XCHRX Greenwood Ltd. v. Pearl River Container Transportation Ltd. AND ANOTHER

1993, No. CL 84

Photocopying of this Headnote

is not allowed

HEADNOTE

O.12 r.8 application - whether H.K. is forum non conveniens - the Plaintiff a British Virgin Island Company alleged breach of Charterparty at London with D1 for their vessel to carry goods from Bulgaria to PRC and the same was guaranteed by D2 - D1 alleged D2 with no authority to enter into the said Charterparty for D1 - both D1 and D2 are PRC corporations - all dealings between D1 and D2 were in PRC - only D1 carried on business in Hong Kong with a branch office here and was served with the writ at their H.K. branch office - Principles in the Spiliada's case applied.

1993, No. CL 84

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

________________

________________

DECISION

________________

1. The 1st Defendant applied to stay the Plaintiff's action pursuant to O.12 r.8 on the ground of forum non conveniens. Mr. Smith for the 1st Defendant submitted that all facts giving rise to the dispute between the Plaintiff and the 1st Defendant were in the People's Republic of China and thus PRC is the forum conveniens.

2. This is an action for breach of the charterparty agreement dated at London on 18th September 1992. The Plaintiff is a limited company registered in British Virgin Island. It is the owner of a ship "Leon" and it alleged that the 1st Defendant chartered from the Plaintiff the said vessel for carriage of goods from Bourgas Bulgaria to Xingang of PRC, and the 2nd Defendant guaranteed the performance and obligations of the 1st Defendant. The 2nd Defendant is a corporation in Guangzhou China. The 1st Defendant is incorporated also in the PRC and it carries on the business of ship owning, container transportation and the carriage of goods. However, it has been registered in Hong Kong as an overseas company under Part XI of the Companies Ordinance. The writ (issued on 23.6.93) was, therefore, properly served on the Hong Kong company office.

3. In respect of the 2nd Defendant, leave was obtained ex parte on 25th November 1993 to serve the writ out of the jurisdiction on the 2nd Defendant. Accordingly, it was served pursuant to that order by registered post on or about 2nd December 1993.

4. When the 1st Defendant's summons was due to be heard on 17th December 1993, parties had by consent agreed to adjourn the hearing. I understand from Mr. Smith for the 1st Defendant that his understanding was the Plaintiff and the 1st Defendant wanted to wait for the reaction of the 2nd Defendant before this summons is heard.

5. The 1st Defendant indicated that its defence to the Plaintiff's action was that the 1st Defendant was never a party to the charterparty. The charterparty was entered into by the London brokers instructed by the 2nd Defendant, and the 2nd Defendant was not given any authority to enter into the same for and on behalf of the 1st Defendant.

6. Mr. Smith for the 1st Defendant submitted that the forum conveniens is clearly and distinctly China. According to the affidavit of the 1st Defendant's solicitor the dealings between the 1st and the 2nd Defendants were made between a Mr. He Pei Kai, a director and a general manager of the 1st Defendant on one part, and a Mr. Qin Wen of the Guangzhou branch of the 2nd Defendant. Mr. He would say that at no time did the 1st Defendant authorize 2nd Defendant to enter into a charterparty with the Plaintiff or any other ship owner on behalf of the 1st Defendant. Mr. Smith submitted that all the witnesses and happening would be in China, and therefore, the action should not be heard in Hong Kong.

7. In the charterparty by Clause 24, it was provided that "any dispute that may arise under this charter to be settled amicably. In case no settlement can be reached the dispute shall be referred to arbitration in Peking or London at defendant's option." However, in this application it became clear that the 1st Defendant would not be relying on this arbitration clause since the 1st Defendant is saying that it was not a party to the charterparty and therefore it cannot invoke the arbitration clause. At one time, Mr. Smith said there is a faint possibility that the stay of the present proceedings in Hong Kong in favour of the PRC court would be for a preliminary question to be decided, viz. whether the 1st Defendant is a party to the charterparty agreement, and if so, for a stay in favour of arbitration. However, in his reply, he accepted that since one could not do that in a Hong Kong court after one had submitted to the jurisdiction of the court for an issue to be decided, and there is no evidence one could do the same in PRC, this faint possibility evaporated into the air. The only application now before me is a stay of the present proceedings in favour of the PRC court for trial of the same.

8. Mr. Smith submitted that the legal position has been summarized by Lord Goff in Spiliada Maritime Corp. v. Cansulex Ltd. [1987] A.C. 460 This has been summarized in Dicey and Morris on The Conflict of Laws Fourth Cumulative Supplement under p.393-395:

"Lord Goff restated the principles as follows: (a) the basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice; (b) the legal burden of proof is on the defendant, but the evidential burden will rest on the party who asserts the existence of a relevant factor; (c) the burden is on the defendant to show both that England is not the natural or appropriate forum, and also that there is another available forum which is clearly or distinctly more appropriate than the English forum; (d) the court will look to see what factors there are which point to the direction of another forum, as being the forum with which the action has the most real and substantial connection, e.g. factors affecting convenience or expense (such as availability of witnesses), the law governing the transaction, and the places where the parties reside or carry on business; (e) if at that stage the court concludes that there is no other available forum which is clearly more appropriate it will ordinarily refuse a stay; (f) if there is another forum which prima facie is clearly more appropriate the court will ordinarily grant a stay unless there are circumstances by reason of which justice requires that a stay should not be granted, and, in this enquiry the court will consider all the circumstances of the case. But the mere fact that the plaintiff has a legitimate personal or juridical advantage in proceeding in England is not decisive; regard must be had to the interests of all the parties and the ends of justice. See also Muduroglu Ltd. v. T.C. Ziraat Bankasi [1986] Q.B. 1225 (C.A.)."

9. Mr. Shieh submitted that the burden is on the 1st Defendant, and that burden is not just to show that Hong Kong is not the natural or appropriate forum for the trial, but to establish that there is another available forum which is clearly or distinctly more appropriate than the Hong Kong forum, (see p.477 of the case of Spiliada.)

10. Mr. Smith accepted that that is the deciding principle and he has the said burden. However, he submitted that he has discharged that burden by showing that PRC is clearly or distinctly more appropriate than the Hong Kong forum since all witnesses are in the PRC, as far as the question of the 2nd Defendant's authority to enter into the charterparty for and on behalf of the 1st Defendant is concerned.

11. Mr. Shieh submitted that the 1st Defendant has been properly served of the writ as it is a Part XI company in Hong Kong. It is not a case where the 1st Defendant just passed through Hong Kong in transit and the Plaintiff took that chance by serving the writ on a defendant in transit within our jurisdiction.

12. Both Mr. He as well as Mr. Qin have many connections with Hong Kong. The 1st Defendant is now carrying on business in Hong Kong. According to the telephone directory it has six telephone lines. According to the visiting card of Mr. He, he described himself as the director and general manager of the 1st Defendant with a Guangzhou Head Office and the Hong Kong office at 28 Connaught Road West Hong Kong with five telephone lines and one fax line in addition to a telex and a cable number. Mr. Qin was previously the manager of the 2nd Defendant but he now manages the Guangzhou office of a Hong Kong company not related to this case.

13. Mr. Shieh submitted that given the proximity between Hong Kong and Guangzhou and the frequency of interval between the places, differences in terms of convenience to witnesses are minimal. Both Mr. Qin and Mr. He would be travelling between Hong Kong and Guangzhou in the ordinary course of their business in any event. I accept the submission of Mr. Shieh for the Plaintiff. It may be a little bit more convenient for the two witnesses to attend proceedings in Guangzhou rather than Hong Kong, but it is not a case where I am satisfied by the 1st Defendant that Guangzhou in PRC is clearly or distinctly more appropriate forum for the trial of the dispute between Plaintiff and the 1st Defendant. The 1st Defendant has been properly served with the writ on its branch office in Hong Kong being a Part XI Company under the Companies Ordinance. It has been actively trading in Hong Kong. It would not cause much inconvenience to them if they have to face litigation in Hong Kong by gathering all the necessary witnesses and documents to attend the court in Hong Kong. From all the circumstances of this case, I would not come to the conclusion that Hong Kong is forum non conveniens and that PRC is clearly or distinctly more appropriate than Hong Kong. This application by the 1st Defendant would have to be dismissed.

14. There is another factor which I have indicated to the 1st Defendant both at the outset and the end of the hearing before me. The 1st Defendant accepted that the aforesaid legal principle would be applied, and that arbitration in Peking is not relevant since it would not be asking a PRC court to try the preliminary issue of whether 1st Defendant was a party to the charterparty and thereafter, if the court should decide it was a party then they would invoke the arbitration clause. However, the 2nd Defendant is a foreign company with no office here in Hong Kong. Leave was obtained ex parte to serve the writ in this action outside jurisdiction. In the latest affidavit of the 1st Defendant's solicitors, they had information that the 2nd Defendant said by 14th December 1993 it had not received the writ yet in Quanzhou which the Plaintiff said they had posted by registered mail on 2nd December 1993. If they had received the writ, they would certainly apply inter parte under O.12 r.8 to set aside the service on the ground that leave should not be granted to serve this action against the 2nd Defendant outside jurisdiction.

15. The case has no connection with Hong Kong at all as far as the 2nd Defendant is concerned. Parties before me accepted that should the 2nd Defendant apply to the Court as aforesaid the burden would then be on the Plaintiff to show that Hong Kong is the proper forum. In the event that the Plaintiff failed to discharge that burden, the action against the 2nd Defendant would then have to be stayed, and the Plaintiff would have to institute proceedings in the PRC. That apparently would be one of the factors I have to take into consideration in considering the application of the 1st Defendant before me. That was the reason why the first hearing of this summons was adjourned on 17th December 1993. However, Mr. Smith for the 1st Defendant upon taking instructions decided not to apply for an adjournment on that ground.

16. I am conscious that my ruling would have some bearing on the 2nd Defendant or the 2nd Defendant's anticipated application. However, since the 1st Defendant themselves are not asking for an adjournment until the 2nd Defendant's anticipated application would be heard together with this summons, I, on my part, would not adjourn this summons for the anticipated application of the 2nd Defendant.

17. Accordingly, the 1st Defendant's summons is dismissed. There shall be an order nisi for costs to the Plaintiff against the 1st Defendant in any event.