HAITONG INTERNATIONAL PRODUCTS & SOLUTIONS LTD v. WANG YAFENG

HCA 124/2023

[2024] HKCFI 2331

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 124 OF 2023

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D E C I S I O N

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1.  Introduction

1.1  The Plaintiff commenced the present proceedings by a generally-indorsed writ on 27 January 2023. On 20 March 2023, Master Ho granted leave to the Plaintiff for service out of the jurisdiction (“Order”). Pursuant to the Order, on 3 April 2023, the Plaintiff made a request under RHC Order 11, rule 5A for service of the Concurrent Writ of Summons through the judicial authorities of the Mainland. On 19 May 2023, the Concurrent Writ of Summons was served on the Defendant. As the Defendant did not give any notice of intention to defend, the Plaintiff obtained default judgment against the Defendant on 11 July 2023 (“Default Judgment”).

1.2  This is my decision on the following applications.

1.3  By a summons dated 5 February 2024 (“First Summons”), the Defendant applies for the following orders:

(1)  the Order be set aside (“First Summons §1”);

(2)  the Concurrent Writ of Summons issued by the Plaintiff , and the service ("Service") thereof through Mainland Judicial Authorities on the Defendant pursuant to the Order be set aside (“First Summons §2”);

(3)  the Default Judgment be set aside on the ground of material non-disclosure (“First Summons §3”);

(4)  a declaration that in the circumstances of the case the court should not exercise any jurisdiction it may have on the grounds that considering the best interests and convenience of the parties and the witnesses, and the judgment of the Beijing Financial Court dated 28 December 2023 ("PRC Judgment") which includes the same cause of action to which the present proceedings relate, as well as the pending appeal proceedings in the Mainland, the proceedings should continue to be conducted in the Beijing High People's Court (“First Summons §4”);

(5)  all further proceedings be permanently stayed forthwith on the ground of forum non conveniens in favour of the Beijing High People's Court (“First Summons §5”).

1.4  By a summons dated 17 June 2024 (“Second Summons”), the Defendant seeks leave to amend the First Summons to include a new paragraph 1(A), namely for leave to be granted to the Defendant to give notice of intention to defend in the present action.

1.5  At the hearing, the Defendant was represented by Mr Leon Guo and the Plaintiff by Mr Thomas Wong, both of counsel.

2.  Scope of the present applications

2.1  The First Summons is supported by the Defendant’s 1^st Affirmation dated 5 February 2024 (“WYF 1^st”). It is plain that the Defendant’s grounds for First Summons §§1 to 3 are premised only on material non-disclosure: WYF 1^st §1 and section D thereof. Under section D of WYF 1^st: (1) §§41 to 45 deal with the Defendant’s allegations of material non-disclosure in respect of First Summons §§1 and 2 and (2) §46 deals with the allegations of material non-disclosure in respect of First Summons §3.

2.2  Given what is set out expressly in the First Summons (in particular First Summons §3) and WYF 1^st, it is entirely unsurprising that the Plaintiff has chosen to oppose the First Summons §§1 to 3 on the basis that the only case it has to meet is material non-disclosure. At the Plaintiff’s affirmation in opposition (Wang Zihao’s 1^st Affirmation dated 23 April 2024 (“WZH 1^st”)) §5, the Plaintiff’s position is set out as follows:

“[5] I have been advised by the Plaintiff’s lawyers and understand that:

[a] the Defendant seeks to set aside the Final Judgment on the sole ground that the Plaintiff was allegedly guilty of material non-disclosure when applying for the Final Judgment;

[b] the Defendant has not made clear (whether in his summons or [WYF 1^st] the ground(s) upon which he seeks to set aside the Service Out Order and the Concurrent Writ of Summons;

[c] except as aforesaid, there is no suggestion that the Final Judgment was irregularly entered, or that the Final Judgment (or the Service Out Order or the Concurrent Writ of Summons) should be set aside because the Defendant has a meritorious defence to the Plaintiff’s claims.”

2.3  In the Defendant’s 2^nd Affirmation (“WYF 2^nd”) dated 17 May 2024 (at §15), apart from challenging WZH 1^st §5(b), the Defendant did not otherwise challenge WZH 1^st §§5(a) or (c). WYF 2^nd §5 reads as follows:

“This has clearly been pointed out by my 1^st affirmation at paragraphs 40, 44 and 45. I hence do not know why the Plaintiff was just making the allegations as if it had not noticed such a clear point. In this connection, I also want to point out that the allegations made by [WZH 1^st] at §5(b) is also unbelievable given what I have explained clearly in my 1^st affirmation.”

2.4  At his Skeleton Submissions §1.3, Mr Guo beguilingly omitted the words “on the ground of material non-disclosure” in First Summons §3 and proceeded to make extensive submissions on the merits of the Defendant’s defence as an additional ground to set aside the Default Judgment. Whilst Mr Wong in his Skeleton Submissions dealt with the Defendant’s defence briefly (§§33 to 36), he confirmed at the hearing that, were the Defendant permitted to depart from First Summons §3 and argue that the Default Judgment should be set aside on basis that the Defendant has a meritorious defence, it was necessary for the Plaintiff to file further evidence, especially when the details of the Defendant’s defence was only set out in WYF 2^nd.

2.5  I accept Mr Wong’s submissions that prejudice would be caused to the Plaintiff were I to allow the Defendant to depart from First Summons §3. I also take into account of the fact that where, as here, the Defendant has belatedly taken out the Second Summons, the proposed amendment does not seek to amend First Summons §3. At the hearing, I determined that I should confine the scope of the present applications to what is expressly set out in the First Summons. In other words, as regards First Summons §§1 to 3, the only issue which I need to determine is whether the Plaintiff was guilty of material non-disclosure.

2.6  As regards the Second Summons, it was issued on 17 June 2024, one day before the hearing to deal with an argument raised in Mr Wong’s Skeleton Submissions, at which it was pointed out that in order for the Defendant to pursue First Summons §§1 and 2 (under RHC Order 12, rule 8(1)) and First Summons §§4 and 5 (under RHC Order 12, rule 8(2)), it is incumbent upon the Defendant to give notice of intention to defend the proceedings. Under RHC Order 12, rule 6(1), except with the leave of the court, a defendant may not give notice of intention to defend in an action after judgment has been obtained. As the Defendant has not given notice of intention to defend, Mr Wong argues that First Summons §§1 to 2 and 4 to 5 fall to be dismissed in limine.

2.7  As I understand Mr Wong, he, in my view fairly, accepts that I may deal with the Second Summons in accordance with the approach set out at MGM Grand Paradise Limited v Chiu Tak Wah, HCA 259 of 2012, 8 October 2012 §§17-22. In gist, having regard to the underlying objectives set out in RHC Order 1A, the court should look at the substance rather than the form and also the relevant and substantive merit of the Defendant’s application. I will therefore, like B Chu J in MGM, accede to Second Summons §§1 to 3.

3.  The Plaintiff’s claim

3.1  The Plaintiff’s claim as advanced in the Concurrent Writ of Summons is as follows.

3.2  Pursuant to, amongst others (1) a side letter dated 12 July 2019 from the Defendant to, among others, the Plaintiff (“Side Letter”), (2) a representation letter dated 12 July 2019 from the Defendant to, among others, the Plaintiff (“Representation Letter”), and (3) a Pricing Supplement dated 22 July 2019 (“Pricing Supplement”) issued by the Plaintiff pursuant to a Programme Memorandum dated 30 March 2017 (“Programme Memorandum” and together with the Side Letter and the Representation Letter “Agreement”), the Defendant subscribed to 772,201 of 12-month USD Denominated Leveraged Participation Notes linked to the shares in NIO Inc due 2020 (“Notes”), which were issued by the Plaintiff pursuant to a Structured Products Programme on a leveraged basis.

3.3  The total nominal amount of the Notes was US$2,702,704, under which the Plaintiff provided a loan of US$1,660,000 to the Defendant for the subscription.

3.4  On around 26 September 2019, a Collateral Posting Event, as defined under the Agreement, occurred. Between 26 September and 30 October 2019, in accordance with the terms of the Agreement, the Defendant was issued multiple written notices informing him of the Collateral Posting Event and that the LTV Liquidation Line, as defined under the Agreement, was triggered. The Defendant was required to transfer the Required Collateral Amount, as calculated under the Agreement, to the Plaintiff.

3.5  Under the Agreement, if the Defendant failed to transfer the Required Collateral Amount, the Plaintiff would be entitled to charge interest at 20% per annum, from (and including) the date on which the Required Collateral Amount was required to be transferred to (but excluding) the actual date of transfer, on the basis of daily compounding and the actual number of days elapsed (“Interest Provision”).

3.6  On 30 October 2019, as the Defendant still failed to transfer the Required Collateral Amount to the Plaintiff, the Calculation Agent determined that a Mandatory Early Redemption Event had occurred. The Plaintiff then exercised its right under the Agreement to redeem the Notes and liquidated the underlying security, being 772,201 shares in NIO Inc. Following the liquidation, an amount of US$498,392.16 remained outstanding from the Defendant as of 30 October 2019.

3.7  On around 7 January 2020, the Defendant deposited US$50,000 to the Plaintiff, leaving an amount of US$467,307,41 outstanding (“Outstanding Sum”) taking into account the interest accrued since 30 October 2019 in accordance with the Interest Provision.

3.8  By the Default Judgment, the Defendant was adjudged to pay to the Plaintiff (1) the Outstanding Sum, (2) contractual interest from 7 January 2020 to the date of the Default Judgment and thereafter at judgment rate and (3) fixed costs in the sum of HK$11,045.

4.  The Order

4.1  The Plaintiff’s ex parte application for leave to serve the Defendant out of the jurisdiction was made by an affirmation dated 8 March 2023 (“Wong 1^st”) of Mr Wong Wai Keung (“Mr Wong”), a partner of the Plaintiff’s solicitors.

4.2  In so far as material to the present applications, Wong 1^st sets out the following matters:

(1)  The Agreement is by its terms governed by Hong Kong law (Clause 10(a) of the Side Letter and page 5 of the Representation Letter);

(2)  The Agreement contains a term to the effect that the Hong Kong courts have non-exclusive jurisdiction (Clause 5(a) of the Side Letter and page 5 of the Representation Letter);

(3)  The Notes are governed by, and shall be construed in accordance with Hong Kong law (Clause 17 of the Programme Memorandum);

(4)  The Defendant had commenced proceedings against a number of parties, including the Plaintiff, at the Beijing Financial Court in respect of matters relating to these proceedings (“Mainland Proceedings”) and a summary of the Defendant’s claims in the Mainland Proceedings is provided;

(5)  The Plaintiff, among others, was challenging the jurisdiction of the Beijing Financial Court (“Jurisdictional Challenge”);

(6)  The Order 11 gateways relied on by the Plaintiff were RHC Order 1(1)(d)(iii) and (iv), namely (1) the Agreement is governed by Hong Kong law and (2) the Agreement contains a term to the effect that the Hong Kong court shall have jurisdiction to hear and determine any action in respect of the Agreement.

5.  The Default Judgment

5.1  The Plaintiff’s ex parte application for Default Judgment was made by Mr Wong’s 2^nd Affirmation dated 23 June 2023 (“Wong 2^nd”). As noted above, the Defendant was served in the Mainland on 19 May 2023. In Wong 2^nd, it was pointed out that the time for the Defendant to file his Acknowledgement of Service expired on 16 June 2023.

5.2  As the Plaintiff’s claim is for a liquidated sum, the application for the Default Judgment was made pursuant to RHC Order 13, rule 1. As set out at Hong Kong Civil Procedure 2024 Note 13/0/13, the requirements to be fulfilled in an application made under RCH Order 13 are, inter alia, (1) that the writ has been duly served and (2) that the time for acknowledgment of service has expired with no such acknowledgment having been returned.

6.  The Mainland Proceedings

6.1  Although the Mainland Proceedings were commenced by the Defendant in December 2021, it was only on 14 February 2023 that the Plaintiff received the relevant documents from the Beijing Financial Court.

6.2  On 3 March 2023, the Plaintiff made the Jurisdictional Challenge.

6.3  On 28 April 2023, the Beijing Financial Court dismissed the Jurisdictional Challenge.

6.4  On 29 May 2023, the Plaintiff lodged an appeal against the dismissal of the Jurisdictional Challenge.

6.5  On 20 September 2023, the Beijing High People’s Court dismissed the Plaintiff’s appeal.

6.6  Following the dismissal of the appeal, the Plaintiff made a counterclaim in the Mainland Proceedings on 27 October 2023.

6.7  On 28 December 2023, by the PRC Judgment, the Beijing Financial Court dismissed the Defendant’s claim and allowed the Plaintiff’s counterclaim for the Outstanding Sum plus interest and costs.

6.8  On 10 January 2024, the Defendant lodged an appeal against the PRC Judgment.

6.9  It is pertinent to note from the above chronology the following matters:

(1)  At the time when the Plaintiff made the ex parte application for service out of the jurisdiction on 8 March 2023, the Jurisdictional Challenge was ongoing and had not been determined;

(2)  Between the Order (granted on 20 March 2023) and the application for the Default Judgment (made on 23 June 2023), the Jurisdictional Challenge had been dismissed and the appeal therefrom was pending;

(3)  It was only after the Default Judgment had been granted (on 11 July 2023) that the appeal from the Jurisdictional Challenge was determined (on 20 September 2023) and the Plaintiff made its counterclaim in the Mainland Proceedings (on 27 October 2023).

7.  The Defendant’s factual case on material non-disclosure

7.1  In WYF 1^st, the Defendant’s case on material non-disclosure is set out as follows:

(1)  The Plaintiff had never properly disclosed to the Hong Kong court the progress of the Mainland Proceedings and in particular the dismissal of the Jurisdictional Challenge (§§43 and 45);

(2)  In the Plaintiff’s application for the Default Judgment, the Mainland Proceedings and the dismissal of the Jurisdictional Challenge were not mentioned in Wong 2^nd (§47).

7.2  At section B of WYF 2^nd, the Defendant emphasizes that the duty to make full and frank disclosure is a continuing one but otherwise does not materially add to the factual allegations set out in WYF 1^st.

8.  The applicable principles

8.1  I do not understand counsel to have disagreed on the following principles.

8.2  On full and frank disclosure, as summarized at Zhang Rui Kang v Tunghsu Group Co Ltd [2023] HKCFI 1866 §37(2):

(1)  The applicant on an ex parte (without notice) application has a duty to make full and frank disclosure of all matters which are material to the exercise of the Court's discretion;

(2)  A fact is material if it would have influenced the judge when deciding whether to make the order or deciding upon the terms upon which it should be made;

(3)  The full and frank duty only relates to the matters which the Court has to decide;

(4)  Courts have recognized that non-disclosure arguments are routinely deployed by respondents for procedural advantage. The Court takes a realistic view, particularly in complex cases;

(5)  Where facts are material in the broad sense in which that expression is used, there are degrees of relevance and it is important to preserve a due sense of proportion. In applying the broad test of materiality sensible limits have to be drawn;

(6)  The ultimate touchstone is whether the presentation of the application is fair in all material respects.

8.3  Whilst the foregoing principles are not in dispute, counsel disagree on the materiality of the Mainland Proceedings in the context of an application for leave to serve out of the jurisdiction.

8.4  On behalf of the Defendant, Mr Guo relies on a number of cases to contend that overlapping foreign proceedings between the same parties are relevant, and the non-disclosure of which may of itself lead to the grant of leave to serve out of the jurisdiction be set aside, for example: Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd [2007] 1 HKC 301 (CFI) and [2007] 4 HKC 372 (CA).

8.5  I agree with Mr Wong that the cases cited by Mr Guo are clearly distinguishable as they do not deal with jurisdiction clauses.

8.6  Mr Wong relies on those cases which set out the principles applicable to a situation involving the existence of a non-exclusive jurisdiction clauses (“NEJC”) and contends that the Mainland Proceedings are objectively immaterial and irrelevant.

8.7  In Noble Power Investments Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631, the Court of Appeal held as follows:

(1)  There is no difference in principle between an exclusive jurisdiction clause and a non-exclusive jurisdiction clause to the extent that in both situations, the parties have agreed, if they are sued in the named forum, to submit to it (§29);

(2)  Where proceedings are instituted in the named forum (to which the parties have agreed to submit), the party who seeks a stay or otherwise to contest the jurisdiction or appropriateness of that forum, has a very heavy burden to discharge, since that party has by definition agreed contractually to submit to the jurisdiction. In other words, he is seeking to avoid a forum to which he has, by contract, agreed to submit (§31);

(3)  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 (§36);

(4)  When there exists a non-exclusive jurisdiction clause and proceedings are instituted in the very forum to which the parties have agreed to submit, 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 non-exclusive jurisdiction clause should not be enforced. One is really talking about factors that were not in the reasonable contemplation of the parties at the time the agreement was made (§40);

(5)  Thus, where a non-exclusive jurisdiction clause is in place and proceedings are commenced in the named forum and leave to serve out of the jurisdiction is required, the court’s approach when considering in an RHC Order 11 situation is as follows (§41):

(a)  The legal burden is on the plaintiff to demonstrate that the named forum is clearly the appropriate one for the trial of the action;

(b)  However, in discharging this burden, the plaintiff can do so simply by referring to the existence of a non-exclusive jurisdiction clause in which the parties have agreed to submit to the jurisdiction of the named forum. This is, after all, the contractual bargain;

(c)  It will then be for the defendant to demonstrate the existence of strong or powerful reasons why this bargain should not be upheld. The approach of the Court here is not simply of weighing up the existence (or lack) of factors connecting the case to one or more jurisdictions;

(d)  Viewed in this way, from a practical point of view, the approach is akin to a situation where a plaintiff has instituted an action as of right;

8.8  As further set out at Nobel Power §71:

(1)  Although, in the exercise of its discretion, the Court is entitled to have regard to all the circumstances of the case, the general rule is that the parties will be held to their contractual choice of jurisdiction unless there are overwhelming, or at least very strong, reasons for departing from this rule;

(2)  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;

(3)  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;

(4)  In particular, the fact that the defendant has, or is about, to institute proceedings in another jurisdiction, not contemplated by the non-exclusive jurisdiction clause, 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 non-exclusive jurisdiction clause could avoid its agreement at will by commencing proceedings in another jurisdiction.

8.9  Even were one to carry out the Spiliada balancing exercise, it is Mr Wong’s further submission that foreign proceedings that have not passed beyond the stage of the initiating process will not be relevant: Chinachem Financial Services Ltd v Century Venture Holdings Ltd, HCA 410/2013, 8 January 2015 at §§106, 125 and 132. In particular, it is stated at §132:

“… 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 …”

8.10  At the hearing, Mr Guo did not seek to dispute the correctness of the legal propositions advanced by Mr Wong (summarized at §§8.7 to 8.9 above). I accept Mr Wong’s submissions that those propositions are the principles applicable to cases concerned with NEJCs.

9.  Analysis

9.1  In this section, I set out my analysis of Mr Guo’s arguments.

(i)  Whether Noble Power distinguishable

9.2  Mr Guo first argues that the relevant jurisdiction clause is General Condition 17 of the Programme Memorandum (“GC-17”) and the present case is distinguishable from Nobel Power as it involves an “atypical” NEJC.

9.3  I should immediately point out that this is not an argument which features in the Defendant’s evidence or Mr Guo’s Skeleton Submissions. In other words, there is no specific allegation by the Defendant that the Plaintiff had failed to disclose to the court that GC-17 had a material bearing in its ex parte applications. As pointed out at Zhang Rui Kang §37(2), where non-disclosure is alleged, it is incumbent on the party making the allegation to give proper particulars of the case being advanced, so that it can be fairly responded to by the other party and there must not be a moving target. It is not appropriate for unspecific complaints to be made in evidence and it is not appropriate for specific complaints to be made for the first time in skeleton arguments. I will therefore only treat this part of Mr Guo’s arguments as his attempt to distinguish the present case from Noble Power.

9.4  General Condition 17 of the Programme Memorandum provides:

“The Notes are governed by, and shall be construed in accordance with, Hong Kong law.

The Issuer [the Plaintiff] irrevocably agrees for the benefits of the Noteholders that the courts of Hong Kong are to have jurisdiction to settle any disputes which may arise out of or in connection with the Notes and accordingly any suit, action or proceedings arising out of or in connection therewith (together referred to as “Proceedings”) may be brought in such courts.

The Issuer irrevocably and unconditionally waives and agrees not to raise any objection which it may have now or subsequently to the laying of the venue of any Proceedings in the courts of Hong Kong and any claim that any Proceedings have been brought in an inconvenient forum and irrevocably and unconditionally agrees that a judgment in any Proceedings brought in the courts of Hong Kong shall be conclusive and binding upon the Issuer and may be enforced in the courts of any other jurisdiction. Nothing in this General Condition 17 shall limit any right to take Proceedings against the Issuer or in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions precluded the taking of Proceedings in any other jurisdiction, whether concurrently or not.” (emphasis added)

9.5  As I understand Mr Guo, he contends that GC-17 is simply an unilateral offer on the part of the Plaintiff to confer jurisdiction on the Hong Kong court, which offer a noteholder such as the Defendant may or may not accept, as is allegedly made clear by the underlined words in the last paragraph of GC-17.

9.6  Mr Guo argues that GC-17 is the relevant jurisdiction clause in the present case because of what is stated in the Pricing Supplement. Page 1 thereof provides as follows:

"Terms used herein shall be deemed to be defined as such for the purposes of the Programme Memorandum dated 30 March 2017 and all referecens to Conditions in this Pricing Supplement are to the General conditions and the applicable Additional Terms and Conditions set out in the Programme Memorandum. This document constitutes the Pricing Supplement of the Notes defined herein. Copies of the Programme Memorandum, may be obtained from the offices of the Issuing and Paying Agent specified herein.

This Pricing Supplement comprises the final terms for the issuance of the Notes." (emphasis added)

9.7  Mr Guo did not cite any authorities in which a clause similar to GC-17 has been construed. However, I do not believe I need to determine the correctness of Mr Guo’s construction of GC-17 for the following reasons.

9.8  As submitted by Mr Wong, GC-17 is not the NEJC relied on by the Plaintiff. As set out at Wong 1^st (§4.2 above), the NEJCs relied on by the Plaintiff are those set out in the Side Letter and the Representation Letter:

(1)  Clause 10(b) of the Side Letter provides: “The courts of Hong Kong have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this letter (including a dispute regarding the existence, validity or termination of this letter)”;

(2)  Page 5 of the Representation Letter provides: “This letter is governed by and shall be construed in accordance with the laws of Hong Kong Special Administrative Region…. The courts of Hong Kong have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this letter (including a dispute relating to the existence, validity or termination of this letter)”.

9.9  Perhaps more importantly, the Side Letter is a document dealing specifically with the Notes. Page 1 of the Side Letter states:

“Refence is made to the Programme Memorandum dated 30 March 2017… pursuant to which Notes have been issued by the Issuer…

In connection with the purchase of the Notes by the Noteholder, the Noteholder hereby confirms that it has received a copy of and read, and understands, and has agreed to and has accepted all the contents of (i) the Programme Memorandum and (ii) the Pricing Supplement to be dated on or around the same date of this letter relating to the Notes… provided to the Noteholder (such Pricing Supplement and the Programme Memorandum collectively, the “Offering Documents”)… In the event of any inconsistency between this letter and the Offering Documents, this letter shall prevail.” (emphasis added)

9.10  The Plaintiff’s claim in the present proceedings (summarized at section 3 above) is made pursuant to the Side Letter and the Pricing Supplement. As explained at Wong 1^st §§13 to 20:

(1)  The Collateral Posting Event relied on by the Plaintiff is defined at clause 6.1(a) of the Side Letter;

(2)  According to clause 6.1(b) of the Side Letter, upon the occurrence of a Collateral Posting Event, the Defendant was required to transfer the Required Collateral Amount (as defined on page 13 of the Pricing Supplement) into an account designated by the Plaintiff;

(3)  According to clause 6.1(c) of the Side Letter, when the Defendant failed to transfer the Required Collateral Amount, the Plaintiff would be entitled to invoke the Interest Provision;

(4)  The LTV Liquidation Line is defined on page 13 of the Pricing Supplement;

(5)  The Mandatory Early Redemption Event is defined in clause 5 of Appendix 1 to the Pricing Supplement.

9.11  I do not accept Mr Guo’s submissions that the Pricing Supplement, in particular the underlined words set out at §9.6 above, has the effect of rendering GC-17 as the relevant jurisdiction clause in the present case. As acknowledged by Mr Guo, the Pricing Supplement does not refer to GC-17. Conversely, I accept Mr Wong’s submissions that GC-17, by reason of the underlined words at page 1 of the Side Letter set out at §9.9 above, renders clause 10(a) of the Side Letter the relevant NEJC in the present case.

9.12  In my view, clause 10(a) of the Side Letter is a “typical” NEJC. I do not agree with Mr Guo’s submissions that the principles set out in Noble Power are inapplicable in the present case.

(ii)  First Summons §§1 and 2

9.13  I agree with Mr Wong that the Defendant has not made out his case on First Summons §§1 and 2 for the following reasons.

9.14  First, the existence of the Mainland Proceedings was disclosed in Wong 1^st (§4.2 above). Therefore, the Defendant is driven to confine its case to an allegation that the progress of the Mainland Proceedings and in particular the dismissal of the Jurisdictional Challenge had not been disclosed at the time when the Plaintiff applied for the Order.

9.15  Secondly, by reason of Clause 10(b) of the Side Letter, the Plaintiff had already discharged its legal burden of demonstrating that the Hong Kong courts are clearly the appropriate forum by referring to it (§8.7(5) above);

9.16  Thirdly, the mere fact that the Mainland Proceedings were in existence could not have discharged the very heavy burden that the Defendant was required to meet in order to contest the Hong Kong courts’ jurisdiction (§8.8 and in particular §8.8(4) above);

9.17  In relation to the 3 reasons identified above, the following observations may further be made:

(1)  In respect of the period preceding the granting of the Order, Wong 1^st had already disclosed the existence of the Mainland Proceedings and the fact that the Jurisdictional Challenge was ongoing;

(2)  Therefore, the Defendant’s complaints of non-disclosure can only apply to the Service stage (ie after the granting of the Order);

(3)  As such, it seems to me that the Defendant’s complaints of material non-disclosure cannot be applicable to First Summons §1;

(4)  Where the existence of the Mainland Proceedings would not have influenced Master Ho when granting the Order, it seems to me that it must be a fortiori that the progress of the Mainland Proceedings and the dismissal of the Jurisdictional Challenge would not have been material to the Service stage, bearing in mind the principles applicable to full and frank disclosure set out at §8.2 above. In my view, the progress of the Mainland Proceedings and the dismissal of the Jurisdictional Challenge would not have influenced the court when deciding whether to make the Order or to consequently seek assistance from the Mainland Judicial Authorities in respect of Service.

9.18  Fourthly, even were a Spiliada balancing exercise required to be carried out, at the time immediately preceding the application for Default Judgment (§6.9 above), the Mainland Proceedings had not passed beyond the Jurisdictional Challenge (and the appeal therefrom), and as such, would not be of relevance (§8.9 above).

9.19  I am therefore of the view that First Summons §§1 and 2 ought to be dismissed.

(iii)  First Summons §3

9.20  The Defendant’s complaint here is that the Plaintiff should have disclosed in Wong 2^nd the dismissal of the Jurisdictional Challenge when applying for the Default Judgment.

9.21  Mr Guo relies on 2 cases.

9.22  First, at Alan Chung Wah Tang and Kan Lap Kee (Joint and Several Liquidators of Wah Hin and Company Limited (in liquidation) v Chung Chun Keung [2021] HKCFI 369 §22, Coleman J said as follows;

“Whilst it may be strictly correct that there is no clear obligation on an applicant for default judgment to comply with the requirement of full and frank disclosure as is applicable on, say, an application for a Mareva injunction, I would express my full agreement with the comments made by DHCJ William Wong SC in Sky Joy Investment Ltd v Zheng Dunmu (unreported, HCA395/2016, 16 August 2017), when he said that given the nature of an application for default judgment, akin to an ex parte application, the applicant ought to make full and frank disclosure of matters which militate against the grant of declaratory relief, so that the court could properly assess the merits of granting such relief without having the benefit of full submissions from both sides.”

9.23  Secondly, in Bluesun Capital Ltd v Tewoo Group Finance No 3 Limited & Ors [2021] HKCFI 2040, Mr Recorder Manzoni SC said at §53:

“As a matter of practice it is clear that a material non disclosure is sufficient to set aside a default judgment. Generally speaking the plaintiff would not have to make disclosure of possible defences to the underlying action, because those defences are generally not relevant to a default judgment. But the matters to which I have alluded go beyond simply being a defence to the action. They relate to the plaintiff’s standing and locus to bring the action, and to the validity of the service that the plaintiff relied upon.”

9.24  In my view, neither of the above 2 cases assists the Defendant. As noted at §5.2 above, the Plaintiff’s claim is one for a liquidated sum and is therefore plainly distinguishable from Alan Chung. Further, unlike Bluesun, the issue on the validity of the Order and the Service has already been debated in the context of First Summons §§1 and 2. In the circumstances where I have decided against First Summons §§1 and 2 on the basis that there was no material non-disclosure in the Order and the Service, it seems to me axiomatic that failure to mention the Jurisdictional Challenge in Wong 2^nd also cannot amount to material non-disclosure at the time of the Plaintiff’s application for the Default Judgment.

9.25  I have pointed out at §5.2 above the requirements to be met in an application under RHC Order 13. In the present case, I am of the view that in compliance with those requirements, it is entirely proper for Wong 2^nd to have only dealt with those matters.

9.26  I am therefore of the view that there was no material non-disclosure in the Plaintiff’s application for the Default Judgment and First Summons §§3 ought to be dismissed.

(iv)  First Summons §§4 and 5

9.27  Once First Summons §§1 to 3 are dismissed, the Default Judgment stands and there are no “further proceedings” to be stayed in favour of the Beijing High People’s Court. It therefore follows that First Summons §§4 and 5 should also be dismissed.

9.28  In any case, I accept Mr Wong’s submission that, given the NEJC in the present case, the court should not embark on a Spiliada balancing exercise, and as noted in Noble Power (§8.8(4) above), the fact that the Defendant has instituted proceedings in another jurisdiction (which in the present case have concluded by the PRC Judgment subject only to an appeal therefrom) is not a strong or compelling reason to relieve the Defendant from his bargain.

10.  Conclusion

10.1  For the above reasons, I accede to Second Summons §§1 to 3 and dismiss the First Summons (as amended by the Second Summons).

10.2  I also make a costs order nisi that the Defendant is to pay to the Plaintiff the costs of the First and Second Summonses, to be taxed if not agreed.