate jurisdiction and then taking no further action.  Mr Chan SC suggested the impact of the PRC Litigation between P and D would likely, in Lord Goff’s words in de Dampierre, “have a continuing effect”. 

127. Mr Chan SC submitted another relevant factor was enforcement of judgment.  If D were successful in the PRC Litigation between P and D, P would be liable to pay D’s remuneration under the Agreement.  So far P had not indicated any substantive defence thereto apart from P’s Claims as set out in the statement of claim in the HK Action, and P had not asserted any lack of juridical or personal advantage in litigating the dispute in the PRC.  But D would suffer great juridical disadvantage if they were to litigate in Hong Kong in that the Chan Aff gave no information as to P’s assets other than P was a $2 company, and that it was uncertain whether P had any assets at all in Hong Kong.  P’s only known substantial assets were the fruits of the Minsheng Litigation being the Minsheng Shares presently frozen and held for the purpose of the Minsheng Litigation in the PRC, so even if D were successful in dismissing P’s Claims, in the absence of any procedure for reciprocal enforcement of judgments between Hong Kong and the PRC, D would still have to sue P in the PRC to recover payments due to them under the Agreement.  Mr Chan SC suggested that proceeding in Hong Kong would mean D would lose the convenience of seeking execution of any judgment in their favour against the Minsheng Shares in the PRC, which would probably be available after completion of the execution of the 2^nd Minsheng Judgment.  Mr Chan SC submitted that Chan’s bare assertion of enforcement against P’s assets in Hong Kong without any elaboration on what those assets were was plainly evasive. 

128. On the other hand, Mr Ho SC submitted that matters of enforcement were well within the contemplation of the parties at the time of making the Agreement, and there was no affidavit evidence from D to say otherwise.  The parties knew at the time of signing the Agreement that some of the work envisaged under the Agreement in respect of the Minsheng Dispute/Appeal would have to be carried out in the PRC, and D held out they had broad connections in the PRC to provide specialist services in relation to the Minsheng Litigation.  So there was no basis for D to say the potential recovery of remuneration payable to them under the Agreement against the Minsheng Shares being the fruits of the Minsheng Litigation was an unforeseen or exceptional circumstance.  After all, Clause 3.3 and 4 already envisaged the possibility to tapping into the Minsheng Shares (upon execution of the 2^nd Minsheng Judgment) for distribution between P and D and for payment of Dishi’s legal fees. Having agreed to the NEJC, Mr Ho SC submitted it did not lie in D’s mouth to now say the availability of the Minsheng Shares for execution was an exceptional or overwhelming circumstance.  He argued that none of these matters constituted strong, overwhelming or exceptional reasons, and the complaint of inability to enforce any judgment in Hong Kong merely served to disguise the real issue.

129. I must remind that this is not a case in which a party has sued in a foreign jurisdiction and then subsequently seeks to sue in Hong Kong (a situation contemplated in Bas Capital Funding Corporation & ors), and even in the exercise of the forum non conveniens discretion which required a Spiliada balancing exercise, the existence of the PRC Litigation is but a factor to be considered.  Here, P commenced the HK Action as of right in the named/chosen jurisdiction under Clause 15 without being aware that D has commenced the PRC Litigation against them in the PRC.  Under the approach advocated in Noble Power Investments Ltd, the burden is on D to demonstrate that the existence of parallel litigation in both Hong Kong and the PRC constitutes a “strong ground” to unseat the Hong Kong jurisdiction and stay the HK Action rather than to carry out a Spiliada balancing exercise. 

130. Mr Chan SC submitted that the main issues in the present dispute between P and D (which he said were primarily questions of fact) concerned (a) whether the Agreement had expired and/or had been terminated or whether it had been extended orally or by conduct such that P was estopped from denying its validity, (b) whether there was actual performance of the Agreement by P and D, particularly if the Agreement had been extended by conduct, (c) whether P was obliged to pay remuneration to D for services rendered (eg on a quantum merit basis), and (d) if so, what was the amount of remuneration payable to D.  For (a) above, the court would have to consider whether (i) P represented to and assured D the time limit under the Agreement was a mere formality and/or P would definitely agree to an extension of the Agreement, (ii) P requested, approved or acquiescenced continuous performance by D during/after the time limit of 18 months under Clause 9, and (iii) whether D relied upon such representation/assurance and suffered detriment.  For (b) above, the court would have to examine the conduct/intention of the parties after expiry of 18 months from the signing the Agreement, including P’s alleged continuous requests/acquiescences for provision of services by D, which in turn would require looking into what D and/or Dishi did, and what were the effect of their acts.  For (c) and (d) above, the court would have to examine the works and services provided by D.

131. D suggested there were overlapping issues/evidence in both the Hong Kong and PRC proceedings since it was likely that P would raise P’s Claims in the PRC Litigation by D against them, and it was argued that the existence of the PRC Litigation (which has a wider scope since it also covers D’s claim for substantive monetary relief against P in respect of the Agreement) obviates the need for the HK Action, which will remove (a) the undesirable risks of an unseemly race between the two jurisdictions to reach trial/judgment and inconsistent findings by the courts in two jurisdictions, and (b) the disadvantages and inconvenience of added costs and inefficient resolution of the dispute.

132. But at this stage, P has not revealed their substantive defence in the PRC Litigation and D has not revealed theirs in respect of the HK Litigation.  In my view, although it is expected that P may raise P’s Claims in response to D’s claim against them in the PRC Litigation, the full range of disputed issues that may be canvassed in the PRC Litigation between P and D is not known, and it is premature to say that both sets of proceedings in the PRC and Hong Kong would necessarily raise the same overlapping issues and/or the same scope of evidence.  This is precisely the reason why even in the Spiliada balancing exercise foreign proceedings that have not passed beyond the stage of the initiating process will not relevant.  Although the PRC Litigation was commenced in 2013, there was no progress in relation to the substantive action itself since the parties became embroiled in jurisdictional matters that do not go into the merits of the claim. Indeed, P has not even divulged its defence as yet.  I am of the view that the PRC Litigation has not passed the stage of the initiating process for in reality such litigation has not progressed beyond D having simply served their claim on P.  There has not been substantial development as yet that can be seen to have a continuing effect.

133. As regards the risk of inconsistent findings in the parallel proceedings, I am not persuaded this is a strong factor.  In view of Clause 15, such risk must be within D’s reasonable contemplation when they chose to issue proceedings in the PRC for they should anticipate the possibility that P might abide by the NEJC and commence legal action as of right in the named/chosen jurisdiction.  In any event, even on D’s case, the risk of inconsistent findings cannot be eliminated even if the HK Action were stayed.  It is D’s case that there is nexus of contractual rights among P, D and Dishi under the Agreement and Dishi Agreement such that the validity or otherwise of the former will have a bearing on the validity or otherwise of the latter, but the 2^nd Stay Judgment held that the PRC Litigation between P and D and between Dishi and P will be tried separately by the Beijing HPC and the Beijing IPC respectively, in which case there is already inherent risk of contradictory findings.

134. As regards the matter of enforcement, in light of the mode of payment to D and Dishi under Clauses 1.5, 2.4, 3.3 and 4 which refers to realising and tapping into the Minsheng Shares for such purpose, it must be well within the contemplation of the parties at the time of making the Agreement that (a) some work under the Agreement would be carried out in the PRC, (b) disputes that might arise from the Agreement might involve such matters, (c) D might need to resort to the Minsheng Shares for enforcement of any judgment against P for payments under the Agreement.  Whilst D refers to the convenience of the PRC Litigation for execution against the Minsheng Shares, I am not persuaded it is such a strong, exceptional or overwhelming reason for displacing the Hong Kong jurisdiction. 

135. Nexus with Disi’s claim against P  Mr Chan SC submitted there was nexus of contractual rights among P, D and Dishi under the Agreement and Dishi Agreement, and the parties’ clear intention was for both D and Dishi to be jointly engaged by P in providing services in respect of the Minsheng Litigation.  D also assumed contractual obligations towards Dishi under the Agreement,[73] and the Dishi Agreement also contained provisions that governed the rights/obligations vis-à-vis D.[74] For all practical purposes, Dishi acted as D’s “sub‑agent” such that (a) D had a contractual obligation to procure Dishi to perform and (b) D was liable for payment of all or at least the bulk of Dishi’s legal fees for P.  Since there was no separate contract entered into between D and Dishi, their legal relationship (including the payment of legal fees to Dishi) was governed by the Agreement and Dishi Agreement, which together formed a composite tripartite agreement among P, D and Dishi.[75]

136. Mr Chan SC postulated that in the PRC Litigation between P and Dishi, P might rely on Clause 3.3(b) to contend that even upon termination of the Agreement under Clause 9 D shall bear all Dishi’s legal fees, in which case D would argue (a) there was no termination of the Agreement under Clause 9, and (b) even if there was such termination Clause 3.3(b) would not apply and P (instead of D) shall be liable for a portion of Dishi’s legal fees.  In the PRC Litigation between Dishi and P, Dishi might also rely on Clause 3.3(a) to claim legal fees against P, and to do so Dishi would have to show (but it was expected that P would oppose) the Agreement was till valid and the amount of distributable benefits.  Mr Chan SC suggested D would be entitled to be heard in the PRC Litigation between P and Dishi (which was bound to be litigated in the PRC)[76] on such matters since it would affect D’s rights/obligations, in particular their obligation to pay Dishi’s legal fees, so the interests of justice would require such matters to be determined by the PRC courts to avoid duplicity of proceedings and risk of inconsistent findings. 

137. Mr Chan SC also argued that the issue of termination of the Agreement could not be determined without regard to the merits of the issue of termination of the Dishi Agreement.  First, the Agreement and Dishi Agreement showed that D’s performance was predicated on Dishi’s appointment as P’s lawyers in the Minsheng Litigation, so the Agreement could not continue to subsist despite termination of the Dishi Agreement or vice versa.  Thus, the validity of the Agreement would have a bearing on the validity of the Dishi Agreement (and vice versa).  Secondly, Clause 7.2 of the Dishi Agreement provided that the duration of such agreement shall be for a period of six months (ie until 27 February 2010) after which Dishi’s appointment shall automatically terminate.[77] Yet, it was P’s case that the Agreement only expired at the earliest on 25 February 2011, so P could not deny the Dishi Agreement must have continued until at least 25 February 2011, which would have substantial bearing on the effect of the time limit provisions in the agreements.  Thirdly, the Dishi Agreement was entered into on the premise of the Agreement.  The two were inter-related, and in particular both agreements imposed obligations on P and D to pay legal fees to Dishi, so if the Agreement was found to be of no effect, some of the provisions in the Dishi Agreement would become illogical or inoperable.  Fourthly, the 2^nd and 3^rd Supp Agts also sought parallel extension of the time limit for the Dishi Agreement, which reinforced the suggestion that the Agreement and Dishi Agreement together constitute a tripartite agreement.  All in all, Mr Chan SC submitted it would be against the interests of justice to determine the validity of one in isolation of the other in different jurisdictions. 

138. On the other hand, Mr Ho SC submitted Dishi was not a party to the HK Action, so their position was irrelevant as to whether or not the court should exercise discretion to preside over disputes between P and D.  The Agreement and Dishi Agreement were two distinct contracts and could not be regarded as a tripartite contract.  P and Dishi signed a separate engagement agreement between themselves, which was distinct from the Agreement that was in dispute in the HK Action.  Mr Ho SC submitted that D could not pray in aid the draft 2^nd Supp Agt to support the argument for a tripartite contract when D themselves contended that it was merely a draft and not agreed by P.  Mr Ho SC could not see how the argument that “P never objected to the contents of the [draft]” could evidence the parties’ alleged joint intention to imply a tripartite agreement.  Mr Ho SC reminded that D and Dishi were experts in law and litigation (at least they held themselves out to be), so the fact they had not expressly specified for a tripartite agreement was prima facie strong evidence that the Agreement and Dishi Agreement were distinct and were intended to be enforced/observed separately.  Hence, the fact Dishi was a law firm in the PRC and P could not bring proceedings against Dishi in Hong Kong was irrelevant for P was not seeking to stay Dishi’s proceedings in the PRC.  The choice of PRC governing law and jurisdiction in the Dishi Agreement (which was totally different from Clause 15) convincingly demonstrated that the two agreements were intended to be construed and enforced separately. 

139. In my view, although D (and Mr Chan SC in his written submissions) emphasised the alleged nexus of contractual rights among P, D and Dishi under the Agreement and Dishi Agreement and the claims by Dishi and D against P, the matter is now informed by the recent 2^nd Stay Judgment which Mr Chan SC said was a final decision on the merits in respect of the issues resolved by such decision.  The SPC did not accept the Agreement and Dishi Agreement were so closely connected that they had to be tried together by the same forum.  Contrary to D’s plea, the SPC found the subject matters of and legal relationships created by the two agreements were distinct,[78] so even if the HK Action were stayed, it is unclear whether D’s tripartite agreement argument can be made out in the PRC Litigation.

140. There is no dispute Dishi’s claim against P in respect of the PRC Litigation should proceed at the Beijing IPC.  But the SPC made clear the PRC Litigation between D and P will not be tried in the same forum but at the Beijing HPC.  Plainly, the SPC did not consider the issues arising under the two claims have to be jointly resolved notwithstanding D’s contentions above.  So even if the HK Action were stayed, there will be risk of inconsistent decisions/findings between the Beijing HPC and Beijing IPC in respect of D’s and Dishi’s claims against P for the PRC Litigation.  In light of the 2^nd Stay Judgment, I am not persuaded the determination of P’s Claims in a separate forum in Hong Kong would prejudice the interests of D and/or Dishi (as a non-party to the HK Action).  This is unsurprising given the very different jurisdiction clauses in the Agreement and Dishi Agreement.

141. The Jiang Aff suggested that notwithstanding the 2^nd Stay Judgment Dishi could still apply to transfer the PRC Litigation between Dishi and P back to the Beijing HPC, and if so allowed it would be possible for such claim to be heard together with the PRC Litigation between D and P.[79] But Jiang did not set out the legal basis for such transfer or the grounds that justify the application for such transfer.  He also did not canvass the likelihood of success of such application in view of the 2^nd Stay Judgment.  I also do not lose sight of the fact that the Jiang Aff was filed late in the day so that P did not have a chance to respond to the same.  In all the circumstances, I am not convinced that I can safely rely on the allegation of possible transfer to the Beijing HPC in the Jiang Aff.

142. In the premises, I do not find D’s arguments under this head to be a strong cause or exceptional/overwhelming circumstance to displace Hong Kong as the named/chosen forum for the HK Action under Clause 15.

143. Availability of witnesses  D argued their key witnesses all reside in the PRC, and it would be cheaper and more appropriate to have a trial at a place where witnesses are to be found and are compellable.  But most of P’s witnesses are based/located in Hong Kong.  As explained in Greenwood Ltd v Pearl River Container Transportation Ltd & anor,[80] given the proximity of Hong Kong to the PRC and the modern infrastructure for travel and communication, Hong Kong is not an inappropriate forum for a trial involving witnesses from the PRC.  I do not consider it inconvenient for witnesses from some parts of the PRC (eg Dishi’s lawyers or other PRC nationals) to travel to Hong Kong to give evidence and for conferences.  Even though YH and YK Lam may reside in the PRC, they are permanent residents of Hong Kong and there is no suggestion they have any difficulty in travelling to Hong Kong.  YH Lam has come to make affirmations for the Summons, and YK Lam has given presentations to the Exco in Hong Kong when dealing with the Minsheng Litigation.  Pang is, of course, a Hong Kong resident.  

144. In any event, the possibility that there may be PRC witnesses in relation to any dispute that may arise under the Agreement must have been within the parties’ contemplation when they entered into the Agreement, which concerns D’s services in relation to the Minsheng Litigation in the PRC.  I am not persuaded this amounts to any strong reason to unseat Hong Kong as the named/chosen jurisdiction.

145. PRC-related dispute  P invited the court to take judicial notice that Hong Kong courts had a great deal of experience dealing with PRC‑related disputes given Hong Kong’s role as a major financial centre conducting businesses of PRC companies, and Hong Kong was a widely recognised forum for disputes with PRC elements and documents in simplified Chinese.  Indeed, in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd & ors,[81] DHCJ Lam (as he then was) said as follows:

“With regard to languages and documents in simplified Chinese, I must say these factors, at the most, only have bearing on practical convenience. Judges in Hong Kong, either with or without the assistance of interpreters, are well equipped and qualified to try cases with these elements.”[82]

I respectfully agree with the learned judge’s observations.  Further, the governing law of the Agreement is Hong Kong law, and there can be no doubt that Hong Kong courts are suited to deal with matters of Hong Kong law without the need of expert evidence. 

146. Summary  D bears the onus of showing strong grounds to displace the Hong Kong jurisdiction (being the named/chosen jurisdiction under the NJEC) in favour of the PRC, and merely showing convenience of the PRC courts (or that the Hong Kong courts were an inconvenient forum) under the Spiliada balancing exercise is not enough.  I have carefully considered D’s affirmation evidence and Mr Chan SC’s submissions.  All the “convenience” connecting factors, eg witnesses, language, enforcement, PRC-related background etc, must or could have been foreseen at the time of the Agreement.  But even taking into account these matters, the nature of the HK Action as well as the PRC Litigation, I find they do not amount to justification, whether in law or in fact, that go to a matter of public policy or the interests of justice that require the HK Action to be stayed in favour of the PRC.  Even though having the HK Action in Hong Kong and the PRC Litigation between P and D in the PRC may cause some inconvenience, I am unconvinced that Hong Kong is thereby an inappropriate forum for the HK Action.  D has failed to discharge their burden in showing the PRC is more appropriate than Hong Kong.

XVI.  CONCLUSION

147. For the reasons above, Hong Kong is the appropriate forum to resolve the dispute in the HK Action.  In the circumstances, I dismiss the Summons.  There is no reason why costs should not follow event, and I grant a costs order nisi that D shall pay costs of and occasioned by the Summons (including all costs reserved if any) to be taxed if not agreed with certificate for two counsel.  I take this opportunity to thank counsel for their helpful assistance.

Annex – the Agreement

背景 (Background):

……

協議雙方現同意如下 (Contracting parties hereby agree as follows) :-