FOUR TREASURE ZHUHAI LTD v. ZHUHAI GREENERY HOTEL COMPANY LTD

HCMP 2109/2022

[2025] HKCFI 3819

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2109 OF 2022

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D E C I S I O N

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1.  Introduction

1.1  By my Decision dated 31 March 2025 (“Decision”)[1], I made, inter alia, the following orders:

(1)  I dismissed D’s application pursuant to RHC Order 12, rule 8(1)(g) for a declaration that the court has no jurisdiction over D in respect of the subject matter of the claim or the relief or remedy sought in these proceedings (“Moçambique Issue”): Decision §§2.3 and 5.30;

(2)  I dismissed Jurisdiction Summons §§1 and 2 for an order that the present proceedings against D be stayed on the ground of forum non conveniens and for a declaration that the Hong Kong court should not exercise jurisdiction over P’s claims in the present proceedings (“FNC Issue”): Decision §§1.5(1) and (2) and 6.11;

(3)  I acceded to Jurisdiction Summons §3 for an order that D do have leave to file and serve a further affirmation in opposition to the AOS within 28 days after the final determination of the Jurisdiction Summons (“Case Management Issue”): Decision §§1.5(3) and 7.4;

(4)  I made a costs order nisi that D is to pay to P 90% of the costs of the Jurisdiction Summons, and save as aforesaid, the costs of the Evidence Summons and the costs of the hearings be in the cause of the AOS (“Nisi Order”): Decision §8.4.

1.2  Pursuant to Decision §8.3, on 9 April 2025, I gave further directions for the conduct of the AOS, which included an evidential time timetable and a further directions hearing (“9/4/25 Order”).

1.3  This is my decision on the following applications:

(1)  By its summons dated 14 April 2025, D applies for leave to appeal against the Moçambique Issue and the FNC Issue (“Leave Application”) and for a stay pending appeal (“Stay Application”);

(2)  By its summons dated 9 April 2025, P applies to vary the Nisi Order (“Variation Application”).

1.4  Directions were given for the above applications to be determined by paper disposal. I have received helpful submissions from the same counsel teams which appeared at the hearings, save that the submissions in respect of the Variation Application were lodged by junior counsel (Mr Kenny Lin) for P.

2.  The Leave Application

2.1  The draft Notice of Appeal advances 10 proposed grounds of appeal[2]. As explained in D’s submissions:

(1)  Grounds 1-4 and 8 are directed at the Moçambique Issue, in particular they argue that, in concluding that the Moçambique rule has no application in the present case, I had failed to recognize the true nature of the central issue in the present dispute (“Characterization Issue”): Decision §§5.10-5.30;

(2)  Grounds 5-7 challenge my conclusion that even were the Moçambique Rule applicable, I was wrong in coming to the view that the personal obligation exception to the Moçambique rule applies in the present case (“Personal Obligation Exception Issue”), as either the lex situs prohibition applies and/or P’s pleaded relief cannot be effectively supervised by the Hong Kong court: Decision §§5.31-5.37;

(3)  Grounds 9-10 are directed at the FNC Issue and argue that I was wrong in concluding that there were no exceptional reasons for refusing enforcement of the non-exclusive jurisdiction clause in the form of PTA Clause 20.1: Decision §§1.2 and 6.1-6.10.

(i)  The applicable principles

2.2  The principles applicable to an application for leave to appeal are well-established. Essentially, under section 14AA(4) of the High Court Ordinance Cap 4, leave to appeal shall not be granted unless the intended appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard. To meet the merit threshold, it must be shown that the prospect of succeeding is more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125 §17.

(ii)  Proposed appeal against the Characterization Issue

2.3  Although put in a number of different ways, the proposed appeal directed at the Characterization Issue may be summarized as follows:

(1)  P’s pleaded relief at AOS §2(a) requires D to “effectively vest” the Property’s title to P;

(2)  I should have simply recognized the relief claimed by P instead of giving it an interpretation that emasculates the terms of the actual pleading;

(3)  Instead, I had erroneously characterized the pleaded relief as one not requiring D to “effectively vest” the Property’s title in P but one which only concerns the mechanism to effect the transfer of the Property.

2.4  As an initial observation, there remains no dispute between the parties in the Leave Application that whether the Moçambique rule has any application in the present case is to be answered by reference to the proper characterization of the substantive dispute: Decision §5.10. Despite the fact that it was recognized that there was an apparent lack of authorities on the approach to be adopted in the exercise of characterization of the substantive dispute (apart from Macmillan Inc v Bishopsgate Investment Trust Plc [1996] 1 WLR 387 and the commentary at The Conflict of Laws in Hong Kong §§2.049-2.050), the proposed appeal grounds do not suggest that I was erroneous in taking on board the following observations set out in the materials referred to at the hearings (Decision §5.11-5.12):

(1)  The proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the true issue or issues thrown up by the claim and defence;

(2)  The courts, when faced with the issues of characterization, address them in a pragmatic way with an eye to the overall justice.

2.5  At Decision §5.13, I set out the principal disputes between the parties, namely, D contended that the substantive dispute was about title to foreign land (ie the Property) therefore engaging the Moçambique rule and P argued that the substantive dispute is contractual in nature.

2.6  At Decision §5.21, I set out my views on what were the “true issue or issues thrown up by the claim and defence”. In particular, I observed that, were D to fail on the Misrepresentation Defence and the Delay Defence[3] (and hence the PTA was as result enforceable), there could be no further justification for D not to transfer the Property, the only remaining question was whether P was entitled to have the title of the Property vested in it without the Property being first vested in Sei Pou.

2.7  I further identified a number of consequences arising from the foregoing:

(1)  At Decision §5.21(5), the Restriction Defence did not involve the determination of the title to the Property but only on a dispute on the mechanism to effect the transfer of the Property;

(2)  At Decision §5.22-5.23, I set out my interpretation of the relevant contractual provisions and observed that their effect was that P itself was ultimately responsible to perfect its legal title in the Property but D was required to cooperate to execute the necessary documents and take the necessary steps to effectively vest the Property in P (“Interpretation Issue”);

(3)  At Decision §5.23, I did not regard it germane to deal with the expert evidence, because even were D correct that D could only transfer the Property at first instance to Sei Pou, that was part of the necessary documentation and necessary step to effectively vest the Property on P, and importantly, how P then liaised with Sei Pou to effect the further transfer did not concern D;

(4)  At Decision §5.24, I agreed with leading counsel for P that the pleaded relief was modelled after the express terms of the PTA and concluded that the order sought in the AOS was a remedy in personam;

(5)  It bears emphasis that it is not suggested that I had erred on the Interpretation Issue.

2.8  With due respect to leading counsel for D, it appears to me that the submissions made in the Leave Application are essentially a regurgitation of the arguments made by him at the hearings, as summarized at Decision §5.14.

2.9  In my view, the focus he places on the wording of the pleaded relief does not address the approach set out at §2.5 above, namely that the proper approach is to look beyond the formulation of the claim, and in the exercise of characterization, the court should address the issue in a pragmatic way with an eye to the overall justice.

2.10  I do not accept Mr Mok’s submissions that the observations set out at Hamed v Stevens [2013] EWCA Civ 911 does not inform on under what circumstances would attract the application of the Moçambique rule. Indeed, in the Leave Application, Mr Chan has further cited Otsuka Pharmaceutical Co Ltd v GW Pharma Ltd [2022] EWCA Civ 1462 §44 which refers to Hamed §21 as an authority for the proposition that there are circumstances in which the contractual exception means that the court will grant relief which alters the title or right to possession of foreign property (Decision §§5.27-5.28 and 5.37).

2.11  For the above reasons, I am of the view that the proposed appeal targeted at the Characterization Issue does not have a reasonable prospect of success.

2.12  Whilst I was initially attracted to the submission that, in the light of the paucity of precedents, I should grant leave on the basis that the proposed appeal should be heard in the interests of justice as the jurisprudence will benefit from further analysis by the appellate court. On further reflection, I decline to do so since, as noted above, it has not been suggested by Mr Mok that the approach which I have identified is erroneous.

(iii)  The Personal Obligation Exception Issue

2.13  It must be emphasized that my conclusion on the Moçambique Issue was reached primarily by reason of the Characterization Issue and the Personal Obligation Exception Issue was only dealt with in the Decision for the sake of completeness (Decision §5.31).

2.14  As I have formed the view that D has not met the merit threshold in respect of the proposed appeal against the Characterization Issue, it is unnecessary to further deal with the proposed appeal against the Personal Obligation Exception Issue. In any event, I must confess that my conclusions reached in the Characterization Issue did permeate through to my analysis on the Personal Obligation Exception Issue: Decision §§5.35 and 5.36.

(iv)  The FNC Issue

2.15  As set out at Decision §6.1, the existence of PTA Clause 20.1 would preclude argument that Hong Kong is not a clearly convenient forum and it would be wrong to evaluate the application to stay proceedings in terms of Spiliada factors.

2.16  Insofar as proposed appeal ground 9 relies on factors such as availability of witnesses and the “convenience” of having the issues dealt with by the Mainland court, it is inherently incompatible with D’s concession that the Misrepresentation Defence and the Delay Defence should be tried in Hong Kong: Decision §6.1. In any event, such factors seem to me to be quintessentially Spiliada factors and do not amount to “exceptional reasons”.

2.17  Insofar as Mr Mok relies on consideration of comity, as set out at Decision §6.8, it is common ground between the parties’ experts that under Mainland law, disputes arising from immovable property fall within the exclusive jurisdiction of the place where the property is situated. However, the assertion that the present dispute is about title to the Property situated in the Mainland is but a repeat of the arguments ventilated in the Characterization Issue above.

2.18  As regards Mr Mok’s criticisms on my consideration of the issue of whether a judgment by the Hong Kong court in the present case may be enforced in the Mainland and my treatment of the Impala cases (Decision §§6.3-6.7), it is plain that the Impala cases are only authorities that detriment or prejudice caused to a party as a result of a judgment (in his favour) being unenforceable by the courts of the situs can amount to a strong reason for not enforcing a non-exclusive jurisdiction clause. At Decision §6.7, I had already pointed out that as there is no “claim” by D, there can be no suggestion that it would suffer any prejudice such that it would constitute a strong reason for not giving effect to PTA Clause 20.1.

(v)  Conclusion on the Leave Application

2.19  For the above reasons, I decline to accede to the Leave Application.

3.  The Stay Application

3.1  In the light of my conclusion on the Leave Application, I am not minded to accede to the Stay Application.

3.2  Even were I of the view that there is an arguable appeal, I still would not have acceded to the Stay Application. The Stay Application seeks a stay of the 9/4/25 Order, effecting seeking to “freeze” the continuation of the AOS pending appeal. The concern expressed by D is that by taking steps in the AOS, including the filing of an affirmation in opposition, there is a real risk that P will take the point that D has chosen to submit to the jurisdiction of the Hong Kong court.

3.3  In my view, that concern is illusory. In refusing D’s application for an interim stay, I had pointed out that Hong Kong Civil Procedure 2025 Note 12/8/2 expressly provides that as long as it is made clear that the right to challenge jurisdiction is preserved, the court will not construe a step taken in the proceedings as a submission to jurisdiction. In any event, such concern at that stage was further ameliorated by P’s undertaking not to point by the filing of an affirmation in opposition.

3.4  I have no doubt that D will, in taking any further steps in these proceedings, as it has done throughout makes it clear that its right to challenge jurisdiction is preserved. I therefore do not see how it can be said that absent a stay the appeal would be rendered nugatory (should leave be granted by the Court of Appeal). The countervailing factor is, as has been set out in the factual background of the Decision, substantial time has elapsed since P first demanded D to transfer the Property.

3.5  I therefore dismiss the Stay Application.

4.  Variation Application

4.1  P asks for the following costs order:

“D shall pay 90% of the costs of and occasioned by the Jurisdiction Summons including the hearings on 22 August and 15 October 2024 to P forthwith with a certificate for 2 counsel to be assessed summarily or alternatively to be taxed if not agreed and paid forthwith.

Save as aforesaid, the costs of the Evidence Summons be in the cause of the AOS.”

4.2  Conversely, D says that the present case only justifies the engagement of a junior counsel and submits that the costs should be taxed as opposed to summarily assessed. D interprets the Nisi Order as meaning that the entire costs of the hearings should be in the cause of the AOS.

4.3  Perhaps the Nisi Order should have been stated in clearer terms. As noted at Decision §1.7, the hearings dealt with the Jurisdiction Summons, the Evidence Summons and the AOS. What I had intended, but perhaps not expressed clearly, is that the costs of the hearings, insofar as they are not attributable to the Jurisdiction Summons, should be in the cause of the AOS, but insofar as they are attributable to the Jurisdiction Summons, should be paid by D to P.

4.4  I agree with Mr Lin that there is no reason why costs should not follow the event and that the costs of the Jurisdiction Summons should be paid forthwith. In the light of the complexity of the issues involved and the fact that D itself engaged 3 counsel, I grant a certificate for 2 counsel.

4.5  Doing the best I can, it seems to me that the bulk of the hearings was attributable to the arguments on the Jurisdiction Summons. In my view, an apportionment of 80% is appropriate.

4.6  Mr Lin envisages that further submissions are required on the contentions raised by D on overlapping items of costs incurred in the Jurisdiction Summons and the AOS. In my view, this is an appropriate case for costs to be taxed as opposed to be summarily assessed.

4.7  I therefore vary the Nisi Order to as follows:

“D shall pay 90% of the costs of and occasioned by the Jurisdiction Summons and 80% of the costs of the hearings on 22 August and 15 October 2024 to P forthwith to be taxed if not agreed with a certificate for 2 counsel. Save as aforesaid, the costs of the Evidence Summons and the costs of the hearings on 22 August and 15 October 2024 be costs in the cause.”

5.  Costs

5.1  I make a costs order nisi that D is to pay to P (1) costs of the Leave Application and the Stay Application (with a certificate for 2 counsel) and (2) the costs of the Variation Application to be summarily assessed. P has already lodged its Statements of Costs. D is to lodge and serve its Statement of Objections within 7 days hereof and summary assessment will be conducted thereafter on the papers.