CHOI HON CHEUNG v. CHAN CHONG MAN

HCA 1295/2022

[2024] HKCFI 538

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1295 OF 2022

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DECISION

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INTRODUCTION

1.  This is the Defendant’s application to set aside leave granted to the Plaintiff to issue and serve the Writ in the present action out of the jurisdiction, by the Order of Master Kot dated 26 October 2022, made by summons dated 9 August 2023 under O 12 rr 8(1)(a),(c),(ga)  and 8(2)(a),(b)  of RHC (“Summons”). 

2.  §1 of the Summons sets out the grounds to set aside the leave granted to the Plaintiff to serve the Writ out of the jurisdiction:

(a)  The transactions in dispute happened in Mainland China were denominated in Renminbi which is the lawful currency of the People’s Republic of China (“PRC”);

(b)  The oral agreement concerning the transactions in dispute was established in Mainland China;

(c)  The applicable laws to disputes in question is the laws of the PRC;

(d)  The Plaintiff has failed to demonstrate that Hong Kong is clearly and distinctly the most appropriate forum for the trial of the claims by the Plaintiff; and

(e)  Considering the best interests and convenience of the parties to the proceedings and the witnesses in the proceedings, the proceedings should be conducted before the PRC courts. 

3.  Further or in the alternative, the Defendant seeks a declaration that in the circumstances of this case, the Court should not exercise any jurisdiction it may have in respect of the subject matter of the claim or the relief sought by the Plaintiff in these proceedings on the grounds set out in §1 of the Summons. 

4.  Further or alternatively, the Defendant seeks an order that the present proceedings against the Defendant be stayed on the grounds as set out in §1 of the Summons. 

5.  The Defendant has filed his affirmation dated 8 August 2023 (“1^stAffirmation of Chan”)  in support of the Summons.  The Plaintiff has filed his affirmation in opposition dated 27 September 2023 (“Affirmation of Choi”), and the Defendant has filed his affirmation in reply dated 8 November 2023 (“2^nd Affirmation of Chan”). 

6.  The Plaintiff has also filed the Affirmation of Lui Chi Lok Patrick dated 19 October 2022 (“Affirmation of Lui”)  in support of the Plaintiff’s ex parte application for leave to issue and serve the Writ out of the jurisdiction. 

BACKGROUND

7.  This is a claim for the sum of RMB8,344,700 and interest pursuant to an outstanding loan.  It is the Plaintiff’s case that by an oral agreement made between the parties at the Defendant’s office in Shenzhen in or around late May 2011 (“Oral Agreement”), the Plaintiff agreed to lend, and the Defendant agreed to borrow money from the Plaintiff from time to time on the following terms:

(a)  The Plaintiff would upon the Defendant’s request and mutual agreement between the parties, lend the Defendant money in the sum to be agreed by the parties;

(b)  The Defendant shall pay interest to the Plaintiff on the total amount of the principal sum of the loan at the monthly rate of 1.5%;

(c)  Such monthly interest shall be payable by the Defendant to the Plaintiff on the 15^th day of each month;

(d)  The Plaintiff is entitled to terminate the loan agreement by giving the Defendant one week’s notice;

(e)  Upon termination of the loan agreement, the Defendant shall repay all principal sums of the loan (together with all interest accrued thereon)  to the Plaintiff forthwith; and

(f)  Interest at a monthly rate of 1.5% shall continue to accrue on all outstanding principal sums until further repayment of the same

  (the “Loan Agreement”).

8.  It is also the Plaintiff’s case that the Plaintiff and the Defendant agreed to reduce the monthly interest rate of the principal sum of the Loan Agreement from 1.5% to 1.2% from April 2015 onwards. 

9.  According to the Plaintiff, both parties agreed that the total amount outstanding owed by the Defendant to the Plaintiff under the Loan Agreement as at 9 August 2017 was RMB8,344,700, being the outstanding principal sum (“Outstanding Principal Sum”). 

10.  The Defendant’s case is the Oral Agreement was an investment agreement, whereby the Plaintiff entrusted sums to the Defendant which the Defendant lent to third parties as the Plaintiff’s agent.  The Defendant would not be personally liable for the third-party borrowers’ failure to repay their loans, but the Defendant would only receive sums which went beyond the base interest rate as fees / remuneration if the borrowers repaid both the principal and interest (at the base interest rate)  (“Investment Agreement”): §9 of 1^st Affirmation of Chan. 

11.  Mr Dong made submissions on behalf of the Defendant.  The Defendant submits that the Plaintiff has failed to satisfy the requirements for leave to serve out of the jurisdiction under O 11 r 1:

(a)  The Plaintiff has failed to establish a good arguable case that its claims fall within one of the gateways under O 11 r 1; and

(b)  In any event, the Plaintiff has failed to show Hong Kong is clearly or distinctly the appropriate forum for the trial of the action.  The Defendant submits that it is far from clear (to say the least)  that Hong Kong has the most real and substantial connection with the action in light of the various Mainland elements to the context, terms, and performance of the Oral Agreement. 

12.  Mr Yip made submissions on behalf of the Plaintiff.  The Plaintiff relies on the following gateways under O 11 r 1 of RHC for service out:

(a)  O11 r 1(d)(iii): that the claim is brought to enforce a contract, or to recover damages in respect of the breach of a contract which is governed by Hong Kong law; or

(b)  11 r 1(e): that the claim herein is brought in respect of a breach committed within the jurisdiction of a contract (whether made within or out of jurisdiction); or

(c)  11 r 1(p): that the claim is brought for money had and received against the Defendant and the Defendant’s alleged liability arises out of acts committed within the jurisdiction.

LEGAL PRINCIPLES

13.  The Defendant’s application is to set aside leave granted to the Plaintiff for service out.  The burden is on the Plaintiff to satisfy this Court that the requirements for service out have been satisfied. 

14.  In Chen Hongqing v The persons whose names are set out in the second column of the Schedule to the Re-amended Writ of Summons filed on 26 March 2018 [2019] HKCFI 2121, Yeung J (at §53)  referred to the judgment of Seaconsar Ltd v Bank Markazi [1994] 1 AC 438 in which Lord Goff summarised the requirements for leave to serve out as follows (at pp 456H – 457B):

“ … a judge faced with a question of leave to serve proceedings out of the jurisdiction under Order 11 will in practice have to consider both (1)  whether jurisdiction has been sufficiently established, on the criterion of the good arguable case laid down in Korner’s case, under one of the paragraphs of rule 1(1), and (2)  whether there is a serious issue to be tried, so as to enable him to exercise his discretion to grant leave, before he goes on to consider the exercise of that discretion, with particular reference to the issue of forum conveniens.”

15.  That approach was applied in Hong Kong in Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454, in which Cheung JA stated at §29 that:

“ In order to obtain leave under O 11 r 1, the plaintiff must satisfy the court that:

(a)  There is a good arguable case (in the sense that there is a good prospect of success at trial, per Kempster J in Deak v Deak Perera Far East Ltd [1991] 1 HKLR 551)  that his case comes within [one of the gateways].

(b)  The discretion should be exercised in its favour in that:

(i)  There is a serious issue to be tried on the merits of the case;

(ii)  Hong Kong is the appropriate forum under the principle governing forum conveniens for the trial of the action.” [53]

16.  Accordingly, in order to resist the Defendant’s set aside application and establish that leave was properly given for service of the Writ on the Defendant out of the jurisdiction, the Plaintiff has to satisfy the Court of these three requirements.  

17.  First, the Plaintiff must show that there is a serious issue to be tried on the merits in the claim against the Defendant.  

18.  Second, the Plaintiff must satisfy the court that there is a good arguable case that their claim against the Defendant falls within one or more of the ‘gateways’ in  O 11 r 1(1)  pursuant to which leave may be given for service out of the jurisdiction.   

19.  Third, the Plaintiff must satisfy the court that in all the circumstances Hong Kong is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction.  This reflects the requirement in O 11 r 4(2)  that it has to be made sufficiently to appear to the Court that the case is a proper one for service out of the jurisdiction under this Order. 

  (see Chen Hongqing at §55).  

20.  I now discuss whether the Plaintiff has satisfied these three requirements. 

DISCUSSION

(a)   Whether the Plaintiff has shown a serious issue to be tried

21.  Mr Yip requested me to look at the parties’ respective cases.  The Plaintiff submits that the merits of the underlying case will have a significance not only on the jurisdictional gateways but also on forum. 

22.  The Plaintiff’s case on the Loan Agreement is set out at §3 of the Statement of Claim (“SOC”): there is an Oral Agreement between the parties, it was concluded in Shenzhen in May 2011 and the form of the Oral Agreement was a Loan Agreement with six terms –

(a)  the Plaintiff would upon the Defendant’s request and mutual agreement between the parties, lend the Defendant money in the sum to be agreed by the parties;

(b)  the Defendant shall pay interest to the Plaintiff on the total amount of the principal sum of the loan at the monthly rate of 1.5%;

(c)  such monthly interest shall be payable by the Defendant to the Plaintiff on the 15^th day of each month;

(d)  the Plaintiff is entitled to terminate the Loan Agreement by giving the Defendant one weeks’ notice;

(e)  upon termination of the Loan Agreement, the Defendant shall repay all principal sums of the loan (together with all interest accrued)  to the Plaintiff forthwith; and

(f)  interest at a monthly rate of 1.5% shall continue to accrue on all outstanding principal sums until full repayment of the same (adjusted to 1.2% in or around April 2015). 

23.  The Defendant’s version of the Oral Agreement is set out in the 1^st Affirmation of Chan at §9: around early 2011, the parties reached an Oral Agreement being the Investment Agreement in an office in Shenzhen in which:  

(a)  the Plaintiff would occasionally transfer to the Defendant the funds he wished to lend, and as the Plaintiff’s agent, the Defendant would lend these funds to third parties (the “Third-Party Loan Agency Services”)  for a certain loan period (upon the Defendant’s decision)  at an interest rate not lower than 1.5% per month (the “Base Interest Rate”);

(b)  as compensation for the Third-Party Loan Agency Services, the Defendant would personally retain any interest received from the third-party borrowers in addition to the Base Interest Rate, provided that the third-party borrowers repay the loan principal and interest calculated based on the Base Interest Rate.  (ie, if the Plaintiff transfers RMB 10,000.00 to the Defendant for loan investment, and the Defendant provides a loan to a third-party borrower at a monthly interest rate of 1.7% for a month, if the third-party borrower repays the loan and interest after one month, the Plaintiff would receive the principal of RMB 10,000.00 together with interest of RMB 150, and the Defendant would retain RMB 20 as the Defendant’s service fee); and  

(c)  as the loan investment was the Plaintiff’s personal investment and not the Defendant’s, the Defendant is not personally responsible for any outstanding third-party loans that remain unpaid. 

24.  Both parties’ cases are diametrically opposite.  On the Defendant’s version of the Investment Agreement, the Plaintiff lent money to the Defendant, who lent money to third party borrowers that were strangers to the Plaintiff.  Despite that, the Defendant is not personally responsible for any outstanding third-party loans that remain unpaid. 

25.  The Plaintiff referred to the following documents which support his version of the Oral Agreement:

(a)  The first receipt dated 15 June 2011 in the sum of RMB3.5 million, which correlates with the table pleaded at §6 of the SOC:  “[w]hereas [the Defendant] have received RMB3,500,000 from [the Plaintiff].  The terms is to be determined by [the Plaintiff].  There must be one week’s notice. Interest to deposit 15 July.  477270801880075095. Bank of China Shenzhen Branch.”  It was signed by the Defendant as “Borrower.”  The amount transferred is HK$4,211,793 (equivalent to RMB3,500,000).  At the bottom of the receipt, the name of the payor is Hanky Investment (Intl)  Co Ltd (“Hanky”)  from its Bank of China account in Hong Kong, and the name of the payee is Gao Sheng Yuan Intl Group Co Ltd (“Gao Sheng Yuan”), to its Bank of China account in Hong Kong.  This matches item 1 of the table at §51 of the Affirmation of Choi. There is a further manuscript note stating “this payment (equivalent to RMB 3,500,000)  is remitted to the company’s account stated above. The monthly interest of 1.5%, calculated as RMB 52,500 is to be deposited to the Bank of China Shenzhen account.” 

(b)  At CHC-19 of the Affirmation of Choi there is exhibited a copy of the note given by the Defendant setting out the remittance details of Gao Sheng Yuan, with the name of bank being Bank of China (Hong Kong)  Limited, with address at Bank of China Center, 19/F, Olympian City, 11 Hoi Fai Road, West Kowloon, Hong Kong and Hong Kong account number 01288510766060, and a manuscript note “HK$4,211,793 equivalent to RMB3,500,000.”  The Hong Kong account number of Gao Sheng Yuan matches the account number as specified on the bottom of the receipt dated 15 June 2011.

(c)  Receipt from the Defendant dated 15 March 2012 in which the Defendant acknowledges that he has received a sum of RMB6,000,000 from the Plaintiff.  The deadline is set by the Plaintiff but must be requested one week in advance.  Interest is to be deposited into the designated account on 15^th day of each month.  Account Number: 477270801880075095 of Bank of China, Shenzhen Branch.  It was signed by the Defendant as “Borrower.”

(d)  Receipt from the Defendant dated 3 June 2013, in which the Defendant acknowledges that sum of RMB8.5 million was deposited.  The Defendant signed as payee, and included his Hong Kong ID No P221279(3).  The previous receipts issued were declared null and void.   

(e)  Receipt dated 18 February 2014 in which the Defendant acknowledged that the total amount received is RMB 12 million. The receipt previously issued was hereby declared null and void. 

26.  The Plaintiff submits that the previous receipt superseded is just the amount agreed between the parties as of that date.  However, the designation by the Defendant himself to state that he is a borrower is conclusive evidence that the Defendant was dealing as a borrower and that his version of the Investment Agreement should be rejected by this Court. 

27.  Furthermore, the Plaintiff referred to the WeChat conversations between the parties in which the Plaintiff kept chasing for money and requested the Defendant to solve the problem:

(a)  Message of 30 June 2019 from the Plaintiff to the Defendant (as translated): “I have returned to HK. I have received the documents sent by your accountant and I will think about whom to look for help from. Please help get some money for me to cope with the bank. I can’t take it anymore. Please help.”

(b)  Below that message is an image of a handwritten note of a ledger sent on the same day at 17:10. 

(c)  The Plaintiff stated on 30 June 2019 in the WeChat message (as translated)  “the principal of this year 8,986,876 and six months of interest 647,052 = 9,633,928.”  

(d)  A further message was sent by the Plaintiff to the Defendant on 1 July 2019 as follows (as translated): “Now the principal plus interest is the sum of 9,633,928. This calculation is based on interest on a monthly basis plus the principal amount by the end of the year, and then starts from January plus interest. This is not calculating on a compound interest basis, which would only result in a larger figure. Please check and confirm.” 

(e)  The Defendant did not respond to these messages to deny that the principal and interest was owing. 

(f)  On 26 July 2019, the Plaintiff sent the Defendant the following message (as translated): “How’s the situation? I can’t handle it anymore. You need to think of ways to save me. What is your plan? If you have one, do it now!”  

(g)  On 19 August 2019, the Plaintiff sent the Defendant the following message (as translated): “If you want to sell Park Towers, you must tell me the address and size. What’s the price? Tell me about it.”

(h)  On 13 September 2019, the Plaintiff stated as follows (as translated): “I’m feeling restless every day now! The way you’re handling this, I feel sorry for myself! Not all of the money is mine; several million is a bank loan, and one million belongs to my cousin. If you still consider me a friend, please find a way to quickly resolve my issues!”  The Defendant responded on the same day shortly afterwards as follows (as translated): “I’m really sorry.  I will try to find a way to make arrangements.”  There was a further message from the Plaintiff on the same day shortly afterwards stating (as translated)  “You should take action as soon as possible.  Be flexible.  Otherwise I’m at a dead end”, to which the Defendant shortly responded “I’m working on it.”

(i)  A message on 24 September 2019 from the Plaintiff to the Defendant stated (as translated): “Did you manage to collect money in Hainan? If you did, transfer it to me quickly.  Help.  I’m begging for my life!”  The Defendant replied “noted.” On the same day, he stated (as translated)  “Looking for connections to chase him, the money is definitely not coming back to me.  I will see if it’s possible to use the flat as collateral, and will also need to get Suo Dao to coordinate.” On 10 October 2019, the Plaintiff sent the Defendant the following message: “The property prices have dropped a bit. You should handle the sale of the flat as soon as possible. I’m suffering every day, and it’s getting worse. The pressure keeps increasing every day! It’s becoming unbearable.  You need to resolve this quickly, don’t leave me with no way out.”  The Defendant responded on the same day (as translated)  “Understood.  I’m making arrangements.  It’s been tough lately.”

(j)  There was a further message sent by the Plaintiff to the Defendant on 8 November 2019 regarding the outstanding principal and interest (as translated): “Starting from January this year, the monthly interest is 107,842 multiplied by 12 months, which is $1,294,104. Plus the above principal $8,986,876 = $10,280,977. Only the monthly interest is calculated and then the total interest for the 12 months has yet to be repaid is added to the principal. If calculated according to the bank’s compound interest method, the calculation is not limited to this figure.”

(k)  The Plaintiff’s message to the Defendant on 30 January 2020 stated as follows (as translated): “The monthly payments keep rising, and there’s a second mortgage and O/D (overdraft). Compound interest keeps accumulating, and the bank is chasing repayments. You owe me compound interest, and you haven’t even paid me the interest. What do you expect me to do? I strongly suggest you quickly sell a property or find a way to repay me, otherwise I have no choice but to face a dead end.”

28.  The Defendant submits that the WeChat conversations do not lend support to the Plaintiff’s Loan Agreement:

(a)  The chain of conversations began with a plea for help from the Plaintiff by message on 30 June 2019, as opposed to a demand for payment. This sits uncomfortably with the Plaintiff’s case that the Defendant had been in default under the Loan Agreement since 2015 (ie 4 years before the message).

(b)  It is obvious that the bulk of the messages from the Plaintiff were not met with any response by the Defendant. In particular, the Defendant never acknowledged the Plaintiff’s messages with the purported calculations that sought to render the Defendant liable for the relevant sums. 

(c)  When the Defendant did respond, such responses cannot amount to acknowledgments of the Loan Agreement or any liability thereunder. In particular, the Defendant explained to the Plaintiff of efforts taken to collect repayment of loans, for example, by messages on 23-24 September 2019, which was entirely consistent with the Investment Agreement.

(d)  Insofar as the Defendant apologised or made (unspecific)  offers to find solutions for the Plaintiff, this is entirely consistent with the Defendant’s explanation that he felt morally obliged to help the Plaintiff and the Plaintiff and the Defendant’s long-standing friendship.  The messages must be viewed against the backdrop of the Plaintiff’s and Defendant’s friendship, such that the Defendant would naturally be less inclined to reject the Plaintiff’s allegations outright. This was why when the Plaintiff referred to their friendship and mentioned his financial difficulties (e.g. by message on 13 September 2019 at 12:06), the Defendant did not simply deny legal liability and instead made an unspecific promise to “make arrangements.”

29.  The Plaintiff’s burden is only to show there is a serious issue to be tried. I agree with the Plaintiff’s submission that there is no evidence from the Defendant to contradict the Plaintiff’s case based on the Loan Agreement.  Considering the WeChat messages, when the Plaintiff chased the Defendant for payment of the alleged outstanding principal and interest in the messages, there was no denial, even when the Plaintiff suggested to the Defendant to sell a property or find a way to repay him.  There was no assertion of the Defendant’s case in this proceeding that the Defendant would not be personally liable for the third-party borrowers’ failure to repay their loans as it was only an Investment Agreement.  There was no denial regarding the Plaintiff’s suggestion to the Defendant as to the sale of his property located in Hong Kong.  On 10 October 2019, the Plaintiff sent the Defendant the following message: “The property prices have dropped a bit. You should handle the sale of the property as soon as possible. I’m suffering every day, and it’s getting worse. The pressure keeps increasing every day! It’s becoming unbearable.  You need to resolve this quickly, don’t leave me with no way out.”  The Defendant responded on the same day “Understood.  I’m making arrangements.  It’s been tough lately.”

30.  Coupled with the handwritten notes where the Defendant himself signed to state that he is a borrower,  I am satisfied that the Plaintiff has shown there is a serious issue to be tried. 

(b)  Whether the Plaintiff’s claim against the Defendant falls within one or more of the ‘gateways’ in O 11 r 1(1)

31.  The Plaintiff relies on the following gateways for leave to serve out of the jurisdiction:

(a)  11 r 1(e): claim brought in respect of a breach committed within the jurisdiction (“Gateway (e)”);

(b)  11 r 1(d)(iii): claim brought to enforce, rescind, dissolve, annul or otherwise affect a contract or to recover damages in respect of the breach of a contract which is by its terms, or by implication, governed by Hong Kong law (“Gateway (d)(iii)”); and

(c)  11 r 1(p): claim brought for money had and received and the defendant’s alleged liability arises out of acts committed within the jurisdiction (“Gateway (p)”). 

32.  The Defendant submits that to meet the good arguable case threshold in the context of O 11 r 1(1), one side needs to have a much better argument on the material available. There needs to be good prospect of success at trial and something better than a mere prima facie case.  A provisional conclusion on the evidence has to be reached, and it suffices if the defendant can show that the evidence of the plaintiff is incomplete or plainly wrong or attendant with some sustained doubt: Chen Hongqing at §63. 

33.  The Court takes jurisdiction not on it being shown conclusively (ie to the trial standard of balance of probabilities)  that the case is within a gateway, but on a “good arguable case” to that effect being made out: Hong Kong Civil Procedure 2023 at §11/1/40.  However, this is still a high threshold, as observed by To J in GDH Ltd v Creditor Co Ltd [2008] 5 HKLRD 895, To J at §16 and referred to in Chen Hongqing at §63(b). 

Gateway (e)

34.  Gateways (d)(iii)  and (e)  are premised upon a breach of contract.  Gateway (p)  is premised upon a total failure of consideration by virtue of the Defendant’s failure to return the principal sum of the Loan Agreement to the Plaintiff in Hong Kong. 

35.  The Defendant submits whether any of the three gateways can be relied upon therefore depends on whether the Plaintiff can show that it has a good arguable case based on the Oral Agreement (which according to the Plaintiff takes the form of the Loan Agreement).  The Defendant submits that the Plaintiff has failed to do so.  In any event, the Defendant submits that the requirements of the individual gateways are not met in the present case.

36.  The Court needs to ascertain whether first, the Plaintiff has made out a good arguable case that there is a Loan Agreement, and second, the breach of repayment has been committed in the jurisdiction. 

37.  I refer to my analysis above regarding the Loan Agreement.  As I have observed, there is no evidence from the Defendant to contradict the Plaintiff’s case on the Loan Agreement.  In considering whether there was a Loan Agreement, even on the test whether the Plaintiff’s claim against the Defendant falls within one or more of the gateways,  I am of the view that the Plaintiff has met the good arguable case threshold in the context of O 11 r 1(1). 

38.  When the Plaintiff chased the Defendant for payment of the alleged outstanding principal and interest in the WeChat messages, there was no denial.  There was no assertion of the Defendant’s case in these proceedings that the Defendant would not be personally liable for the third-party borrowers’ failure to repay their loans as it was only an Investment Agreement.  There was no denial regarding the Plaintiff’s suggestion to the Defendant as to the sale of his property located in Hong Kong (for the Park Tower), only an acknowledgment that the Defendant understood handling the sale of the property.  Coupled with the handwritten notes where the Defendant himself signed to state that he is a borrower, the Plaintiff has a good arguable case there was a Loan Agreement. 

39.  The Defendant submits that for the record of transfers from the Plaintiff to the Defendant listed in the table in the Affirmation of Choi at §51 (“Plaintiff’s Table of Transactions”), a substantial part of these are not actually to the Defendant or related to the Loan Agreement.

40.  According to the Defendant, the transfers to Gao Sheng Yuan, Zhong Sheng Investment Development Company (“Zhong Sheng Investment”)  and Reliance Group Holdings Limited (“Reliance Group”)  do not concern the Defendant, as there is no evidence at all linking these entities to him (see §26 of 1^st Affirmation of Chan; §40 of 2^nd Affirmation of Chan). 

41.  In Chow Man v Wong Hong Chun [2022] HKCFI 746, B Chu J at §25 referred to the 3-stage test adopted in Komala Deccof & Co SA v Perusahaan Pertam bangan Minyik Dan Gas Bumi Negara (Permatina) [1982] 1 HKLR 158 on the question of whether the plaintiffs had established a good arguable case that the place of payment was Hong Kong:

“The purpose of stage 1 was to enquire whether the parties had expressly agreed a place of performance.

The purpose of stage 2 was to investigate whether the parties had impliedly agreed such a place. This stage was governed by the usual principles covering the implication of terms into a contract with the object of ascertaining the parties’ real but unexpressed intentions.

Stage 3 was only reached if the inquiries at stages 1 and 2 produced no result. At this stage the court applied a rule of law, namely that a debtor had to pay the creditor at the creditor’s place of business.”

42.  The Defendant submits that the Plaintiff has failed to put forward credible evidence showing Hong Kong, as opposed to Mainland China, was the intended place of performance. On the contrary, the evidence currently available shows that almost all, if not all, of the transactions between the Plaintiff and the Defendant pursuant to the Oral Agreement were conducted in Mainland China. 

43.  For the transfers purportedly by the Plaintiff to the Defendant, once the irrelevant transactions are excluded, it is clear that the remaining transfers were all made in Mainland China, in RMB, between the Plaintiff and the Defendant’s Mainland bank accounts. 

44.  As for transfers by the Defendant to the Plaintiff, the Defendant submits that the available evidence indicates almost all, if not all, of the transfers were made in Mainland China. 

45.  It is further submitted by the Defendant that in performing the Oral Agreement, the parties have conducted transactions almost (if not only)  exclusively in Mainland China. In particular, for repayments by the Defendant to the Plaintiff, save for a cheque in Hong Kong Dollars that was barely asserted by the Plaintiff without any objective evidence, all repayments have been made in RMB and in Mainland China.  This is strong indication that parties had agreed, expressly or impliedly (in an application of the officious bystander test – ie it is so obvious that it goes without saying)  that Mainland China was the place of performance (ie repayments under the Oral Agreement). 

46.  That such a term has been agreed upon at least impliedly is bolstered by the fact that: (a)  the Oral Agreement was entered into to finance Defendant’s money lending business in the Mainland; and (b)  all payments were denominated in RMB. 

47.  According to the Plaintiff, the evidence available before the Court fell far short of showing that the parties have expressly or impliedly agreed on a place of performance:

(a)  Since the Loan Agreement is an oral contract, there is an absence of documentary evidence recording the term(s)  on the place of repayment. In the circumstances, whether the parties have agreed on the said term boils down to the probability and credibility of their respective case.

(b)  In view of the capital outflow control in Mainland China and the Plaintiff’s residence and business in Hong Kong, it defies commercial sense for the Plaintiff to have expressly agreed that Mainland China would be the place of repayment.

(c)  For the same reasons, it cannot be said that “it is so obvious that it goes without saying” that Mainland China must be the place of performance.  In fact, in light of the capital outflow control and the residence of the Plaintiff, the obvious place for repayment would be Hong Kong, not Mainland China. 

(d)  The conduct of the parties also showed that there was neither an express nor implied term to perform in Mainland China. 

48.  I have considered the evidence.  There is a copy of an undated note given by the Defendant setting out the remittance details of Gao Sheng Yuan.  At the bottom, there is a handwritten note of HK$4,211,793, equivalent to RMB3,500,000.  The account number of Gao Sheng Yuan is 01288510766060, which matches the account number on the remittance slip of the Bank of China (Hong Kong)  Limited regarding Hanky’s transfer from its Bank of China Hong Kong account to Gao Sheng Yuan’s Bank of China Hong Kong account of HK$4,211,793 on 15 June 2011. 

49.  On 30 September 2011, there is another transfer of HK$426,309 (equivalent to RMB350,000)  by the Plaintiff from its Bank of China Hong Kong account to Gao Sheng Yuan’s Bank of China Hong Kong account. 

50.  On 22 March 2012, there is a transfer of HK$1,798,235 (equivalent to RMB1,500,000)  by the Plaintiff from his Bank of China Hong Kong account to Zhong Sheng Investment’s Bank of China Hong Kong account. 

51.  On 1 November 2012, there is a transfer of HK$1,612,900 (equivalent to RMB1,300,000)  by the Plaintiff from his Bank of China Hong Kong account to Reliance Group’s Bank of China Hong Kong account.  There is a handwritten note on the remittance advice stating total amount of RMB 1,300,000 as deposit for interest.

52.  Further, from his Bank of China Hong Kong account, the Plaintiff deposited to CP-Tech Kingdom Development Co’s Bank of China Hong Kong account a sum of HK$3,841,229 (equivalent of RMB3,000,000)  on 30 January 2014.  At §40(4)  of the 2^nd Affirmation of Chan, the Defendant acknowledges that CP-Tech Kingdom is his son’s sole proprietorship.  From the business registration search with incoming date of 27 April 2010 and outgoing date of 2 March 2015, CP-Tech Kingdom Development Co is owned by Chan Wai and the residential address is at Park Towers in Hong Kong.  This property features in the WeChat messages.   

53.  In the Plaintiff’s handwritten notebook, there is a note that on 30 January 2014, the Plaintiff remitted again to the Defendant RMB 3,000,000 (equivalent to HKD 3,841,229), deposited to Hong Kong CP–Tech Kingdom Development Co, account number: 012-885-1-088805-4.  It further states that up to today, the total sum that has been deposited to the Defendant is RMB 12,000,000. 

54.  The Defendant also alleges that the RMB3,000,000 remitted to CP–Tech Kingdom Development Co was used by the Plaintiff to repay the Defendant for the HK$ 3 million transferred to Mr Choi Zechang, a designated payee, on 22 January 2014: §27 of 1^st Affirmation of Chan.  

55.  However, the Defendant’s allegation does not match the total sum that has been deposited to the Defendant being RMB 12,000,000 as recorded in the Plaintiff’s handwritten notebook, and the Defendant’s acknowledgment that a total amount of RMB 12,000,000 had been received on 18 February 2014. 

56.  I refer to the table at §51 of the Affirmation of Choi which sets out the amounts the Plaintiff allegedly transferred to the Defendant.  These include amounts to Gao Sheng Yuan, Zhong Sheng Investment, Reliance Group which the Defendant alleges do not concern him, and there is no evidence at all linking these entities to him.  It also includes an amount transferred to CP-Tech Kingdom Development Co.  I note that the amounts in the table allegedly transferred to the Defendant total RMB13,000,000.  According to the Plaintiff, the Defendant returned RMB1,000,000 to the Plaintiff (see §52(c)  of Choi’s Affirmation).  I note that the Defendant signed a receipt on 18 February 2014 acknowledging that he received funds from the Plaintiff in the total amount of RMB12,000,000.  This also matches with the Plaintiff’s handwritten notebook of the amount transferred to the Defendant. 

57.  Putting this all together, I disagree with the Defendant’s assertion that the entities above were unrelated to the Defendant and the transfer of funds from the Plaintiff to the Defendant all took place on the Mainland.  A majority of funds were transferred from the Plaintiff’s Hong Kong bank account to the Defendant’s nominees in Hong Kong.

58.  I also find that not all repayments from the Defendant to the Plaintiff were made in RMB on the Mainland, as alleged by the Defendant.  In §60 of the Affirmation of Choi, he refers to a payment of HK$1 million on or around 25 November 2015.  This is not merely a bare assertion, as this matches with the Plaintiff’s handwritten notebook recording that he had received a cheque on 25 November 2015 in the sum of HK$1,000,000 (equivalent to RMB825,000).

59.  I refer to “CCM-2” produced by the Defendant, a copy of the alleged transaction records between the Plaintiff and the Defendant.  It is alleged there was repayment of amounts in RMB to the Plaintiff on the Mainland, but there are no supporting documents for such repayment.  As Mr Yip points out, some of these do not match up.  For example, there is an alleged payment on 23 December 2013 in which the Defendant transferred RMB 2,000,000 to Liu Xu’s Bank of China account with a note “loan”, but the Plaintiff’s name is not on that entry.  The transfer ledger dated 15 October 2014 also does not support the Defendant paying the Plaintiff a sum of RMB 180,000 as there is a different name.

60.  The Plaintiff is a Hong Kong permanent resident and a director of a Hong Kong company Perthland Limited since its incorporation in 1988 to 2012.  It is also the sole shareholder and director (one of two)  of Hanky, a Hong Kong company.  The Plaintiff has purchased (either as joint tenants with his wife or through Hanky)  various properties in Hong Kong.  He has been domiciled in Hong Kong since 1979. 

61.  This contract is an oral agreement.  Given my findings above, I do not think there is any evidence that the parties had expressly or impliedly agreed a place of performance to be in Hong Kong or Mainland China. 

62.  Further, the fact that there was/is foreign exchange control in Mainland China does not mean the parties had impliedly agreed to Hong Kong being the place of performance, and the Plaintiff is not asserting as such: Chow Man v Wong Hong Chun at §44. 

63.  I also do not think that the parties had impliedly agreed a place of performance on the Mainland.  In Lo Yuk Sui v Fubon Bank (Hong Kong)  Ltd [2019] HKCA 261 at §30 and Pui Ying Middle School of Hong Kong v Hong Kong Council of the Church of Christ in China [2021] HKCFI 692 at §152, the conditions for implied terms are set out:

(a)  it must be reasonable and equitable;

(b)  it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(c)  it must be so obvious that “it goes without saying”;

(d)  it must be capable of clear expression; and

(e)  it must not contradict any express term of the contract.

64.  I do not think it is not so obvious that it goes without saying, particularly given the foreign exchange restrictions on the Mainland.  I also do not think that an implied term for the Mainland being the place of performance must be necessary to give business efficacy to the Oral Agreement, as the contract is effective without it. 

65.  Accordingly, the Court should apply a rule of law as the default position, namely that the debtor has to pay the creditor at the creditor’s place of business, being Hong Kong in this case. 

66.  In conclusion, I am of the view that there is a good arguable case that Gateway (e)  is available to the Plaintiff. 

Gateway (d)(iii):

67.  This requires the Plaintiff to show that the claim is brought to enforce a contract or to recover damages in respect of the breach of a contract which is by its terms, or by implication, governed by Hong Kong law.

68.  The parties are not in dispute that they made no choice of the law applicable to the Oral Agreement.

69.  The governing law of a contract is determined by a 3-stage test:  Johnston, The Conflict of Laws in Hong Kong (3^rd ed), at §§5.004, 5.009:

(a)  Whether the parties have expressly agreed upon the law to govern their contract;

(b)  In the absence of an express choice, whether there is factual basis for inferring an agreement on the governing law; and

(c)  Failing the above, a residual rule (ie a system of law by reference to which the contract was made or that with which the transaction has the closest and most real connection)  applies: First Laser Ltd v Fujian Enterprises (Holdings)  Co Ltd (2012)  15 HKCFAR 569 at §§53-56 per Lord Collins of Mapesbury NPJ.

70.  The parties agree that only Stage 3 applies, the system of law with which the transaction has the closest and most real connection.

71.  Case law has suggested certain factors that may be of particular importance in determining the closest and most real connection. As The Conflict of Laws in Hong Kong (3^rd ed) at§5.009 observes, these factors are merely indicative, and reasonable judgments may often differ in practice as to the conclusion to be reached in a particular case.  These factors include, inter alia:

(a)  Location of subject matter of the contract.  It is less significant if the asset is intangible or if a tangible asset represents merely one, not necessarily dominant, aspect of the transaction.

(b)  Place of intended performance.  The place of intended performance is still generally viewed as a very important factor in determining the system with which the contract has the closest and most real connection.

(c)  Place of making or negotiating the contract. The place where the contract was made is relevant but certainly not determinative.  The location of negotiations prior to the entering into of the contract is also often considered by the courts.  With the great ease of modern international transport it is suggested that these factors are now of much diminished significance as a pointer to a contract’s closest and most real connection.

(d)  Domicile or residence of parties. The residence or domicile of the parties is frequently considered in the case law, but it is suggested that it is inappropriate to give it much weight unless the domicile or residence of both, or most, of the parties on different sides of the contractual relationship is the same.

(e)  Currency. It has been held that references to a particular currency are indicative of the law of the country of that currency being the chosen law (ie the implied choice of the parties, rather than the place of closest and most real connection).  There are, however, clearly limits to the relevance of this factor.

72.  Although the agreement was negotiated and made in Shenzhen, the place of negotiating the agreement is relevant but not determinative.  It is now of much diminished significance as a pointer to a contract’s closest and most real connection: The Conflict of Laws in Hong Kong (3^rd ed) at §5.009.

73.  According to the Plaintiff’s version of the Oral Agreement, there was no reference to a particular currency in the Loan Agreement.  I have found above that the Plaintiff remitted amounts from his Hong Kong bank account in Hong Kong Dollars and from the Plaintiff’s evidence, at times from his bank account on the Mainland in Renminbi.  In any event, currency relates to the implied choice of law of the parties rather than the place of closest and most real connection and it is recognised there are clearly limits to the relevance of this factor: The Conflict of Laws in Hong Kong (3^rd ed) at§5.009. 

74.  The Defendant submits that it has rebutted the Plaintiff’s assertion that some transfers were made in Hong Kong through Hong Kong accounts.  Regarding the domicile or residence of the parties, it is the Defendant’s case that he only lived in Hong Kong from 1996 to 2001 and moved back with his family once he had obtained permanent residence.  Furthermore, the Defendant’s business dealings were and are all primarily in Mainland China. The Defendant was therefore not domiciled in Hong Kong when the Loan Agreement was made in or around May 2011.  In any event, it is the Plaintiff’s own evidence that the Defendant had moved back to Shenzhen in or around 2016. The Defendant further submits that the place of reaching the Loan Agreement (Shenzhen)  is plainly relevant, particularly when viewed against other factors which point strongly towards PRC law being the governing law of the contract.

75.  At footnote 46 at§5.009, The Conflict of Laws in Hong Kong (3^rd ed) referred to cases which observed that the place of intended performance is still generally viewed as a very important factor in determining the system with which the contract has the closest and most real connection. 

76.  In Bank of India v Gobindram Naraindas Sadhwani [1988] 2 HKLR 262, Nazareth J confirmed that “great weight” should be given to the law of the place of performance, though “[t]hat is not to say that it is not to be weighed against the other factors.” In Cim Company Ltd v Koo Chi Yun (unreported judgment of Chung J, HCA 14293/1999, 6 December 2001, [2002] HKEC 48), Chung J adopted Dicey & Morris’s statement that “a debt is situate in the country where the debtor resides” to assist in establishing the place of performance, and in turn applied that place of performance as a guide to the governing law. In First National Bank of Chicago v Carroway Enterprises Ltd [1990] 2 HKLR 10, Bokhary J, it was stated that “there is a tendency to regard the fact that payment under a contract is to be made in a particular place as a strong indication that the legal system of that place is the one with which the contract has the closest and most real connection.”  In The Cavalry [1987] HKLR 287, Hunter J, the place of the lender’s business, together with the place where the money was lent and was repayable were together considered to be “crucial” factors in determination of proper law.

77.  I have dealt with the transfers above and found that some of the transfers were made by the Plaintiff in Hong Kong from the Plaintiff’s Hong Kong bank account to the Defendant’s Hong Kong bank accounts.  I have also found that the place for repayment of the loan is also Hong Kong as a matter of law: see above at §65.  The place of intended performance is still generally viewed as a very important factor in determining the system with which the contract has the closest and most real connection: The Conflict of Laws in Hong Kong (3^rd ed) at§5.009.

78.  Regarding the domicile or residence of the parties, as I have discussed above, the Plaintiff is a Hong Kong permanent resident and domiciled there.  The Defendant is also a permanent resident of Hong Kong and indicated his Hong Kong ID No P221279(3)  in his receipt dated 3 June 2013, in which the Defendant acknowledges that a sum of RMB8.5 million had been deposited.  He and his wife jointly owned a property in Hong Kong at Park Towers, Tin Hau, which property the Plaintiff was urging the Defendant to sell in his WeChat messages. 

79.  I note that the Plaintiff claims that due to the fear of being prosecuted by the Hong Kong Inland Revenue Department’s (“IRD”)  and/or other law enforcement agencies, the Defendant moved from Hong Kong to Shenzhen in or around 2016: §32 of the Affirmation of Choi.  In response, the Defendant states that he and his wife had not been living at the Park Towers property in Hong Kong since moving back to Mainland China in 2001. From then, it has always been rented out: §15 of 2^nd Affirmation of Chan. 

80.  However, the evidence produced in support of the Defendant not living at the Park Towers property in Hong Kong since moving back to Mainland China in 2001 is a tenancy agreement of the Park Towers property dated 8 April 2016. 

81.  The Loan Agreement was made in or around May 2011. There are letters regarding the IRD investigation into the Defendant’s tax liabilities for the years of 2008/09 to 2013/14 (for CP-Tech (Holdings)  Company Limited of which the Defendant was a director and shareholder, and the Defendant’s entity trading as Japan Door Moor Cheung (HK)  Trading Company).  These letters from the IRD relating to the Defendant’s objection to the assessment for the years of 2008/09 to 2013/14 stated that the Defendant in his letter dated 21 June 2017 confirmed that he was engaged in foreign exchange business during the aforementioned tax years and earned commission income from the exchange rate difference in each transaction. In addition to conducting relevant foreign exchange transactions through the entity’s bank account, he also conducted such transactions through his own personal bank account and the bank account of his sole proprietorship business that he owned. 

82.  The Defendant’s agent Onway Management & Secretarial Services Limited (“Onway”)  wrote to the IRD regarding the Defendant’s tax assessment from years 2008/09 to 2014/15.  According to Onway’s letter dated 12 December 2017, the Defendant had not engaged in any exchange activities since the 2012/13 fiscal year, as evidenced by the bank records for 2013/14.

83.  Onway further wrote to the IRD by letter dated 6 November 2018 to confirm that the Defendant had ceased his exchange trading business after 20 April 2015.

84.  The Defendant on 17 June 2021 accepted the IRD’s proposed revised assessment to settle his objection for the tax years 2008/09 to 2013/14.

85.  The correspondence above suggests that the Defendant was residing and carrying on business in Hong Kong at the time the Loan Agreement was made in May 2011. 

86.  The evidence produced by the Defendant, which includes a copy of a record of his daughter’s attendance of primary school in Shenzhen (ending in July 2007), a copy of a letter by the management office of the Defendant’s residence, 30A, Building D, Fengdu Tianxia Anye Xinyuan, 498 Yanfang Road, Huangbei Street, Shenzhen (the “Shenzhen flat”), confirming that the Defendant and his wife have been living in that address since 3 February 2012, and copies of receipts of utilities and management fees of the Shenzhen flat issued to the Defendant’s wife since November 2017 to February 2022, do not address the year 2011.  Furthermore, the Defendant’s Shenzhen lending business in Mainland China was founded on 29 July 2011, whereas the Oral Agreement was made in or around May 2011. 

87.  I am of the view there is at least a good arguable case that Hong Kong law is the governing law of the Loan Agreement, based on the closest and most real connection test.  The Plaintiff can also have recourse to Gateway (d).

Gateway (p)

88.  Gateway (p)  is a claim brought for money had and received and the Defendant’s alleged liability arises out of acts committed within the jurisdiction.

89.  §14 of the Statement of Claim is an alternative claim for restitution and pleads as follows:

“Alternatively, the consideration for the Outstanding Principal Sum has wholly failed and the Plaintiff is entitled to and does claim the Outstanding Principal Sum of RMB8,344,700 by way of restitution.”

90.  The Plaintiff submits that since:

(a)  the Plaintiff did transfer money to the Defendant from Hong Kong; and

(b)  the Defendant’s failure to repay any money (in Hong Kong to the Plaintiff )  constituted the total lack of consideration giving rise to this restitutionary claim, Gateway (p)  is also open to the Plaintiff.

91.  The Defendant submits that the pertinent issue is therefore the same as that for Gateway (e): whether the place of performance was Hong Kong. The analysis therefore mirrors that for Gateway (e)  above.

92.  Given that I have decided that the place of performance is Hong Kong, I am of the view that there is a good arguable case that the Plaintiff can also have recourse to Gateway (p). 

(c)    Whether Hong Kong is clearly or distinctly the appropriate forum

93.  The Court applies a three-stage test in assessing the question of appropriate forum: Tremendous Success Holdings Ltd v Sinosoft Technology Group Ltd, HCA 2345, 1613 and 2423/2013 (unreported judgment of DHCJ Anita Yip of 11 July 2016)  at §101, quoting the Court of Appeal judgment of The Adhiguna Meranti [1987] HKLR 904 at 907F–908B:

(a)  Stage I: Whether it is shown that Hong Kong is not only not the natural appropriate forum for the trial, but that there is another available forum which is clearly or distinctly more appropriate than Hong Kong.  The evidential burden is here upon the applicant. The emphasis is upon ‘appropriate’ rather than ‘convenient’ because this is not simply a matter of practical convenience. The purpose is to identify the forum ‘with which the action has the most real and substantial connection’;

(b)  Stage II: If the answer to (I)  is yes, will at trial at the other forum deprive the Plaintiff of any legitimate personal or juridical advantages.  The evidential burden is on the Plaintiff; and

(c)  Stage III: If the answer to (II)  is yes, the court has to balance the advantages of (I)  against the disadvantages of (II). Deprivation of one or more personal or juridical advantages will not necessarily be fatal provided that the court is satisfied that notwithstanding such loss substantial justice will be done in the appropriate forum.  Proof of this rests upon the applicant for the stay: on balance the other forum is more suitable ‘for the interests of all the parties and ends of justice.’ This may be another way of saying that the plaintiffs’ choice of forum has been shown to be so inappropriate as to deserve the pejorative description of ‘forum-shopping’ and to be restrained accordingly.

See also the Court of Final Appeal’s judgment in SPH v SA (2014)  17 HKCFAR 364 at §51. 

94.  The burden is on the Plaintiff to show that Hong Kong is clearly or distinctly the appropriate forum for the trial of the dispute: Dynasty Line at §§57, 75; Chen Hongqing at §55.

95.  If the Plaintiff is unable to show that Hong Kong is clearly or distinctly the appropriate forum, juridical advantage should not be considered: Tremendous Success at §§101-105, 150-152. This factor is therefore wholly irrelevant unless this Court accepts the Plaintiff’s case on appropriate forum.

96.  In Dynasty Line, Cheung JA at §§57-61 observed as follows:

“Real and substantial connection

57. The issue is whether the plaintiff has raised a serious question that Hong Kong is not only the appropriate forum to try the case but that this is clearly so. The burden is on the plaintiff.

58. The ‘appropriate’ or ‘natural’ forum is one ‘with which the action had the most real and substantial connection’. This includes not only factors affecting convenience and expense (such as availability of witness)  but also other factors such as the law governing the relevant transaction and the place where the parties respectively reside and carried on business, Spiliada at page 478.

59. In my view, the ‘real and substantial connection’ requirement needs to be emphasised. Modern commercial transactions usually entail multiple jurisdictional aspects. Like the present case, they may involve, for example, the use of a company incorporated in a foreign country with tax benefits; the acquisition or disposition of assets in different locations; employment of lawyers and accountants in these locations to facilitate the transactions. Inevitably a case may contain various jurisdictional aspects. However, some of these aspects may feature only as the backdrop to the case. They may have little, if any, substantial relevance to the issues that may be required to be canvassed at the trial. Ultimately one has to consider the forum where the action could most suitably be tried for the interests of all the parties and for the ends of justice. Comments of a similar nature although differently put have been made by the Courts in the past: the Court is not simply to load up factors which point to any particular jurisdiction but to focus on the appropriateness of a forum from the point of view of the trial of the action, see : Rambas Marketing Co. LLC v. Chow Kam Fai David [2001] 3 HKC 250 per Recorder Ma (now Ma CJHC)  at 255.

Relevant factors

60. In my view it is here that the plaintiff runs into difficulties. The fact that the plaintiff has satisfied the requirement that the claim comes within the ambit of paragraphs (f)  and (p)  does not mean that one is precluded from examining the factors that had been considered in the paragraphs (f)  and (p)  context to see if they point towards Hong Kong as clearly the appropriate forum for the purpose of the exercise of discretion. In some situations these factors may provide the conclusive answer but they are not necessarily so in all cases.

61.  Factors such as the Commerzbank pledge in Hong Kong, the CDC shares having been sold in Hong Kong and judgment having being obtained in Hong Kong are relevant in so far as they show that there were acts done in Hong Kong and damage was sustained by the plaintiff in Hong Kong.  Where these acts are relied upon in the context of forum conveniens, one has to see whether they are indeed relevant considerations for the trial of the action.”

97.  In Chen Hongqing, K Yeung J at §67 stated the relevant factors when considering whether a forum is one with which the action has the most real and substantial connection include (a)  the nature of the case and the dispute; (b)  the law governing the relevant transaction; (c)  in terms of convenience or expense, availability of witnesses; (d)  the places where the parties reside or carry on business; and (e)  the legal and practical issues involved and such questions as local knowledge: see Hong Kong Civil Procedure 2023, at §11/1/65 where the principles stated by the House of Lords in The Spiliada [1987] AC 460 are summarised. 

98.  In determining the appropriate forum, the approach is not just an exercise in loading up factors which point to any jurisdiction.  The Court is required to focus on the appropriateness of a forum from the point of view of the trial of the action (Rambas Marketing Co LLC v Chow Kam Fai David [2001] 3 HKC 250, per Recorder Ma SC (as he then was)  at 255B-C, as referred to in 四川順利昌隆科技有限公司 [2021] HKCFI 2289 at §19 by Linda Chan J). 

99.  I am of the view that Hong Kong is clearly the appropriate forum for the trial of this action for the following reasons:

(a)  the place of performance of the Loan Agreement is in Hong Kong (see §65 above);

(b)  the law governing the Loan Agreement is Hong Kong law (see §87 above);

(c)  the Plaintiff resides in Hong Kong, which is also his principal place of business. The Defendant is a Hong Kong permanent resident and has property in Hong Kong.  As evidenced by the IRD correspondence, he was carrying on business in Hong Kong when the Loan Agreement was made in or around 2011; and

(d)  the main witnesses in the trial, being the Plaintiff, his wife, and the Defendant, are all Hong Kong permanent residents.

Defendant’s application to stay proceedings on the basis of forum non conveniens

100.  For the Defendant’s alternative application to stay the proceedings on the basis of forum non conveniens, the burden falls on the Defendant: Dynasty Line at §56. 

101.  The Defendant has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum has the most real and substantial connection with the action)  and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong. Failure by the Defendant to establish these two matters at this stage is fatal: see SPH v SA (2014)  17 HKCFAR 364 at §51.

102.  I do not think the Defendant has met this burden.  I refer to my findings at §99 above.  In addition, the Defendant alleges that staff members whom the Defendant said were present when the Oral Agreement was reached may be called upon to testify. However, it is the Plaintiff’s case that there were only three attendees at the meeting – the Defendant, the Plaintiff, and his wife Ms Wong Pui Ying: Affirmation of Choi at §43.  Even if the Defendant wishes to call his staff members to testify in Hong Kong, I do not think the necessity for visas is one factor that sways me to exercise my discretion to stay these proceedings. Furthermore, the Defendant can apply to give evidence via videoconferencing. 

103.  The Defendant also submits that as explained in the Defendant’s Legal Opinion, Mainland laws provide courts with powers to obtain evidence from all relevant entities. This would include records of all transfers made between the Plaintiff and the Defendant through Mainland banks, as well as transfers between the Defendant and third-party borrowers insofar as they may be relevant. It is alleged that these records are of substantial utility and importance to the trial of the action, specifically, in determining the true nature of the Oral Agreement between the Plaintiff and the Defendant and the performance (including any breach)  thereof. 

104.  I make the following observations.  First, the Plaintiff and the Defendant will have possession, custody, or control of the bank records on the Mainland, and this renders unnecessary for the Mainland courts to step in even in proceedings based in Hong Kong.  Second, it is not understood why transfers between the Defendant and third party borrowers are relevant to the true nature of the Oral Agreement.  The Defendant should have possession, custody, or control of these records in any event.  Third, even if court assistance is required, the parties can have recourse to the Arrangement on Mutual Taking of Evidence in Civil and Commercial Matters between the Courts of the Mainland and the Hong Kong Special Administrative Region. 

105.  The Defendant submits that the applicable law to the disputes in question is PRC law.  The Defendant further submits that the business underlying the Oral Agreement is the Defendant’s money lending business in Mainland China.   Loans to third-party borrowers would have been made in Mainland China under Mainland laws. 

106.  I do not think that the loans to third party borrowers are relevant in the court ascertaining the terms of the Oral Agreement and breach of such agreement.  Even if the applicable law to the disputes in question is PRC law and loans were made under PRC law, this factor should carry very little weight, as a Hong Kong court is accustomed to dealing with foreign laws including PRC law (see 四川順利昌 隆科技有限公司 at §35(2), quoting Venetian Macau Limited v Chen Mei Huan also known as Liu Chen Mei Huan also known as Liu Mei Huan Chen, HCA 1440/2012, 27 January 2014, at §50).

107.  The Defendant submits that the transactions in dispute happened in Mainland China were denominated in Renminbi.  However, there is evidence that the Plaintiff remitted and/or deposited amounts in Hong Kong Dollars in Hong Kong to the Defendant’s nominee Hong Kong bank accounts.  There is a repayment in Hong Kong Dollars of HK$1 million by the Defendant.  Furthermore, even if denominated in Renminbi, this should carry little weight as Hong Kong is an international financial center.  

108.  In summary, I decline to exercise my discretion to stay these proceedings on the basis of forum non conveniens.

Juridical disadvantages to the Plaintiff

109.  For completeness, even though the Defendant has failed to establish for his stay application that Hong Kong is not the natural or appropriate forum and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong, I address whether the Plaintiff has shown that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.

110.  If the Plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the Plaintiff may suffer. Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum: SPH v SA at §51; Tremendous Success at §11.

111.  In 四川順利昌隆科技有限公司 at §§40-48, Linda Chan J held that: (a)  the absence of bankruptcy proceeding against natural persons in Mainland China; and (b)  the inability to enforce PRC judgment in Hong Kong via the arrangement for mutual enforcement of judgments implemented in 2006, are juridical disadvantages that would cause the Court to decline to exercise the discretion to order a stay of the action based on forum non conveniens.

112.  The Plaintiff submits that these factors are also applicable in the present case.

113.  First, regarding the enforcement of a Mainland judgment, the Plaintiff has referred to the arrangement for mutual enforcement of judgments implemented in 2006 having no application to the Loan Agreement and the judgment obtained: see Mainland Judgments (Reciprocal Enforcement)  Ordinance (Cap. 597), ss 3(2), 5(2)(b).  The fact that the Plaintiff would have to commence a fresh action in Hong Kong before he can take enforcement actions against the Defendant’s assets in Hong Kong constitutes a juridical disadvantage suffered by the Plaintiff: 四川順利昌 隆科技有限公司 at §47 per Linda Chan J.

114.  The Plaintiff does not have to commence a fresh action in Hong Kong to enforce a Mainland judgment if he is required to litigate on the Mainland.  The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement)  Ordinance Cap 645 (“Reciprocal Enforcement Ordinance”)  came into force on 29 January 2024. This superseded the Mainland Judgments (Reciprocal Enforcement)  Ordinance Cap 597, and applies to judgments given on or after 29 January 2024. 

115.  Under section 10 of the Reciprocal Enforcement Ordinance, a judgment creditor under a Mainland Judgment in a civil or commercial matter may apply to the Court for a registration order to register the Judgment, or any part of the Judgment, if—

(a)  the Judgment—

(i)  was given on or after 29 January 2024; and

(ii)  is effective in the Mainland; and

(b)  the following conditions are satisfied—

(i)  the Judgment or part requires the payment of a sum of money, or the performance of an act, by a party to the original proceedings for the Judgment;

(ii)  a default in complying with the requirement occurred within 2 years before the date of the application; and

(iii)  the default has not been made good as at the date of the application.

116.  The effect of registration of a Mainland Judgment is provided in section 26(1)  of the Reciprocal Enforcement Ordinance.  Subject to section 27, a registered judgment may be enforced in Hong Kong as if—

(a)  it were a judgment originally given by the Court and the Court had jurisdiction to give it; and

(b)  it were given on the day of registration of the judgment.

117.  The exclusive jurisdiction and the agreement being concluded or evidenced in writing is removed under the Reciprocal Enforcement Ordinance.

118.  Second, the Plaintiff submits that the Defendant has no assets in Mainland China available for enforcement.  According to Mr Yang’s expert report, (a)  multiple judgments had been entered against the Defendant; (b)  as the Defendant has failed to repay judgment debts, the Defendant is now subjected to an “Order of Consumption Restriction” and has been declared by the Mainland Court to be an “Dishonest Judgment Debtor”; and (c)  the judgment records showed that the Defendant has no enforceable assets in Mainland China. 

119.  However, even assuming that is the case, unlike the plaintiff in 四川順利昌隆科技有限公, the Plaintiff in this case can enforce a Mainland Court judgment in Hong Kong.  So I do not think the juridical disadvantages as alleged by the Plaintiff exist.

DISPOSITION

120.  For the reasons set out above, the Defendant’s Summons is dismissed. 

121.  O 12 r 8(6A)  of RHC provides that if the Court dismisses an application under Order 12 rule 8(1)  or (2), it may give such direction on the further conduct of the proceedings.

122.  The Writ endorsed with the SOC was issued on 6 October 2022.  The Defendant acknowledged service on 9 May 2023.  The Summons was issued on 9 August 2023.  The Defendant has had ample time to consider and prepare a Defence.  I order and direct that the Defendant to file and serve his Defence within 21 days of this Decision. 

123.  Costs should follow the event.  I make a costs order nisi that the Defendant do pay the Plaintiff the costs of the Summons with certificate for one counsel. 

124.  I am minded to order summary assessment.  Any party who seeks any variation or summary assessment should lodge their submissions within 14 days from the date hereof, response within 7 days upon receipt, and reply within 7 days thereafter. 

125.  I thank counsel for their helpful submissions rendered to the court.