MARMOR HOTAVLJE d.o.o. v. PETER SILLING & ASSOCIATES HOTEL INTERIOR DESIGN LTD

HCA 2475/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2475 OF 2014

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D E C I S I O N

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1.  This dispute arises out of a contract for the construction of aspects of a 5‑star hotel, known or to be known as The Ritz Carlton.  There was already in existence a high‑rise building of 38 floors.  The construction work was to be carried out in Almaty, Kazakhstan.

2.  The parties to the agreement, which is in German, and I have relied upon an agreed English translation, are the plaintiff in this Hong Kong action, which is the contractor for the work, and the defendant, referred to as the client.  The plaintiff contractor is a Slovenian company and the defendant client is a Hong Kong company with its German principal based in Cologne, Germany.

3.  The contract appears to have been executed in Hong Kong on 17 July 2012.  Within it are provisions for stage payments for the specified work.

4.  The design office and representative of the client (defendant) is in Cologne, Germany.  The construction manager/supervisor on site in Kazakhstan (who is to speak German or English) is subordinate to the construction management appointed by the client (defendant) and represented by Mr Hermann Silling of the defendant company and principal German entity.

5.  At the end of the contractual document before the signatures of the parties is the succinct statement: “The English law is agreed upon, jurisdiction London.”  There is no dispute that this statement forms part of the contract.

The cause of action in Hong Kong

6.  The Statement of Claim filed and served on 4 December 2014 refers to three agreements, the second and third relating to additional work and therefore additional pricing for the work.  I do not need to consider these later.  They are in effect supplemental agreements, whether oral or written, save that the third, an oral agreement, involved allegedly, Herman Silling of the defendant client and two Slovenian employees of the plaintiff contractor.  The claim is essentially for money due for work carried out under the contract(s).  On 14 January 2015 the defendant’s solicitors took out a summons for an order to stay the Hong Kong proceedings and for the action to proceed in the High Court in London, England by virtue of the provision at the end of the agreement relating to the law and jurisdiction governing the contract.  This is the principal issue before me today.  There is an alternative prayer seeking to strike out the action.

7.  Over two months later, perhaps as a riposte, the plaintiff took out a summons for an order for the defendant to make an interim payment of €180,000.  This being the subject matter pleaded in the later part of the Statement of Claim.  This is also listed before me.

The defendant’s argument

8.  The agreement was in reality made with the German company which oversaw the whole contract from Cologne and relies, inter alia, upon a letter making this clear, dated 18 July 2012, which the plaintiff denies receiving.

9.  It seems to me that this letter does no more than confirming the obvious reality.

10.  More importantly, reliance is placed upon the clause providing for English law and jurisdiction to which the plaintiff subscribed its agreement.  It is interesting to note that the letter before action on behalf of the plaintiff, was sent, dated 6 June 2014, almost six months before it commenced proceedings, by a London firm of solicitors who claimed payment of over €500,000 and referred to a right to claim interest under English law.

11.  The problems arising originated at the site of the project in Kazakhstan.  The defendant had on‑site management and control through its agent appointed by the Cologne company.  There is clear documentary evidence of the plaintiff’s contact with the German company in Cologne concerning the execution and progress of the contract.

12.  The material witnesses on behalf of the plaintiff are in Slovenia and the defendant’s witnesses are based in Cologne.  Any experts are likely to come from Europe.

13.  The only factor linking the contract to Hong Kong is that the defendant, a subsidiary of the German company, is incorporated in Hong Kong, but is little more than a titular party, being used as a payment agency under the contract, probably for tax purposes.

14.  In my view it is clear that the contract itself was effectively controlled or supervised from Germany and that the Hong Kong company was simply an adjunct of its controlling German entity.  Certainly there is no material factor which would render the agreed jurisdiction provision inappropriate, inconvenient or anomalous.  There is nothing to suggest or support an argument that the forum should be Hong Kong other than the defendant’s corporate status.

The plaintiff’s argument

15.  This really hinges on the fact that the Hong Kong company is the party to the contract and that, by implication, the defendant rendered itself amenable to the Hong Kong jurisdiction.

16.  It is contended that the provision for jurisdiction is non‑exclusive and that the plaintiff can sensibly opt for proceedings in Hong Kong where English law applies in any event.  Applying the principles in Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460, the form of the jurisdiction clause is such that it does not require proceedings to be brought in the English courts.

17.  In support of that contention the facts are:

(1) Kazakhstan has geographical borders with China and Russia.

(2) The plaintiff is a Slovenian company.

(3) The agreement is in the German language.

(4) The agreement states that it was completed in Hong Kong.

(5) Payments have been made via the defendant company in Hong Kong whose director, Miss Ng Tsz Kan, is resident in Hong Kong.

(6) The payments were to be made in Euros.

(7) E‑mails concerning invoices and payments passed between the plaintiff (in Slovenia) and the defendant (in Hong Kong).

(8) There are no witnesses in the United Kingdom nor is there any other factor connecting the parties or the contract with the United Kingdom.

Exclusive or non‑exclusive jurisdiction clause

18.  If, at the time of the signing of the agreement, either party had suggested that any dispute could or would have been subject to the jurisdiction of the Hong Kong courts it would have been astonishing if either had agreed.  The notion that a company based in Germany, with or without an ancillary or subsidiary company in Hong Kong, and a Slovenian company, undertaking a contract in Kazakhstan, would even contemplate the possibility of litigation in Hong Kong does, I fear, fly in the face of what rational businessmen would consider as good commercial practice.

19.  Applying the approach set out in Dicey’s The Conflicts of Laws, I have concluded that the proper interpretation of the clause is that it requires proceedings to be brought in the English courts.  Its pithy form is mandatory and does not leave open any alternative save by further agreement.  I find it impossible on that wording to treat it as a simple record of an agreement that the English courts applying English law should have jurisdiction without requiring proceedings to be brought there.  But even if it could conceivably be open to such an interpretation all the factors to aid such, are absent and these I have considered earlier.  I do not consider that there is any complexity in this issue.  The general statement in Dicey is that (at 12‑106):

“The fact that a court was contractually chosen by the parties will be taken as clear evidence that it is an available forum, and that, in principle at least, it is not open to either party to object to the exercise of its jurisdiction at least on grounds which should have been foreseeable when the agreement was made.”

20.  The objective observer would then ask rhetorically “why would a Slovenian company and/or a German company contracting for work in Kazakhstan (albeit acting through a subsidiary company incorporated in Hong Kong for convenience’s sake) even consider the Hong Kong courts as a forum of choice when there are European courts, including English courts, available for the resolution of disputes?”  If the answer is only, as I find it to be, that a Hong Kong entity was tasked with the payments under the contract and the transmission of other decisions, then the effort to expand any flexibility to justify Hong Kong’s jurisdiction must fail.

21.  To that analysis must be added the fact that the plaintiff well knew, on the evidence, that the real contracting party was the principal behind the contract, the German company in Cologne.

22.  Accordingly, I order a stay on proceedings in Hong Kong and for the action to be adjudicated in London.  I can see no hardship in this for either party.  It is far less likely to be bogged down in expensive interlocutory procedures.  Overall it will be far more economical for the parties to litigate in London and I do not need to spell out all the aspects of this.

23.  Any persisting dispute over which company should be the defendant, can easily be dealt with by the German company undertaking to meet any judgment against the Hong Kong company and the matter of service, etc, can be readily and economically dealt with by the German company’s solicitors’ undertaking to accept service and enter appearance.

24.  I do not need to deal with the defendant’s alternative argument concerning a striking out of the plaintiff’s claim and it would be inappropriate for me to consider the plaintiff’s application for an interim payment in the light of my decision to stay the proceedings here.

25.  There was no opposition to the defendant’s claim for the costs of and occasioned by this application, to be taxed if not agreed.